SECOND U.S.-EU HIGH LEVEL DIALOGUE ON CLIMATE

UNCLAS SECTION 01 OF 07 STATE 033478

SIPDIS

SENSITIVE
SIPDIS
WHITE HOUSE FOR NSC/DPRICE JSHRIER LCATIPON
WHITE HOUSE FOR CEQ/JCONNAUGHTON DBANKS ELADT
EPA FOR JBURNETT
DOE FOR SEULE

E.O. 12958: N/A
TAGS: KGHG SENV ENRG TRGY EUN
SUBJECT: SECOND U.S.-EU HIGH LEVEL DIALOGUE ON CLIMATE
CHANGE, CLEAN ENERGY AND SUSTAINABLE DEVELOPMENT

Sensitive but Unclassified -- Entire Message


1. (SBU) SUMMARY. In a frank exchange on March 7, U.S. and
European principals reviewed work on climate change under the
Major Economies and UNFCCC Processes. U.S. principals
secured EU Environment Commissioner Dimas' admission that
current EU proposals will permit some EU Member States to
record absolute increases in emissions by 2020. Both sides
cited questions surrounding biofuels and agreed to cooperate
in reviewing them, though the Commission also cited the
"social impacts" of biofuels. The Commission clarified the
proposed flow of proceeds from emissions trading auctions to
Member States under the Commission's January 23, 2008 Climate
Change legislative package. The U.S. delegation summarized
recent U.S. legislation on climate change, under which the
U.S. is demonstrably moving forward on the issue as
aggressively as the EU. Both sides spoke positively of U.S.
efforts on FutureGen, carbon capture and storage and
near-zero emission coal, though the U.S. del sought
clarification as to existence of E
U budget resources in these areas. Both sides highlighted
their efforts to address illegal logging, deforestation, and
biodiversity.


2. (SBU) For next steps, both sides expressed support in
principle for referencing climate change in U.S.-EU Summit
document(s). Both sides agreed to issue a joint press
statement on the day's HLD consultations (paragraph 41).


3. (U) The U.S. delegation was led by Paula Dobriansky, Under
Secretary of State for Democracy and Global Affairs, Jim

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Connaughton, Chairman of the White House Council on
Environmental Quality, and Dan Price, Assistant to the
President for International Economic Affairs. The EU
delegation was led by Janez Podobnik, Slovenian Minister of
Environment and Spatial Planning (for the EU Presidency) and
Stavros Dimas, European Commissioner for the Environment and
Pierre Vimont, French Ambassador to the U.S. END SUMMARY.

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The Major Economies Process (MEP)
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4. (U) Assistant to the President for International Economic
Affairs Dan Price restated the U.S. position that we see the
purpose of the Major Economies Process as supporting and
assisting the UN negotiations on climate change, not
launching an alternative negotiating forum.


5. (SBU) Price asked whether the EC would commit to a
Leaders' Declaration under the MEP containing these six
elements: a long-term global goal; legally binding,
nationally determined mid-term goals (mid-term defined as
approximately the years 2020-2030) backed by national plans;
sectoral agreements; financing mechanisms and elimination of
barriers to trade in clean energy goods and services;
measurement and accounting at the facility-level; addressing
deforestation; and highlighting adaptation. Commissioner
Dimas was noncomittal, stating that one would have to review
each item individually, such as, what sectoral approaches to
pursue, and what mid-term targets to commit to. Both sides
reaffirmed their support for the U.S./EU proposal at the WTO
to eliminate barriers to trade in environmental goods and
services.


6. (SBU) French Ambassador Vimont stated that all agree on
the usefulness of the MEP, and said France looked forward to
hosting the Third Meeting under the MEP in Paris. The
program will consist of a workshop April 16 on sectoral
approaches, and preparations on April 17-18 for the MEP
Leaders' Summit in July. The agenda, still under discussion,
is likely to include: seeking better definition of sectoral
approaches; roadmap for technological cooperation; work to
narrow positions on mid-term goals, including common and
differentiated responsibility; and financing.


7. (SBU) Price added that the next meeting of some of the MEP
parties will actually occur at Chiba, Japan, with work on the

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draft Leaders' Declaration. He said the European Union would
be represented on the drafting committee by France, and that
the committee would also include China, Brazil, South Africa,
Japan, and the U.S.

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The UNFCCC Process
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8. (SBU) CEQ Chairman Jim Connaughton said that to receive
Congressional assent to an international agreement on
greenhouse gas emissions, the U.S. would need binding
commitments from other countries including major developing
countries. He urged a commitment in principle to this at the
Major Economies Leaders' Summit. He said a commitment to
take on binding commitments from other countries would also
send a positive message to Congress as the Administration
seeks $2B in spending for the proposed Clean Technology Fund.
When pressed by Connaughton as to whether the EU supports
binding commitments from all major economies, Dimas was
non-committal.


9. (SBU) Connaughton argued that specific mid-term plans for
each country should be left to the UN process, but that this
summer should see agreement on *design* of an agreement that
provides for national plans and sectoral approaches. Dimas
argued that that, too, should be left to the UN process.


10. (SBU) Dimas criticized the U.S. for failing to ratify and
implement the Kyoto Protocol. Connaughton noted the problem
that Kyoto is not internationally binding in that it is not
enforceable. Price added that Kyoto is flawed because it
fails to recognize that even the EU and the U.S. together
cannot stop global emissions increases, unless we draw in
China and other major developing countries.


11. (SBU) Slovenian Minister Janez Podobnik suggested that
developed countries should lead by example, cutting emissions
in absolute terms.

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The Mid-Term Goal
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12. (SBU) Connaughton and Price questioned Dimas as to
whether the EU holds that each developed country must achieve
an absolute emissions reduction by 2020. They said the U.S.
accepts that many countries, such as South Korea, Mexico,
Greece, Portugal, Spain, and Italy, would find it impossible
to reduce absolute levels of emissions by 2020. Price
pointed out that each EU Member State was a Party to the
Convention.


13. (SBU) Dimas argued that each European nation will make
its contribution toward one (pan-European) target. But he
conceded this means some EU Member States will be permitted
under the EU's proposals to record an absolute increase in
emissions by 2020.


14. (SBU) Connaughton said that, if it was unacceptable for
the EU that the U.S. will not achieve absolute emissions
reductions by 2020, he would urge that the EC's experts
review our recently-enacted Energy Independence and Security
Act of 2007 (EISA) and explain how our requirements could
reasonably be increased. He also noted that if the EU
presses the U.S. on absolute emissions reductions by 2020, we
will insist that Austria, France, Ireland, and other EU
Member States with energy profiles similar to that of the
U.S., also take on these absolute emissions reductions.

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Biofuels: Challenges and Criticisms
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15. (SBU) Connaughton urged that the U.S. and Europe avoid a
situation in which shipments of biofuels must be "checked at
the border" to review for provenance. Although the U.S.
currently imports a small amount of biofuels, the amount of
imported biofuels could increase significantly. Connaughton
urged that, rather than analyzing every batch and checking
paperwork at ports of entry, developed countries need to
engage on this potential problem with biofuels-exporting
countries.

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16. (SBU) Both sides referenced the possible negative aspects
of biofuels and agreed it would be good to work together on
the topic. Dimas said the EU was grappling with the
deforestation impacts of increased usage of biofuels.
Notably, he also cited the "social impacts," including the
impact on food price levels.


17. (SBU) Connaughton and EPA Associate Deputy Administrator
Jason Burnett said the U.S. is confronting some of the same
issues. They said that while the EU has proposed a criterion
of 35% emissions reduction in order for biofuels to qualify
under its standard, the U.S. EISA has three greenhouse gas
thresholds: a 20% reduction is required for any eligible
renewable fuel; 50% for advanced biofuels; and 60% for
cellulosics.


18. (SBU) EISA also mandates that the U.S. review the
indirect impact on land-use caused by cultivation of biofuel
crops. U.S. Mission to the EU Minister-Counselor for
Economic Affairs Peter Chase noted that C. Boyden Gray,
Special Envoy to the European Union, has met with the EPA to
attempt to get the U.S. and EU to look at the sustainability
question together.


19. (U) Stephen Eule, Director of the Climate Change
Technology Program in the Office of Policy and International
Affairs at the U.S. Department of Energy (DOE),said that DOE
is currently planning ethanol biorefineries with small-scale
cellulosic activities.

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Next Steps
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20. (SBU) EUR/ERA Director William Lucas said we should give
thought to how we wish to reflect our work together on the
critical issue of climate change at the U.S.-EU Summit.


21. (SBU) Minister Podobnik urged that the Summit statement
include a forward-looking statement of principles and
reference the use of market-based instruments. He also urged
that the next High Level Dialogue be held in one year in
Europe. Dimas asked whether the climate and clean energy
policy and measures forum might be held in April or May.

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Emissions Trading
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22. (SBU) Connaughton said he agrees that international
emissions trading is a useful tool -- for those who choose
it. But the U.S. does not endorse global carbon markets when
not all countries have a cap because it creates an incentive
for some nations to avoid making real commitments to reduce
emissions, as some nations would wish to remain sellers of
credits, not buyers. The system would suffer from moral
hazard, as key developing nations would not aggressively
commit so that they could continue to collect. Connaughton
added that, although the EU has had some success in its Clean
Development Mechanism (CDM),it is near-impossible under the
U.S. domestic political process to transfer billions of
dollars to China while raising electricity and gas prices for
the average working American.


23. (SBU) Chase asked who would receive the money raised by
the emissions trading system auctions under the January 23
European Commission climate change proposal. Dimas said the
funds raised would go to the finance ministries of each
Member State, under a complicated formula to allow the poorer
nations to auction more than their climate-change needs. He
said 20% of the resulting funds would be flagged, so that it
*should* (emphasis added) go to such purposes as
redistribution, education campaigns, CCS, adaptation, and
funding for renewable energy. However, he noted, the
drafting process had seen "shall" changed to "should."

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U.S. Energy Reforms and Associated Spending Measures
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24. (SBU) Connaughton said the U.S. mandatory mid-term
commitments on climate change are locked into the recently

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enacted EISA legislation, which he summarized.
Additionally, new U.S. spending commitments complement the
EISA mandates. Preliminary estimates show EISA will prevent
6-10 billion metric tons of greenhouse gas emissions in the
U.S. by 2030. Connaughton noted emissions from the non-OECD
countries are projected to be double that of the OECD nations
by 2050, highlighting the need to engage developed countries.
A 38-gigaton reduction in projected 2050 global carbon
dioxide (CO2) emissions is needed to halve global emissions,
an enormous amount, given that one gigaton of CO2 equates to
the savings from 273 clean, zero-emission, coal-fired power
plants, of which we currently have none. We are nowhere near
the scale of what we need to reduce emissions.


25. (SBU) Connaughton added that first-generation biofuels
will not significantly assist in meeting the EISA goals.
Success of EISA depends on second-generation biofuels
fulfilling their promise.


26. (SBU) Under EISA, 10% of projected future energy supply
will be met by renewables. EISA contains a mandate of 20%
renewable fuels usage for the U.S. Government itself,
significant given that the USG alone is a bigger economic
entity than most countries.


27. (SBU) EISA mandates a 40% increase in fuel efficiency by

2020. The U.S. has in the past relied more on gasoline than
diesel, compared with the EU, because of air quality concerns
associated with diesel. Connaughton noted the U.S. will
begin to use more diesel now that the we have clean diesel
rules. This will pose an economic issue for the EU, as the
EU currently purchases the U.S. diesel surplus.


28. (SBU) USG is working with localities to develop a model
building code, to gain a 30% increase in energy efficiency
for buildings. In appliance efficiency, EISA mandates new
standards in every major category of appliance. EISA
mandates a 70% improvement in lighting efficiency by 2020,
mostly through phase-out of traditional incandescent bulbs.
In response to a question from Dimas, Burnett said we are
handling the issue of how to dispose of mercury in new
high-efficiency light bulbs by working with industry to make
the next generation of such bulbs mercury-free, and through a
campaign to educate the public on disposal.


29. (SBU) Connaughton said that on the spending side, the USG
proposes to spend this year $7.4 billion on climate change.
Loan guarantees are being established for advanced coal
plants and large-scale renewable power generation. We are
spending significantly to develop clean coal plant designs,
which would have benefits worldwide. $18B in loan guarantees
will be allocated for new nuclear plants.


30. (SBU) Responding, Dimas criticized the U.S. for not
achieving the emissions reduction goal for 2000 it had agreed
per the U.S. signing and ratifying the 1992 U.N. Framework
Convention on Climate Change. Dimas asserted that although
1990 has been agreed to as the reference year in multiple
fora, the U.S. has increased emissions 16% since then, while
the EU has reduced. Emissions have gone below 1990 levels
even for the EU15 (the pre-2004 set of western European
Member States, with economies more similar to that of the
U.S.).


31. (SBU) Connaughton replied that the U.S. and EU are
demonstrably moving forward on climate change equally
aggressively. For example, EISA is 50% more aggressive on
renewable fuels than what the EU has proposed. Connaughton
said that under EISA the U.S. will not get down to 1990
emissions levels by 2020, but will later. The EISA
legislation and associated budget commitments will, however,
put U.S. emissions on the downward trajectory for the first
time. Connaughton said he did not know when the U.S. will
reach 1990 levels. He said that for Europe, 1990 as a
reference year incorporates the early 1990s economic collapse
of eastern Europe, which no policymaker would recommend be
repeated; the UK's decision to move away from coal to natural
gas, long before climate change was a policy issue; and the
EU's use of diesel fuel, at the expense of air quality and
human health. Price further pointed out that the Framework
Convention's reference to reductions by 2000 was cast as a
non-binding aim.


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U.S. Efforts on FutureGen, CCS, and Clean Coal
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32. (SBU) Dimas asked about the restructuring of the
FutureGen clean coal project and suggested that the U.S.
cooperate with the EU and also China on pilot projects.
Connaughton said the restructuring will ultimately result in
a bigger program with more projects.


33. (SBU) Eule noted the Bush Administration has requested an
increase in funding for Carbon Capture and Storage (CCS)
research this year. Seven large-scale CCS demonstrations are
planned, including one ethanol plant (ethanol production
being a source of carbon). Chase added there has been one
expert-level U.S.-EU dialogue on CCS and there will be
another March 31 in Washington. Eule noted the
Administration has asked for $622M for clean coal this year,
the largest amount in over 25 years.

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EU Budget for Clean Coal Research
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34. (SBU) Connaughton expressed concern over reports that
there were no EU budget resources dedicated to address this
topic through 2013 (through the time period of the Seventh
Framework). Dimas said only that the Seventh Framework has
research funds through this period, and that the issue was
addressed in part by the emissions trading scheme.

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Methane to Markets and Energy Star
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35. (SBU) Reviewing the Work Action Plan from the 2007
U.S.-EU Summit, Artur Runge Metzger, Head of Unit, Climate
Strategy, international negotiation and monitoring of EU
action, DG Environment, said the European Commission has
acceded to the Methane to Markets Partnership and the work is
going well. EPA Associate Deputy Administrator Burnett said
the U.S. agreement with the EU on Energy Star for appliance
efficiency is bearing fruit. Burnett offered to work with
Europe to extend Energy Star to consumer electronics products.

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Illegal Logging and Deforestation
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36. (SBU) Dimas said that, like the U.S., the EU is working
with developing nations on illegal logging, and suggested
that the EU and U.S. could increase their effectiveness by
working together.


37. (SBU) Connaughton cautioned that payments for "avoided
deforestation" pose a moral hazard problem: one could easily
end up paying to prevent deforestation in one region, only to
push it into the next province. This also has potential to
spur graft among local officials. Connaughton suggested that
the problem of deforestation is in part the problem of more
food from less land. We need to mobilize agricultural
experts to convert agriculture in developing countries to our
high-yield methods.

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Biodiversity
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38. On biodiversity, U/S Dobriansky highlighted such U.S.
efforts as the President's Initiative Against Illegal
Logging; U.S. aid to Indonesia to develop a national legality
standard for timber harvesting; the recent MOU with China to
address illegal logging and associated trade; our work plan
to improve forest law enforcement and address illegal
Mahogany exports in the context of our Free Trade Agreement
with Peru; and the recent Brussels meeting between USTR
officials and Commission representatives on this topic.


39. (SBU) Dimas said the EU is working on a global network of
marine protected areas, given that much marine biodiversity
is outside national jurisdiction, and urged the U.S. to work
with the EU on this topic. U/S Dobriansky agreed. (Note:
Dimas did not raise the EU's standing proposal for a


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