EB/ESC DAS PAUL SIMONS MEETINGS WITH GERMAN

UNCLAS SECTION 01 OF 02 BERLIN 000208

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EB/ESC DAS SIMONS, EUR/AGS O'KEEFFE, THE WHITE
HOUSE FOR CEQ, NSC FOR MCKIBBEN

E.O. 12958: N/A
TAGS: ENRG PGOV PREL SENV EU GM
SUBJECT: EB/ESC DAS PAUL SIMONS MEETINGS WITH GERMAN
OFFICIALS ON ENERGY


ENTIRE TEXT IS SENSITIVE BUT UNCLASSIFIED. NOT FOR INTERNET
DISTRIBUTION.


1. SUMMARY. On January 25, EB DAS Paul Simons met with
Foreign Office Policy Planning Staff Head Markus Ederer and
Economic Ministry Director General for Energy Issues
Andreas Schusseil to discuss energy issues during Germany's
EU and G-8 presidencies. Both German officials were
positive about the President's energy agenda, unveiled in
his State of the Union Address. They also sought follow-up
to the German proposal for U.S.-EU cooperation on research
in clean energy technologies, arguing this was an opportunity
to build on existing transatlantic cooperation
in developing clean energy technologies. Germany is trying
to engage the Russians on transparency in the energy market
and increased efficiency. German foreign ministry officials
also support bringing major Asian countries, such as India
and China, closer to the IEA to ensure its continued
relevance. The next German national energy summit has been
postponed to the end of June. END SUMMARY.
GERMAN REACTION TO PRESIDENT'S CLIMATE CHANGE/ENERGY AGENDA
-------------- --------------


2. Both Ederer and Schusseil were very supportive of the
President,s State of the Union message and interested in
more details about the President's agenda on energy and
climate. This followed Simons, appearance on a panel with
German environment minister Gabriel at the Handelsblatt
Energy Conference, during which Gabriel also welcomed the
President,s speech as a "major opening." Simons discussed
in detail the President's proposal to achieve 20% savings in
projected gasoline use by 2017 with an increased use of
biofuels and higher CAFE standards for vehicles. Schusseil
said that Germany is also interested in increasing its
biofuels quota to 12.5% of total consumption of gasoline.
The EU goal is currently 10%. Schusseil added that one of
the barriers to raising the percentage is the fear this might
lead to shortages of food items elsewhere or encourage
CO2-intensive agriculture techniques such as deforestation.
Another sensitivity is paying biofuel subsidies to foreigners
if imports need to increase to meet these targets.


3. Both Ederer and Schusseil raised the issue of emissions
trading discussions in the U.S. The Germans are interested
in bringing the U.S. into post-Kyoto emissions targets as
well as in discussions in the U.S. about a cap and trade
system. Simons replied that the U.S. is focusing on ways to
bring other major developing economies into any such
arrangement, especially China and India. Only a regime that
covers all major economies can be successful. Schusseil
complained the emissions trading system in Germany was too
expensive and energy companies had passed on the cost of
emissions trading certificates to customers, even though they
had received them for no cost from the government. As a
result, the Economic Ministry is looking at other mechanisms
for distributing certificates such as auctions and is
considering strengthening competition law.
U.S. EU COOPERATION ON CLEAN ENERGY TECHNOLOGIES
-------------- ---


4. Ederer raised the status of the American response to
the German proposal for cooperation in renewable energy
technologies. He understood from his deputy, Victor
Elbling, that State energy coordinator Manuel is working on
coordinating the USG response. Ederer noted this was the
perfect opportunity for the U.S. to appeal to the European
public and show that it was engaged with European partners in
working to create new technologies that helped the
environment. It would also convince doubters of the U.S.
commitment to working with Europeans to address climate
issues. Ederer is confident energy/climate is one area
progress can be made before the U.S.-EU Summit but added that
time was short; an American response was needed soon. The
U.K. are supportive of the proposal and the French "are not
negative." The opportunity to work with the EU on funding
new energy technologies is a perfect example of an area in
which both the U.S. and EU can be proactive. Ederer also
raised the possibility of conducting a private sector
roundtable to discuss further U.S.-EU cooperation in
developing new energy technologies. He emphasized that if
both the U.S. and EU pooled venture capital and R&D efforts
in this area, they would be unstoppable. Ederer said other
issues such as deregulation and agreeing on joint standards
are more difficult and will take more time. Schusseil also

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endorsed the energy proposal, emphasizing that there is a lot
of ongoing transatlantic cooperation in developing new energy
technologies, of which many Europeans are unaware.
Simons confirmed the German proposal was being studied
closely in Washington and the U.S. side was preparing a
response.

ST. PETERSBURG ENERGY PRINCIPLES
--------------

5. Simons sought out German views on ways to build upon
the St. Petersburg energy principles in this year,s G8
summit. Ederer responded that while some stocktaking would
be desirable, Russian President Putin counter EU critics
(including at the Soichi summit) with examples of how other
G-8 partners do not live up to their commitments to open
energy markets, for example, by failing to provide
third party access to LNG infrastructure. He added the
Germans are trying to translate these principles into the
EU-Russian relationship, and said that Germany is looking
into the idea of having the "plus five" countries at the
summit endorse the St. Petersburg principles. Meanwhile,
Germany will continue to stress energy efficiency and its
links to energy security. Ederer suggested that Germany and
the U.S. remain in close touch on energy agenda.

IEA ISSUES
--------------

6. On the IEA, the German Foreign Office believes it is
important to engage developing Asian economies in
international governance structures. Otherwise, the IEA
risks becoming irrelevant. Ederer pointed out the proposed
conference under the G-8 with plus 5 countries on energy
security and climate was designed to start this dialogue.
Schusseil also endorsed the need to bring China and India
into the IEA process. Simons agreed, saying the U.S. and
Japan were pushing the hardest to integrate China and India
into the IEA.

GERMAN NATIONAL ENERGY SUMMIT POSTPONED
--------------

7. Ederer confirmed that the third German national energy
summit will be postponed until the summer. He said the
government intends to address the nuclear issue at that
time. While it is important to send clear signs to
industry in order to attract needed investment, Schusseil
said the most that will happen would be an extension of the
operating life of existing plants. Ederer bemoaned the
fact that Germans seem to have few qualms about buying
nuclear energy from neighboring countries, but do not want
the plants in Germany. Schusseil said the summit would
likely take place at the end of June. He noted that the
IEA's focus on nuclear energy as essential for any country
concerned about CO2 emissions is helpful to discussions in
Germany about changing its commitment to a nuclear
phase-out. Schusseil confirmed that the Economics Ministry
was undertaking a major effort inside the German bureaucracy
to revisit the issue of nuclear phase out, using reduced
carbon emissions as the principal argument to bring around
the critics. While he did not believe that Germany would
shift its opposition to new nuclear plants prior to the
expiry of the current coalition agreement in 2009, he did
expect that Germany with Merkel,s support would find some
way to extend the life of its existing nuclear plants beyond
their current phase out schedule.


8. This cable has been cleared with DAS Simons.
TIMKEN JR