Identifier
Created
Classification
Origin
08BRUSSELS1770
2008-11-21 17:24:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
USEU Brussels
Cable title:  

MEMBER STATES SKEPTICAL ON CLIMATE AND ENERGY

Tags:  EAIR ECON EIND ENRG EUN EWWT KGHG SENV TPHY 
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RR RUEHAG RUEHAST RUEHDF RUEHHM RUEHIK RUEHKW RUEHLN RUEHLZ RUEHMA
RUEHPB RUEHPOD RUEHROV RUEHSR RUEHTM
DE RUEHBS #1770/01 3261724
ZNR UUUUU ZZH
R 211724Z NOV 08
FM USEU BRUSSELS
TO RUEHC/SECSTATE WASHDC
INFO RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE
RUCNMUC/EU CANDIDATE STATES COLLECTIVE
RUCNMEU/EU INTEREST COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
UNCLAS SECTION 01 OF 02 BRUSSELS 001770 

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EAIR ECON EIND ENRG EUN EWWT KGHG SENV TPHY
TRGY, TSPL
SUBJECT: MEMBER STATES SKEPTICAL ON CLIMATE AND ENERGY
PACKAGE PASSAGE, BUT LAST MINUTE DEAL STILL VERY POSSIBLE

UNCLAS SECTION 01 OF 02 BRUSSELS 001770

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EAIR ECON EIND ENRG EUN EWWT KGHG SENV TPHY
TRGY, TSPL
SUBJECT: MEMBER STATES SKEPTICAL ON CLIMATE AND ENERGY
PACKAGE PASSAGE, BUT LAST MINUTE DEAL STILL VERY POSSIBLE


1. (SBU) Summary: Representatives from several EU Member
States have expressed skepticism that the EU will be able to
come to compromise on all aspects of the Climate and Energy
Package in time for an agreement by the end of the year, but
each stated with differing levels of surety that an eleventh
hour deal is not out of the question. In conversations with
Luxembourg, Malta, Romania, Slovenia, and the UK, only the
British held to the line that a deal definitely will be
reached. The Parliament continues to emphasize the need for
strong climate legislation in order to achieve the 25-40%
emissions reductions from developed countries by 2020, as per
scientific recommendations from the Intergovernmental Panel
on Climate Change (IPCC). To that end, the Parliament
appears to be holding firm to its commitment not to approve
any Council proposal with which it does not agree. The last
piece of the puzzle, the Commission, which appears to be
limited in its ability to effect change, is remaining firm in
its belief that there will be an agreement by the end of the
year, under the argument that a failure to compromise will
damage the EU's ability to negotiate internationally. End
summary.


2. (SBU) Among the five Member States, Malta seems most
convinced that the Climate and Energy Package would fall to
2009, despite the consensus among all 27 Member States to
reach an agreement by December. The Maltese representatives
believed there were too many differences between the various
Member States to come to agreement. If that is the case, it
appears likely that a deal will not be completed until close
to the end of 2009. Luxembourg officials stated it most
clearly, explaining that Czech representatives declared in a
closed-door Council working group that they will not address

the package during their Presidency in the first half of

2009. The Czech Republic is more focused on the internal
energy market, and will therefore target the completion of
the 3rd Energy Package, allowing the Climate and Energy
Package to slide to the Swedish Presidency in the second half
of 2009.


3. (SBU) From the conversations with the various Member
States, a clearer picture formed as to where the possible
concerns fell. The largest threat to the Package came in
October, when a group of 11 Member States, composed of Italy,
Poland, Slovakia, Hungary, Romania, Bulgaria, Cyprus, and the
three Baltics, joined in opposition to the Package, primarily
on the grounds that the legislation, specifically the
Emissions Trading Scheme (ETS),would cause damage to their
economies. However, it has become clear that this group does
not form a tight bloc, but instead is a loose collection of
countries common in their opposition, but completely divided
in their goals. Poland, heavily dependent on coal, is
targeting primarily a method to lower the cost or increase
the number of free allowances for its energy sector. On the
other hand, Hungary is most concerned with an overall
redistribution of allowances, or seeking more for the Eastern
Member States to promote economic growth. Romania and
Bulgaria are in the middle, pushing for both additional
allowances to the energy sector and a redistribution of
allowances. To address this division among the 11, the
French Presidency is approaching several of the Eastern
Member States first, and will wait until later to negotiate
with Italy. Italy is one of the largest manufacturing
countries in the EU, and according to a few Member State
representatives, the country with the most to lose from the
legislation. President Sarkozy will thus meet with
representatives from Romania, Bulgaria, Poland, and the
Baltic States in Gdansk, Poland on 6 December. The meeting
with Italy is scheduled to take place on the margins of the
UN meetings in Poznan, the second week of December.


4. (SBU) Beyond the group of 11, Germany appears to be one of
the largest concerns, despite public statements by Chancellor
Merkel calling for continued climate legislation in the face
of the financial crisis. Specifically, Germany is expressing
the largest concerns over "carbon leakage" - the departure of
carbon intensive industries to countries with weaker
environmental laws - and the need to maintain strong support
for its industry. The EU is stressing that an international
climate agreement should be the first aim to solve the
problem; if all countries sign up to a universally acceptable
- maybe not ideal - climate agreement, there will be no need
to protect against carbon leakage. Beyond that, it appears
as though 100% free allocations to at-risk industries will be
the fall-back, and a carbon border tax will be used as a
final option if the EU feels it needs to exert further
influence over foreign industries.


BRUSSELS 00001770 002 OF 002



5. (SBU) There are also several smaller players with smaller
issues, but none of these are likely to affect negotiations.
A Member State official explained that Denmark and Finland,
for instance, disagree with the choice of 2005 as the base
year - the EU's overall target is in reference to 1990, but
it needs to use 2005 for individual targets because that is
the first year where there is sufficient emissions data
available for all 27 Member States. The Danes and Finns
argue that 2005 is a difficult year because they received
above-average rainfall, leading to a large increase in the
use and availability of hydroelectric power, and therefore
lower emissions. Luxembourg is concerned about its
renewables target, set at 10%, as it claims to have no
renewables potential at all, and will therefore need to rely
exclusively on biofuels. Malta and Cyprus, both heavily
reliant on tourism for their economies, have objected to the
inclusion of aviation under ETS. However, both the Council
and the Parliament have made clear that aviation will remain,
leaving little room for negotiation.


6. (SBU) Spain and Portugal have been notably quiet, and
according to at least one contact, this is because they stand
to be the biggest winners from the legislation. They have
increased their pollution, and they will be allowed to
continue to increase their pollution, as they will be able to
use offsets from Clean Development Mechanisms (CDMs) in South
America, where they each hold very close relationships. As
such, through support to developing countries there, Spain
and Portugal will be able to offset their domestic emissions
and still meet their targets. On renewables, both countries
have a very large potential and should be able to meet their
targets with little problem.


7. (SBU) The European Parliament has continued to work to
exert its influence during the negotiations, initially moving
its plenary vote to the first week of December, days before
the Environment and Energy Councils and a week ahead of the
European Council of Heads of State. However, despite recent
comments from the Hans-Gert Pottering, the President of the
Parliament, it appears as though the Parliament will await
the Council decision and vote on the package at its next
Plenary in Strasbourg, 18-19 December. It was believed that
if Parliament waited, then the Council would be in control
and probably able to strong-arm its position on the
Parliament. However, Irish MEP Avril Doyle, the Rapporteur
for the ETS Revision Directive, clearly stated that the
Parliament will not vote in favor of a Council position with
which it does not agree. It is unclear how firm Parliament
will stick to this statement, especially as the Council
position seems to be moving farther away from that of the
Parliament as France provides further assurances to Poland
and Italy.


8. (SBU) Comment: Despite all of the skepticism, it is very
clear the French Presidency will stop at almost nothing to
come to a deal, even if that means trading away the vast
majority of the strength behind the Package. This type of
horse-trading is typical in EU negotiations, and it seems
everyone is trying to extract as much as possible. Several
countries, Poland and Italy key among them, have threatened
vetoes in Council if their demands are not met. From a legal
perspective, these threats do not hold much weight, as under
EU law, only a qualified majority is necessary to pass this
legislation. The block of 11 countries together more than
exceed a blocking minority, but losing a couple of the key
countries would eliminate this. However, both Italy and
Poland are quick to remind that it promised to pass this
Package by consensus. If necessary, France can back off of
this promise and revert to EU law, but the political capital
lost by doing this could cause large problems in the future,
and it seems unlikely France would take this step. At the
moment-and details are changing o an almost daily basis-it
appears as though te Council is going to yield to
Parliament's position on biofuels sustainability criteria and
press for the Council position on aspects related to ETS,
where the Member States have the most concern. End comment.

SILVERBERG
.