SWEDEN REVERSES BAN ON NEW NUCLEAR REACTORS

UNCLAS SECTION 01 OF 02 STOCKHOLM 000088

SIPDIS

E.O. 12958: N/A
TAGS: ENRG SENV KGHG PREL SW
SUBJECT: SWEDEN REVERSES BAN ON NEW NUCLEAR REACTORS


1. Summary: The four center-right governing Alliance party leaders
announced the removal of the ban on construction of new nuclear
power reactors February 5. This is a key element of the GOS'
Climate and Energy policy bill, which it will send to Parliament in
March. New reactors may be built to replace old ones -- but only at
the current nuclear sites and on the condition that no more than 10
reactors are in operation at any one time. The agreement on energy
policy also includes other ambitions. By 2020 Sweden will:

-- use 50 percent renewable energy,
-- use 10 percent renewable energy in the transport sector,
-- have 20 percent more efficient energy usage, and
-- have a 40 percent reduction in greenhouse gas (GHG) emissions.

The GOS invited the opposition to consultations aimed at getting a
broad political agreement. Reversal of the ban represents a victory
for PM Reinfeldt, a move towards a pragmatic political platform for
the 2010 general election. Given his Center Party coalition
partner's historical anti-nuclear stance, this new agreement
underlines both Reinfeldt's leadership and the adaptability of the
governing Alliance coalition. End summary.


2. The four parties of Sweden's centre-right governing Alliance on
February 5 announced they had reached a historic agreement to
reverse a 1997 decision to phase out the country's 10 nuclear
reactors. The party leaders agreed that the plants can instead be
replaced at the end of their life spans as part of an ambitious new
climate program.

A Tortured History
--------------


3. Nuclear power accounts for nearly half of Sweden's electricity
production. Nuclear energy policy has caused serious political
divisions over the last three decades, leading to abrupt reversal of
energy policies, considerable uncertainties for market operators, as
well as even causing a government to resign over the issue (Center
Party-led government in 1978).


4. The country voted in a non-binding referendum in 1980 to phase
out Sweden's 12 nuclear reactors by 2010, but that target was
abandoned in 1997 after officials acknowledged that there would not
be sufficient alternative energy sources to replace the nuclear
output. Instead, the government agreed to phase out nuclear power
over the course of about three decades by not replacing the aging
reactors. The Center Party in particular has long been a virulent
opponent of a return to nuclear energy.

A Pragmatic Political Decision
--------------


5. Pressure mounted on Center Party leader Maud Olofsson late
January when her coalition partner Christian Democrats switched
sides on the issue, joining the Moderates and the Liberal Party in
calling for the ban to be lifted. After a top secret party meeting
on February 4, the party leadership announced it had the mandate to
negotiate a new nuclear energy deal. Olofsson was careful to point
out that the party has not changed its mind about nuclear power, but
that the compromise is one the party can live with. In return, she
won a commitment for resources for the scaling up of renewable
energy as well as energy efficiency programs, including for the
development of wind energy and biomass.


6. Another measure, which will be further specified in the energy
and climate bill to be presented to the Parliament on March 17, is
that the carbon dioxide tax will be raised. In total, GHG emissions
will be reduced by 20 million tons compared to 1990 emissions. Two
thirds of these reductions will be done domestically and one third
will be done through investments in other EU-countries and in
developing countries.


7. Alliance government leaders hope that the deal will remove the
problem of their decade-long division on the nuclear issue well
before the next general election in September 2010. The debate will
likely be intense within the Center Party, although all Center Party
MP's stand behind the agreement -- which strengthens party leader
Maud Olofsson in the debate to come.

A Divided Opposition
--------------


8. Immediately after the Alliance's announcement, the three
opposition parties - Social Democrats, Greens, and Left Party -
called a press conference, where they criticized the deal and stated
that if/when they are in government they intend to continue with the
nuclear phase-out. Maud Olofsson has invited the opposition parties
to talks with the aim of getting broad political agreement. If
those attempts fail, the nuclear issue will figure prominently in
the 2010 general election.

Comment
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9. With her party divided on the nuclear issue, Social Democrat
Party leader Mona Sahlin faces a dilemma. About half of the party
favors building additional nuclear power plants, and the powerful
trade unions and energy-intensive industries are vocally praising
the Alliance government's deal. Sahlin will face considerable
opposition from within, then, if she appears to be closing the door
to a broad agreement with the ruling Alliance parties. But for the
governing parties, this development is another significant move
towards a pragmatic political platform for the 2010 general
election. Given his Center Party coalition partner's historical
anti-nuclear stance, the deal also underlines PM Reinfeldt's
leadership and the adaptability of the governing Alliance coalition.


SILVERMAN