AUSTRIAN CLIMATE CHANGE EXPERT: POST-KYOTO AGREEMENT SHOULD

UNCLAS SECTION 01 OF 03 VIENNA 002690 SIPDIS SIPDIS, SENSITIVE STATE FOR OES/GC AND EUR/AGS EPA FOR OIA (ALMEIDA) E.O. 12958: N/A TAGS: SENV ENRG PREL EIND ECON AU SUBJECT: AUSTRIAN CLIMATE CHANGE EXPERT: POST-KYOTO AGREEMENT SHOULD GO BEYOND CAPS REF: VIENNA 568 Summary -------------- ¶1. (SBU) While Austria portrays itself as a crusader against climate change, it is falling significantly short of its own commitments under the EU's Burden Sharing Agreement (BSA) to the Kyoto Protocol. With 93 million tons of CO2 equivalent emissions in 2005, Austria is a whopping 25 million tons above the EU goal of a 13% reduction (compared to 1990). Within the EU, only Denmark has a wider deviation from actual emissions and targets. The GoA has committed 9 million tons per year to Clean Development Mechanism (CDM) and Joint Implementation (JI) projects abroad, but domestic measures will most probably produce a reduction of only 5 million tons. If current trends continue, Austria will have to buy up to Euro 2.5 billion in permits from surplus countries. Austria has created a Euro 500 million Energy and Climate Fund to give new impetus to its efforts to reduce greenhouse gas emissions. The head of the fund, Stefan Schleicher told post that any post-Kyoto agreement needed to go beyond caps, allowing countries, within the UN framework, to employ their own strategies to reduce emissions. Schleicher opined that the international community should put more focus on technology and sectoral reduction targets. Schleicher said that Austria was eager to step up U.S-Austrian contacts and cooperation on environmental research with both governmental and business. End summary. Austria Failing to Meet Kyoto Targets -------------- ¶2. (U) Austria continues to fall well short of its greenhouse gas reduction goals under the Kyoto Protocol. In 2005 (latest available figures),Austria's emissions were 18% above 1990 levels and 37% above its own Kyoto commitment of 68 million tons of CO2 equivalents in the period 2008-2012. Within the EU, Austria has the second greatest percentage deviation from its stated reduction goals; only Denmark has a greater deviation. In terms of EU reduction goals for 2020 (minus 20% emissions compared to 1990),Austria is 43% above the target. GoA Creates Energy and Climate Fund -------------- ¶3. (U) Austria's efforts to reduce emissions have primarily focused on energy efficiency measures (reftel),which will only reap benefits in the longer-term. In an attempt to breathe new life into its climate change policy, the GoA created a Euro 500 million Energy and Climate Fund in June 2007. The fund aims to promote research and marketing of green technologies and to encourage the use of public transportation. The GoA appointed four well-known scientists to the fund's Supervisory Board. Emboffs recently met with the Head of the Board, Stefan Schleicher, to discuss Austria's climate change policy and the possibility of cooperation with U.S. entities in this area. Schleicher is a Professor of Economics at the University of Graz and staff member of the Austrian Institute for Economic Research. He is one of the most knowledgeable experts on climate change in Austria. Paying Billions for Missed Targets -------------- ¶4. (SBU) Schleicher told us that, contrary to claims by the Ministry of Environment, Austria will not meet its greenhouse gas reduction goals for the period 2008-2012. In Schleicher's view, the 1997 goal (13% reduction from 1990 levels) was "too ambitious," although it was based on reasonable emissions projections at that time. In 2000, greenhouse gas emissions began a steady upward trend to the current situation in which Austria is 25 million tons above its goal. The GoA hopes to reduce up to 9 million tons per year through increased use of the Joint Implementation (JI) procedure (1 million tons) and the Clean Development Mechanism (CDM) (8 million tons) to promote green investments abroad. Schleicher maintained that Austria could realistically only save 5 million tons domestically. Given the remaining 11 million tons, the EU could institute infringement proceedings for breach of the EU's Burden Sharing Agreement (BSA). To abide by the BSA, the GoA would have to buy allowances from countries with an emissions surplus. According VIENNA 00002690 002 OF 003 to Schleicher, Austria might have to spend Euro 2.5 billion at the current price of Euro 20 per ton on the trading market. ¶5. (SBU) Schleicher, who participated in the initial Kyoto negotiations, faulted the U.S. for supporting overly generous emission limits to Russia and Ukraine. Schleicher opined that the Clinton Administration had hoped to receive equally generous limits for the U.S., before the USG decided not to ratify the Kyoto Protocol. Nevertheless, Schleicher stressed that it was crucial to integrate Russia into the next phase of emissions trading under Kyoto. EU Emissions Trading is a "Disaster" -------------- ¶6. (SBU) Schleicher conceded that the first phase (2005-2007) of the EU's Emissions Trading Scheme (ETS) was a "disaster." Due to the over-allocation of free allowances to emitting companies in 18 of 25 EU countries (not in Austria),there were no incentives for industries to reduce CO2 emissions. Schleicher added that the EU has apparently learned from this experience, prodding Member States to set tougher targets for the next phase. Even Austria has been forced to reduce allowances for CO2 emissions by 6.4% compared to Austria's proposal for the 2007-2009 period. ¶7. (SBU) Schleicher emphasized that ETS in its current form would not be able to reduce emissions sufficiently, as it covers only around 50 percent of total emissions. In Schleicher's opinion, to expand the ETS mechanism, the next step is to include aviation emissions. However, Schleicher acknowledged that aviation emissions were only responsible for a small amount of total emissions. It was even more important to tackle transportation emissions, which produce almost a third of overall CO2 emissions. Schleicher posited that stricter CO2 emissions standards for the automobile industry were therefore vital. Creative Programs to Reduce Domestic Emissions -------------- - ¶8. (U) As head of the Energy and Climate Fund, Schleicher hopes the GoA will put "new money" into the fund, rather than shifting money from existing climate change programs. Schleicher and other environmental experts drafted a paper entitled "Innovative Climate Strategies for the Austrian Economy." The paper recommended incentives for increased use of public transportation, massive investments to renovate buildings to become more energy-efficient, and emission reduction programs for industry in the form of "Domestic Offset Projects," i.e., national compensation projects analogous to JI and CDM projects. Post-Kyoto: Sector Agreements Instead Of Caps -------------- ¶9. (SBU) Schleicher stressed that the international community needed "to go beyond caps" in the post-Kyoto period after 2012. (Comment: This is an interesting perspective from a GoA advisor, given the GoA's consistent public support for a continuation of the current cap system in any post-Kyoto strategy. End Comment.) Schleicher opined that the EU championed strict and binding follow-up targets as a vehicle to promote the development of non-fossil fuel energy. Schleicher maintained that it was important to support different approaches to reach greenhouse gas reduction targets. ¶10. (SBU) In Schleicher's view, there are three lessons to be learned from Kyoto. First, focusing on caps alone has undermined discussions about the use of innovative technologies that are compatible with caps. Second, the ETS unfairly affected certain sectors, while it did not sufficiently cover others (transportation). Finally, incentives to entice the U.S., Australia, and newly industrialized countries to participate are crucial for the next phase to reach global emissions reductions goals. ¶11. (SBU) Schleicher recommended replacing binding caps with sector-specific agreements for industries, e.g., steel, and for the creation of technology platforms. (Note: A major Austrian steel producer, Voest, made the creation of an alternative measuring model for emissions after 2012 a condition for further investments. End VIENNA 00002690 003 OF 003 Note) Schleicher envisages a "Kyoto core group" of countries continuing to set caps. However, Schleicher also foresees that a UN-based agreement could allow individual countries or groups of countries to employ measures other than caps, as long as they contribute to a reduction of greenhouse gasses in the atmosphere. Potential U.S.-Austrian Cooperation -------------- ¶12. (U) Having taught in the U.S., Schleicher is an advocate of U.S.-Austrian cooperation on environmental research with both government and business. Schleicher is convinced that new technologies are crucial for emissions reductions, and that U.S. universities and industries are leading the way. Polygeneration technologies, nano-save batteries, low-carbon energy systems, and tesla motors are examples where U.S.-Austrian cooperation and joint ventures could be productive. Austria has strong firms in the environmental technology sector. Comment -------------- ¶13. (SBU) Though the GoA supports a continuation of the cap and target process embodied in the Kyoto Protocol, there has been very little discussion about how Austria will realistically meet its emission reduction obligations. We find it encouraging that Schleicher, one of the GoA's primary policy advisors on climate change, is advocating a more realistic, multi-faceted approach for the post-Kyoto period. There are promising opportunities for joint U.S.-Austrian cooperation on environmental technology issues. Success in this work may give added credibility to those, like Schleicher, who see a need for a more flexible approach than just "cap and trade." End Comment. MCCAW#