CLIMATE CHANGE: AUSTRIA TALKING TOUGH, BUT ACTING SOFTLY

UNCLAS VIENNA 000568

SIPDIS

SIPDIS, SENSITIVE

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TAGS: SENV ENRG EIND ECON PGOV AU
SUBJECT: CLIMATE CHANGE: AUSTRIA TALKING TOUGH, BUT ACTING SOFTLY


Summary
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1. Austria, with one of the most ambitious Kyoto Protocol targets,
has thus far failed to achieve its emissions reduction goals.
According to Austria's 1997 Kyoto Protocol commitment, it should
reduce emissions to no more than 69 million tons of CO2 equivalent
by 2012. In 2005 Austria emitted 93 million tons. Between 1997 and
2005, there was only one year when emissions did not rise.
Austria's deviation from its Kyoto target and actual emissions is
one of the widest among developed countries. In an effort to
achieve its Kyoto target, the GoA plans to place more emphasis on
investments abroad that would count towards Austrian CO2 reductions.
If current trends continue, Austria may have to buy as much as Euro
1.5 billion worth of emissions certificates from nations in surplus.
End Summary.


Austrian CO2 Emissions Rising and Rising
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2. According to January 2007 figures from the Austrian Federal
Environment Agency (FEA),Austria emitted a record level of
greenhouse gases in 2005, the equivalent of 93 million tons of CO2.
This is 18% more than in 1990, the Kyoto reference year (79 million
tons). The figure is also more than 30% above the self-proclaimed
goal of 68.9 million tons that Austria wants to reach in 2008-2012.
Since 1995, greenhouse gas emissions rose constantly until 2003.
The introduction of a federal climate strategy in 2002 apparently
triggered a turnaround in 2004 with a small drop in emissions.
However, an increase of 2.3% in 2005 signals a return to previous
trends.


No Sector Improving, But Transportation is Worst
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3. The figures are even more discouraging for Austria's plan when
you consider sectoral emissions. 26.5% percent come from industry
with an increase from 22.3 to 24.7 million tons of CO2 equivalents
compared to 1990. Transportation (26.2% of total) almost doubled
emissions from 12.8 to 24.4 million tons. Energy production
contributes 17.1% to emissions, with an increase from 13.7 to 15.9
million tons. While the EU's Emissions Trading Scheme (ETS) covers
industrial and energy production emissions, national measures must
address the fast growing transportation emissions.


At Least Seven EU Countries to Miss Kyoto Targets
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4. Compared to other EU Member States with emissions reduction
plans, Austria ranks number 21 out of 23 in terms of achieving
reduction goals. According to Helmut Hojesky, the chief GoA expert
on climate change in the Ministry of Agriculture and Environment,
Austria is among at least seven countries that will miss targets
with current policies. Hojesky maintained that many EU countries
are facing similar challenges. Most Member States that are
achieving targets have either profited from the favorable base year
(1990) following the collapse of the East Bloc or from very low
reduction goals (e.g., Greece).


5. With regard to the EU's ETS, Austria submitted its second
National Allocation Plan (NAP) for the period 2008-2012 in January

2007. The submission was six months late and came only after the
Commission had sent the GoA a warning letter. The initial NAP for
2005-2007 more or less matched with anticipated industrial
emissions, so companies did not have to buy certificates on the
emissions certificates market. The new NAP calculates emissions
reductions of 5.3 tons per year (-14%),which may trigger
significant savings efforts. However, the ETS covers only 43% of
Austria's CO2 emissions.


GoA Program Focusing On Energy Efficiency
--------------


6. To meet these targets, the new Austrian Government has announced
the following measures:

- doubling the production of renewable energy to at least 25% by
2010;

- increasing the use of alternative fuels to 10% by 2010 and 20% by
2020;

- improving energy intensity by 5% by 2010 and by at least 20% by
2020;

- and running 5% of all cars on alternative fuels by 2010.

Further, the GoA plans to create a Euro 500 million fund to finance
energy and climate protection projects, such as making new
environmental technologies economically feasible.


Blaming Germans And Italians For Rising Emissions
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7. Reducing transportation emissions remains Austria's biggest
challenge. The GoA plans to increase the mineral gas tax slightly
by leveling a one Eurocent tax on gasoline and a three Eurocent tax
on diesel fuel. However, the GoA intends to use the additional
revenues mainly for investments in road and rail expansion.
According to the FEA, 34% of transportation emissions originate from
Italian and German vehicles crossing the border to buy cheaper
Austrian gas. The GoA has asked for the Commission's permission to
deduct these emissions (8.4 million tons of CO2 equivalents) from
Austria's overall emission figures. The GoA has acknowledged to us
that this scheme would do nothing to reduce overall levels of
emissions in the EU.


Climate Change Investments Abroad Are The Last Hope
-------------- --------------


8. A glimmer of hope to achieve Austria's Kyoto goals is the use of
the Kyoto Protocol's flexible mechanisms: Joint Implementation (JI)
-- cooperating with developing countries to meet their Kyoto
targets; and the Clean Development Mechanism (CDM) -- crediting
climate protection activities in developing countries. The GoA
estimates that Austrian emission reduction projects abroad account
for savings of more than 10 million tons of CO2 equivalents.
Austria has already completed 31 JI and CDM projects, with 170 in
process at an investment volume of Euro 290 million.


Buying Emissions Certificates For Euro 1.5 Billion
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9. The GoA has told us that it would most likely have to buy
emission certificates from countries with a certificate surplus to
meet its Kyoto targets. The Commission could start treaty violation
procedures, should Austria fail to reduce emissions as promised.
The Austrian Economic Research Institute's climate expert, Stefan
Schleicher, estimates that Austria will miss its commitments by 30
million tons per year over the 2008-2012 observation period, or 150
million tons total. Assuming an average price of Euro 10 per ton of
CO2 emissions over this period, Austria would have to purchase
approximately Euro 1.5 billion worth of emissions certificates.


Strategy Emphasizes Cuts In Developing Countries
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10. Minister of Agriculture and Environment Josef Proell recently
announced details of a new strategy to reduce emissions. Proell
acknowledged that Austria's emissions will be at only 77.7 million
tons of CO2 equivalents by 2010. The GoA must therefore purchase
the approximately nine million tons shortfall through JI/CDM
investments. Compared to the 2002 strategy, the new plan allows for
an additional two million tons of industrial and transportation
emissions per year. Opposition parties and environmental NGOs have
harshly criticized the plan, arguing that the GoA should concentrate
more on reducing emissions in Austria.


Comment: Not Practicing What You Preach
--------------


11. Austria will continue to fail to meet its Kyoto Protocol
commitments. It appears that the Kyoto targets conflict with the
prospects of slower economic growth and possible job losses
associated with strict implementation of Austria's ambitious
targets. Austria remains a good example of a developed nation that
is fighting climate change primarily with strong words, rather than
with actual deeds.

MCCAW#