BRAZIL: FRANK DISCUSSION ON CLIMATE CHANGE

UNCLAS SECTION 01 OF 05 BRASILIA 002020

SIPDIS

SENSITIVE

SIPDIS

NSC FOR D.PRICE, J.COBAU, G.TOMASULO
DEPT FOR G - D.ROCHBERG, WHA/EPSC - L.KUBISKE
DEPT FOR OES/EGC-E.FENDLEY AND D.NELSON AND OES/ETC - S.CASWELL
DEPT PASS TO CEQ FOR E.LADT AND A.SCHMITZ
ENERGY DEPARTMENT FOR S.EULE - CLIMATE CHANGE PROGRAM

E.O. 12958: N/A
TAGS: SENV KGHG ENRG KSCA BR
SUBJECT: BRAZIL: FRANK DISCUSSION ON CLIMATE CHANGE

REF: A) STATE 140075, B) BRASILIA 1952, C) BRASILIA 1351


1. (U) THIS CABLE IS SENSITIVE BUT UNCLASSIFIED AND NOT FOR
INTERNET DISTRIBUTION.


2. (SBU) SUMMARY. In a frank and wide ranging conversation,
Director of the National Economic Council Al Hubbard, Deputy
National Security Advisor Dan Price, and Ambassador Clifford Sobel
met in Brasilia on October 11 with Brazilian Ministry of Exterior
Relations (MRE) Under Secretary for Policy Everton Vargas and
Brazilian Ambassador to the United States Antonio Patriota to
discuss climate change. Hubbard expressed unhappiness on Vargas'
public statements on the Major Economies Meeting (MEM). He noted
that the United States was prepared to work cooperatively on a
post-2012 international framework based on five elements laid out at
the MEM. Vargas said that the new framework must be a continuation
of the Kyoto Protocol.


3. (SBU) In response to a question from Price, Vargas said that
even if the United States were willing to accept internationally
legally binding caps on emissions, Brazil would not be, even if the
obligations or quantities were different. Vargas said that under
the terms of the UN Framework Convention on Climate Change (UNFCCC),
Brazil would only be willing to accept a commitment on greenhouse
gas emissions that would be binding domestically. Vargas said that
this inconsistency was necessary because of the UNFCCC framework,
and any change would require revising this framework. Price noted
that the UNFCC did not pose an obstacle to developing countries
taking legally binding commitments if the political will was there,
and that this was just a drafting issue. END SUMMARY.


4. (SBU) On October 11, the Director of the National Economic
Council, Al Hubbard, Deputy National Security Advisor Dan Price, and
Ambassador Clifford Sobel met in Brasilia with Brazilian Ministry of
Exterior Relations (MRE) Under Secretary for Policy Everton Vargas
and Brazilian Ambassador to the United States Antonio Patriota to
discuss climate change. Hubbard and Price were in Brazil in
connection with the CEO Forum (SEPTEL). COMMENT. Vargas plays a
key role as the Government of Brazil's (GOB) lead negotiator on
climate change, personal representative of President Lula to the
"Major Economies" process, and the sherpa for Brazil in the G-8
setting. END COMMENT.

U.S. VIEW ON ADDRESSING CLIMATE CHANGE


5. (SBU) Hubbard provided the U.S. perspective on the Major
Economies Meeting (MEM) on energy security and climate change, which
took place in Washington September 27-28. (REFTEL A) Hubbard said
the MEM fulfilled President's Bush's plan for a next step in
addressing climate change, which was announced in June at the G-8
meeting in Heiligendamm, Germany. The United States recognizes that
CO2 is a problem that needs to be addressed, and that needs to be
addressed globally. Hubbard underscored that if the United States
alone halted its CO2 emissions completely it would have virtually no
impact on global CO2 levels. This is why we need a global solution
with the participation of all the "major emitters" and why we
organized the MEM. It will take time and conversation to put a
global solution together.


6. (SBU) Hubbard said transformational technology is needed to
solve this problem. This is why the U.S. Government (USG) is

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committing billions of dollars to research and development of clean
technologies, which we will share with the world. Moreover, we
believe that there are many existing clean technologies that can
make a contribution and these should be traded freely.


7. (SBU) Hubbard said that a mandatory cap on CO2 emissions is a
non-starter. A cap that excludes major countries would not be
politically acceptable in the United States, and further it would
not have a significant effect. He pointed out that the Europeans
have had less success than the United States in controlling CO2
emissions. The USG is careful about the commitments it takes on
because when the United States makes a commitment, we fully intend
to fulfill it. Hubbard added that imposing mandatory CO2 emissions
would constrain the U.S. economy, and what the world needed was
strong economic growth to support efforts to deal with climate
change.


8. (SBU) Price elaborated saying the USG at the MEM laid out the
five core elements for a post-2012 world: (A) agreement on a
long-term global goal; (B) agreement on medium-term goals to be
implemented by national plans which may have binding elements and
may use market mechanisms; (C) common measurement tools; (D) a
financing mechanism to accelerate use of existing technologies; and
(E) research focused on adaptation and mitigation, including
reducing deforestation and reforestation. We want to build
consensus on a few principles, such as no "free riders" which isn't
different from the "common, but differentiated responsibilities"
principle found in the UN Framework Convention on Climate Change
(UNFCC). Price made clear that the USG thought that a multilateral
regime was worth pursuing and we were doing so.

WORKING WITH BRAZIL


9. (SBU) When President Bush met with Brazilian President Lula in
New York in September, there was a good feeling on collaboration on
climate change and on the Doha Round of the World Trade Organization
(WTO),Price related. That spirit at the top should be reflected on
both sides elsewhere in the two governments, he said.


10. (SBU) Hubbard told Vargas that his public comments weren't
helpful. Saying that the United States is not doing anything does
not help reach a solution. (REFTEL B) He added that if we truly
want to address CO2, rather than play to headlines, technology is
the only solution. So the focus needs to be on accelerating
technology development. He said, at some time, each country will
have its own goals, though meeting those goals will depend on using
effective technologies. Hubbard noted that it will be healthier and
more productive if we could work collaboratively and don't use the
press to make unnecessary attacks on the United States or others.
Price added that there may be differences between our two countries,
but it is not helpful to attack the United States for not taking on
the commitments in the Kyoto Protocol.

VARGAS EXPLAINS THE GOB POSITION


11. (SBU) I'll be frank, Vargas began. He said that he hadn't
attacked the United States but rather gave Brazil's impression of
the MEM. He later added, "We can do things together, but on some
issue we can't be silent." Brazil - and others - thought that at
the MEM we would see the USG move to show willingness to work toward
a multilateral regime on climate change. This didn't happen, he

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said. Vargas bristled at the use of the term "major emitters" with
regard to Brazil, stressing that the meeting was of the "Major
Economies." He later returned to the topic, saying that he is not
negotiating through the press and that Brazil is ready to work with
us.


12. (SBU) Vargas outlined his view of the post-2012 regime. He
said it is essential that the United States is part of the post-2012
multilateral regime under the UNFCC, if that new regime is to
succeed. Of course technology is important, he said, which is why
the GOB is joining with the USG in promoting the use of ethanol.
Technology is not the only way, he said, we need to put the
principle of "common, but differentiated responsibilities" to work.
This means using mandatory, not voluntary goals, and we need a
review of our achievements on efforts to reduce greenhouse gas
emissions. President Lula said in Heiligendamm that Brazil expects
to see a second commitment period for Kyoto Protocol commitments.
The United States must take a leadership role and take the bold step
of participating as part of this second round of Kyoto Protocol
commitments. For Brazil's part, he said, we are prepared to make
deeper - voluntary - cuts in emissions from deforestation and
promote better energy efficiency.


13. (SBU) Brazil under the UNFCC does not have to - and will not -
take on commitments that will hurt its economy. Vargas said he had
stressed to Under Secretary Paula Dobriansky during her visit to
Brazil in May (REFTEL C) that President Lula stated we won't
sacrifice economic growth, and what we need is to use different
production and consumption patterns. If Brazil takes on
commitments, this could adversely affect its competitiveness in the
global economy. He stated, "We can't lose competitiveness."


14. (SBU) With regard to the MEM process, Vargas said that it would
be difficult to go along with the U.S. idea of developing a backbone
for the UNFCCC negotiations through MEM. Brazil couldn't be part of
an effort to impose a solution on other countries in the UNFCCC.


15. (SBU) Vargas responded to the key points raised by Hubbard and
Price. He said:

-- The good spirit between the two presidents wasn't reaching other
areas. Specifically, the GOB sees very little progress on lifting
the U.S. tax on ethanol. (Subsequently, Hubbard explained that the
ethanol tariff is meant to counterbalance the 51 cents per gallon
subsidy to ethanol producers. The United States is not going to
give a subsidy to non-U.S. ethanol.)

-- A funding mechanism is not as important as how it is going to be
funded. The GOB has suggested various ideas on funding, but we find
resistance from the industrialized countries.

-- Trade barriers to clean technologies cannot be solved in
isolation, they need to be part of the WTO Doha Round negotiations.

-- One of the biggest barriers to technology transfer is
intellectual property rights (IPR). "Can we be more flexible on IPR
rules to deal with climate change?" he asked. (Hubbard replied that
weakening IPR would be the best way to assure that no new
technologies are developed. It would kill the goose that lays the
golden egg, by removing incentives to innovate.)


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16. (SBU) Vargas identified several areas where the USG and GOB
should cooperate:

-- Deforestation. Brazil has made a proposal to create
international financial incentives to reduce the rate of
deforestation. Vargas said the GOB was waiting for a response from
the USG to their proposal.

-- Clean Development Mechanisms (CDMs). Vargas noted that the USG
and GOB has played a critical role in developing this concept and
now should work together in implementing it. Brazil has proposed a
fund to support CDMs.

- Roadmap from Bali. He urged the USG to work with the GOB on
developing a "roadmap" to come out of the UNFCCC Conference of the
Parties in Bali in December. Such a roadmap could be helpful with
the MEM process. (Hubbard and Price replied that we have a
"roadmap" on climate change; it is what President Bush proposed back
in June for developing a long-term global goal.)

BRAZIL'S FUNDAMENTAL POSITIONS


17. (SBU) The frank discussion clarified the GOB's fundamental
positions in the climate change debate:

-- UNFCCC MEANS THAT BRAZIL CANNOT ACCEPT MANDATORY EMISSIONS
OBLIGATIONS, BUT THE UNITED STATES MUST DO SO. Vargas stated that
the UNFCCC principle of "common, but differential responsibilities"
means that Brazil and other developing countries can take on binding
national measures, but not international commitments. Even if
hypothetically the USG assumed mandatory obligations, Vargas stated
that Brazil would not do so, even if the obligations or quantities
were different. He said setting a long-term global goal, as
envisioned in the MEM process, would not satisfy the obligation in
the UNFCCC on industrialized countries. On the other hand, the only
commitments that Brazil and other developing countries had under the
UNFCCC were to submit reports and a vague obligation to protect
carbon "sinks". That said, he noted Brazil was prepared to take
additional voluntary steps, such as improving domestic energy
efficiency and promoting the use of biofuels.

-- BRAZIL WOULD NOT AGREE TO BE ADDED TO UNFCCC'S ANNEX I. To take
on international commitments, which industrialized countries must
accept, Brazil would have to be added to the list in Annex I (or
industrialized countries),Vargas explained. That would be a "MAJOR
PROBLEM" for Brazil if it did so, he declared. (COMMENT. Price
replied that if Brazil took such a step it would be a "MAJOR STEP
FORWARD". END COMMMENT.) The UNFCCC formula cannot be annulled,
Vargas stressed. Price responded that the UNFCC did not pose an
obstacle to developing countries taking legally binding commitments
if the political will was there, and that this was just a drafting
issue.

-- MUST ACKNOWLEDGE HISTORIC EMISSIONS. While not disagreeing that
China will become the leading CO2 emitter, Vargas declared that for
reasons of equity and fairness any limits should take into account
"historic" or cumulative levels and not just current ones. He would
not agree that China or India needed to accept international
mandatory obligations, but did agree that we needed to "deal with
China."


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-- THE UNITED STATES COULD ACCEPT MANDATORY LIMITS WITHOUT
IMPAIRING ITS ECONOMIC GROWTH. Vargas said he recognized that no
U.S. leader would accept obligations that impeded U.S. economic
growth, but persisted in calling on the United States to participate
in a second round of commitments under the Kyoto Protocol. He
squared the circle by baldy declaring that he could not believe that
accepting mandatory obligations would hurt the U.S. economy.

-- NO ILLUSIONS ABOUT NEGLIGIBLE IMPACT ON CO2 LEVELS BY A SECOND
ROUND OF COMMITMENTS UNDER KYOTO PROTOCOL. In response to Hubbard,
Vargas admitted that he had "no illusions" about the ability of a
second round of commitments to make a significant impact on CO2
levels other than a draconic regime that shut down the world
economy. He explained that the real value of the Kyoto Protocol lay
in giving cover to countries to take some steps to reduce their CO2
emissions.

SEARCH FOR COMMON GROUND


18. (SBU) Amb. Sobel underscored the USG interest in working
together with the GOB. He said we need to find common goals,
addressing the climate change problem while protecting economic
growth. Vargas said that Brazil was ready to continue dialogue
always keeping in mind the principle of common, but differentiated
responsibilities found in the UNFCCC. Price and Vargas concluded
the meeting saying, "We understand each other."

OTHER ATTENDEES


19. (U) The other attendees on the USG side were NSC John Cobau,
NSC Gary Tomasulo, State WHA/EPSC Director Lisa Kubiske, ESTH
Counselor Rick Driscoll, and Deputy ECON Counselor Tim Hall. For
the GOB side, the other MRE attendees included the Director of the
Department of Environmental and Special Issues, Luiz Alberto
Figueiredo Machado, the Chief of the Environmental Policy and
Sustainable Development, Rafael Azeredo (and his assistant Paulo
Chiarelli),the Chief of the Renewable Energy Division, Claudia
Santos, the Special Ambassador for Climate Change, Sergio Serra, and
the Chief of the U.S. and Canada Division Joao Tabajara.

SOBEL