FRANCE QUESTIONS BIOFUEL SUSTAINABILITY

UNCLAS PARIS 004432 SIPDIS SIPDIS BRUSSELS PASS USEU FOR AGMINCOUNSELOR STATE FOR OES; EUR/ERA AND EB(SPIRNAK); STATE PASS USTR FOR MURPHY; USDA/OS/SHAPOURI; OCRA/CURTIS OGA/CHAUDRY, DOUVELIS FAA/YOUNG; EU POSTS PASS TO AGRICULTURE AND ECON GENEVA FOR USTR, ALSO AGRICULTURE E.O. 12958: N/A TAGS: EAGR SENV ETRD EU FR SUBJECT: FRANCE QUESTIONS BIOFUEL SUSTAINABILITY ¶1. In announcing the conclusions of the "Grenelle of the Environment" on October 25, President Sarkozy said that in France, the development of biofuels will be reassessed. He specifically targeted first generation biofuels (produced from food and feed crops) and suggested that a priority should be given instead to second generation biofuels, i.e. plant-derived fuels such as cellulosic ethanol. ¶2. On October 26, Minister for Ecology and Sustainable Development Jean Louis Borloo reaffirmed Sarkozy's position. France will maintain its goal of 7 percent use of biofuels in fossil fuels by ¶2010. However, with the recent hike in commodity prices, France will reassess the feasibility of the 10% percent mandatory use of biofuels by 2015. The French Energy and Environment Agency (ADEME) will be tasked with assessing the ecological impact of biofuel production from food and feed crops. In the meantime, public research organizations will increase R&D on biomass biofuels, including plant-derived fuels. ¶3. Unlike farmers' association, French environmental associations and consumers organizations have been very critical of the French biofuel program. They were disappointed by Borloo's announcement, hoping that the GOF would lower its 2010 biofuel goals and reduce its tax credit commitments for the production of 700,000 MT of biodiesel and 250,000 MT of ethanol. At the same time, farm groups, especially arable crop associations, have expressed concern that GOF support for first generation biofuel production is diminishing. ¶4. Comment : This is the first time the GOF has officially questioned the viability of its biofuel programs. While most economists have not linked the hike in wheat prices to French biofuel programs, media and the general public have blamed ethanol production as one of the factors accounting for higher bread prices. In any case, continuous high commodity prices could seriously hamper the economic viability of French biofuel production in the future, despite record oil prices. At least, one major ethanol project has already been postponed, officially for technical reasons. However, as the volume of wheat used in ethanol production is still limited, a shift in the GOF position will have no direct impact on French wheat availability for either domestic uses and exports. Embassy will continue to stress to our GOF contacts the importance of biofuel production and research in the fight against climate change and the enhancement of energy security. Stapleton