Biofuels in APEC: Crafting Messages for Ministers and Leaders

Focus on EMM-8  What are some key messages that the Task Force can convey to ministers by spring 2007?  How can we put those messages in a form that ministers and leaders can bring to the APEC public?  Can we work towards a Joint Statement of APEC Biofuel Potential?

Some Topical Areas  Biofuel Economics  Biofuel Delivery Infrastructure  Biofuel-Capable Fuel-Flexible Vehicles  Biofuel Resource Availability  Biofuel Trade Potential  Cross-cutting: Biofuel Policies  Cross-cutting: Biofuel Standards

A Possible Approach  Start with a “working hypothesis” in each topical area of TF activity.  Look for APEC economy examples that support the working hypothesis.  Revise the working hypothesis as needed, according to facts gathered.  Group together final hypotheses as a set of Biofuels Messages to Leaders.  These become the basis for a Joint Statement of Biofuels Potential.

Biofuel Economics  Possible Working Hypothesis –At oil prices over US$50 per barrel, biofuels represent a cost-effective opportunity to displace conventional gasoline and diesel fuel for transport.  Example of Supporting Evidence –Australian Biofuels Taskforce reported in August 2005 that “the long term world price of oil would need to average US$42-47 per barrel in dollars… for a new ethanol producer to be viable post-2015 without government assistance.” –IEA World Energy Outlook projects 2020 price of $46 per barrel in a “deferred investment” case.

Biofuel Infrastructure  Possible Working Hypothesis –It should be affordable for several APEC economies to provide a network of filling stations for biofuels by 2015 that provides substantial flexibility to shift away from conventional transport fuels.  Example of Supporting Evidence –In the USA, the State of Illinois recently saw an increase from 14 to 114 in the number of E85 filling stations from a $500,000 program – a public contribution of $5,000 per station to a total conversion cost of $7,000 per station. (Source: Governors’ Ethanol Coalition)

Fuel-Flexible Vehicles  Possible Working Hypotheses –Fuel-flexible vehicles can be introduced into vehicle fleets at very low cost. –It is practical grow the portion of fleets that can shift between biofuels and conventional fuels by about 5 percentage points a year.  Examples of Supporting Evidence –GM reports that a new computer chip can give vehicles full flexibility to shift between gasoline and E85 for just $30 extra per vehicle. –Vehicle fleets turn over in 20 years, so if all new vehicles were fuel-flexible, 5% of total vehicles would become fuel-flexible each year.

Biofuel Resource Availability  Possible Working Hypotheses –Enough biofuels can be produced from conventional crops to displace a significant portion of APEC oil use. –Development of new technology for use of lignocellulosic feedstocks would boost the biofuels resource potential greatly.  Examples of Supporting Evidence –US study found 1 billion tons of biomass available for fuel, surplus to food needs. –US expects lignocellulosic technology to be cost effective as soon as 2012.

Biofuel Trade Opportunities  Possible Working Hypotheses –There are substantial opportunities for biofuels trade among APEC economies. –There are substantial opportunities to diversify transport fuels away from oil through imports of biofuels into APEC.  Examples of Supporting Evidence –Biofuels are produced from different crops at different costs in various APEC economies. –Japan is planning to import ethanol from Brazil to displace up to 3% of its vehicle oil use.

Biofuel Policies  Possible Working Hypotheses –An integrated set of policies regarding biofuel production, biofuel distribution infrastructure and fuel-flexible vehicles can pave the way for expanded use of biofuels in APEC economies. –Measures to cap feedstock prices do not contribute to a reliable biofuels supply. –Long-term expansion of biofuel markets does not depend on financial incentives but will mainly be driven by oil prices.  Example of Supporting Evidence –Recent shortages of biofuel feedstocks. –Past shortages of natural gas in N. America.

Biofuel Standards  Possible Working Hypothesis –Mutually agreed quality standards for biofuels, as well as technical standards for fuel-flexible vehicles and fueling stations, can help to speed the penetration of biofuels in the marketplace and boost biofuel trade in the APEC region.  Examples of Supporting Evidence –Technical standards have boosted trade in other areas like energy-efficient lighting. –Cars and filling stations today have widely varying ability to use biofuels, in part because of different technical specifications. –U.S. and Brazil are discussing ethanol standards that might be adopted by APEC.

Let’s put our experience and knowledge together to build the case for biofuels as an effective strategy for energy security and trade.