null

UNCLAS        BERLIN 03399

SIPDIS
CX2BERLN:
    ACTION: ECON
    INFO:   DCM JIS ECONMIN FCS PAO POL AMB CHRON FAS
CXBERLIN:
    ACTION: ECON
    INFO:   DCM JIS ECONMIN FCS PAO POL AMB CHRON FAS

DISSEMINATION: ECON
CHARGE: PROG

APPROVED: DCM:JMKOENIG
DRAFTED: ECON:MASULLIVAN
CLEARED: EMIN:RFCEKUTA, ECON:DNEUMANN, GA:JJACOBY, EXEC:CCONWAY

VZCZCRLI224
RR RUEHC RUCNMEU RUCNFRG RHEHAAA RHMFIUU
DE RUEHRL #3399/01 3341222
ZNR UUUUU ZZH
R 301222Z NOV 06
FM AMEMBASSY BERLIN
TO RUEHC/SECSTATE WASHDC 6238
INFO RUCNMEU/EU INTEREST
RUCNFRG/FRG COLLECTIVE
RHEHAAA/THE WHITE HOUSE WASHDC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC

UNCLAS SECTION 01 OF 03 BERLIN 003399 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
THE WHITE HOUSE FOR CEQ CONNAUGHTON AND BANKS, DOE FOR ROSSI 
 
E.O. 12958: N/A 
TAGS: ENRG PGOV PREL EU GM
SUBJECT: ENERGY AND GERMANY'S EU PRESIDENCY 
 
REF: A. BERLIN 3267 
     ¶B. BERLIN 2782 
 
ENTIRE TEXT IS SENSITIVE BUT UNCLASSIFIED, PROTECT ACCORDINGLY 
 
¶1.  (SBU) SUMMARY.  The German EU presidency provides us with 
opportunities to engage both Germany and the EU on all 
aspects of energy policy, including the question of standards 
for the next generation of energy technologies.  Germany 
plans to make energy a key focus of its EU and G-8 
presidencies.  The Chancellery, various Ministers, and top 
officials have all stressed they see boosting energy 
efficiency, whether as a tool to foster advanced industrial 
countries' economic productivity or to cut pollution and 
greenhouse gas missions, as a key aspect of upcoming 
discussions.  Greater transparency in energy markets, 
increased applications of clean energy technologies, and 
greater use of renewable energy will also be themes.  The 
plans parallel and build on the Merkel government's work to 
draft a comprehensive national energy strategy through 2020 
and the EU's release of a green paper calling for an EU-wide 
energy policy last spring.  While Germany is unlikely to 
advocate a greater role for Brussels in setting national 
energy policy, Berlin is interested in assisting the 
integration of energy markets within Europe and diversifying 
energy supplies.  Officials also note talk of 
creating a more united EU stance on energy is designed to 
strengthen the EU's position in talking with energy 
suppliers.  There is strong awareness as well of the 
implications -- whether in terms of emissions or higher 
resource prices -- stemming from expansion of energy 
consumption and power generating capacity in China, India, 
and other large emerging markets. 
 
¶2.  (SBU) The German EU presidency provides us with 
opportunities to engage both Germany and the EU on all 
aspects of energy policy.  Recent senior USG visitors have 
raised the need for closer cooperation with the EU and its 
members on new energy technology to improve global energy 
security and address global warming, thus helping frame 
German thinking for its presidency.  The German presidency's 
focus on efficiency, renewables and new 
technologies is an opportunity to find ways to harmonize 
standards on both sides of the Atlantic.  By making progress 
on this front, the U.S. and the EU can advance the 
development/applications of leaner energy technologies and 
their acceptance worldwide.  Given the high percentage of 
world economic output represented by the U.S. and EU, any 
joint decisions regarding new technologies, such as clean 
coal or biodiesel , could serve as benchmarks and better 
options for emerging global players such as China, India, and 
Brazil.  In addition, we can use discussions on energy policy 
to focus on the security of energy supply, including 
diversification, transit and supply routes, such as LNG and 
pipelines.  END SUMMARY. 
 
¶3.  (SBU) Following the cutoff of gas to Ukraine in January, 
German officials have focused increasingly on the issue of 
energy security and diversification of energy sources.  The 
debate was furthered by the Merkel government's decision to 
call an energy summit in April to begin work on an ongoing 
national energy strategy through 2020, including building a 
factual base for re-examining the planned phase-out of 
nuclear power in Germany.  The EU's recent publication of a 
green paper calling for a European-wide energy strategy and a 
greater role for Brussels in European energy policy added 
further impetus to these discussions.  (Note: strong 
opposition from the 
Social Democrats in the ruling coalition is ruling out a 
change now in the plans for phasing out nuclear power; even 
Economics Minister Glos, a vocal advocate for nuclear power, 
admits publicly that progress on this issue is not likely 
until after the expected 2009 national elections.  End note.) 
 
¶4.  (SBU) The Chancellor, Ministers, and senior officials in 
the Chancellery, Ministry of Economics, Foreign Office, and 
Environment Ministry have stated their desire to highlight 
energy security.  Germany is also interested in some aspects 
of the Commission's recent green paper on energy, promising 
to work on the completion of the internal European market for 
gas and electricity and external energy relations. 
Chancellor Merkel has noted publicly that while she does not 
support giving Brussels more power over national energy 
policy, she does want to use the German presidency to 
implement existing energy directives and believes Europe 
needs to speak with one voice in its external energy 
relations.  This last point gets at the question of Russia; 
thinking here is a solid EU front will improve members' 
ability to talk with Russian oil and gas suppliers.  Germany 
intends to build on the EU's strategic energy report expected 
in early January and will develop an action plan setting out 
the various priorities for a European energy policy to be put 
forward for adoption at the spring summit in 2007. 
 
ENERGY EFFICIENCY 
 
¶5.  (SBU) German government officials repeatedly emphasize 
that they have chosen to focus on areas where they believe 
Germany has the most to contribute.  As the most energy 
efficient economy in Europe and second only to Japan in this 
area worldwide, energy efficiency is a natural focus for 
Germany's presidency.  Domestically, the German government 
intends to double energy efficiency by 2020, relative to 
consumption and economic output in 1990.  To achieve this 
goal, the government is focusing on implementing stricter 
building codes and adopting new technologies.  A new energy 
saving law has as its standard the "seven-liter house," 
designed to use just seven liters of oil to heat one square 
meter for a year, about one-third the amount consumed by a 
house built before the 1973 oil shock. 
 
¶6.  (SBU) Within the EU, our German contacts have emphasized 
they fully support the conclusions related to energy 
efficiency in the Commission's green paper.  Germany believes 
energy efficiency can be increased through the adoption of 
stricter building codes, encouraging consumers to replace 
older appliances and phasing-out less efficient power plants, 
with the effect of cutting greenhouse gas emissions as well 
as energy use.  During its Presidency Germany is likely to 
focus on the adoption of the most advanced technology in 
increasing energy efficiency as well as encouraging consumers 
to conserve energy where possible.  This planned focus on 
energy efficiency, given U.S. advances in the field, should 
provide numerous areas for partnerships with German entities. 
 
COAL 
 
¶7.  (SBU) Overall, Germany ranks first in European coal 
production and seventh worldwide.  Most of this is lignite 
(brown coal).  Coal currently accounts for 23% of all energy 
consumed in Germany and about three-quarters of coal usage in 
Germany is for electric power production.  German concern 
over coal-fired plants' CO2 emissions remains high.  In 
addition to using the national emissions trading scheme to 
encourage power companies to replace older, less efficient 
power plants with new, more efficient models, Germany is 
focused on carbon capture and storage technology.  The 
Swedish energy giant Vattenfall broke ground in June on the 
world's first carbon-free plant 
fueled by coal.  The plant, located in southeastern Germany, 
will be a 40 MW test facility, but is seen as an important 
symbol in resolving outstanding issues in carbon capture and 
storage technology.  Germany's largest energy 
generator, RWE, plans a carbon-free coal-fired plant to go 
into service in 2014.  The $1.2 billion project would have a 
450 MW capacity. 
 
¶8.  (SBU) German senior officials have stated that clean coal 
will be a major priority for the EU presidency.  There is 
strong interest in discussing the latest trends in clean coal 
technology and awareness.  However, the main issues facing 
this sector are cost, safety, and public acceptance.  German 
industry and the Ministry of Economics, the Chancellery and 
the Ministry of Environment want to cooperate with American 
counterparts on developing clean 
coal technology, potentially as an element of a broadened 
transatlantic relationship as well as a step further to the 
2005 Mainz Declaration. 
 
RENEWABLE ENERGY 
 
¶9.  (SBU) Germany is the largest electricity generating and 
consuming country in the EU and ranks sixth worldwide in 
electricity generation and seventh in electricity 
consumption.  It is now the world's leading generator of 
electricity from wind and currently has about 20% of the 
world's non-hydro renewable energy generating capacity, 
ranking second (behind the U.S.) in that regard. 
 
¶10.  (SBU) Germany would like to establish a road map for 
greater use of renewable energy and is not opposed to the 
Commission's focus on sectoral targets.  Germany is very 
interested in promoting biofuels, especially biodiesel.  This 
is an area in which the Federal Republic has a large 
technological lead; it is currently the largest producer of 
biodiesel worldwide.  Germany encourages this sector through 
favorable tax rates for biodiesel.  Our interlocutors have 
noted the Commission has set a non-binding target for 
biofuels of 5% by 2010, but the Merkel government considers 
this a binding target nationally and will push for a binding 
target within the EU.  Germany wants to work with the U.S. to 
set joint standards and efficiency criteria.  While there are 
differences in how the U.S. and EU/EU members set 
standards, the current discussion on EU diesel standards in 
the European Commission Directorate General for Environment 
presents an opportunity to realize uniform standards. 
 
CLIMATE 
 
¶11.  (SBU) In discussing energy, senior German officials 
reiterate their desire to raise climate change.  Our contacts 
have told us repeatedly this is an expectation of the German 
public that the Chancellor cannot ignore.  In 
addition, Kyoto commitments are the driving force for much of 
the EU's interest in new energy technologies.  That said, 
contacts within the Chancellery, Economic Ministry and 
Foreign Office have emphasized that Germany does not seek to 
use this issue to divide countries or obstruct close 
cooperation with the U.S., but wishes to move forward to a 
constructive dialogue on climate change and energy policy, 
which they consider interrelated. 
TIMKEN JR