Tal
Internationell konferens om biodrivmedel, Bryssel 5 juli 2007
Sten Tolgfors, Handelsminister

Anförande vid den internationella konferensen om biodrivmedel i Bryssel

(Det talade ordet gäller)

Global warming and climate change are rapidly transforming the political scene.

Voters all around the world are concerned, and expect their political leaders to address the problem. The European Union and individual countries are responding by raising the ambitions to replace fossil fuels with renewable fuels, not least in the transportation sector.

The aim is to reduce greenhouse gas emissions by at least 20 per cent by 2020. In addition, the EU has set a binding target that bio fuels are to constitute 10 per cent of the transport fuel supply by 2020.

All political fields must contribute in meeting this goal, if we are to make a difference. Until now, international trade has not been fully used to support climate policy ambitions. Domestic approaches in the field of bio fuels have often been based on market access restrictions, such as tariffs and other trade distorting measures. Trade in ethanol accounted for only 10 per cent of the global production 2004.

This has made bio fuels more expensive in the EU than necessary. And it has restrained present and potential future production countries from using their natural given comparative advantages in bio fuel production. We must use the full potential of the international trading system in haltering global warming.

Ethanol produced in Brazil presently comes at almost half the cost of European-produced ethanol. Yet it is met by a tariff that - in many cases - pretty much evens out the price levels. The value of the tariff added is currently up to 55 per cent, depending on the price of ethanol. Tariff rules also differ in between ethanol as a chemical product, for example when blended in to gasoline, and as an agricultural product. Still, the tariff can be compared with the tariff on petrol, which is only 5 per cent. It simply does not seem consistent to make import of ethanol more expensive at a time when we are trying to expand the use.

Today, sugar cane-based ethanol seems to be more efficient in reducing carbon dioxide emissions, than grain based ethanol. The energy efficiency differs. Still, of course, every litre of fossil fuel replaced by any energy efficient renewable fuel is a good thing for the climate.

I am convinced that we need to create a world market for bio fuels and dismantle market distortions.

1. Demand for bio diesel and ethanol is climbing constantly and considerably. This is both due to increasing interest in blending ethanol with gasoline for cars in general, and for fuelling ethanol-powered E85 cars specifically. A larger number of bio fuel producing countries will be needed to meet demand and make bio fuels into a global commodity.

Many nations lack the conditions for large scale and effective production of bio fuels, using present commercial technology. On the other hand many countries have climate conditions and available productive arable land that are very suitable. In the foreseeable future we are not likely to be able to meet demand with domestic production. We would need about three times the area in the EU, compared to for instance Brazil, in order to produce the same quantity of ethanol.

Bio fuels create an opportunity for developing countries to produce bio fuels, and to prosper from doing so. There is a considerable interest among developing countries in entering the market.

2. Sweden calls for abolishment of tariffs on bio fuels such as ethanol. The EU could do this on its own, or make it a question for the WTO. Commissioner Mandelson has proposed a zero tariff on environmental products, which I find to be a very constructive proposal. Renewable fuels such as ethanol could be a product with a zero tariff.

Politicians probably can not select which the next generation of car fuel will eventually be. There is a new generation coming - such as fuel cell technology. But present tariffs also affect the development.

3. We need a comprehensive and consistent market-oriented policy on bio fuels. Some countries use subsidies to favour domestic production, in a way we rarely see in other sectors of the economy. Rules and standards can differ between countries. We need to move further on harmonising standards.

There are many aspects to consider. Sweden and the Netherlands therefore took an initiative at the OECD ministerial meeting in Paris a couple of weeks ago, for a comprehensive study on the international trading system and bio fuels. The study, the mandate for which is just being formulated, is to be concluded by the spring of 2008.

4. Demand for bio fuels is to a large extent determined by the environmental interest of consumers. They choose to buy a flexi fuel powered car. They also choose what fuel to fill it up with. Price as well as perceived environmental friendliness both matter.

Bio fuels can raise some ethical questions among consumers. The impact on food prices are sometimes claimed to be considerable. Bio fuel production needs to be carried out in a environmentally friendly manner.

Standards for production can be developed on a voluntary basis. Consumer interest in the whole chain of production should not be allowed to turn into protectionist measures.

5. The demand for bio fuels is likely to increase in the near future, to a point where present global supply will be too limited. There is a limit to how much present production countries in the short term can expand their production, especially if environmental concerns are to be given proper attention.

We will need competitive production within the EU as well, even if tariffs are lifted and capacity is added by other countries. The second generation lingo cellulose-based ethanol production is likely to make European production more effective and also competitive on the world market.

I have recently visited two countries with great potential, Indonesia and Malaysia, to learn more about their future production possibilities. Indonesia is to host the next UN climate conference, in Bali in December this year, and I hear that there is a possibility for a trade minister session. This would underline the need to use the international trading system in order to combat climate change.

I have also discussed the topic with a number of colleagues and investors from other countries. The conclusion is clear: we must use comparative advantages, create a well functioning world market for renewable fuels and the mechanisms of the international trading system to help combat climate change.