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FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC 3014
INFO RUEHSO/AMCONSUL SAO PAULO 3144
RUEHRG/AMCONSUL RECIFE 8768
RUEHRI/AMCONSUL RIO DE JANEIRO 6945
RUEHBU/AMEMBASSY BUENOS AIRES 5950
RUEHAC/AMEMBASSY ASUNCION 7229
RUEHMN/AMEMBASSY MONTEVIDEO 7601
RUEHSG/AMEMBASSY SANTIAGO 0728
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RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHDC

UNCLAS SECTION 01 OF 04 BRASILIA 001553 
 
SIPDIS 
SENSITIVE 
 
STATE PASS USTR FOR KDUCKWORTH 
STATE PASS EXIMBANK 
STATE PASS OPIC FOR DMORONSE, NRIVERA, CMERVENNE 
DEPT OF TREASURY FOR JHOEK, BONEILL 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV ETRD EAGR BR
SUBJECT: BRAZIL'S BIOFUELS CONFERENCE - MANDATES NEEDED, 
CERTIFICATION'S COMPLICATED, AND DEVLOPING NATIONS WANT IN 
 
REF: Brasilia 1393 
 
¶1. SUMMARY:  The International Biofuels Conference hosted by the 
Brazilian government in Sao Paulo from November 17-21, may have 
changed the focus of the international debate over biofuels. 
Despite some criticisms of U.S. corn-based ethanol and tariffs, the 
participants from over 90 countries overwhelmingly were supportive 
of biofuels.  There was significant discussion about the benefits of 
biofuels on economic development, the environment and energy.  The 
discussions began with three days of panels made up of largely 
non-governmental experts examining the questions of energy security, 
sustainability, climate change, innovation, and trade, and were 
followed by two days of high-level government meetings, in which the 
results of panel debates were presented to the assembled delegations 
for response.  Very broadly, conclusions of the conference were that 
sustainability is important but how to ensure sustainability is very 
complicated. Although a certification scheme received support from 
European countries in particular, while many developing countries 
expressed their concerns about implementation costs and the 
possibility that sustainability standards will create barriers to 
trade.  Other conclusions include: government mandates are essential 
to the development of local biofuels industries and that biofuels 
present an economic development opportunity, particularly for 
developing countries, and are key to achieving energy 
diversification goals.  It was the latter point which began to take 
on increasing momentum throughout the conference, and likely will 
increasingly impact the international debate moving forward. 
 
¶2.  There were some criticisms of the United States, both for what 
some participants termed the protectionism of surcharges and 
subsidies, as well as for the perceived shortcomings of corn-based 
ethanol.  It should be noted that few of these attacks originated 
from the Government of Brazil, which was largely supportive and 
positive to USG goals for the conference.  Brazilian ethanol 
received its share of barbs for what some allege is a biofuels 
industry that spurs deforestation while the Europeans were 
frequently on the defensive for lack of transparency and 
science-based criteria in the proposed draft European Community's 
directive on biofuels sustainability.  END SUMMARY. 
 
DEVELOPMENT MOVES TO THE TOP OF THE AGENDA 
------------------------------------------ 
 
¶3.  Developing nations were united in their desire to take advantage 
of the economic opportunities presented by the biofuels industry. 
Countries such as Senegal, Tanzania, and Mozambique voiced their 
desire for a chance to join what Sweden called "the Green New Deal." 
 Many of them were critical of primarily European sustainability 
efforts which several speakers regarded as having the effect of 
excluding them from reaping the benefits, both in terms of energy 
security and economic growth, presented by biofuels.  Developing 
nations expressed a concern that rich countries, under the guise of 
sustainability, will prevent them from exporting higher value added 
products, pointing out that European agricultural exports of soy or 
sugar, feedstock for biofuels, have no such sustainability criteria. 
 A few conference observers noted that this dynamic seems to have 
set the Europeans somewhat on the defensive, though Europeans 
insisted that these measures are necessary to ensure continued 
consumer confidence and demand for biofuels.  The Brazilian 
government had aggressively worked to ensure the participation of 
developing nations and paid for the travel by these countries' heads 
of delegation.  The presence of these delegations expanded the range 
of discussion away from land use and food for fuel controversies 
which had previously characterized recent debates over biofuels, to 
include the development opportunities for poorer nations.  Several 
observers noted that these were impassioned voices for biofuels 
expansion and would be a force to be reckoned with for biofuels 
opponents in the future.  U.S.-Brazil biofuels cooperation with nine 
developing countries proved a positive example of North-South and 
South-South cooperation, sparking additional developing countries' 
interest, and an issue where Europe was, again, defensive in 
response to calls for greater European engagement in Africa on 
biofuels. 
 
SUSTAINABILITY 
 
BRASILIA 00001553  002 OF 004 
 
 
-------------- 
 
¶4.  Biofuels sustainability was perhaps the most dominant theme of 
the conference, even subsuming the trade panel discussion. 
Discussions on sustainability focused on four major themes, 1) how 
to best address sustainability concerns, 2) the food vs. fuel 
debate, 3) life cycle analysis of greenhouse gas emissions from 
biofuels, and 4) trade issues.  Regarding how to address 
sustainability concerns, many groups called for sustainability 
certification systems, others called for mandatory sustainability 
criteria, while others called for voluntary science-based 
approaches.  Delegations noted the ongoing work in the Global 
Bioenergy Partnership (GBEP) as well as the proposal from the 
International Standards Organization to develop a sustainability 
standard. The European representatives by and large were insistent 
on the need for certification regimes but were roundly criticized 
for the lack of science-based criteria and transparency in their own 
proposed regime.  Proponents of certification faced criticisms over 
how to define the standards, who would administer, and who would 
pay.  Other delegations raised concerns that sustainability not be 
used as a means to slow the biofuels market and limit a tool to 
create economic development. While no consensus was reached as to 
the best way to address sustainability, it was an important step for 
this conference to recognize the importance of taking action.  There 
were still some remnants of the food versus fuel debate, 
particularly among some panelists, though with a notably decreased 
degree of volubility.  The Food and Agriculture Organization 
representative, for instance, confined himself to discussion of 
addressing hunger through investment in rural infrastructure which 
could be part of the biofuels industry development as well. 
Venezuela distinguished between biofuels produced by small farmers 
(good) and those produced by large companies (bad).  The Head of the 
U.S. delegation, Secretary of Agriculture Ed Schafer, noted the 
belief that biofuels are responsible for large impacts on food 
prices is a largely "discredited notion."  The third major theme, 
life cycle analysis, was also hotly debated. Many countries pointed 
out that other energy sources (such as oil) were not subject to life 
cycle analysis but should be.  Land use analysis, direct and 
indirect, was characterized as important but problematic, 
particularly indirect land use change. No real consensus was reached 
regarding how to best address indirect land use. The U.S. rulemaking 
process attempting to define how to address indirect landuse 
received surprisingly little attention.   Brazil, in defending 
against deforestation allegations, announced it is near completing 
its ecological zoning plan which will feature three zones: areas 
considered prime for sugarcane cultivation, areas in which 
cultivation is permissible with some restrictions, and restricted 
areas where sugarcane may not be grown, including the 
environmentally sensitive regions of the Amazon and Pantanal. 
 
¶5.  Trade underpinned all of the topics, with many countries raising 
concerns that sustainability criteria, particularly those being 
developed by Europe, could have a negative impact on biofuels trade 
and also set a negative precedent for trade in other goods.  Cuba 
also noted its opposition to U.S. mandates and tariffs which 
resulted in food stocks being used as a fuel source.  However, Cuba 
did not repeat its previous attacks on biofuels in general and even 
offered to help with capacity building, pointing to its success in 
capacity building in the medical field. 
 
SURCHARGES/TARIFFS/SUBSIDIES 
---------------------------- 
¶6.  Surcharges and tariffs as well as subsidies came under heavy 
criticism for what several speakers termed their protectionist 
and/or trade distorting results, with many African countries 
stressing the need for the free flow of products from 
drought-resistant crops.  Most prominently Sao Paulo State Governor 
Jose Serra (see Sao Paulo septel for more information on Serra's 
remarks) in both his opening and closing remarks, which immediately 
preceded President Lula's closing remarks, singled out U.S. policies 
for particular criticism.  During his introduction of President 
Lula, he went so far as to compare U.S. trade policy to a Chilean 
priest who "preaches a lot but does not practice what he preaches," 
stating that the U.S. message of free trade is inconsistent with a 
closed market to Brazilian ethanol.  (Note: Brazilian officials 
 
BRASILIA 00001553  003 OF 004 
 
 
privately apologized to U.S. delegation members for these remarks). 
Other speakers such as the representative from Chile were more 
broad-based in their remarks, calling for free trade and an end to 
subsidies in biofuels.  The Italian Energy Minister called for 
biofuels to be an environmental commodity in the WTO and suggested 
that biofuels sustainability criteria should be considered in the 
WTO rules. 
 
FINANCIAL CRISIS 
---------------- 
 
¶7.  Several speakers evoked the current financial crisis as an 
impetus for more, rather than less, biofuels development.  The 
potential for biofuels to serve as an engine of economic growth, as 
well as to offer a diversified energy matrix immediately following 
the recent period of highly escalated oil prices, was on display as 
benefits the biofuels industry could bring to help alleviate the 
economic woes currently faced globally.  Though many speakers 
touched on this, President Lula himself made the strongest case when 
he asked how anyone could erect impediments to the possibility of 
generating energy quickly and cleanly while creating jobs for many 
small farmers.  He reaffirmed Brazil's commitment to bioenergy, 
noting that Petrobras' new assessments of Brazil's oil resources, 
confirmed that day, would not deter the GOB from developing biofuels 
even as it becomes an oil exporter in the future.  He noted that 
biofuels held promise for more than 100 countries and said that, as 
a country with over 30 years of experience, Brazil was ready to 
enter into dialogue with any country looking to promote sustainable 
biofuels development.  He said no critics had managed to provide 
another viable solution to helping do what biofuels can do both in 
diversifying energy sources and creating economic development.  Lula 
called for the conclusion of the Doha development round and the 
abolition of trade barriers as other important ways of addressing 
the financial crisis.  (Note: In a brief bilateral meeting with 
Secretary Schafer, Foreign Minister Amorim also pressed for the Bush 
administration to push to conclude Doha for the same reason.) 
 
GOVERNMENT ACTIONS NEEDED 
------------------------- 
 
¶8.  If there was one element of the conference in which there was 
near virtual agreement, it was the need for government mandates for 
blending biofuels to help the biofuels industry flourish.  It was 
also stressed that governments must not create impediments to trade 
and that they should create incentives for next generation biofuels 
development.  Several noted that without the assurance of a 
prospective market, companies would not produce.  Many further 
reinforced the need for development assistance and technology 
transfer to developing countries to allow them to take part in this 
promising new field. 
 
U.S. INTERVENTIONS 
------------------ 
 
¶9.  The U.S. delegation made interventions in the plenary session on 
sustainability and during the high level government sessions on 
energy security, sustainability, innovation and trade.  During the 
plenary on sustainability, State Department Principal Deputy 
Assistant Secretary Reno Harnish expressed the U.S commitment to 
sustainable biofuels production, U.S. desire for science-based 
sustainability criteria, transparency in processes and rule-making, 
and U.S. support for sustainability work being under taken by the 
GBEP, which met in working groups on the margins of the meeting 
(results of which will be reported septel).  Agriculture Secretary 
Ed Schafer intervened to cite the U.S. Energy Independence Security 
Act as evidence of U.S. commitment to sustainable biofuels 
development and cited the promise of next generation biofuels at 
even further reducing green house gas emissions.  He also heralded 
the U.S.-Brazil bilateral cooperation through which we are assisting 
nine developing countries to develop their biofuels industry.  He 
concluded that comparisons between biofuels feedstocks was not the 
important point, rather the fact that environmentally both corn and 
sugar based ethanol are improvements over oil as a fuel source.  Dr. 
Helena Chum of NREL, during the innovation panel, positively 
summarized the work of the U.S. R&D biomass board that works across 
 
BRASILIA 00001553  004 OF 004 
 
 
the whole supply chain, and cross-sectorally, to integrate biofuels 
and innovation in our market. 
 
¶10.  COMMENT:  Post had previously assessed that Brazil's goal in 
hosting this conference was to use the event as a vehicle to counter 
some of the criticisms over biofuels and claim the mantle of global 
leader on the issue.  While there were criticisms and Brazil 
strategically chose to make room for all voices in the discussion, 
the conference appears by and large to have met the expectations of 
its organizers and perhaps surprised some of its participants. 
Brazilian government organizers privately told members of the U.S. 
delegation that they wanted to open up the topic for thorough 
examination and debate, while destroying the myths about biofuels. 
As the Ministry of Foreign Relations' Under Secretary for Energy and 
Scientific Affairs, and primary conference organizer, Andre Amado 
told the delegation, "We're not afraid of the criticisms.  We have a 
strong case and can answer every argument."  He and other Brazilian 
officials made it plain that open debate was their goal, with the 
presence of developing countries to help strategically frame the 
debate.  Based on the tenor of the conference, it seems that the 
debate over biofuels has moved from whether to pursue this option 
(due to concerns over food) to how to do it in a sustainable manner. 
 Future discussions over the issues surrounding the biofuels 
industry will likely have to contend with the need to open economic 
development opportunities to the developing world, a need that may 
be at odds with draconian sustainability measures.  Brazil will 
likely continue to encourage more countries to become biofuels 
producers to democratize the energy market, as well as ensure a 
stable global trade.  END COMMENT. 
 
SOBEL