SPANISH CABINET APPROVES C02 EMISSIONS PLAN TO

UNCLAS SECTION 01 OF 02 MADRID 003273

SIPDIS

SENSITIVE

DEPARTMENT FOR OES/EGC (ED FENDLEY) AND EUR/WE

E.O. 12958: N/A
TAGS: SENV ECON ETRD ENRG PGOV SP
SUBJECT: SPANISH CABINET APPROVES C02 EMISSIONS PLAN TO
MEET KYOTO TARGETS

REF: MADRID 1743


1. (U) SUMMARY: The GOS August 27 issued a Royal
Decree-Law that launched a National CO2 Emissions Allocation
Plan designed to both: (1) set Spain on course for meeting
its CO2 emissions commitments under the Kyoto Protocol; and,
(2) comply with the EU Directive intended to launch the EU's
CO2 trading regime come January 1, 2005. This law suggests
that Zapatero's Government takes Spain's Kyoto commitments
more seriously than it predecessor and sets the stage for
Spain to feel, for the first time, the economic costs of the
Kyoto approach to reducing greenhouse gas emissions. END
SUMMARY.


2. (U) During its first official session after the summer
holiday, the Spanish Cabinet ("Consejo de Ministros") on
August 27 approved a 2005-2007 National CO2 Emissions
Allocation Plan designed to meet Spain's commitments under
the terms of the Kyoto Protocol. The plan authorizes an
annual average of 172.31 million emission "rights" (each
right equaling one ton of CO2 emissions) divided among
covered industry sectors. It specifies the methodology
through which these rights are divided among sectors and how
compliance is measured. Affected sectors are given until
September 30 of this year to apply for individual CO2
emission rights authorized for their sector. On October 1,
these rights will be codified into a National Emission Rights
Register ("Registro Nacional de Derechos de Emision") which
will be controlled by the Environment Ministry and open to
public scrutiny. This codification will form the legal basis
for later trading in emission rights.


3. (U) According to the plan, the covered sectors encompass
40 percent of traditional Spanish CO2 emissions (including,
inter alia, electricity generation, the mining and refining
of ferrous metals, and the cement, glass, ceramics, and paper
products sectors). The non-covered sectors, representing 60
percent of traditional Spanish C02 emissions, are expected to
emit 225.79 million tons of CO2 per year during this period
for a total average annual emission of 398.1 million tons.
This would represent a 0.2 percent drop compared to total
2002 CO2 emissions of 401.34 million tons. The stated goal
of the 2005-7 plan, which is formally titled Regulating the
Commercial Regime of Greenhouse Gas Emission Rights"
("Regulado el Regimen del Comercio de Derechos de Emision de
Gases de Efecto Invernadero") is to stabilize current
emissions at the rate measured from 2000-2.


4. (U) For serious violations of emission authorizations,
the plan includes provisions for closing facilities as well
as for fines of up to two million Euros. Less serious
infractions will be punished by fines of 40 Euros for each
CO2 ton over the limit during the period of 2005-7, climbing
to 100 Euros per excess ton in the 2008-12 period.


5. (U) Through this plan, Spain hopes that total CO2
emissions in the 2008-12 period do not exceed 1990 emission
levels (the Kyoto base line) by more than 24 percent.
Spain's Kyoto target is 15 percent over the 1990 CO2
emissions baseline. Under the plan, Madrid hopes to find the
missing nine percent through a mixture of carbon sink credits
(two percent) and emission credits obtained on the
international market (seven percent).


6. (U) Finally, the decree creates an inter-ministerial
commission to supervise all GOS efforts to meet its Kyoto
commitments. Members will include representatives from the
Foreign, Economy/Finance, Environment, and
Industry/Tourism/Commerce ministries, as well as a
representative from the President's Office of Economic
Affairs. The formal head of this Commission will be Arturo
Gonzalo Aizpiri, Secretary General of the Environment
Ministry's Office of Pollution Prevention and Climate Change.



7. (U) Approval of this plan, which had originally been
drawn up by the Aznar Government but was not approved by the
cabinet prior to that government's defeat in the March
national elections, will allow Spain to submit to Brussels
its national CO2 emissions plan required under an EU
directive 87/2003. This, in turn, should allow Spain to
participate in the new EU CO2 emissions market that is
expected to debut on January 1, 2005. This submission has
been overdue in Brussels since March 31.


8. (SBU) COMMENT: With this announcement, Spain takes a
step toward, at least on paper, meeting its Kyoto targets.
It also addresses the need to formally implement the EU
emissions trading directive via national regulation. One
should not be surprised that Zapatero's center-left coalition
would be more attracted to Kyoto than its center-right
predecessor. And it is of course easier to impose such
regulations immediately after an election. However, once the
economic costs of attempting to meet these targets become
more readily apparent, it will be interesting to see exactly
how green is Zapatero's valley.
MANZANARES