Special Session of the São Paulo State Forum on Global Climate Change and Biodiversity

Palácio dos Bandeirantes, São Paulo, December 20, 2005

with
Paul Wolfowitz, President, World Bank Group
Geraldo Alkmin, Governor, São Paulo State
José Goldemberg, Secretary for the Environment, São Paulo State
Fábio Feldmann, Executive Secretary, São Paulo State Forum on Global Climate Change and Biodiversity

PROCEEDINGS

MR. FELDMANN: First of all, I would like to apologize for the delay. But as a Santos supporter I never expected the São Paulo team to win the championship. Anyway, we are here with our special guest, at least he will get a chance to see how popular soccer is in Brazil. At first he thought that this warm reception was meant for him [Laughter]…but it’s not for him. In fact the Governor has asked me to initiate our meeting because right now he is welcoming the players of the São Paulo soccer team. Our agenda is going to be organized as follows: first I will make a brief introduction of the São Paulo State Forum on Global Climate Change and Biodiversity, explain what it is, then I will give the floor to our guest, Mr. Paul Wolfowitz, after which Prof. Goldemberg will make some remarks. Then I will possibly make some comments, and then, Rachel Biederman, we will open for questions.

Before anything else, I would like to say that we are gathered here today with representatives from civil society, from Greenpeace, from Ethos, representatives from the scientific and academic community. Here with us is the Secretary for the Environment in Minas Gerais State, former Brazilian Minister of the Environment, also Dr. Miguez, most important Brazilian reference on global climate change. You visited the Amazon [addressing Mr. Wolfowitz], here we have Roberto Esmeraldi, from Amigos da Terra, one of the main entities involved with Amazon issues. Minister Celso Lafer, who was also my professor at Law School. So let me explain very quickly to you some facts about the São Paulo State Forum on Global Climate Change and Biodiversity, and after that I will hand it over to Mr. Wolfowitz, Prof. Goldemberg, and then we will open for some comments from Minister Celso Lafer, Ambassador Rubens Barbosa, who is also here with us, and to anyone wishing to participate. Virginia, please? The São Paulo State Forum on Global Climate Change and Biodiversity is chaired by the Governor of São Paulo State and is composed by several important figures holding positions in State Secretariats. It was created soon after the Kyoto Protocol entered into force. What’s new about the forum is that we try to work with global scope themes: climate change and biodiversity. In fact, here in Brazil the main source of emissions of greenhouse gases is deforestation. Seventy-five per cent, right Miguez? So according to the latest figures, it’s deforestation and deforestation in the Amazon. So the forum is presided by the Governor of São Paulo State, I am the Executive Secretary, representing civil society. We work with climate change and biodiversity under two specific conditions: the forum is composed by public figures, representatives from civil society, district attorneys, including some guests who are members of the federal government: the national Secretary on biodiversity, the Minister of Foreign Affairs is also a member of the forum, because it consists of an articulation between the São Paulo State government and the Brazilian government. Next slide, please.

Our main goal is to raise awareness to the issues of global climate change and biodiversity among residents of the state and in Brazil at large. São Paulo State is the most industrialized state in Brazil, but 80% of the Atlantic Rain Forest, one of the most severely threatened biomes in the world is located in the southern part of the state. And recently in the South of Bahia, an area has been found that contains the largest mega-biodiversity on the planet: 120 forest species in a single hectare, this is more than the sum of all European species. Next.

It’s an articulation between government and society and it aims at the cooperation between governments, international bodies, and multilateral agencies, so for us your presence here in the state of São Paulo is very important. Next.

We want to work with public policies and systems and incorporate the international aspects of both themes in the decision-making process of the state of São Paulo. Next.

We’re very glad to have you here because the World Bank plays a very important role. I met John Briscoe a long time ago, during a debate on water resources. For a long time I was a representative and acted as rapporteur for a national water resources policy. The World Bank, don’t you think so Magalhães, exerted a key role in the drafting of this Brazilian legislation. The World Bank promoted a visit to the United States, where we were able to find out more about their experiences and this was extremely important. Another theme we want to explore is the emergence of carbon market, the issue of vulnerability, adaptation and additionality. Next.

Our stakeholders are civil society, the business community and the academic community etc. And that’s it. I just wanted to give you an overview of the São Paulo State Forum on Global Climate Change and Biodiversity and its activities. I will now give the floor to Mr. Wolfowitz and then to Prof Goldemberg.

MR. WOLFOWITZ: Thank you, Mr. Feldmann. I asked for a little coaching on a few phrases in Portuguese and I guess I asked a São Paulino [São Paulo supporter] because I was told two phrases, one is Bom dia [Good morning] and the other is Parabéns aos São Paulinos[Congratulations to São Paulo fans]. [Laughter]

Before the great soccer win I am aware that I have a great deal of competition. And I am tempted, there is a practice in the United States of submitting speeches for the record, so that the constituents can read the speech and think you spent a lot of time making brave comments, but all you actually did was put it on record. But I could, I was thinking that maybe I could do that and we could all go watch the soccer team. But I will give my remarks, anyone who wants to go watch the team should not feel it’s impolite to slip out and back in, we all know what you are doing, but that’s ok.

It is really a pleasure to be with you at the forum today and share with you some thoughts about how the global community can face the double challenge of protecting our environment and strengthening our economies. Not too long ago, many people would have felt that these were conflicting goals. But I think that we know increasingly today that there are innovative ways to preserve this planet’s precious natural resources, and to do so in a way that protects and expands livelihoods, not destroys them. 

Brazil today is working toward a potential double dividend…to meet the energy needs that are essential for economic growth and fighting poverty…while at the same time leaving a smaller environmental footprint.  

In the past week I was fortunate to travel extensively in your fascinating country and, quite frankly, I’m reluctant to leave tonight. I am not reluctant because it is colder up north, although it is much colder, but it’s because it is so attractive here in Brazil and most of all because the people here are so warm and hospitable, fascinating and interesting to talk to. I saw inspiring examples of how poor communities in the semi-arid areas of the Northeast are trying to cope with the devastating effects of droughts…droughts which have also hit the rainforests of the Amazon hard this year, leaving communities stranded without food or transport.

I saw the effects of deforestation and I have to say that until you actually see it, reading about it doesn’t quite get you there. And I think probably many Americans think ‘well we hear about deforestation but we’ve seen forests come back again’—and to realize how complex the Amazon forest is and how different it is from a forest in North America or Northern Europe and how difficult it would be— or is in fact—to bring it back once you’ve lost it. You can read about it all you like but seeing it is firsthand much more compelling. And I learned about the challenges of reconciling development with the conservation of this vast region’s rich biodiversity that Mr. Feldmann referred to.

Brazil’s response to these enormous challenges has been impressive.  I learned about how your active carbon trade market is generating methane from landfills and about your world-class agricultural research complex, EMBRAPA.  I heard personally President Lula’s enthusiasm for bio-fuels as a source of job creation and green energy.  And this morning, I visited the world’s largest ethanol plant in Ribeirão Preto…

Investing in the environment is investing in the future of the poor.  Perhaps, more than any other country, Brazil, I think, understands that the costs of neglecting the environment are high, both in economic and social terms. 

But despite the achievements there is an urgent need to do more, both at the global and local levels, to preserve a healthy Brazil for the future generations of Brazilians and frankly for all of us on this planet. Because as I said only half jokingly to the Governor in Ceará, there are many people outside Brazil who feel the Amazon is a little bit theirs, even though, it’s yours. And I think this is both a challenge and an opportunity, I am going to talk later about how to take advantage of that opportunity. Because Brazil’s environment is important not only to Brazilians but to all of us.

When poorly-managed development damages the environment, it is often the poor who suffer the most.  They are often poor because they already live in fragile environments which makes them particularly vulnerable. I saw this in China, I saw this in Northeast Brazil and I saw it in Pakistan.

From Southern Africa to Latin America and from Bangladesh to Afghanistan, it is poor people who suffer most from climatic variability and environmental degradation.  Seventy percent of the world’s poor live in rural areas.  When extreme weather hits, small farmers pay the price with failed crops and disrupted water supplies – hardships that are hard to recover from.  These farmers need predictable weather to earn their living and feed their families.

This past year alone, we have seen a major drought in the Amazon destroy fish and crops—the lifeline for indigenous communities.  Last week, I visited Ceará in the northeast, where the entire culture has been warped by having to deal with the vagaries of an erratic climate.  It is no wonder that this is where one finds the largest concentration of poor people in Brazil.

Vulnerabilities like these are exacerbated by global warming.  There has been much debate on the global community about the major causes of climate change and how best to curb carbon emissions.  But while the world continues to debate long-term goals to protect the environment, it is the poor who suffer in the short-term – too often.
 
Here in Latin America, around 7 million cubic meters of ice cover disappeared from the tropical glaciers of the Andes over the last three decades, jeopardizing water supplies in the area.  Sea levels in the Caribbean basin are rising at a rate of 3 millimeters per year, and threaten to displace people, damage infrastructure, and affect fresh water sources on islands and coastal areas.  Tropical diseases, such as malaria and dengue fever, have become more common and have started to appear even under mild temperatures. 

We may not be able to link all of these changes directly with global climate change, but we know the pressure on the environment is serious and the livelihoods of the poor are at risk.  We must collectively work on mitigating the consequences for the most vulnerable among us.  But doing so is treating the symptoms.  We also need to address the underlying causes.

There is no doubt that the use of greater quantities of higher-quality energy is absolutely essential for developing countries to grow and fight poverty. For a country like Brazil, where tens of millions of people still live in extreme poverty, on less than a dollar a day, there is much work to be done.

So how can we address the increased pressure on our environment and the rising demand for energy? How do we protect the most important natural asset of the poor—their land—from being ravaged by droughts and floods? I don’t claim by any means to have the answer but I don’t think the answer lies in a futile effort to halt energy consumption. It does include generating energy with a smaller environmental footprint, and using energy more efficiently..  And Brazil has made strides on these fronts.

The poor cannot improve their living conditions without shifting from inefficient energy sources like fuel wood or raw coal to modern forms like electricity and gas. 

Without adequate energy services, the poor have to walk or rely on animals rather than travel by motorized transport.  They must live in poorly lighted and badly heated homes, and work without the benefit of powered machinery. They have to cook with dangerously polluting fuels like wood and crop residues in inefficient and often unvented stoves. It is estimated that exposure to soot and smoke causes about 4 million premature deaths and 40 million new cases of chronic bronchitis every year. And the returns from a day’s work will be much lower if people do not have access to electricity.

So to improve the lives of the poor and to create job opportunities for them, the developing countries need much more energy than they do today. 

Poor countries consume on a per capita basis, only 5 percent of the modern energy consumed by rich countries.  In rural areas of the developing world, particularly in South Asia and sub-Saharan Africa, four out of five people live without electricity.  Rich countries have developed more than 70 percent of their economically-viable hydroelectric potential.  For developing countries overall the corresponding figure is only 20 percent, and for Africa it is just three percent.

The world’s billion poorest people use only one fifth of a ton of oil equivalent of energy per capita annually, while the billion most prosperous use nearly 25 times as much.

I think the bottom line is clear.  Developing countries need more energy but they need to use it wisely, if they want improve their living standards.  The big question is whether it is possible to expand access to energy in a way that leaves a sustainable environmental footprint—both at the local and global levels? 

As a global leader on clean energy, Brazil has much to share with the world about how developing countries can use more energy, but with a reduced environmental footprint.

The industrial world is overwhelmingly responsible for today’s greenhouse gas emissions—which means that it’s those countries that must take the lead in doing something about it.  Rich countries’ per capita greenhouse gas emissions today are five times higher than those of poor countries.

That said, many of these poor countries are catching up. It is clear that as developing countries grow, their demand for energy is growing dramatically..  China is already the world’s second largest emitter of greenhouse gases, after the U.S.  Its high resource consumption is partly driven by inefficiencies—China uses about twice as much energy per unit of Gross Domestic Product (GDP) as Western economies do—there is great opportunity there for improvement.

As rich and poor countries invest in energy infrastructure, they will need to apply energy-efficient technology to cut future greenhouse gas emissions.  Yet power plants in developing countries and even in the OECD countries—who are about to embark on a major power plant renewal program—have yet to adopt clean technologies that are readily available.  This is a serious concern but it also provides a great opportunity to do better, to make climate-friendly investments.
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Increasing energy generation and decreasing greenhouse gas emissions represents a double challenge.   Brazil is developing innovative ways to turn this double challenge into a double dividend. 

Brazil has long understood the importance of maintaining a balance between development and conservation—and I think I would say from what I learned increasingly understands. And it is increasingly using the route of innovation to tackle this challenge.  Today 42 percent of Brazil’s energy use  comes from renewable sources, compared with 6 percent for OECD countries, the most developed countries.  Around 90 percent of Brazil’s electricity comes from hydropower. And Brazil is also the world’s largest producer and consumer of fuel ethanol from sugarcane as a transportation fuel, an achievement possible because it is the world’s most efficient producer of cane sugar.  Today, the ethanol program is saving around 180,000 barrels per day of gasoline, this comes out as the equivalent of about US$4 billion per year.  That means that about 24 million tons less CO2 are added to the atmosphere every year because of that program already. 

Green energy also has a huge pay-off with its potential to earn Carbon Credits under the growing public and private carbon emission reduction markets.  It is not a surprise that President Lula, Minister Palocci, Minister Rodriguez and many others are excited about the economic, employment and environmental possibilities of bioenergy in Brazil.

But it serves little purpose to be too starry-eyed about Brazil, let’s be straightforward about two challenges that Brazil continues to face.  

First, in spite of Brazil’s great concern for the environment and huge potential to expand its renewable energy options, environmental legislation is sometimes pushing investors away from where they ought to be.  It is ironic that it is apparently easy to get environmental clearance for thermal power plants, yet very difficult to get the necessary licenses for renewable hydropower.  It is also unfortunate that Manaus, which lies in the heart of the world’s biggest source of hydropower, relies on diesel fuel, shipped across hundreds of kilometers along the Amazon River.

These cases, I think, demonstrate the need for broad, consistent environmental policies that balance the need to encourage development and protect natural resources—to reap the double dividends that may be possible.  It is not an easy task, but I was pleased to hear that progress is being made in issuing environmental licenses in the recent energy auctions, and in the use of strategic environment assessment tools.  

The second and much greater challenge lies in slowing the threat of deforestation.  In just the last five years, approximately 112,000 km2 have been deforested in the Amazon. The Amazon, the pride of Brazil, the world’s richest reservoir of biodiversity, and a vital economic asset for the indigenous population is threatened by potentially irreversible deforestation.

I have seen maps of the Amazon, with all the countries of Western and Central Europe fitting inside just the territory of the Brazilian Amazon. I have to ask my staff what country is 112,000 km2, that deforestation I bet is as large as some countries in Europe. Being on one small edge of the Amazon after traveling a couple of hours up a river on a boat just brings home the immensity of the region and I am equally impressed by the immensity of the challenges. I met with rubber tappers, with representatives of civil society organizations, business people, government leaders. I saw that the challenges are as enormous as the Amazon itself.  But I was deeply impressed by the vision of some leaders, and by the commitment of so many people to address the causes of deforestation.  I am also encouraged by to hear about the substantial 31% drop achieved in the rate of deforestation last year, despite – as Minister Palocci informed me – an increase in the sown area.

But much remains to be done.  Brazil is one of nine countries, and the biggest on that hosts, the extraordinary treasure of that river.  It is not only a national heritage for the people of Brazil, but as I said earlier, it is also an asset for the entire region and for the global community.  Brazil will need to apply the same creativity towards the Amazon as it did towards clean energy—to benefit from the ecosystem without destroying it. And the whole world has an interest in helping manage those resources in a way that both maximizes the contribution to development and preserves the environment.

Let me say a little about where I believe the World Bank fits into this picture.

Our mission at the World Bank Group is to support economic development and policies that help the poor.  In a middle-income country like Brazil, the Bank is providing this support in a number of ways. 

First, Brazil has an enormous amount of knowledge and technology related to energy and the environment that Brazil can share with the rest of the world.   One of the important roles that the World Bank plays in the developing world is to facilitate the sharing of knowledge for development.  From my week here, it is obvious to me that the potential for partnerships between the World Bank and Brazil in exporting Brazilian know-how is large and only beginning to be tapped.

Last year, we signed the first Reform Loan for Environmental Sustainability aimed at helping Brazil balance economic growth with social development and environmental management.  The reforms supported by that loan will ensure that environmental concerns are integrated in Brazil’s economic planning.

And on another front, earlier this month, the IFC – the International Finance Corporation, the private sector arm of the Bank Group – perhaps it’s worth explaining for just a minute. I used the phrase Bank group because the World Bank is more precisely the public sector arm of the so called International Reconstruction and Development Bank that lends to governments. The IFC lends to private businesses. We are one group, one team, we are working together to get the synergies out of that here in Brazil.

Earlier this month the IFC and its partners at Bovespa and the Getúlio Vargas Foundation launched the first ever in the world-- no – first ever Sustainability Index in Latin America, sorry.  This index includes up to 40 local companies and tracks not only their financial performance, but also their environmental and social performance.  The index is part of a wider trend to promote environment-friendly business practices.

Second area where can work is in partnering with developing countries to improve the supply of what we call “global public goods”.  Trade liberalization is one example.  It is an issue of vital importance to the world’s poorest people, and one on which Brazil has played a leading role.  It is one in which Brazil and the World Bank will continue to work closely together..

We are also looking at ways to support clean and efficient technology and protect vulnerable communities from extreme climate variability and change.  At the Gleneagles Summit, attended by President Lula earlier this year, the leaders of the G-8 asked the World Bank to develop what they called an “investment framework” to promote climate-friendly technologies for developing countries.  We have held meetings already with the reinsurance industry, investment banks and cutting-edge technology companies and we have dispatched teams to consult with the governments of Brazil, India, China, Mexico and South Africa.  There is much more work to be done and I think some great opportunities to use new financing mechanisms, technology transfer mechanisms, and even some degree of subsidies from rich countries to promote more efficient energy use in the rapidly-growing developing countries.

Third, there is the traditional but still important role of the World Bank Group in financing.   We have two major lending instruments…I skipped over a paragraph, I think I want to say it. It is a little bit technical but I think it is important.

The IFC has developed over the last 3 or 4 years a very valuable report called the Doing Business report, that calls attention to the business environment in nearly 180 countries around the world. And it also helps countries identify where they have challenges to create a more favorable business environment. We are also, on that model, developing a conservation index, in consultation with our partners, that will help countries to look at how they manage their natural resources and at the opportunities created for indigenous communities. These tools include rankings. And sometimes countries get upset at how they get ranked on these lists. And there is always some room to argue about how you put the list together and how you weigh the various scores. But I think that there is no question in my mind that focusing people’s attention on where there are problems and focusing on where other countries are doing better than they are, in this area of environmental management, could be a very important way to fix problems and improve performance everywhere.

Third area where we can work as the traditional but still important role of the World Bank Group in financing and lending. As I explained we have to main lending instruments for financing projects in Brazil—IBRD loans to the public sector and IFC loans to the private sector. 

We also developed a wide range of lending and grant instruments, including investment guarantees from another sector of the Bank called MIGA and IBRD and the IFC, and grants from something called the Global Environment Facility. We have several carbon finance funds—grant funds--  totaling nearly $1 billion.

Let me use the example of the Amazon to suggest how the World Bank might play a role in addressing that great challenge and perhaps other environment and development challenges of our time.

Over the past decade the World Bank has had little involvement in the Amazon, aside from a donor-funded grant program of roughly $400 million. You may say $400 sounds like a lot of money. It is in a way, but if it is spread over ten years and over that vast region it is actually very modest compared to the challenges – and the importance – of the Amazon..  

During my trip this week, I came away with the impression that Brazilians are increasingly coming to grips with the challenge of how to proceed with much-needed economic development while simultaneously protecting the forests and environmental treasures of the Amazon region.  While-- as you know better than I—they don’t all have the same vision about the future, I think that the differences among people are narrowing.  In some cases – such as in the state of Pará – this vision has been endorsed very broadly by elected public officials.

The development and environment issues of the Amazon need to be addressed on a scale commensurate with the vastness of the area, and the complexity of the problems.  Many Brazilians asked me for a larger, more comprehensive engagement by the World Bank as a partner to the national and state-level political leaders who are developing a Brazilian vision for the future and who need support to translate this vision into action.   I was told frequently that the World Bank Group could play an important role, partly as a financier, but even more because of first our substantial expertise in this area and second because we are sometimes able to bring people together in unique ways to catalyze both local and international cooperation to address this challenge.

In response to such requests, we are prepared to look at how to enhance our efforts in the Amazon.  We are also working on the national stage providing advice on designing policies that are pro-poor, pro-growth and pro-environment. As I think I mentioned already, last year, we signed the first Reform Loan for Environmental Sustainability and we are working with the State of Pará to develop a $100 million project to help implement the promising vision of forest conservation and economic development which was explained to me by Governor Simão Jatene in Belém.

I see many opportunities for us, working with partners, to make a real difference.  In the right policy and legal framework, the World Bank Group and other international donors could work on a much larger scale on forest conservation, on projects with farmers and agro-industries, on helping to analyze and finance appropriate forms of energy generation and distribution, and on transport to achieve the twin goals of development and environmental protection.

Obviously it is the Brazilian national and state governments which would necessarily and appropriately be the primary partners for the Bank.   But through and with government we would work with other Brazilian partners – with research institutions, with civil society and with the private sector.  And I believe the international community would be prepared to bring additional international resources to address these twin challenges. 

To conclude, as Brazil develops, the World Bank is becoming an increasingly small actor on the large stage that is Brazil.  Our lending is only about 0.3 percent of Brazil's GDP and less than 6 percent of total external financing.  So our strategy must be realistic and we must focus on those issues where we have a comparative advantage, and where we can add real value.  

What I heard before I came to Brazil has been confirmed by what I have seen in my six days here.  The Bank can and should continue to engage with conservation activities, but also needs to engage with the major forces of development in an integrated approach.   

Doing so can contribute to important global issues such as biodiversity and climate change, but it is fundamental for the domestic balance which Brazilians seek to achieve between development and environment.

For the World Bank, Brazil is more than a borrower.  It is increasingly a major global player and a donor, an exporter of knowledge and a leader on environment. 

We can and will continue to work with Brazil to raise global consciousness about our shared responsibility toward our environment.  We owe it to the children and grandchildren of Brazil…and of the world…to demonstrate that the coming decades can be different.  That we can reap the double dividend of robust growth on a healthy planet.

Thank you.

[Applause]

MR. FELDMANN: I would like to thank Mr. Wolfowitz and hand it over to Professor Goldemberg, reminding everyone that last week Business Week magazine portrayed the 20 more important people in the field of global climate change and Professor Goldemberg appeared as the 7th more influential name, the only personality from the Southern Hemisphere. Whenever energy is under discussion, Professor Goldemberg is considered a key reference. Professor Goldemberg, we would like to say publicly that we are very proud of your citation by Business Week and we are very happy to see your life’s work acknowledged. In addition to being the Secretary for the Environment in São Paulo State you are considered as an important reference on this topic and we would like to recognize that. I would like to ask now for a round of applause for Professor Goldemberg.

[Applause]

MR. GOLDEMBERG: Thank you, Fábio and Mr. President. I would like to talk for a few minutes to our colleagues who are gathered here with us and to your friends at the World Bank about what São Paulo State is doing in relation to global change issues.

Well, dear friends, here we have a schematic table showing that energy is one of the main sources of pollution problems throughout the world. Please have a look at the first column, you will see lead emissions to the atmosphere.

Then we have the human disruption index, which indicates that today humans are emitting 18% more lead to the atmosphere than 200 years ago. In other words, human impact has generated the problems you can see listed on the table. Fossil fuels burning accounts for 41 % of the 18% increase in lead emissions, as compared to the levels of 200 years ago.

Please notice, for example, the sulphur emissions to the atmosphere. The human disruption index is 2.7%; emissions related to human action are 2.7% higher than two hundred years go, before the dawn of the industrial era. And 85% of this total stem from fossil fuels and so on and so forth. On the last line we have carbon emissions, they are one of the main problems faced by humankind today. And 75% of all human disruption is due to fossil fuels burning.

What have we been doing to counter that in São Paulo State? About 20 years ago, São Paulo State engaged in a program aimed at producing a viable fuel alternative for gasoline, and the name of that fuel is ethanol. People tend to forget but as early as 1906, that is, almost 100 years ago, Mr. Henry Ford had a plan to make his cars run on ethanol. Naturally, Mr. Rockefeller was not satisfied with that solution, so they went for an alternative solution that is responsible for a big share of the global and even local problems we have faced in the 20th century.  São Paulo State promoted a wide-range ethanol production program based on sugarcane.

This graph shows current fuel consumption levels in São Paulo State. Just a second. Diesel oil represents 49%, fuel oil is 16%, gasoline is 24% and ethanol is 11%. Please note that roughly half, or rather one third of the gasoline that would be used if ethanol was not available is represented today by ethanol.

Now, with the introduction of flex fuel automobiles, which are cars that can take either gasoline or ethanol, this percentage is likely to grow. The result of this was a clear drop in local pollution levels within the metropolitan São Paulo area. Additionally, carbon emission figures for the São Paulo State have started to show a modest decline in spite of the current cycle of economic growth. The gross state product is rising at a rate of 5% per year. However, as of 1996 carbon emissions have been showing a slight decrease. That means that the state is making a significant contribution to the reduction of carbon emissions, but this is not hindering its economic development. Below, on the red line you can also realize the small contribution of vegetation recovery in the state. Forest covering in São Paulo State is being recovered and the World Bank has a participation in this accomplishment, because the GEF has granted us around US$8 million this year. They are encouraging our efforts in the recovery of riparian forests. Therefore, the participation forest recovery in carbon emission reduction is probably going to rise.

This graph provides the answer to the question every economist likes to ask: if ethanol is such an attractive fuel and efficient gasoline replacement, promoting the reduction of local and global carbon emissions, why has ethanol not been used in the past? And the answer lies in this graph. Ethanol was not used in the past because it was expensive, as is usually the case with new technologies that are introduced in the market. However, as the cumulative production rose, and as you can see, it has already reached almost 300 million m3, the production cost decreased, as shown by the black line. On the other hand, prices of gasoline in the international market, which had always been lower than ethanol prices finally crossed the ethanol curve in 2004. Today as you can check for yourself in any Brazilian gas station, ethanol is cheaper than gasoline. Hence the answer to the classic question asked by economists. No subsidies were incorporated to the plotted curves. And this begs the question: Is this production sustainable? A large expansion of ethanol production is currently taking place in São Paulo State and I can report to our visitor, President of the World Bank, that environmental licensing has not deterred this expansion. Improvements were made to the legislation, inspection has also been tightened. São Paulo State is responsible for 60% of the Brazilian output. Emissions are controlled very closely. The burning of crops prior to harvesting, which used to be a major problem, is also being controlled. The State House of Representatives passed a new law requiring the gradual introduction of mechanized harvesting in sugarcane plantations. This process is still being implemented. Land use is also strictly supervised and we also keep a close watch on this preservation of riparian forests and other ecosystems. Finally, on the last slide, we have depicted the expansion of ethanol production in the country. This expansion is concentrated in the Center and South of Brazil, not in the Amazon, which is not fit for sugarcane, at least for the time being. Genetic modifications may change this, I certainly hope this doesn’t happen. In any case, there are no ethanol production units located in the Amazon or in the Atlantic Rain Forest, which boarders our coastline. The production units are concentrated in the Center and South, and expansion is also taking place in the Cerrado regions of São Paulo State. We are making strong efforts, dear friends, to increase renewable energy use, in a way that is compatible with environmental protection and brings about a reduction in global impacts. Of course, there is much more to be done, and the President in his speech referred to this fact. There is much to be done in Brazil and abroad in the field of energy conservation and in the development of other solutions. But in my view we are clearly making a significant contribution. In conclusion, I would like to mention that in the past 20 years the ethanol program prevented the emission of 160 million tons of carbon to the atmosphere. Brazil as a whole, not including the Amazon, emits around 80 million tons of carbon a year. This is a very reasonable contribution and we intend to keep following this path.

MR. FELDMANN: Thank you Mr. Goldemberg. We would love to hear the comments from our participants. Some people have already registered to participate in the debate, such as Minister Celso Lafer, José Carlos, I am not sure if you want to speak now or later, Ambassador Rubens Barbosa, Plínio Lastari, who by the way is one our most knowledgeable experts on the ethanol program, Ricardo Young and perhaps Geraldinho from Plantare, an organization involved with the Prototype Carbon Fund (PCF)
project. So let’s try to stick to this order. Minister Celso Lafer, I am very interested in hearing your remarks, there is also Frank from Greenpeace. Frank, please when you comment make sure you mention the Greenpeace experience, featured on the Fantástico TV show, on the issue of illegal wood routes. So if you please, Mr. Celso Lafer…

MR. LAFER: I would just like to add a footnote and thank you for the opportunity of being here and hearing Mr. Wolfowitz and our dear friend and great master, Professor Goldemberg. With reference to the Amazon theme and specifically to the Amazon Cooperation Treaty: one of the things we tried to do towards the end of the Cardoso administration was establishing the Secretariat for the Amazon Cooperation Treaty. As you know, the responsibility for the Amazon region falls upon us and upon our partners and neighbors who share this region with us. I believe, and that’s a suggestion I would like to leave for your consideration, that the Secretariat was designed to implement cooperation projects in this area. So maybe the Secretariat could be used as a vehicle for developing joint work with World Bank.

MR. FELDMANN: Ambassador Rubens Barbosa, the floor is yours...[Pause] Let me make just a brief introduction. Ambassador Rubens Barbosa was Brazil’s ambassador in London and in the United States for many years. Today he is considered a reference in Brazil. He also acted as a consultant for the BM&F (Brazilian Commodities and Futures Exchange), that maintains a carbon emission credits exchange, one of the most innovative experiences of its kind in the world, headquartered here in São Paulo. I apologize, Mr. Barbosa, I just wanted to make an introduction.

AMBASSADOR BARBOSA: I would like to comment precisely on that issue, very briefly. First, I would like to tell to the President that the BM&F-- 5th largest commodities and futures exchange with transactions totaling 30 billion dollars per day-- is making vigorous efforts to create a market for trading carbon emission credits, based on the Kyoto Protocol guidelines.  Two weeks ago we visited the World Bank headquarters in Washington where we held important discussions with members of the technical area, opening an opportunity for cooperation between the World Bank and the BM&F. This market is still being developed, but we have already set up a project database that can later result in transactions. The Exchange is set to start operations in mid 2006. We hope that the dialogue we had with the World Bank may prosper, enhancing the cooperation between the BM&F and the Bank. And as Fábio Feldmann said, this possibly is one of the first exchanges designed according to the principles defined by the Kyoto Protocol for carbon emissions trading. Thank you.

MR. FELDMANN: Well, I will hand it over now to Roberto Esmeraldi and Frank, who are sitting nearby and then to Minister José Carlos Carvalho. Roberto Esmeraldi is a member of the Amigos da Terra organization. During the Rio Summit he spoke on behalf of the world’s civil society. He was also chairman of the Advisory Board of the World Bank’s PPG7 .

MR. ESMERALDI: Thanks. Fábio and Mr. President, considering that the main topic of our meeting is climate change, I would like to tell you that Professor Goldemberg was the person who taught me a few months ago-- he also showed me the supporting data-- that due to deforestation-related emissions alone, Brazil became the 4th largest carbon emitter worldwide as early as 2000. At the time, Professor Goldemberg had just conducted the study, using data from 2000. After that, the rate of deforestation grew. And just now I was thinking of the emissions reduction spurred by the ethanol program. Well, one year of reductions created by the program is equivalent to only one month in deforestation-related emissions and change in land use in the Brazilian Amazon, without taking into account other land use changes in Brazil, and without including slash-and-burn emissions. I am just referring to deforestation: the net conversion of vegetal covering. In light of this, you mentioned very appropriately that the World Bank has gone through a period of reflection and learning. I participated actively in this process, in my capacity as member of the advisory board, as Mr. Feldmann has mentioned. Recently, in 2004 to be precise, the World Bank through the IFC resumed some initiatives, and one in particular raised some concern because it provides financing for agribusiness expansion activities in the Amazon. This implies a chain of conversion impacts: agribusiness in replacement of cattle ranching and displacement of cattle ranching which in turn creates deforestation. The process is quite complex and I am not going to go deep into the details right now. Before your mandate, in October 2004, the former president, Mr. Wolfenson summoned an audit to be led by the IFC’s Compliance Advisory Office (CAO). The audit results were quite surprising, revealing the need to incorporate several decision-making procedures in relation to projects of this type, in accordance with IFC’s own rules. The results were made public two days after your inauguration, on June 2 or 3, 2005 as I recall it. Civil society here in Brazil is expecting some follow-up on this process, expecting that caution be heightened when dealing with agribusiness expansion in the Amazon, especially when it contributes to forest conversion and consequently to global emissions. I would also like to call your attention to the relevance attributed by Brazilian civil society to this theme. Thank you.

MR. FELDMANN: Frank, after Frank, Rachel Biederman I would like you to give your remarks about the sustainability index indicators. Frank Guggenheim, who is Executive Director of Greenpeace. Just last Sunday, Greenpeace denounced in Fantástico, one of the highest rating TV shows, the route used by illegally extracted wood in the Amazon. The Governor is about to arrive any minute now, and we have to end the meeting by 4.55pm. So please, let’s move on.

MR. GUGGENHEIM: My question to Mr. Wolfowitz is the same asked by Roberto, I would like to know if the IFC criteria are different from the ones used by the World Bank concerning financing for environmental projects. The Maggi group received resources from the IFC and it is known that they plant soybean in the Amazon, where soy is one of the principal vectors of destruction. So it is basically the same question, we are very concerned about this, and until now we haven’t heard anything from the Bank in this respect.

MR. FELDMANN: Ricardo Young, please. Just an observation. Ricardo Young belongs to Ethos Institute, the main NGO in Brazil-- Ethos and Uniethos-- dealing with social responsibility issues. He has become a reference in the field and participated in the Global Compact, sponsored by the UN, and besides he was my classmate at the Getúlio Vargas Foundation.

MR. YOUNG: And that’s the most important thing, right Fábio? Thank you for your lecture, Mr. Wolfowitz. My question is along the same lines as Frank’s . The IFC has been promoting noteworthy initiatives in the public sector, initiatives with remarkable driving force in the area of sustainability. Some examples are the Equator Convention which bore a great impact on credit policies adopted by banks here in Brazil as regards non-clean technologies. The latest initiative, which you mentioned in your speech, was the EASY, which has an extraordinary potential for changing financial and economic performance benchmarks here in Brazil. There is a movement in this direction, a convergence between the sustainability index and corporate sustainability reports, which are becoming the main benchmarks for granting credit to the private and public sectors. Nevertheless, even though the private sector is so important in the battle against climate change and environmental problems, it is clear that IFC efficiency levels in relation to the private sector have not been matched by the World Bank Group as a whole in relation to the private sector. And I raise again the issue of agribusiness. Although the sugarcane and ethanol sector is extremely committed and advanced in relation to clean energy and several social responsibility policies, we don’t witness the same in other agribusiness sectors. This is because the sector as a whole doesn’t receive the same kind of incentives from international financing bodies and multilateral agencies, as is the case with the private sector. Besides, this sector is more dependent on public financing and funding from multilateral agencies. So my two questions are: Are there any IFC projects that entail the involvement with agribusiness corporations on the top level of the chain, such as soy crushing plants, large trading companies, and secondly: Does the World Bank have any policies or projects aiming at improving conditions for the granting of credit to agribusiness operations, on the lines of the Equator Convention, that take environmental factors into consideration?

MR. FELDMANN: I will give the floor now to…I am not sure, whenever Mr. Wolfowitz wishes to speak, please feel free, to Plínio Nastari, Geraldinho from Plantare, Marcelo Takaoka, who is representing the business community. Up to now we have had the participation of civil society representatives. So please go ahead Plínio Nastari. Rachel, afterwards could please make some observations on the Bovespa sustainability indicators, because they have been mentioned, and also because it’s always good to count on the participation of a woman in the debate.

MR. NASTARI: Thanks, first of all I would like to thank you for your lecture, it was very useful and rich with examples. My name is Plínio Nastari. I work for Datagro, a private research institute active in the fields of sugarcane, ethanol and biomass fuels. I am very happy to hear that you visited a sugarcane mill today, an ethanol production facility. And I hope that you were able to see that large-scale ethanol and sugar production is not a potential nor a promise but a reality in Brazil. In the Unites States, corn ethanol represents 2.5% of fuel consumption in the octo-cycle-- this is still a small share. But in Brazil this percentage is above 40% already. So throughout the world people are talking about future potential for the development of renewable energy sources, about biomass ethanol etc as if this was an unrealized potential and I am glad to see that you witnessed that as a competitive reality. In Brazil ethanol is already being produced at market costs, not at factor costs, with costs ranging from US$0.60 to 0.80 cents per gallon. Brazil’s experience can serve as a model for other countries. Today, 66 countries in varying stages of development still use tethra etyla lead as a gasoline addictive, in spite of the huge negative impact to human health. Many promises have been made, even within the Americas. The Miami Summit of 1995 established the elimination of lead as one of its few goals but  nothing has been done about it. Unfortunately, lead is still being used in the Americas. The Brazilian experience can be used as an example for other Latin American countries, for Asia and especially Africa. There are 121 sugar-producing countries in the world, many of which are developing nations or less developed nations that account for 66% of the global sugar output. All of these countries have a high potential as bio-fuel producers. I would like to remind you that on the early days of the Ethanol Program in Brazil, the World Bank had a key role supporting the initiative, providing a loan of US$200 million on the early 1980s. This loan had an economic impact, obviously, but also a great political impact. I believe that the World Bank team-- and I would like to take this opportunity to acknowledge the presence of Otaviano Canuto. He has been making remarkable work there. I had the opportunity of accompanying a group of researchers during a visit to the World Bank, providing assistance and guidance for a study, and Dr.Canuto’s help was instrumental. The World Bank has a huge potential for transferring this initiative to many other developing countries and to achieve very positive results. Thanks for your visit, I hope it’s a great success.

MR. FELDMANN: Geraldinho, please. Geraldinho is representing Plantare, a company that is developing a project together with World Bank’s Prototype Carbon Fund in an area that I consider extremely important, namely forest-friendly steel production. So I am looking forward to your comments, but please try to be brief.

MR. MOURA: I will be quick. It’s a great pleasure to have you here, Mr. Wolfowitz. I just wanted to go back to Mr. Goldemberg’s presentation and to the topic of sugarcane in São Paulo State. Mr. Nastari, I think that eucalyptus planting in Brazil and the planting of forests in Minas Gerais State for producing the charcoal used to fuel steel mills is extremely important for our state and for Brazil too. Minas has a strong steel-making vocation. We are one of the few states that produce steel based on charcoal (the other location is Carajá).This is something we do to avoid using fossil fuels. We combine a world-class forest planting technology-- we have developed the highest technology available worldwide in eucalyptus aforestation-- to 365 days a year of sunlight. The forest productivity is very high, trees are cut when they are 7 years old. We produce charcoal and as a side benefit we recycle the CO2 found in the atmosphere. We generate clean energy, we make steel without using fossil fuels or cutting native trees.  The World Bank has acknowledged our efforts in 2001. We have been receiving support from the Prototype Carbon Fund since then to fund this project that aims at the replacement of fossil fuels and native forests. In other words, we create new forests for use in steel making. This is extremely important for our state. So in addition of giving you this news I would like to thank Mr. Wolfowitz for the support received through the Prototype Carbon Fund. Thanks.

MR. FELDMANN: Now on to Professor Miguez. He is the main negotiator in the Brazilian team and he is just back from Montreal.

MR. MIGUEZ: Just very briefly, the president mentioned the G-8 initiative. Together with 5 more countries, the Growth-8 countries have appealed for the creation of an investment framework. During the negotiations in Montreal, we created a side track in the convention. The proposal is that positive incentive be given to countries participating in the convention. This represents a concrete opportunity for implementing this investment framework and in particular for supporting programs, such as the Brazilian ethanol and biodiesel expansion program, charcoal-based steel making, which have a great impact in climate change and also make a significant contribution in the fight against deforestation. This a good avenue of action and it would be very important for the World Bank to participate in this collective thinking process so that we can devise the best way to implement this initiative.

MR. FELDMANN: Marcelo. Has anyone else registered for participation in the debate? John? I am just waiting for the Governor, John. Has he arrived? He is coming soon. Marcelo Takaoka is a real estate entrepreneur, he is also the author of a very interesting project. Marcelo, please.

MR. TAKAOKA: Well, speaking from a business perspective, I would like to know if there is a financing line to support the research and development of CDM projects, especially sustainable projects that seek to achieve a triple bottom line, that is, job generation, improvement of living standards and with this...

[Mr. Alkmin arrives]

MR. FELDMANN: Please carry on, Marcelo.

MR. TAKAOKA: We hear a lot of people talking about reducing environmental impact. In fact, I think that when developing reforestation programs we shouldn’t restrict ourselves to reduction, we can aim higher, we can aim at zero impact. A French group came to visit us, they were studying certification for real estate developments, and I told them that the civil construction sector is always thinking of reducing impacts. I told them we could conceive real estate developments in combination with reforestation efforts and this could result in zero impact. But for this we need to conduct research so that reforestation can bring additional returns, maybe by using sap to produce fragrances, perfumes, drugs. Another example, we are engaged in collaboration with the Brazilian Foundation for Sustainable Development to find out if we can use the vegetation that cleans up sewage in wetlands and turn it into energy as well. So that’s my question.

MR. FELDMANN: We have more people waiting to ask their questions: the Secretary for the Environment, José Carlos, Professor Moreira and then I will give the floor to Mr. Wolfowitz. And just a short recap on the governor’s behalf: Dr. Wolfowitz made a lecture on his visit to Brazil, he also made some remarks about Brazil’s initiatives on the fields of climate change and the environment and also biodiversity. He visited the semi-arid regions of the Northeast, in Ceará, is that right, Magalhães? He was also in the Amazon, where he saw the largest rainforest in the planet. He made extensive comments on the opportunities for establishing partnerships between Brazil and the World Bank, also explaining the role played by World Bank. Well, let’s proceed. I will hand it over to Professor Moreira, I would just like to request you to please be brief. What about you Giovan? No comments you would like to share? No?! Professor Moreira was chairman of an IPCC working group. IPCC stands for Intergovernamental Panel on Climate Change. He is a reference in this subject. After his remarks I will give the floor to José Carlos, and then we will close for questions, since Giovan doesn’t want to participate.

MR. MOREIRA: Thank you. Let me take advantage of this opportunity to remind the World Bank of a recent report that questioned Brazil’s achievements in the field of ethanol. Just remember that the trail of successes we discussed here today is nothing but the first chapter in this story. The ethanol program, the use of a renewable source of energy can progress much farther ahead. Carbon capture and carbon storage are terms being used increasingly often today. Both of them could be used to reduce or to mitigate the effects of greenhouse gases emissions. If this technology is used in sugarcane plantations or corn plantations, as is currently the case in the United States, by combining both techniques we are not going to obtain a reduction but rather a negative emission of greenhouse gases. This is the only option providing a negative emission of GHG gases. The more energy we produce, the more CO2 is going to emitted to the atmosphere. This is the only solution for negative emission discovered by the scientific community. Therefore, just think of how far the effort launched by Brazil can go, it is really an unfathomable contribution and perhaps the solution to the global climate change problem.

MR. FELDMANN: I will give the floor to José Carlos. He was Minister for the Environment during the Cardoso administration; he is São Paulo State Secretary for the Environment. On our way to the Palace we were talking about the need to review environmental licensing requirements and to implement strategic environmental assessments.

MR. CARVALHO: Thanks very much. I would like to offer you a reflection and a comment. The presence of the Mr. Wolfowitz in our country coincided with the end of the WTO meeting in Hong Kong. I believe that the solution to our problems depends largely on the subjects discussed at the WTO on this last meeting. And this is somehow connected with the issue of ending subsidies given to farmers in rich countries. Whereas developed nations subsidize their agriculture using their financial capital, directly and explicitly, emerging countries subsidize their agriculture by using their natural resources capital. This is an issue worthy of reflection and it was widely discussed in Hong Kong. This is also an issue that has been debated in Brazil since Celso Lafer’s term of office as Minister of Foreign Affairs. Another comment I would like to make, going back to Professor Goldemberg’s presentation, on a topic that was also touched on by Geraldo Moura. We have a great vocation for generating renewable energy. Alongside São Paulo State, we have Minas Gerais, whom I represent. If we add up our biomass, especially ethanol, wood and hydroelectric power, which is another important energy source, we will see that these sources account for more than 60% of the primary power supply in Minas Gerais State. This reveals our vocation. Allow me to say something I am always sure to mention: we have the vocation of becoming the Saudi Arabia of renewable energy sources. This is our challenge, this is the path we will follow. And in support of Mr. Goldemberg’s statements, the Center-South has a wide stock of land currently being under-utilized as pastures or unproductive fields. This land could be used in the production of renewable energy, with absolutely no human impact over the remaining native forests, in any region, and especially not in the Amazon.

MR. FELDMANN: Rachel Biederman, I forgot about you. Would you like to speak now? You’re the only woman commenting today. Rachel Biederman, working with FGV and in collaboration with Bovespa developed the sustainability indicators used by the São Paulo Stock Exchange. She is also the governor of the city of Bananal, in the Paraíba Valley [Laughter].

MS. BIEDERMAN: Thanks for the opportunity, Fábio. It is a pleasure to tell you that the World Bank, through the IFC, sponsored a very important effort in Brazil. We created a benchmark, the Bovespa Corporate Sustainability Index. The index includes criteria and indicators to assess corporate performance in economic, financial, social responsibility and environmental aspects and also in corporate governance. Among the criteria used to evaluate companies we include indicators to gauge their role in the fight against the worsening of the greenhouse effect. We have been asking companies about their initiatives to check whether they keep inventory of GHG they produce, whether they adopt any policies in this regard and whether they take any concrete measures to counter the problem. We hope this benchmark will be adopted by all emerging markets. This effort is led by the Sustainability Studies Center of the Getúlio Vargas Foundation, within the framework of a project called Sustainable Finance, which is coordinated by Gladys Ribeiro, who is here with us. She is working throughout Latin America to develop a Latin American network of sustainable finance.

MR. FELDMANN: I will now give the floor to the President of the World Bank, Mr. Wolfowitz, and to the Governor next.
[Pause]
John has already sent me 7 messages. John, do you think that at a hearing with representatives from civil society they are not going to complain about the pres…

UNIDENTIFIED SPEAKER, OFF MIKE: …in a slum [Inaudible]

MR. FELDMANN: [Laughs] Do you think we are going to have a hearing with the president of the World Bank without people voicing their criticism? John...[Laughs] Please go ahead Mr. Wolfowitz.

MR. WOLFOWITZ: I am going to be fairly brief and basically comment on two directions. First of all it was truly impressive to visit the ethanol production factory in Ribeirão Preto, is that how you pronounce it? And I love your chart [referring to Prof. Goldemberg’s chart]. I want to take it with me and I want to find out if it stopped in 2004 because I think it did. I think that if you take it out into this year with energy prices where they are, the difference is going to be even larger. But we hear a lot in the United States about the lack of competitiveness of ethanol, because of course people are focused on producing ethanol in Iowa. It is a very different proposition from producing it here with sugarcane and it is very good news and I was very interested in exploring with the people we talked to. Now on the things that might be done to expand ethanol production here in Brazil. Obrigado [Thanks conference staff for handing him a piece of paper]. But also whether it might be possible to take advantage of Brazil’s expertise and technology to create some new opportunities for sub-Saharan Africa, which is the part of the world that needs help the most and this might be an incredibly good source of sustainable energy for them, and that would be exciting. I realize it is quite a different proposition. But nevertheless I was encouraged to hear a number of Brazilians who are doing this here believe that it is transferable. On a more complicated and difficult question of what IFC does with soy producers here. Let me say it is a complicated issue, it’s something I am still working to understand. We are a very big organization. And as I said, I think, during my opening comments, the IFC on one hand and the IRBD on the other, each of them are huge and coordinating is a challenge. But I think it is extremely important that we be coordinated and I think it is important to make it clear that the purpose of the IFC is not to make money, the purpose of the IFC is to support development, but to support development by helping those parts of the private sector that are contributing to development. And it is sort of easy and the IFC is involved in fact today with the ethanol producers in São Paulo State. That’s an easy one. It is very important to work on things like the sustainability index. I think that the IFC has really done some pioneering work not just in Brazil but around the world on leveraging the desire of many companies and not necessarily out of the most altruistic motives but the motive doesn’t really matter. Leveraging their desire to show that they are socially responsible and environmentally responsible. I think that one of the things that we bring when we come into a project like that is that companies are looking for that kind of certification. It also means that we have to hold them to a high standard when we do. I’d say the third thing and this one I am just learning about and I am happy to learn more, but it seems to me that the general principle in large parts of the Amazon region is there is soy farmers there, they are going to grow soy, they can grow it irresponsibly or they can grow it responsibly more or less. And that part of a coherent Brazilian strategy, I believe, is to encourage soy farmers to behave responsibly, to encourage them to grow on already deforested land rather than deforesting additional land. There is a list of things that can and should be done. And now that I think I understand the problem better I need to hear a little more from the IFC people when I get back to Washington as to what mistakes were and weren’t made in the course of this project. It is clearly a mistake if your own internal auditors say you made a mistake, although our internal auditors are very tough, so it doesn’t mean that it was, I think I heard somebody say ‘even your internal auditors’. I am sorry, our internal auditors are tough people, they are supposed to be tough people. If we made a mistake and it can be corrected then it should be corrected. If we made a mistake and it’s not correctable we should at least learn from our mistakes and not repeat them. But the strategy for the whole Bank Group in the Amazon is to support sustainable development not to make money for its own sake. And to recognize though that there are huge profit motives at work, that are, that as far as I can tell can’t be stopped, I mean, one might wish, and I think I had better not take a position on this or I will reveal too much. One might wish, like this old woman, this 75 year old woman I met who clearly wished that the Amazon was the way it was when she was born...One might wish that development would simply stop entirely. My impression is that is total pie in the sky. So the question is how encourage development that is positive, including by the profit-making sectors. That’s what we are trying to do, we may not be perfect at it, we are ready to learn and improve but I’d like to at least be clear that throughout the Bank Group, that’s our mission and I am quite pleased on the whole and happy to hear positive reviews of the sustainability index, very happy to... even from just the pure financial point of view...we are actually making money from your success in ethanol and that is a good thing because even when we make money it is not to go to fancy shareholders, it is to go into supporting other development projects. So that’s the spirit of it, that’s the way in which we will approach you going forward. I feel...for me one of the most valuable things about this trip really...and I said this as we were on the Amazon, in a boat, no excuse me, we were on this river, it’s staggering to think that a tributary of the Amazon, a tributary is so huge. That I have learned a lot about the Amazon over the years in my head. I learned something in this visit in my heart. I believe very strongly that if the World Bank can help Brazil lead the world in the proper management of this treasure it will be something to be proud of. Thank you.

MR. FELDMANN: I will give the floor now to the president of the forum, Governor Geraldo Alkmin.

MR. ALKMIN: Good afternoon, ladies and gentlemen. Allow me to salute you, Mr. Paul Wolfowitz, President of the World Bank; Mr. Fábio Feldman, Executive- Secretary of the São Paulo State Forum on Global Climate Change and Biodiversity; Professor Goldemberg, Secretary for the Environment; Minister of Foreign Affairs and Ambassador Celso Lafer; Ambassador Rubens Barbosa; Minister José Carlos Carvalho, Minas Gerais State Secretary for the Environment; directors of the World Bank, my greetings to you all, Frank from Greenpeace, Ricardo Young from Ethos, Amigos da Terra, José Miguez from the Ministry of Science and Technology, Meira, Marcelo Takaoka, I salute you all. It is a great joy to be here with the President of the World Bank.

This morning, together with one of the World Bank’s representatives for Latin America, Jorge Rebelo, we launched the first public-private partnership (PPP) in Brazil, which will allow us to build Line Number 4 of the São Paulo Subway System. The public part of Line 4 is going to be financed by the World Bank and by the Treasury and we have launched the private part. Our greatest problem with carbon emissions in metropolitan cities is the issue of carbon monoxide. We have the largest vehicle fleet in the world, it is larger than Tokyo’s and New York’s. There are 5,5 million vehicles and only 58 km of subway track. With this in mind, we launched the PPP today-- the construction is already underway. The PPP will enable us to purchase our rolling stock. We expect to transport 900,000 passengers per day in this line alone. We have two simultaneous subway expansion initiatives underway. 

The goal is to tackle the very serious problem of CO emissions. In fact, the three most important death causes have always been cancer, heart problems and accidents. The accident figures are on the decline, because the number of homicides is experiencing a sharp drop. From a high of 15,000 homicides in 1999, we went down to about 8,000 this year, if that much, even though the population increased. However, we see respiratory disease now beginning to climb the chart. Lung disease is gaining importance as a health problem. This is a result of the increase in life expectancy, people live longer, they get older, but we should not dismiss the effect of pollution. Therefore we are making great efforts in order to provide the population with high-capacity, clean transport. We thank the President of the World Bank, which is one of sponsors of this project.

We also have another World Bank financing project in course, the Riparian Forests Program. We are developing a project based on micro-basins throughout the state in which US$120 million dollars will be invested with counterpart funding provided by the state. The soil is the main beneficiary of this project: contour lines, terracing, erosion prevention, soil recovery and recovery of riparian forest. This is a wide-ranging program, a great success with 400 municipalities involved.

São Paulo is the alcohol capital, of course I am referring to the good kind of alcohol, ethanol. [Laughs] We produce 60% of Brazil’s ethanol. São Paulo is the world capital of sugarcane, which is now expanding to other Brazilian states. Maybe in three years, Brazil will not have any more gasoline- or ethanol-fueled cars, just flex-fuel cars. This year, flex-fuel cars accounted for 58% of the new cars incorporated into our fleet. I believe that in two or three years, we will have a fleet composed exclusively by bi-fuel cars. This highlights the need for clean energy sources.

We did our share. The ICMS tax rate on gasoline, a fossil fuel derivative, is equivalent to 25%. The ethanol tax rate used to be 25% as well, but it has been cut to 12%, less than half than before, in order to encourage the use of a clean and renewable energy in São Paulo State.

Finally, I would like to say that we are making advances. Last Sunday, I went walking up a small stretch of the Caminho do Mar (old Santos to SP highway). There was even a very popular song by Roberto Carlos. He wrote ‘Nas Curvas de Santos’ [Driving on the Curves of the Santos Highway]. I remember that in the 1970s the Atlantic Forest along the edges of the Caminho do Mar was terribly scorched, gray as a result of chemical pollution and acid rain in Cubatão. Cubatão was dubbed Death Valley, a place where children were born brainless, where cases of anencephaly occurred. The Atlantic Forest was ravaged at the time. But Governor Franco Montoro, following his statesman vision, initiated a far reaching effort with the collaboration of civil society.  We battled against pollution in the petrochemical complex and today Cubatão is the capital of life. The recovery of the Atlantic Forest was extraordinary. It’s dense, lush and green again, fully recovered.

By the way, we’re setting a good example to the world. São Paulo State is home to two metropolitan areas: the São Paulo metropolitan area, with 18 million inhabitants, and the Baixada Santista metropolitan area, with around 2,5 million people. And right in the middle of the two areas we have the Atlantic Forest. Sixty percent of all preserved Atlantic Forest areas is located in São Paulo State. The state of São Paulo is committed to the issues of the environment and climate change.

Once again, I would like to express my joy in welcoming you all to this special meeting of the São Paulo State Forum, where we were able to make contributions and share experiences. I also thank the World Bank, an important partner in several infrastructure and public policy projects, especially in connection with the environmental area.

In metropolitan areas, the best solution for diminishing carbon monoxide levels is using the subway. Something I learned as a medical student is that carbon monoxide kills. This is because CO2 when linked to hemoglobin forms an unstable bond. So it attaches itself to the lungs, releases the carbon and the oxygen is transported by the hemoglobin. Carbon monoxide creates a stable bond. If you turn on the ignition and let the engine run in an unvented garage you will die. Because all hemoglobin will be linked to carbon monoxide and the person will die without even realizing what is going on. They die because there will be no “little trucks” left to transport oxygen to the cells.

Fábio Feldmann, I congratulate you for your work and I salute the president of the World Bank and all of you, reaffirming the commitment of São Paulo State to the crucial theme of climate change. I would also like to express our happiness at seeing Professor Goldemberg’s efforts and work recognized by the world. Thank you very much.

MR. FELDMANN: Wilfred from the Brazilian Society for Sustainable Development wanted to hand a letter to Mr. Wolfowitz and to the Governor...
 
UNIDENTIFIED SPEAKER: Klabin could not be here today so he asked me to deliver this letter to you and to Mr. Wolfowitz.

MR. FELDMANN: Well, I would like to conclude this meeting and say some words of praise about John Briscoe and Magalhães who made this meeting possible, enabling representatives from the civil society, the business community and the academe to establish contact with the President of the World Bank. Thank you all for being here. The session is closed.

[Whereupon the forum was concluded at 5.25 pm]