EU Commissioner Louis Michel on biofuels and the developing world

All keynote speeches, debates and webstreams from the landmark International Conference on Biofuels organised by the EU and held in Brussels earlier this month, are now available online. Over the coming days, we will be presenting some highlights of this wealth of information - which signals the definitive acceptance of the idea of a 'biopact'. We begin with Louis Michel, EU Commissioner for Development and Humanitarian Aid, because his directorate-general will play a key role in designing and financing the EU's biofuel cooperation strategies with the Global South.

Today we are faced with a turning point, a choice. The choice between fear of change, distrust and skepticism, or a bold willingness to cease this historic opportunity. My choice is a very clear one: the developing countries cannot afford to miss this opportunity. Europe must invest in this new promising market and assist these countries to engage in sustainable biofuel production which is respectful of the environment, socially acceptable and guaranteeing open access to the market, thus providing new opportunities to poor countries. This is an enormous challenge, but we have face up to it, if we want this promising market not only to serve the interests of the richer countries. - Louis Michel, EU Commissioner for Development and Humanitarian Aid

Michel's contribution to the debate consisted of a short sketch of opportunities and risks of biofuels in the South. He then outlines avenues on how the EU will help to mitigate the risks and turn them into chances for development.

On the positive side, biofuels can create a whole new market for agricultural producers and small farmers, drive rural development and combat food insecurity, reduce greenhouse gas emissions and provide access to renewable energy. Moreover, biofuels produced in the South also bring governments a range of important benefits: a reduction of oil import bills (which have become disastrous with high oil prices; some poor governments are now forced to spend twice as much on importing oil, than on health care); employment creation on a vast scale, and greater social access to more affordable fuels, necessary to drive an economy.

But we all know there are serious risks involved as well: environmental problems arising from bad land magement, which may result in deforestation, soil and water depletion; social concerns regarding landownership, and the threat to food access for the urban poor.

Michel thinks the pros outweigh the cons and that the major challenges can be overcome. But this will only be so if international policies are put in place and if the North helps the South in mitigating the risks. The Commissioner therefor outlined three main venues which he thinks may contribute to the creation of a biofuel development strategy jointly implemented by the EU and the developing world (a 'biopact'). This is an enormous global challenge, says Michel, that must be tackled by all stakeholders involved.

Policy support
First, the Commissioner suggests the establishment of a set of support policies. These would include measures to protect landless farmers and the urban poor (who, unlike rural populations, could face increased food prices). A set of policies could be aimed at involving rural populations in the whole production chain of biofuels, as is being done in Mozambique, Swaziland and Brazil for sugar cane. Designating a minimal percentage of national feedstock production that has to come from small farmers would be one approach:
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Under the Brazil's Pro-Biodiesel Program, 25% of feedstock production currently comes from small farmers. Land-use rules and planning could include the delineation of land to be used for the production of non-food crops.

Financial support
Such measures and policies would come at a cost, which brings us to financing mechanisms and trade rules. The EU Commission is prepared to cover part of the cost for developing policies and to support the creation of a framework for social and environmental impact analyses, through the European Development Fund and the Energy Facility.

This facility currently holds around €220 million (US$304 million). More technically, Michel says use of the so-called 'thematic budgetary lines' could be up for consideration as well.

Technical assistance for the development of a regulary and trade framework would be provided by the EU, as well as assistance for social and environmental impact studies.

For the ACP (Asia, Caribbean, Pacific) countries (with which the EU has special sugar support agreements), the Commission is currently carrying out feasibility and impact studies that will identify the opportunities and risks for ACP countries wishing to develop bioethanol. These studies are important because they offer the first detailed medium and long term analyses of the impacts of ethanol on these countries' markets. These studies will allow for much more targetted support mechanisms.

Trade reform
The third important avenue in which the North must play a key role is trade. The European Union's sugar regime is being reformed, which would have had some dramatic consequences on the ACP countries who enjoy preferential access to the EU. By opening the ethanol market and supporting the development of biofuels trade, the negative effects of EU sugar reform could partly be mitigated.

This is already the case for Zambia, where the Commission is helping with an impact study and regulatory reform, which must allow the country to benefit from sugar reform, instead of losing. Other examples include Jamaica, Mauritius and Madagascar.

Under the Economic Partnership Agreements which are being negotiated, the EU would strengthen and encourage South-South cooperation on biofuels amongst developing countries, by supporting technology transfers and by helping the establishment of regionally integrated markets.