Remarks to the Future Fuels Conference

As Prepared for Delivery

Thank you, Doug, and thank you to the CWC Group for putting together this important and timely conference. It is an honor to be here.

You’ll be talking over the next three days about some of the most important issues, challenges and opportunities facing the United States and the world today. During his State of the Union address last January, the President presented a powerful vision for energy freedom that begins at home, with actions the United States must take domestically. Building energy security through increased diversity of energy sources is a central tenet of that policy.

Today I will provide an overview of our energy policy goals, discuss the foreign policy issues that impact those goals, and describe some of the things the State Department is doing to achieve our international energy goals, especially in the area of biofuels.

The world community faces an unprecedented set of challenges in global energy that makes our energy security objectives all the more imperative:

• Tight global supply and demand balances;
• Geopolitical challenges in major oil production centers;
• Exploding global economic growth particularly driving energy use; and
• Our shared concern over the global environment and climate change.

Global energy markets are being shaped and strained by rapid economic growth in Asia. Natural gas, oil and coal demand are expected to rise faster in East and South Asia than in any other region in the world. If the forecast growth rate of 3.0% annually is maintained, oil demand in the region will roughly double by 2025.

Many of the world’s major oil producing regions are also locations of geopolitical tension, and possibilities exist of unexpected supply disruptions. Instability in producing countries is the biggest challenge we face, and it adds a significant premium to world oil prices.

The Bush Administration international energy policy emphasizes diversity of energy supplies and wise management on energy demand by focusing in four general areas:

1.  Increasing traditional energy supplies and promoting open, competitive, and transparent energy markets;
2. Promoting and diversifying secure and reliable energy supply routes;
3. Increasing the diversity of energy sources like alternative and renewable fuels such as biofuels, clean coal, and nuclear power; and
4. Promoting energy efficiency and conservation through technology, international partnership, and market pricing.

We believe that focusing in these four areas will help us tackle what President Bush recently called the two greatest challenges of our times – addressing energy security and climate change. So this morning I want to provide an overview of just a few U.S. initiatives and policies that support these goals.

The U.S. hosted representatives of 17 world leaders plus the United Nations, the International Energy Agency and the World Bank in the first Major Economies and Meeting on Energy Security and Climate Change September 27-28. These countries represented over 80 percent of global emissions and GDP. (NOTE: countries were: Australia, Brazil, Canada, China, the European Union, Portugal as current EU President plus the European Commission, France, Germany, Indonesia, India, Italy, Japan, Mexico, Russia, South Africa, South Korea, and the United Kingdom).

This meeting is part of the new initiative President Bush announced at the G-8 Leaders Conference in May 2007 to further the shared objectives of reducing greenhouse gas emissions, increasing energy security and efficiency, and promoting strong economic growth. Through the initiative, there will be a series of meetings that bring the world’s major economies together to develop a detailed contribution to address energy security and climate change when the Kyoto Protocol targets expire in 2012.

These meetings are intended to reinforce and accelerate discussions under the UN Framework Convention on Climate Change (UNFCCC) and contribute to a global agreement under the Convention by 2009. The next round of those discussions are beginning today in Bali, as I’m sure you know. We will work with participating major economies to:

• Agree on a path forward under the UNFCCC and a working agenda for the year;
• Identify areas for collaboration in key sectors and discuss challenges and opportunities for the development, financing, and commercialization of clean energy technologies;
• Discuss the approaches to reduce or eliminate tariff and non-tariff barriers for clean energy technologies and services; and
• Develop a stronger, more transparent, and reliable system for measuring actions to reduce greenhouse gases and improve energy security, and track progress toward meeting these goals.

We viewed this first meeting as a success because it is the first time the key emitters from both developed and developing countries sat down to try to map out solutions to climate and energy security challenges. There is no doubt that this will not be easy – but it is an important start.

From a broader perspective this was a successful continuation of a trend over the past year of significant convergence on key issues involving climate and energy security. The press likes to write about disagreements, but over the past year there has been a subtle shift towards convergence among the views on a key set of core issues on climate, energy, economics and the environment that represent a critical shift in the debate:

1. All the major emitters are now at table – developed and developing countries alike – making commitments to address climate and energy security and set up a Post-Kyoto framework;
2. We are taking an integrated approach – climate, energy security, economic growth, technology development are all talked about together as components of the solution;
3. There is agreement that addressing climate should not mean killing economic growth – indeed the opposite is true; and
4. Clean technology development is critical to cut what Secretary Rice last week called “the Gordian Knot of fossil fuels, carbon emissions and economic growth.”

This is why the United States Government has poured over $18 billion into clean energy renewable technology R&D since President Bush took office, and the real untold story is how much the United States private sector is pumping into this part of our economy.

A second area of our International energy engagement is to work with key countries and major American and Western energy companies to help increase global supplies of energy. Thus, for example, we are continuing to deepen and intensify our diplomacy in the Caspian region in order to help diversify routes and sources of supply in this energy rich and geostrategically important part of the world.

Over the past decade, American diplomacy has played a decisive role in helping countries in the region enhance their energy security, sovereignty, and political independence. Our focus in this region continues to be to increased the volumes of gas and oil flows west across the Caspian to European, and global markets. I have personally spent a significant amount of time in this region trying to advance these goals.

A third area of U.S. energy diplomacy is deepening our engagement with key developing countries – especially China and India. We are doing this multilaterally, especially through the International Energy Agency (the IEA), where I have the honor to be the U.S. Governing Board Member.

This is another unreported story on the intensity of how much IEA has increased its outreach to China: sharing best practices on such key issues as strategic oil management, energy efficiency, energy with reform, and stimulating invested clean energy technology. China is extremely interested and receptive to this outreach. This makes clear sense for them as a huge importer and user of energy: second only to the U.S., China’s interest and those of the other large energy consuming countries in the IEA are closely aligned.

U.S. engagement with China on energy and climate issues extends beyond the IEA’s important work to many different areas, including the Asia Pacific Partnership on Clean Energy and Climate, our Strategic Economic Dialogue, the 5 Party Energy Ministerial, APEC, and the MEM. The bottom line is that we see engaging China, India and other emerging economis more deeply on energy security and climate issues as absolutely critical to find solutions to these critical global challenges. This engagement is also a potential opportunity for Alaska.

A fourth area of energy diplomacy, and the one you are all here over the next few days to discuss, is our biofuels strategy, and our cooperation with Brazil and other countries in the Western Hemisphere. The U.S. and Brazil are the world’s two largest producers of ethanol. This past spring Secretary Rice and Brazil’s Foreign Minister Celso Amorim signed a ground breaking agreement on a common biofuels strategy that has captured the imagination of the hemisphere.

Our partnership seeks to catalyze biofuels use in the region and beyond by creating conditions for the commoditization of biofuels and development of markets by establishing compatible standards and identifying opportunities for private sector biofuels investment in third countries. This will diversify energy supplies, bolster economic prosperity, advance sustainable development, and protect the environment.

I’m traveling to Miami right after I leave here today to meet with representatives of this partnership to discuss our progress, which has been extremely strong.

The U.S. and Brazil are cooperating on biofuels on three levels:

1. Bilateral: The U.S. and Brazil are working together to advance the research and development of next generation biofuels technology. Since Presidents Bush and Lula met on March 31, 2007, six high-level visits have occurred to bolster bilateral cooperation on biofuels research. Our scientists are traveling back-and-forth between Brazil and the U.S., identifying strong opportunities for cooperation and working to develop specific projects for bilateral collaboration.
2.  Global: The U.S. and Brazil have created an International Biofuels Forum, which is working with Europe, Africa and Asia, to expand the biofuels marketplace. U.S., Brazilian, and European Union standards organization are working together to deliver on an ambitious timeline to arrive at ‘compatible’ standards and codes by the end of the calendar year. This agreement will significantly reduce the variance across the properties of bioethanol and biodiesel - an essential step toward the commoditization of biofuels. This work continues.
3. Regional/Third Countries: We are working together with our partners to stimulate private sector investment in biofuels and bring the benefits of locally produced biofuels for domestic markets to these third countries to advance employment, clean the air, and to advance regional energy security.

Over the next few days, we are bringing our regional cooperation process to Miami, with our partners from the Inter- American Development Bank, the OAS and the UN Foundation and our Central American and Caribbean neighbors.

I am pleased to announce today, and I will be announcing this again tonight in my dinner speech -- so if you have any friends in Miami please don’t tell them -- that the first stage of feasibility studies is completed, with work done in tandem by U.S. and Brazilian consultants. The U.S. hired Winrock International to identify specific areas for technical assistance and to suggest full feasibility studies for particular projects. Brazil is working through the renowned Vargas foundation, which is making broader recommendations about public policy, crop yields and the best crop varieties for bioenergy production.

Over the past few months State Department and Brazilian diplomats, biofuels academics and experts, and the consultants have been heavily engaged the region, meeting with the public and private sectors to advance this effort. I’ve just concluded such a trip in El Salvador, whose vast sugar industry holds a lot of promise for biofuels inside that country. We are not/not seeking to generate biofuels exports, but to help these countries to use ethanol domestically to offset huge oil import bills.

Tonight and tomorrow, we will be consulting with the partner countries about what our consultants have found, and how, together, we can move forward. We are looking at:

• Technical assistance to help implement renewable fuel standards;
• Analysis on greenfield biofuels projects in two of the countries;
• The use of innovative plants like jatropha for biodiesel; as well as
• The best ways to attract investments to refineries to blend ethanol to offset the import of petroleum.
• I am also pleased to announce that we have agreed with St. Kitts to begin a stream of technical assistance that will guide them in land use decisions as they move to reactivate their sugar fields for bioenergy.

I want to close by underlining how essential the private sector -- and I include NGOs in that group -- will be to the future of biofuels.

Under the U.S-Brazil partnership and through our work in third countries, the private sector will make all of the key investments in this region. The U.S. and Brazilian governments have, and will continue to deepen our consultations with the private sector. The United States is engaged with our governmental counterparts to build regulatory frameworks and tariff structures that will allow clean technology to flourish. Since the President took office, the Federal government has invested nearly $18 billion to research, develop, and promote clean and efficient energy technologies and help get them to market. In addition:

• DOE will invest up to $385 million for six biorefinery projects over the next four years -- combined with the industry cost share, more than $1.2 billion will be invested. When fully operational, these facilities are expected to produce more than 130 million gallons of cellulosic ethanol per year.
• DOE will invest up to $375 million in three new Bioenergy Research Centers located in Oak Ridge, Tennessee; Madison, Wisconsin; and Berkeley, California.
• The U.S. spent $150 million in 2007 on second generation biofuels research and requested $179 million in 2008.

Processes like the MEM, the G8, the U.S.-EU Transatlantic Economic Commission and others I’ve mentioned are all engaged to ensure a bright future for biofuels and ensure that it constitutes a critical part of our energy composition. The financing the government can provide is a critical piece of facilitating the creation of a commercially viable new energy source.

But these processes can only facilitate the action of the private sector. Ultimately it will be your entrepreneurship, vision and guidance that can help lead this country and the world into a future where biofuels meet their true potential.

Thank you.