This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 03 OTTAWA 001125 
 
SIPDIS 
 
STATE FOR OES, OES/ETC, OES/EGC, EB/ESC/ISC, WHA/CAN 
 
USDOC FOR 4320/ITA/MAC/WH/ONIA -- WORD 
 
DOE FOR INT'L AND POLICY, IE-141 (DEUTSCH) AND BPA (ATKINS) 
 
EPA FOR OFFICE OF THE ADMINISTRATOR, INTERNATIONAL AFFAIRS 
AND BRIAN MCLEAN 
 
E.O. 12958: N/A 
TAGS: SENV ENRG CA
SUBJECT:     CANADA UNVEILS CLIMATE CHANGE STRATEGY: 
      MOST CALL IT TOO VAGUE, TOO LATE 
 
REF:  (A) OTTAWA 1020  (B) OTTAWA 0824  (C) OTTAWA 0995 
 
 
SUMMARY 
------- 
 
¶1.   ON APRIL 13 CANADA ANNOUNCED ITS LONG-AWAITED STRATEGY 
TO MEET ITS GREENHOUSE GAS EMISSION REDUCTION COMMITMENTS 
UNDER THE KYOTO PROTOCOL.  MOST PLAYERS ACKNOWLEDGE THAT 
CANADA'S KYOTO TARGET (EMISSIONS SIX PERCENT BELOW 1990 
LEVELS BY 2012) IS NO LONGER ATTAINABLE, IF IT EVER WAS. 
THE NEED TO MAINTAIN A COMPETITIVE INDUSTRY ENVIRONMENT VIS- 
-VIS THE UNITED STATES WAS A MAJOR CONSTRAINT IN CRAFTING 
THE PLAN, BUT GOC ENVIRONMENT MINISTER STEPHANE DION BRAVELY 
TOUTS THE ECONOMIC, TECHNOLOGICAL AND ENVIRONMENTAL BENEFITS 
OF REDUCING EMISSIONS. 
 
¶2.   THE STRATEGY (FULL TEXT AT WEBSITE CLIMATECHANGE.GC.CA) 
IS THE RESULT OF A MAJOR EFFORT BY DION TO OVERCOME 
OPPOSITION AND SKEPTICISM, TAKE RENEWED AIM AT THE KYOTO 
TARGET, AND BUILD CREDIBILITY AS HE ATTEMPTS TO ENGAGE 
INTERNATIONAL PARTNERS - ESPECIALLY THE UNITED STATES - IN A 
"BEYOND KYOTO" DIALOG.  HOWEVER, INITIAL REACTION TO THE 
STRATEGY WAS SKEPTICAL TO NEGATIVE.  EXPERTS EXPRESSED 
DISAPPOINTMENT AT THE LACK OF DETAIL, PARTICULARLY GIVEN 
THAT THIS POLICY HAS BEEN UNDER DEVELOPMENT THROUGHOUT THE 
GOVERNING LIBERAL PARTY'S ELEVEN-PLUS YEARS IN POWER.  PRESS 
CRITICIZED THE PROSPECT OF BUYING EMISSION CREDITS FROM 
ABROAD (TRADING "TAXPAYER DOLLARS FOR THIN AIR") AND ALLEGED 
THAT THE PLAN PUT MORE BURDEN ON INDIVIDUALS AND HOUSEHOLDS 
THAN ON INDUSTRY. 
 
 
 
¶3.   THE ANNOUNCEMENT COMES WHILE THE LIBERAL PARTY MINORITY 
GOVERNMENT IS REELING FROM SCANDAL AND OPPOSING PARTY 
ATTACKS (INCLUDING OVER A KYOTO-RELATED LEGISLATIVE MEASURE 
- REF C), AND MAY FACE AN ELECTION WITHIN 90 DAYS.  AS SUCH, 
THE GOC CAN BE EXPECTED TO USE THE CLIMATE CHANGE ISSUE IN 
AN EFFORT TO GO ON THE POLITICAL OFFENSIVE, PARTICULARLY 
AGAINST ITS CONSERVATIVE PARTY RIVALS.  END SUMMARY. 
 
THE CHALLENGE 
------------- 
 
¶4. WHILE ITS TECHNOLOGICAL LEVEL IS SIMILAR TO THE 
UNITED STATES, CANADIANS CONSUME OVER 20 PERCENT MORE 
ENERGY PER CAPITA, DUE TO THE COUNTRY'S LONG TRANSPORT 
DISTANCES, COLD CLIMATE, AND ENERGY-INTENSIVE RESOURCE- 
BASED INDUSTRIES (ENERGY PRODUCTION, FOREST PRODUCTS, 
MINING AND METALS).  CANADA'S EMISSIONS IN 1990 WERE 
ABOUT 596 MEGATONNES (CO2 EQUIVALENT) AND ITS KYOTO 
COMMITMENT - TO REDUCE THIS BY SIX PERCENT BY 2008-2012 
- WOULD BRING THIS TO AROUND 560 MT.  BUT IN 2003, BY 
THE GOC'S OWN ADMISSION, EMISSIONS WERE ABOUT 740 MT, OR 
24 PERCENT ABOVE 1990 LEVELS.  IN SHORT, REQUIRED 
REDUCTIONS THAT WERE CALCULATED AT ABOUT 240 MT IN 2002 
- AND EVEN THEN CONSIDERED UNATTAINABLE BY MANY - HAVE 
RISEN CONSIDERABLY. 
 
PLAN ELEMENTS 
------------- 
 
¶5. MAJOR, MULTI-YEAR FUNDING FOR EMISSIONS REDUCTION WAS 
RENEWED AND UPDATED IN THE GOC'S FEBRUARY BUDGET.  REFS 
A AND B DESCRIBED THE GOC'S VOLUNTARY AGREEMENT WITH 
AUTO MANUFACTURERS, ANNOUNCED ON APRIL 5, UNDER WHICH 
THE COMPANIES COMMIT TO REDUCE GREENHOUSE GAS EMISSIONS 
FROM CANADA'S ENTIRE VEHICLE FLEET BY 5.3 MT BY 2010. 
THE APRIL 13 ANNOUNCEMENT ATTEMPTED TO FILL IN MORE OF 
THE PICTURE. 
 
¶6. LARGE FINAL EMITTERS:  LFE'S (MOSTLY IN ENERGY, 
MINING AND MANUFACTURING) ACCOUNT FOR ABOUT HALF OF 
CANADA'S GREENHOUSE GAS EMISSIONS.  THE GOC'S STRATEGY 
REMAINS VAGUE, DESCRIBING COMPANIES' OPTIONS FOR 
COMPLIANCE.  THE GOC CLAIMS THAT IT IS MEETING AN OLD 
PROMISE TO LFE'S - THAT THEIR COST OF COMPLIANCE WILL 
NOT EXCEED C$15 (ABOUT US$12) PER TONNE OF CO2 
EQUIVALENT.  THE CURRENT TARGET FOR REDUCTIONS BY LFE'S 
IS 45 MT ANNUALLY. 
 
¶7. EMERGING RENEWABLE ENERGY:  THE GOC WILL ENCOURAGE 
WIND, SOLAR AND TIDAL POWER THROUGH A VARIETY OF 
MEASURES, WHICH "COULD" CONTRIBUTE ABOUT 15 MT OF ANNUAL 
REDUCTIONS. 
 
¶8. CLIMATE FUND:  THE GOC PROMISES "A PERMANENT 
INSTITUTION FOR THE PURCHASE OF EMISSIONS REDUCTION AND 
REMOVAL CREDITS" BOTH IN CANADA AND ABROAD.  THE 
GOVERNMENT ESTIMATES THAT THE FUND "COULD YIELD IN THE 
ORDER OF 75-115 MT OF REDUCTIONS ANNUALLY WITH FUNDING 
IN THE ORDER OF C$4-5 BILLION."  WHILE PRIORITY WILL BE 
GIVEN TO FINDING DOMESTIC REDUCTIONS, "IT IS NOT 
POSSIBLE TO PREDICT HOW MANY OF THESE REDUCTIONS WILL 
OCCUR DOMESTICALLY." 
 
¶9. PARTNERSHIP WITH PROVINCES:  THE GOC WILL CREATE A 
FUND TO INVEST IN TECHNOLOGIES AND INFRASTRUCTURE 
DEVELOPMENT THAT ARE IMPORTANT TO PROVINCIAL 
GOVERNMENTS, SUCH AS CLEAN COAL TECHNOLOGY, CO2 CAPTURE 
AND STORAGE, ETHANOL, AND EAST-WEST POWER TRANSMISSION 
FACILITIES (THE LATTER IS ALREADY TOUTED AS A WAY TO 
HELP THE PHASE-OUT OF COAL-FIRED POWER PLANTS).  HOPED- 
FOR REDUCTIONS ARE 55-85 MT ANNUALLY BY 2008-2012, WITH 
CUMULATIVE FEDERAL FUNDING IN THE ORDER OF C$2-3 
BILLION. 
 
¶10. OTHER ELEMENTS WITH SMALLER EXPECTED REDUCTIONS (OR 
NO ESTIMATES) INCLUDE GREENING GOVERNMENT OPERATIONS, 
ENGAGING CITIZENS TO REDUCE INDIVIDUAL AND HOUSEHOLD 
EMISSIONS, BETTER AGRICULTURE AND FORESTRY PRACTICES, 
AND PARTNERING WITH CITIES TO BUILD URBAN TRANSIT 
INFRASTRUCTURE. 
 
REACTION NEGATIVE 
----------------- 
 
¶11. THE GOC'S APPROACH TO CLIMATE CHANGE HAS BEEN UNDER 
ATTACK FROM ALL PARTS OF THE POLITICAL SPECTRUM FOR 
YEARS, MAINLY DUE TO THE LONG DELAY IN PRODUCING A 
COMPREHENSIVE PLAN TO MEET THE KYOTO TARGET - WHICH HAS 
SHORTENED THE TIME FRAME FOR ACTION, MAKING THE TARGET 
HARDER TO ATTAIN, WHILE CREATING UNCERTAINTY FOR 
INDUSTRY.  THE GOC'S PROMISE THAT THE COST OF COMPLIANCE 
FOR LARGE FINAL EMITTERS WOULD NOT EXCEED C$15 PER TONNE 
WAS AN EARLY EFFORT TO ADDRESS THE UNCERTAINTY PROBLEM. 
 
 
¶12. REACTION TO THE APRIL 13 STRATEGY ANNOUNCEMENT WAS 
NEGATIVE ACROSS THE BOARD.  INDUSTRY AND ENVIRONMENTAL 
NGO EXPERTS, MANY OF WHOM HAVE WORKED WITH THE GOC ON 
CLIMATE CHANGE POLICY FOR MORE THAN A DECADE, EXPRESSED 
DISMAY AT THE ONGOING LACK OF DETAIL.  THE CANADIAN 
CHAMBER OF COMMERCE ISSUED A GENERAL CONDEMNATION OF THE 
POLICY, CITING THE ESCALATING COST, POTENTIAL LACK OF 
ACCOUNTABILITY, AND THE COMPETITIVE CHALLENGES IT WOULD 
CREATE FOR CANADIAN BUSINESS VIS--VIS OTHER COUNTRIES. 
THE CHAMBER URGED THE GOC NOT TO PURCHASE EMISSION 
CREDITS FROM FOREIGN SOURCES.  MEDIA REPORTS ZEROED IN 
ON THE FOREIGN-CREDIT ISSUE AS WELL, DEMANDING ESTIMATES 
AS TO WHAT PERCENTAGE OF CANADA'S REDUCTIONS MIGHT BE 
OBTAINED BY "SPENDING TAXPAYER DOLLARS ON HOT AIR." 
THE MEDIA ALSO CRITICIZED THE MODEST SHARE OF TOTAL 
REDUCTIONS TO BE OBTAINED FROM LFE'S, IMPLYING THAT MOST 
OF THE POLICY'S BURDEN WOULD FALL ON HOUSEHOLDS AND 
CONSUMERS. 
 
¶13. Opposition politicians - who are in a position to force 
 
an election in coming weeks or months - echoed all these 
criticisms.  The leading opposition party, the Conservative 
Party of Canada, had already objected in recent weeks to the 
surprise addition of a Kyoto-related provision in this 
year's budget legislation, and threatened to defeat it, thus 
bringing down the Liberal minority government.  The 
Conservatives have weak credibility with voters on 
environmental issues, however, and backed off.  The 
Conservatives will have to continue to be careful to avoid 
overt displays of pro-industry, anti-environment sentiment, 
so as to avoid giving the Liberals useful election campaign 
ammunition against them. 
 
IMPLICATIONS 
------------ 
¶14. THE CURRENT POLITICAL UNCERTAINTY SURROUNDING THE 
GOC'S TENURE COMPLICATES ANY ASSESSMENT OF IMPLICATIONS 
FOR U.S. INTERESTS.  TO THE EXTENT THAT THE CLIMATE 
CHANGE STRATEGY IS IMPLEMENTED, CANADIAN BUSINESS, AS 
WELL AS MANY IN GOVERNMENT, CAN BE RELIED ON TO 
VIGOROUSLY RESIST ITS APPLICATION IN WAYS WHICH INCREASE 
THE COST OF DOING BUSINESS IN CANADA VIS--VIS THE 
UNITED STATES.  THE GOC HAS SET ASIDE BILLIONS IN 
FUNDING FOR THE STRATEGY, WHICH COULD POTENTIALLY COVER 
A WIDE RANGE OF INFRASTRUCTURE PROJECTS.  SOME OF THESE 
COULD BE OF BENEFIT TO U.S. INTERESTS, SUCH AS ELECTRIC 
POWER GRID IMPROVEMENTS, BETTER TRANSPORTATION, AND 
IMPROVED BORDER FACILITIES, NOT TO MENTION THE GENERAL 
ENVIRONMENTAL BENEFITS TO NORTH AMERICANS OF CLEANER 
PLANT AND VEHICLE EMISSIONS. 
 
¶15. A FAVORED THEME FOR ENVIRONMENT MINISTER DION IS THE 
STRATEGY'S POTENTIAL STIMULUS TO CANADA'S ENVIRONMENTAL 
TECHNOLOGY INDUSTRY - NOT ONLY ITS DOMESTIC GROWTH BUT 
ITS EXPORT OPPORTUNITIES (INCLUDING THOSE WHICH COULD 
POTENTIALLY BE LINKED TO PURCHASES OF FOREIGN EMISSION 
CREDITS).  SINCE CANADIAN AND U.S. FIRMS ARE SO CLOSELY 
INTEGRATED, TO THE EXTENT THAT THIS STIMULUS OCCURS, 
U.S. TECHNOLOGIES AND COMMERCIAL INTERESTS ARE LIKELY TO 
ENJOY SOME OF THE BENEFITS. 
 
DICKSON