Sweden calls for the creation of a 'biopact' with the South - Highlights from the International Conference on Biofuels (Day 1, part 2)

Today's second session at the International Conference on Biofuels focused on the development of international trade in biofuels. The chief of staff of Brazil's President, India's Minister of New and Renewable Energies, the Ukraine's Vice-Prime Minister of Energy and Transport, and European Commissioner for Trade Peter Mandelson presented the many challenges ahead for the creation of a global biofuels market.

They include technical issues like standardisation of fuels, the elimination of tariffs and import duties, a reassessment of farm and biofuel subsidies, a new trade status for the renewable fuels, and the creation of a set of sustainability criteria without these rules becoming new barriers to trade.

Sweden's Minister for Trade, Sten Tolgfors, was most outspoken on what needs to be done (full speech). His country is Europe's greenest economy and the fastest growing user of biofuels. Sweden has also become the largest European importer of bio-ethanol from Brazil, which supplies 75% of ethanol used in the country.

Tolgfors outlined the advantages of what we call a 'Biopact' with the South. And to back up the fact that Sweden is committed to such a pact, it has set a target to decrease its use of fossil fuels in motor vehicles to 50% of current usage by 2020 made possible by importing biofuels from poor countries - a stark difference from the binding EU target of 10%.

So what makes such a Biopact the most logical option for countries in the North? According to the minister, biofuels only make sense when they are produced in such a way that they help contribute to reducing greenhouse gas (GHG) emissions. Countries in temperate climates do not have the agro-ecological resources to produce such fuels, but the Global South does. The energy and GHG balance of ethanol produced in Brazil is many times better than biofuels made in the North. The natural competitive advantages leading to this situation, must therefor be exploited to the fullest.

Consumers, producers and the climate benefit from biofuel trade
Tolgfors stressed that both tariffs and non-tariff trade barriers in the EU make biofuels for European consumers much more costly than they have to be. When imported from the South, consumers in the North benefit, as testified by the fact that ethanol from Brazil costs less than half that of the same fuel made in Europe. Sweden's imports as well the country's automakers' development of flex-fuel vehicles, are responsible for the sudden success of biofuels there. Swedish consumers have started buying flex-fuel cars, because they know the imported bio-ethanol is affordable, and hasn't been subsidised.

According to the trade minister, it has become untenable to keep a 54% tariff on imported ethanol, when the tariff on polluting (and costlier) gasoline is only 5%. These and other trade distortions must be abandoned in order to create a win-win situation for both the South and the North.

The advantages of such a 'Biopact' are manifold: producers in the developing world can enjoy their competitive advantages (abundant land and crops under suitable agro-ecological conditions), and can finally enter a market with a product that will not face price collapses, as has been the case with traditional commodities; demand for the product can only increase when oil prices remain high and when efforts to mitigate climate change are stepped up; finally, consumers in the North as well as in the developing world benefit from less costly fuels - an important aspect in a world in which access to mobility has become a crucial social good. Large-scale production of biofuels in the South - if implemented in a socially inclusive way - offers opportunities for poverty alleviation in countries with large rural populations.

Ending 'resource nationalism'
For all these reasons, Sweden, followed by the Netherlands, has launched a formal request for a study by the OECD on how to get rid of the current trade distortions, to which it objects (we reported on this earlier). If necessary, Tolgfors said, the EU should abandon these distortions alone, without waiting for the US:
bioenergy :: biofuels :: energy :: sustainability :: ethanol :: biodiesel :: biofuels trade :: tariffs :: trade barriers :: subsidies :: developing world :: European Union :: Sweden ::

The Minister referred to European Trade Commissioner Mandelson and his recent proposal to lower taxation and tariffs on so-called 'environmental goods and services': if a proposal for lower duties on these products and services has become an official position of the EU's trade commissioner, then biofuels must follow. Tolgfors calls for the total abolishment of all forms of trade taxation and protectionist measures for ethanol and biodiesel.

The implementation of such trade reforms must however be accompanied by the creation of mechanisms that measure the sustainability of biofuels. Few developing countries will experience an immediate boost in biofuel production, because they often lack technological and agronomic expertise. This leaves time to help them devise policies that ensure social and environmental sustainability. But for countries that already have a working and sustainable biofuels industry, like Brazil, the abandonment of tariffs and trade barriers would only be fair.

Temporal synergy
In the meantime, as developing countries make the transition from the status of agricultural importer (the result of farm subsidies and trade barriers in the US/EU) to that of biofuel exporter, the European Union's producers will make progress on the development of next-generation biofuels. In Sweden, such fuels are already being produced from cellulose.

In short, it becomes possible to think of a synergy between two developments: the time needed for the developing world to become a large biofuel exporter, will be long enough for the EU to become more competitive via cellulosic ethanol. Over the short term, the EU will have to import biofuels from the South in order to reach its 10% target, but in the longer term, its degree of self-sufficiency will rise because of more efficient next-generation fuels. At the end of this cycle (15 years from now), cellulosic bioconversion technologies can be transferred to the South, to increase the energy and GHG balance of fuels there even further.

The Swedish minister's logic comes close to that of the Biopact, as it was expressed in an opinion piece over at EurActiv.

European Commissioner for Trade, Peter Mandelson, largely agreed with his Swedish collegue, and added that the EU is the best actor when it comes to helping the developing world creating biofuels industries that respect the social wellbeing of the farmers as well as the environment. The EU has the technological and scientific expertise needed to achieve this.

However, Mandelson tried to balance the importance of environmental sustainability against 'resource nationalism', and concluded that sustainability criteria are crucial but should not become barriers to trade aimed at protecting European farmers.

Jonas Van Den Berg & Laurens Rademakers, Biopact, 2007, cc.


Picture: Sweden's Minister for Trade, Sten Tolgfors.

References:
Government Offices Sweden: Sten Tolgfors, Minister for Foreign Trade: Speech International Conference on Biofuels, Brussels 05 July 2007.

(Check against delivery)


EurActiv: 'Towards a bioenergy pact with the global south' - Feb. 15, 2007.

Biopact: Sweden looks to Indonesia for green fuels - June 01, 2007.


In a next piece, we zoom in on the points presented by Brazil's President Lula, by the President of the European Commission, and by the new President of the European Union.

Tomorrow, on day two of the conference, focus will shift to the opportunities and risks of producing biofuels in developing countries (session 1) and on the latest scientific and technological developments in bioenergy, in the EU and abroad (session 2).