VZCZCXRO0103
RR RUEHHM RUEHLN RUEHMA RUEHPB
DE RUEHFR #7861/01 3541356
ZNR UUUUU ZZH
R 201356Z DEC 06
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC 3885
INFO RHEHAAA/WHITE HOUSE WASHDC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUEAEPA/EPA WASHDC
RUEHZN/EST COLLECTIVE
RUEHBS/USEU BRUSSELS 1871
RUEHMRE/AMCONSUL MARSEILLE 1471
RUEHSR/AMCONSUL STRASBOURG 0278

UNCLAS SECTION 01 OF 03 PARIS 007861 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR OES/GC, EUR/WE; 
WHITE HOUSE FOR CEQ; 
DOE FOR EIA, INTL AFFAIRS; 
EPA FOR INTERNATIONAL; 
USEU FOR SMITHAM; 
EMBASSIES FOR SCIENCE OFFICERS 
 
E.O. 12958: N/A 
TAGS: SENV ENRG FR
SUBJECT: FLURRY OF FRENCH CLIMATE CHANGE INITIATIVES 
 
REF: (A) Paris 6969 (B) Paris 7208 
 
PARIS 00007861  001.2 OF 003 
 
 
NOT FOR INTERNET DISTRIBUTION. 
 
¶1.  Summary: To reach Kyoto Protocol commitments, the government of 
France recently announced: 
 
-- Its updated 'National Plan' to fight climate change (PNLCC) aimed 
at saving an extra 6 to 8 million tons equivalent CO2 per year 
(MtCO2) for the period 2008-2010. 
 
-- In the context of the EU Emissions Trading Scheme (ETS), a 
stricter CO2 plan (132 MtCO2 instead of 155 MtCO2) for capping 
emissions in the industrial sector during the period 2008-2012 will 
be resubmitted to the European Commission before end-2006. 
 
-- A pioneer program, entitled 'Climate and Domestic Offset 
Projects,' jointly presented by the Finance and Ecology Ministries, 
aims to stimulate projects reducing GHG emissions in sectors not 
covered by the ETS by providing financial remuneration for voluntary 
emissions reduction. 
 
End summary. 
 
-------------------------------------- 
Kyoto goals: France on track, so far... 
-------------------------------------- 
 
¶2.  To comply with the Kyoto Protocol (KP) requirements, France 
agreed to stabilize its GHG emissions at 1990 levels (567.1 MtCO2) 
by 2012.  France emits about 1.2 percent of GHG worldwide while it 
represents about 5 percent of world GDP (UN 2004 data).  According 
to recent figures, total French emissions for 2004 approximated 
562.6 MteCO2, 0.8 percent under the 1990 level (detailed figures per 
sector in para 14).  Between 1999 and 2004, average French emissions 
remained 2 percent below the 1990 emission level, with economic 
growth totaling 25 percent excluding inflation during the same five 
year period. 
 
------------------------------------------ 
New National Plan: Buildings and Transport 
------------------------------------------ 
 
¶3.  In 2000, French authorities adopted a national climate change 
control program, known as PNLCC.  This plan was revised in 2004, and 
provides for an additional annual reduction of 33.5 MtCO2 for the 
period 2004-2012.  It was prepared in tandem with the establishment 
of a national quota allocation program within the ETS scheme. 
According to GOF reports based on energy models, France will succeed 
in reaching its Kyoto objectives.  The updated, but not overly 
ambitious, plan released in November 2006, aimed at assuring 
"France's (emissions) position, taking into account possible changes 
in the energy sector."  The expected gain is an extra 6-8 MtCO2/year 
for the period 2008-2012. 
 
¶4.  On the transport side, major measures are designed to improve 
urban mobility while reducing emissions.  The GOF seeks to develop 
alternatives to road transportation (e.g. urban tram systems), and 
at the same time accelerate the development and deployment of 
biofuels.  The Transport Ministry is studying/(repeat studying only 
at this point) the possibility of introducing urban tolls (so far 
forbidden in France) and a truck tax on vehicles to "re-adjust" road 
transportation in environmentally sensitive areas (e.g. crossing of 
the Alps). 
 
¶5.  The updated plan includes regulatory measures and fiscal 
incentives to exploit emission savings in older commercial and 
residential buildings.  The tax incentive for investments 
contributing to energy efficiency in buildings will be increased 
from 300 million euros in 2006 to 1 billion euros in 2007.  From 
2007, significant renovations in buildings more than 1000 square 
meters will need to meet minimum energy requirements. 
 
----------------------------------------- 
Ratcheting down on industrial polluters... 
----------------------------------------- 
 
¶6.  The revised PNLCC also includes measures to tighten pollution 
taxes with a 10 percent increase in taxation of industrial and air 
 
PARIS 00007861  002.2 OF 003 
 
 
transport pollution and the creation, in 2007, of a coal tax. Coal 
powered energy (of which there is very little in France) will be 
subject to a levy of 1.19 euros per megawatt hour of energy 
consumption.  Industrial groups that already benefit form an 
"environmental (exemption) certification" will not be affected by 
these new taxes. 
 
---------------------- 
The 'other' category... 
---------------------- 
 
¶7.  France also intends to examine with European partners the 
possibility of imposing a "carbon tax" on imports of industrial 
goods from countries not part of international efforts (Kyoto 
Protocol-like efforts) to cut greenhouse emissions after 2012. 
Senior French officials have said the GOF plans to submit a proposal 
for study to the EU and other European countries along these lines 
in early 2007.  (This topic has been discussed in separate Embassy 
reporting.  See, e.g., Paris 7584.)  France further wishes that the 
EU study the possibility of a CO2 quota scheme for goods 
transportation and plans to provide Brussels with a memorandum 
outlining its vision before the end of March 2007. 
 
--------------------------------------------- 
EU Emissions-Trading: Paris lowers quota plan 
--------------------------------------------- 
 
¶8.  Launched in 2005, the ETS is the cornerstone of the EU's efforts 
to fight climate change and meet KP goals.  The ETS fixed an opening 
price for carbon and outlines how much CO2 industries in each EU 
member covered by the scheme can emit. It includes two phases: 
2005-2007 and 2008-2012.  Some 1,100 French facilities - out of 
11,400 in Europe - belonging to the most energy-consuming industrial 
sectors (refining, electric power, cement, steel, paper, etc.) are 
targeted.  They represent roughly one-fourth of France's total GHG 
emissions.  (Note: Authorized emissions for France under the first 
Emissions Trading Scheme period are 156 MtCO2/year; France's actual 
2005 emissions in the covered sectors were 131 MtCO2.) 
 
¶9.  Claiming that national governments did not press hard enough in 
the first phase (as they handed out more permits than needed, for 
example, so that the price of emission permits plummeted in 2006), 
the European Commission recently announced that it would not accept 
overly generous CO2 plans for the second phase.  Accordingly, Paris 
withdrew its initial proposal of 155 MtCO2/year in late November 
given Commission indications that it would be rejected as too weak. 
(Note: France is not the only "bad pupil:" the Commission has 
examined 10 proposals thus far for the period 2008-2012, accepting 
only the UK's without insisting on changes.  End note.)  France told 
Brussels on December 13 that its amended National Allocation Plan 
proposal to the Commission would be 132.8 MtCO2/year, a substantial 
proposed reduction in GHG emissions in the covered sectors.  France 
also decided not to permit the transfer of quotas not used during 
the first period to the second period, a decision highlighted by the 
Ecology Ministry as a significant gesture for environmental 
interests. 
 
--------------------------------------------- -------- 
France pioneers domestic offset projects to fight CO2 
--------------------------------------------- -------- 
 
¶10.  France also has launched a new initiative, outside the PNLCC, 
to fight GHG emissions at the domestic level in sectors not covered 
by the ETS.  These sectors, such as transport, agriculture, 
buildings, and small industries, are responsible for the majority of 
France's GHG emissions, often characterized as "diffuse" emissions. 
The concept of domestic offset projects (DOPs) consists in applying 
at the national level the logic of the joint implementation 
mechanism defined for international projects under the KP by 
crediting GHG emission reductions for projects conducted by smaller 
emitters within France. 
 
¶11.  According to the government, this initiative, a first in 
Europe, can close gaps between other emissions reduction policies 
and motivate larger numbers of actors (often at local levels) in 
many sectors not covered by the ETS program.  Jointly presented by 
the Finance/Industry and Ecology Ministries, this proposal has 
received positive feedback from environmental groups.  To be 
recognized as DOPs, however, these projects must demonstrate that 
 
PARIS 00007861  003.2 OF 003 
 
 
they would not have occurred within existing incentive measures 
("additionality" criteria, sometimes difficult to assess) and they 
must lead to emission reductions which can be posted to the national 
GHG inventory. 
 
¶12.  This initiative will be placed under the supervision of the 
'Caisse des Depots et Consignations' (CDC), a state-owned financial 
institution that performs public-interest missions on behalf of 
France's central, regional, and local governments.  CDC will be 
committed to buy the CO2 "permits" corresponding to avoided 
emissions (1 permit = 1 ton GHG) at a price determined in advance. 
Pooling of projects - notably in the agricultural sector - will be 
encouraged and CDC will help aggregate individual initiatives and 
handle administrative procedures.  CDC has agreed to purchase up to 
5 MtCO2 for the period 2008-2012, which should further help France 
to reach its overall KP goal under the EC scheme.  The first call 
for projects is expected to take place in early 2007.  We expect the 
implementation of this new system to be closely monitored by other 
EU members. 
 
 
¶13.  Comment: As France moves deeper into its presidential election 
season, there is more and more discussion by government figures and 
presidential hopefuls about the environment, especially climate 
change.  It is not all 'hot air.'  Given the French electorate's 
interest in climate change, we expect the trend of generating new 
environmental initiatives to continue for the foreseeable future. 
End Comment. 
 
------------------------------------------- 
France's GHG emissions: Evolution 1990-2004 
------------------------------------------- 
 
¶14.  Breakdown per sector: 
 
Sector           Evolution      % total       % total 
                 1990-2004      emissions     emissions 
                                  1990          2004 
--------------------------------------------- --------- 
 
Transport          + 22.7%        21.4%         26.5% 
 
Building           + 22.3%        15.7%         19.3% 
 
Manufacturing      - 21.6%        25.2%         19.9% 
Industry 
 
Agriculture/       - 10.5%        20.9%         18.9% 
Forestry 
 
Energy Industry    -  9.1%        13.9%         12.8% 
 
Waste Sector       -  9.5%         2.8%          2.6% 
 
HOFMANN