EU: PARLIAMENT AGREES ON RENEWABLES DIRECTIVE;

UNCLAS SECTION 01 OF 04 BRUSSELS 001439

SENSITIVE
SIPDIS

DEPT FOR EUR
DEPT FOR EEB
DEPT FOR OES
WHITE HOUSE FOR SC
WHITE HOUSE FOR OMB/OIRA
WHITE HOUSE FOR CEQ

E.O. 12958: N/A
TAGS: KGHG EAGR SENV ENRG TRGY EUN
SUBJECT: EU: PARLIAMENT AGREES ON RENEWABLES DIRECTIVE;
DEBATE WITH COUNCIL AND COMMISSION STILL TO COME

REF: A. BRUSSELS 1171

B. BRUSSELS 117

C. STATE 98110


1. (SBU) Summary: The European Parliament,s Industry
Committee on September 11 reached an agreement on a set of
compromise amendments during the first reading on the
Commission,s proposed Renewable Energy Directive. However,
this only represents the EP,s negotiating position, and it
is likely that the Council and Commission will make several
changes to the text over the next few months. The French
Presidency remains determined to complete this directive by
December, as part of the Climate and Energy Package, and the
Parliament has indicated it is working to fulfill that
objective. The major agreements from the compromise are:

-- At least 20% of all energy generated in the EU in 2020
must come from renewable sources. In addition, to achieve
these goals, the Parliament added mandatory interim targets
for each member state on which the Commission can impose
penalties for non-compliance;

-- The Parliament allowed for the statistical transfer of
renewable energy from a state exceeding its targets to one
which is falling short, as well as the possibility for member
states to combine their targets and work together jointly to
achieve a new collaborative target. However, each of these
avenues are subject to extensive review and oversight by the
Commission;

-- The 10% target for the use of alternative fuels in
transport for 2020 was maintained (frequently referred to as
the biofuels target, but which includes electric vehicles and
hydrogen fuel cells),but added that at least 40% of this
value must come from sources other than first generation
biofuels. Also, a 5% interim target for 2015 and a
technological review in 2014 were added, both of which have
the aim of allowing the EU to back off of the 10% target if
new technologies are not yet commercialized; and

-- The threshold for greenhouse gas emissions improvements of
biofuels over fossil fuels was increased from the
Commission,s proposed 35% to 45% with an increase to 60% in

2015. The Council, the Commission, and the largest political
party in Parliament, the EPP-ED, are in disagreement with
this change and should press to move back to the original
numbers. End Summary.

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Renewables Directive background
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2. (SBU) Released as part of the Commission,s Climate and
Energy Package in January, 2008, the Renewables Directive has
been contentious primarily for its treatment of biofuels.
There have been few major objections to the EU,s objective
of 20% of total energy supply to come from renewable by 2020.
To achieve this target, each member state was given an
individual target, ranging from Malta at 10% to Sweden at
49%, based upon current use of renewables and expected future
performance. A few member states have voiced concerns that
their targets are too high, but there has been no real push
to change the targets. The Commission originally proposed a
firm 10% target for the use of alternative fuels in
transport. This has been referred to as the biofuels target,
despite encompassing electric cars and hydrogen fuel cells.
Given recent negative press coverage on and the NGO campaign
against biofuels, this aspect of the Directive has received
the most scrutiny. (Note: The Commission has been quick to
admit it was originally poorly written. End note.) Thus,
Parliament has worked over the past several months to soften
the target, and Member of European Parliament (MEP) Claude
Turmes (Lux, Greens),the Rapporteur for the Directive,
originally attempted to eliminate the target completely.

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20% by 2020, but several possible avenues to get there
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3. (SBU) Parliament reinforced the Commission,s proposal of
20% share of renewables across the EU by 2020, but added in a
set of mandatory interim targets. These interim targets are
designed to ensure that each member state is on track to
reach its final 2020 target. The EU does not want to choose
the technologies used to meet the targets, so each member
state can select the mix best suited to its particular
situation. However, the Commission still maintains some
level of oversight, and each member state is required to
submit its national action plan to the Commission for review
by 31 March 2010. To ensure enforcement, the Parliament
added a direct penalty mechanism in which the Commission has
the power to fine member states for non-compliance. No
specific levels were indicated, but the text stated that the
levels should be sufficiently steep so as to provide a strong
incentive to meet the goals. (Note: This often is a
contentious issue in the EU, as most legislation,
particularly as applied to climate and energy issues, is not
&binding,8 in that there frequently are no penalties for
failure to meet the terms of the legislation. End note.)


4. (SBU) Parliament, in its effort both to meet the EU-wide
20% target and to encourage cooperation, added two clauses;
one to allow statistical transfer of renewable energy credits
between member states and one to allow for member states to
pool their collective resources and work toward a combined
target. In the first instance, the Parliament recognized
that there may be circumstances where a country anticipates
falling short of its target for some reason. In cases such
as this, Parliament has allowed for the statistical transfer
of renewable energy credits from one state exceeding its
target to one which is coming short (the terms of the
transfer will be up to the states involved). In the second
instance, Parliament looked to take into account efforts by
member states to develop joint projects which may extend to
truly joint efforts to meet the targets. In this case, the
two or more member states can apply for a new joint target
which will be calculated by the Commission. If this occurs,
all member states involved are accountable for success or
failure of the new target.

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Biofuels targeted, but more supporters appearing
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5. (SBU) MEP Turmes succeeded in strengthening some aspects
of the renewables in transport provisions, but was unable to
go as far as he would have liked given fairly strong
opposition, notably from the EPP-ED, the largest political
party in the Parliament. One key issue which remains, and
was reinforced, is that the biofuels provisions apply to
biofuels produced anywhere in the world. Turmes, efforts to
eliminate the 10% target for 2020 failed, but he was able to
incorporate an unambitious interim target of 5% for 2015.
Given that the EU previously committed to a 5.75% share of
biofuels in 2010, this is a large step back. In addition,
both the 2015 and 2020 targets have stipulations that a
certain percentage come from sources other than first
generation*from food sources*biofuels; 20% of the 2015
target and 40% of the 2020 target. (Note: the Energy
Independence and Security Act (EISA) in the U.S. has a
similar stipulation; 21 billion gallons of the mandated 36
billion gallons of biofuels in 2022 must come from advanced
biofuels. End note.) Additionally, Turmes incorporated an
impact assessment requirement for 2014 to evaluate the state
of technology, the consequences for food security, the
greenhouse gas emissions, and the sustainability criteria for
all fuels used in all forms of transport (maritime and
aviation included). This assessment can then be used to
determine if the 2020 target should be modified.


6. (SBU) Turmes also succeeded in raising the threshold for
greenhouse gas emissions savings over conventional fossil

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fuels from 35% to 45%, an increase to 60% in 2015, and
existing plants having until 2013 to comply. Unlike the 10%
target, this was not as widely supported, with the EPP-ED
proposing a counter-amendment keeping the current threshold
at 35% and then increasing to 50% in 2015. (Note: EISA also
has a step system for GHG emission savings thresholds, which
is defined by technology, not by date. Conventional,
corn-based bioethanol is required to have a 20% GHG savings,
advanced biofuels 50% savings, and cellulosic biofuels 60%
savings. End note.) To calculate the GHG savings, the
Parliament added a term for indirect land use change. Until
31 December 2011, there will be no counting of indirect land
use change, providing a buffer for the Commission to proceed
with the calculations. By 1 January 2012, if the Commission
has not made a satisfactory decision for how to incorporate
indirect land use change, a default value of 40 g of CO2
equivalent per megajoule of energy produced will be used.


7. (SBU) In an effort to strengthen wording related to
sustainability criteria for biofuels, the Parliament added
several clauses pertaining to land use and social criteria.
Originally, the Commission called out several types of
&no-go8 land, including undisturbed forest, areas
designated for nature protection, and highly biodiverse
grassland, using January 2008 as the baseline for
determination. Parliament has pushed that date back to May
2003 (Turmes tried to move it to 1990),and has added areas
that provide basic ecosystem services such as watershed
protection and erosion control; strengthened language on
areas designated for nature protection that contain rare,
threatened, or endangered ecosystems; areas with a
substantial concentration of rare, threatened, or endangered
species; and wetlands, peatlands, and savannah, all of which
contain a high carbon stock. Additionally, Parliament
incorporated social criteria which demand that effctive
measures be taken to ensure that the prduction of raw
materials do not involve child or forced labor as under the
International Labor Organization conventions and that comply
with the Convention on International Trade in Endangered
Species of Wild Fauna and Flora, the Convention of Biological
Diversity, the Cartagena Protocol on Biosafety, and the
United Nations Framework Convention on Climate Change and its
related Kyoto Protocol. (Note: While this is a step back
from the original proposal that demanded that biofuels
producing countries be a signatory to all of the above
treaties and conventions, the Commission still remains
unconvinced that these clauses will stand up in the WTO. End
note.)


8. (SBU) To ensure compliance of all of the above, the
Commission is required to submit a report to the Parliament
and the Council every two years beginning in 2012.
Parliament strengthened the requirements of this report,
requiring the Commission to report on the effects of the
biofuels policy. Specifically, the Commission is asked to
analyze the relative environmental and social effects of
biofuels; the effects on food prices, focusing on Low Income
Food Deficit Countries and Least Developed Countries; the
impact on direct and indirect land use change; and the
availability of advanced biofuel technologies. If the
Commission deems that any aspect of the policy is harmful to
global concerns, the Commission then is asked to propose
corrective action. There is little information as to how
binding these reports will be or how the Parliament and
Council will treat them.

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Initial reaction from industry insider not positive
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9. (SBU) In conversations, one industry representative
expressed concern with the decisions taken during the vote,
but indicated that there will still be movement on the final
text. The maintenance of the 10% target is supported, but
the interim 5% target was considered too low, highlighting
the 2010 commitment of 5.75%. However, there was belief that

BRUSSELS 00001439 004 OF 004


member states will not be willing to adopt an interim target.
Additionally, the representative claimed that the 60%
threshold is unlikely to be achieved with anything other than
Brazilian sugar cane, so 50% with incentives for exceeding
performance would be more effective. The indirect land use
change amendment was strongly contested, given that the
scientific understanding still is not complete and therefore
not ready to develop a methodology. Using a single value
also is considered highly problematic given differences in
global environments, and the use of 40 gCO2eq/MJ was
questioned, as a current crop based biofuel could be required
to deliver over 100% GHG emission savings.

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Debate to continue, though press not always mentioning it
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10. (SBU) Comment: The amendments presented in this vote,
while overwhelmingly approved in ITRE (50-2 in favor),do not
represent the final text of the Directive. In addition to
EPP-ED opposition to several of the amendments, the member
states and the Commission also have expressed major
reservations. Notably, the Council tentatively agreed in
August to support a 35% GHG emissions reduction threshold,
with an increase to 50% sometime after 2015 (2017 is often
mentioned),and both the Commission and the EPP-ED support
this strategy. There are also indications member states will
not accept any interim targets on renewables, including
biofuels. Effectively, this vote sets forth the
Parliament,s negotiating position, and we expect several
meetings between Parliament, Council, and Commission
representatives to work out an agreement. However, the
European press has not always been quick to make this clear.
The press has been one of the largest detractors of biofuels,
and many press reports have implied that this set of
amendments will form the final text.


11. (SBU) Given the mixed opinions on the biofuels aspects of
the Directive, there remains an opportunity for U.S.
engagement. The text as written provides a few instances in
which the Commission is afforded a few years (indirect land
use change calculations is one) to develop an implementing
scheme. Given that the Parliament is amenable to this
approach in at least one issue, the opportunity exists to
extend this to calculations of the GHG reductions and
development of sustainability criteria, thereby allowing the
U.S. and the EU to cooperate on developing compatible
criteria. The French Presidency continues to press for this
legislation, as part of the Climate and Energy Package, to be
completed by the December Council. However, Poland has
expressed displeasure with the emissions reduction
requirements in the emissions trading scheme and is not
convinced it will be able to meet the renewables targets set
for it by the Commission. To that end, the Polish European
Affairs Minister recently stated that it may look to delay
passage of the Climate and Energy Package until March or
April 2009. If successful, Parliament may no longer see the
pressure to complete negotiations by the end of the year,
providing an extra three to four months of discussions. End
comment.

SILVERBERG
.