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UNCLAS SECTION 01 OF 03 BERLIN 003060 
 
SIPDIS 
 
FOR WHITE HOUSE - DAVE BANKS 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: SENV ECON ENRG EAIR GM
SUBJECT: SCENESETTER FOR CEQ CHAIRMAN JAMES L. 
CONNAUGHTON'S VISIT TO GERMANY 
 
 
¶1.  SUMMARY.  Your visit to Germany -- Frankfurt October 23 
and Berlin October 26-28 -- provides excellent opportunities 
to advance U.S.-German cooperation and to refute German 
public misperceptions about U.S. climate and energy policies. 
 The visit particularly offers opportunities to engage on 
clean energy technology, to explore ways to advance 
bilaterally what was started with the 2005 Mainz Declaration, 
and look at what Germany might do during its upcoming EU and 
G-8 presidencies.  The senior officials you will meet in the 
ministries of Environment and Economics, the Bundestag, and 
in the Chancellery are taking a more pragmatic, constructive 
approach in dealing with us in respect to climate change and 
other environmnetal issues.  The Merkel-led coalition readily 
sees the linkages between environmentally friendly 
technology, including in the energy sector, and economic 
growth/potential commercial success.  Senior officials 
acknowledge steps U.S. industries have taken to boost energy 
efficiency and recognize U.S. scientists and industries are 
making discoveries and technological innovations that can 
benefit the environment.  Top German officials have signaled 
a strong interest in bilateral discussions that include both 
government and industry.  Your visit is especially timely 
because the government is finalizing its agenda for the 2007 
EU and G-8 presidencies and energy efficiency is expected to 
play a major role.  END SUMMARY. 
 
------------------------------------ 
GOVERNMENT DESIRE TO ENGAGE INDUSTRY 
------------------------------------ 
 
¶2.  The current government -- a grand coalition of Christian 
Democrats and Social Democrats -- is markedly more receptive 
than its Social Democratic-Green predecessor to cooperation 
with the U.S. on climate and energy issues.  The doctrinaire 
Green Juergen Trittin is gone, replaced as Environment 
Minister by the pragmatic Social Democrat Sigmar Gabriel. 
The Chancellor, a former CDU Environment Minister, still 
watches environmental issues and forged a connection between 
environment and energy policy makers in the Energy Summit 
dialogue she launched in April 2006.  Its goal is to develop 
a national energy strategy for taking Germany to 2020 while 
paying attention to environmental concerns and the need for 
broader international cooperation.  The ministries of 
Economics, Environment, and Foreign Affairs all participate, 
as do selected German industries.  In this context the 
Chancellery has sent two significant signals demonstrating a 
new perspective on Germany's energy future.  One is in the 
realm of nuclear power: the process does not directly address 
the controversial planned phase-out of nuclear power, but 
Merkel stated the government must "lay everything on the 
table" when considering its energy policy.  Merkel's CDU/CSU 
supporters, including Economics Minister Glos, have publicly 
called for doing away with the nuclear phase-out scheduled 
for 2015.  Some moderate SPD members agree, albeit less 
publicly.  Environment Minister Gabriel (SPD) strongly 
supports sticking with the nuclear phaseout, but has also 
changed the Environment Ministry's message on coal, 
emphasizing it as a transition technology.  The other signal 
is the strong focus the Chancellery gives environmental 
innovation -- particularly in energy efficiency and clean 
energy -- as a tool in economic growth. 
 
¶3.  The Merkel government wants to work with us more on 
energy efficiency.  Energy efficiency will be high on the EU 
presidency and G-8 agenda.  Economic Ministry officials see 
clean coal/clean fossil fuels, heating energy efficiency in 
buildings, and more energy efficient vehicles as areas for 
discussion for G-8 leaders next year.  Officials at the 
Environment Ministry want U.S. ideas on boosting efficiency 
through federal programs such as Energy Star, as well as 
input from specific U.S. industry sectors on their successes 
in cutting energy consumption.  One idea perhaps to explore 
during your visit may be whether high profile dialogue 
between U.S. and German energy-intensive sectors -- such as 
the chemical sector -- and the two governments could provide 
the structure for broader bilateral engagement on climate.  A 
sectoral approach, like that of the APP, could be a way to 
build on Mainz. 
 
¶4.  Environment, MFA and Economic Ministry officials tell us 
Germany will raise climate change during its G-8 presidency, 
but with of a focus on energy efficiency, clean energy, and 
new technology.  One reason is the need for Merkel to satisfy 
German public opinion.  At the same time, Economic Ministry 
officials say Germany will seek consensus on any statements 
on climate change and take a different approach from the UK 
at Gleneagles. 
 
¶5.  All the same, the German public remains skeptical about 
U.S. interest in combating climate change.  German newspapers 
 
BERLIN 00003060  002 OF 003 
 
 
and periodicals routinely criticize U.S. climate policy. 
Public outreach is crucial and effective in changing popular 
misperceptions: following his meeting with you in Washington, 
Bundestag Green Party member Matthias Berninger stated in an 
interview with a major German daily newspaper that the image 
of the U.S. as an "environmental killer" is not correct.  He 
then went on to articulate his belief that U.S. environmental 
technologies will be more advanced than Europe's. 
 
----------------------------------- 
RECENT DEVELOPMENTS IN CLEAN ENERGY 
----------------------------------- 
 
¶6.  On August 1 a new energy law came into effect that places 
a nine euro cent/liter tax on biodiesel and rises by six euro 
cents annually to put biodiesel on equal footing with the 
fossil diesel tax (currently at 47 cents/liter) by 2012.  The 
Bundestag passed a law requiring that German diesel fuel 
contain five percent biodiesel effective January 2007.  The 
law couples this quota with an international quality 
standard, DIN EN 14214, which establishes minimum performance 
requirements for biodiesel at cold temperatures.  Producers 
of biodiesel not meeting the standards will have to pay the 
full 47 cent/liter tax.  German biodiesel producers, already 
concerned over annual tax hikes, favor introducing DIN EN 
14214 because it will protect the domestic market from 
foreign producers.  Domestic rapeseed-based biodiesel already 
meets the DIN EN 14214 requirements. 
 
¶7.  In June the government introduced its National Allocation 
Plan for 2008-2012, which is Germany's second period of 
emissions regulations for energy providers, industry, land 
transportation, and households.  An emissions trading system 
applies to energy providers and several industries.  The plan 
is designed to encourage power companies to replace their 
older plants with new, more efficient installations by 
letting them transfer four years of allowances from old 
facilities to new ones provided they meet performance 
benchmarks based on best available technology.  So far the 
transfer rule is having the desired effect.  Germany's 
largest energy company, RWE, has announced plans to close 
down a number of smaller power plants built in the 1950s and 
open three 2,200 megawatt facilities in their place. 
 
------------------------- 
U.S. AND GERMAN COMPANIES 
------------------------- 
 
¶8.  U.S. companies active in Germany share interests with 
German firms in clean energy technologies such as clean coal, 
biofuel, and renewables.  Sweden's Vattenfall, one of the 
largest power companies in Germany, has already started 
constructing a carbon sequestration pilot facility.  RWE is 
also planning construction of the first commercially viable 
clean coal power plant with carbon sequestration technology. 
Biofuel producers are providing more household heating and 
electricity, especially in the former East Germany (where 
biomass is easier to collect because the farms are larger), 
which provides jobs in an area of high unemployment. 
 
¶9.  The automobile sector, one of the largest components of 
the German economy, includes a significant number of 
partnerships that promote hybrids and fuel cell technology 
between U.S. and German manufacturers.  Shell Germany, 
Volkswagen, and DaimlerChrysler have a joint venture to build 
the world's first commercial biomass-to-liquid (BTL) facility 
in Freiberg.  Officials in the Chancellery have expressed 
enthusiasm in the development of BTL because it can be 
produced from a broader range of plants and plant parts than 
the current biodiesel.  You will visit the Opel fuel cell 
facility as part of your trip to Frankfurt where you will 
have the chance to discuss Opel's work on biodiesel, hybrid, 
and fuel cell technology. 
 
¶10.  On renewables, cooperation between U.S. and German firms 
is occurring in the solar sector.  A photovoltaic production 
facility recently opened in the eastern state of 
Saxony-Anhalt that is a German-U.S.-Swedish joint venture 
which produces solar cells and modules.  The facility was 
funded in part by the German government, and is a good 
example of public-private sector partnerships in the area of 
renewable energy.  It will create 300-400 jobs in an 
economically depressed region.  It also benefits from German 
subsidies for the solar power industry.  General Electric 
opened its European Global Research Center in Garching, 
Bavaria in 2004 where major research focus areas include 
alternative energy generation technologies such as hydrogen 
and biomass and electrical systems for renewable energy 
sources such as solar, wind, and water. 
 
 
BERLIN 00003060  003 OF 003 
 
 
 
 
KOENIG