Cablegate: Colombia: Biofuels Means Jobs in Post-Conflict

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TAGS: ENRG SENV PGOV ECON CO
SUBJECT: COLOMBIA: BIOFUELS MEANS JOBS IN POST-CONFLICT
ZONES

1. (U) Summary. Environment Minister Carlos Costa recently
highlighted for us the rationale behind Colombia's biofuels
policy: 1) create jobs in rural and post-conflict zones; 2)
remain self-sufficient as an energy producer; and 3) protect
the environment. The policy has been bolstered by Colombia's
success in providing in major cities a 10 percent mix of
ethanol (E10) from sugarcane in gasoline pumps and a 5
percent mix of biodiesel (B5) from palm oil in diesel pumps.
Colombia's goals for biofuels for 2012 and 2015 are E15/B15
and E20/B20 levels respectively, which may be overly
ambitious. End Summary.

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Economic Development in Rural and Post-Conflict Zones
--------------------------------------------- ---------

2. (U) Minister Costa told Econoffs on August 27 that the
GOC's primary reason to invest in and expand the biofuels
sector is to create jobs in rural areas and post-conflict
zones. According to the Colombian Association of Sugarcane
Cultivators (Asocana), the sugarcane industry employs 36,000
direct employees and over 212,000 indirect employees. The
palm oil industry employs more than 42,000 direct employees
and 63,000 indirect employees. Both industries, which are
located in rural areas, have been expanding into
post-conflict zones, creating a licit economy with social
programs that benefit the communities and providing
additional revenue streams to poor municipalities.
Colombia's initiative to increase biofuel levels will expand
cultivation and production further into the rural and
post-conflict zones (e.g., Narino, Valle de Cauca, Meta,
Casanare) and create much needed employment.

3. (U) Small farmers also are enjoying the benefits of the
biofuel boom. According to the Federation of Palm
cultivators and producers (Fedepalma), small farmers have
united to form alliances to create better economies of scale
and become more competitive. There has been a major increase
in the participation of small farmers (with less than 20
hectares), generating 18.4 percent of Colombia's palm oil
production in 2008 compared to 3.7 percent in 1999. (Note:
Under Plan Colombia, USAID has assisted at least 80 percent
of the small farmer alliances, which account for an estimated
50,000 hectares of palm cultivation. End Note.)

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Remain a Net Exporter of Energy
-------------------------------

4. (U) The second priority in expanding biofuels production,
according to Minister Costa, is to remain self-sufficient as
an energy provider. The GOC expects to continue to be a net
exporter of oil and gas through at least 2019. These
predictions continue to change as more, but smaller, oil and
gas fields are discovered. That said, Colombian authorities
maintain that the country needs to complement its oil and gas
reserves with biofuels. The largest consumer of petroleum
products is the ever-expanding transportation sector.
Ethanol and biodiesel, however, are still priced higher than
their counterpart fuels, but Costa noted that a greater
increase in supply should reduce biofuel prices.

5. (U) Currently, there are 337,000 hectares of palm under
cultivation and more than 205,000 hectares of sugarcane.
Minister of Mines and Energy Hernan Martinez told us that the
objective over the next 20 years is to convert three million
hectares of fallow cattleland into sugarcane and palm fields
for the production of ethanol and biodiesel.

6. (U) The sugar and palm oil producers are encouraged by
Colombia's success in providing in major cities a 10 percent
mix of ethanol (E10) from sugarcane in gasoline pumps and a 5
percent mix of biodiesel (B5) from palm oil in diesel pumps.
Colombia's goals for biofuels for 2012 and 2015 are E15/B15
and E20/B20 levels respectively. Biofuel experts we
consulted estimated the targets are overly ambitious given
the available technology in country.

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Protect the Environment
-----------------------

7. (SBU) Minister Costa acknowledged the potential hazards
of what an increase in biofuels may have on the environment,
particularly deforestation. In an attempt to mitigate this
hazard, the Ministry of Environment and the Institute of
Hydrology, Meteorology, and Environmental Studies (IDEAM)
have created a map of Colombia that charts areas for palm and
sugarcane expansion. The biofuels plan seeks to avoid
deforestation and use fallow cattleland and grasslands,
generating a neutral or beneficial impact. Stakeholders in
both industries are reviewing the map.

8. (SBU) Costa is also interested in an environmental and
social certification program for the biofuels industry.
Norms have yet to be decided, but he cited European standards
as a possibility. Econoffs noted that pilot projects of the
World Wildlife Fund and the Rainforest Alliance are
establishing an environmentally-friendly certification
process for palm oil producers. If successful, the palm oil
industry could rebrand itself, since its image has suffered
within the NGO community. (Note: NGOs have accused the palm
industry for environmental damage of monocroping, displacing
people to acquire more land, and disproportionately favoring
large landowners. End Note.)

9. (U) Both industries are conscious of the environment and
are looking for ways to reduce their carbon footprint.
According to Asocana, most Colombian ethanol mills are energy
self-sufficient and use bagasse -- a byproduct of ethanol
production -- to generate the power for their plants.
Surplus bagasse-based power is sold to the national electric
grid.

10. (U) The palm oil industry, led by Fedepalma, is looking
to become energy self-sufficient through a recently approved
UN Clean Development Mechanism (CMD) umbrella project. This
project will capture methane from the residual pool of 32
palm oil plants and use the captured methane in cogeneration,
powering the palm oil plants and providing surplus energy to
the national grid. In May 2009, the UN's Executive Committee
for the Clean Development Mechanism (CDM) approved
Fedepalma's project, making the Colombian initiative the
largest sectoral CDM project registered by the UN Framework
Convention on Climate Change.

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Comment: Opportunities for Energy Cooperation
--------------------------------------------- -

11. (SBU) Post is exploring potential areas of cooperation
to best match Colombia's agenda with the Administration's
goals under the Energy and Climate Partnership of the
Americas. Areas of interest here in Colombia are biofuels,
wind, geothermal, carbon/methane capture, trans-border
electricity transmission, green cities, and the
privatization/reforming of state-owned utility and energy
companies.

Brownfield

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