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R 311219Z AUG 07
FM AMEMBASSY LONDON
TO RUEHC/SECSTATE WASHDC 5157
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RUEHBUL/AMEMBASSY KABUL 0498
RUEHFR/AMEMBASSY PARIS 2989
RHMFIUU/HQ EPA WASHINGTON DC
RUEKJCS/JCS WASHDC
RUEKJCS/SECDEF WASHDC
RUCNDT/USMISSION USUN NEW YORK 0986
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHBS/USEU BRUSSELS
RUEHBC/REO BASRAH
RUCNFUR/DARFUR COLLECTIVE

UNCLAS SECTION 01 OF 02 LONDON 003338 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: OREP SENV KGHG PREL UK IZ AF SU
SUBJECT: SENATOR BOXER HEARS POSITIVE VIEWS ON CARBON 
TRADING; DISCUSSES IRAQ, AFGHANISTAN, DARFUR 
 
REF: A. STATE 109658 
     ¶B. LONDON 3093 
 
LONDON 00003338  001.2 OF 002 
 
 
¶1.  Summary: Senator Barbara Boxer heard strongly positive 
views from HMG, heavy industry and the investment community 
on the UK,s experience with carbon cap-and-trade systems as 
a tool for addressing climate change.  Many of HMG officials 
who handle climate change are new to their portfolios, and it 
is not yet clear who will attend the September 27-28 Major 
Economies Meeting (ref a).  Discussions on Iraq and 
Afghanistan with the FCO Minister for Asia, Africa and the 
UN, Mark Malloch-Brown, (see paras 8-810) focused on 
post-conflict support for Iraq from the UK, and the need for 
more international support for Afghanistan.  On an eventual 
withdrawal of UK troops, Malloch-Brown said that PM Brown 
understands his obligation to &do it the right way.8 On 
Darfur, Malloch-Brown praised President Bush as a 
&tremendous, tremendous leader.8 
 
¶2.  Senator Barbara Boxer, Chair of the Senate Environment 
and Public Works Committee, had a series of meetings on 
August 23-24 focused on climate change.  She met with the 
senior officials in the new Brown cabinet and with a variety 
of private sector groups.  She met Sir Mark Malloch-Brown, 
former UN Deputy Secretary-General, who is the Minister for 
Africa, Asia and the UN at the Foreign and Commonwealth 
Office (FCO).  His portfolio includes global issues such as 
climate change and human rights.  She also met MP Phil 
Woolas, the new Minister of State for Climate Change and 
Environment at the Department of Environment, Food and Rural 
Affairs (DEFRA).  Senator Boxer met London Climate Change 
Services, which is a trade association of the financial 
industry; the UK Emissions Trading Group, which is a trade 
association representing industrial interests; and Climate 
Change Capital, a private financial firm.  End summary. 
 
-------------------------------------------- 
Climate Change Seen as a Business Opportunity 
--------------------------------------------- 
 
¶3.  In Senator Boxer,s first meeting, DEFRA Minister Woolas 
expressed the basic message that would recur throughout the 
visit: aggressive engagement on climate change through 
cap-and-trade programs is a business opportunity that creates 
jobs and adds to, not subtracts from, GDP.  Woolas said that 
the EU Emissions Trading Scheme (EU-ETS) and other emissions 
trading programs within the UK itself have &created an 
industry8 of high-end environmental engineering firms, 
environmental technology manufacturers and consultants. 
Environmental protection, including emissions trading, &is a 
way to make money,8 Woolas said, and has created 400,000 
jobs in the UK.  Separately, FCO Minister Malloch-Brown said 
that carbon emission caps would &unleash8 technology and 
investment. 
 
--------------------------------------------- ------ 
Carbon Market Works ) Currently Low Price Proves It 
--------------------------------------------- ------ 
 
¶4.  Government officials, such as the Head of International 
Emissions Trading at DEFRA Jill Duggan, industrialists from 
Shell Oil, British Cement and BP, and representatives from 
international financial players such as Goldman Sachs, 
Merrill Lynch, NatSource and JP Morgan Chase conveyed a 
consistent message that the EU-ETS carbon trading market 
works.  The legislation, rules, people and infrastructure for 
carbon trading are in place, and carbon trading is now a 
multi-billion dollar industry. 
 
¶5.  Dr. Bill Kyte from the Emissions Trading Group, an 
industrial consortium that focuses on emissions trading 
policy and communication, said that the simplicity, certainty 
and transparency of emissions trading programs are paramount. 
 Financiers made the same point in a separate meeting.  Kyte 
noted that the effect of taxes is more opaque and more 
difficult to adjust than a trading system.  Kyte also 
emphasized the need for &data, data, data.8  He promoted 
early engagement on policy between government and industry at 
the &pre-decision8 stage. 
 
--------------------------------------------- ----- 
 
LONDON 00003338  002.2 OF 002 
 
 
Learning by Doing8 Builds Capacity, Infrastructure 
--------------------------------------------- ----- 
 
¶6.  Lessons have been learned from early mistakes, 
particularly an initial over-allocation of carbon emission 
permits.  The over-allocation has pushed the price down near 
zero for the time being, but futures prices for carbon are 
healthy, indicating the market is functioning and foresees a 
greater demand, said Dr. Kyte from the Emissions Trading 
Group.  Both Dr. Kyte and DEFRA,s Jill Duggan said that 
business and government had learned a tremendous amount from 
the pilot stages of the EU Emissions Trading Scheme, which 
Kyte called &learning by doing.8  Duggan said three years 
of pilot program was too long; two would have been enough. 
Financial representatives at a separate meeting noted that 
carbon caps have to be &tough8 in order to send a price 
signal at the beginning of the trading program that is strong 
enough to encourage serious, long-term investors.  Investors 
also noted their preference for &linking8 carbon 
instruments in various markets to promote liquidity, rational 
prices and supply.  Investors are concerned that a U.S. 
carbon market would be &hermetic,8 unlinked to global 
markets. 
 
----------------------------------------- 
Major Economies Meeting on Climate Change 
----------------------------------------- 
 
¶7.  Although the FCO and DEFRA are aware of the September 
27-28 Major Economies Meeting (reftels), they were unaware of 
any decision on who will come from the UK.  The Labour 
Party,s annual conference, PM Brown,s first as PM, is 
September 23-27, complicating the question of who attends. 
Woolas and Malloch-Brown both commented that the formal 
invitation had not yet been received through the EU,s 
Portuguese Presidency.  Malloch-Brown said that the meeting 
is &a good signal8 that there is movement within the USG on 
climate change, a sentiment noted in other meetings as well. 
 
---------------------------------------- 
Other Issues ) Darfur, Afghanistan, Iraq 
---------------------------------------- 
 
¶8.  FCO Minister Malloch-Brown noted the Prime Minister,s 
interest in &pushing the poverty agenda8 in Africa, and in 
paying more attention to Asia.  On Darfur, he noted that 
things are looking better, especially because of the recent 
15-0 Security Council resolution on Darfur.  &Sudan 
recognizes it must comply,8 he said.  He commented that 
Darfur is in part an environmental war.  He praised President 
Bush as a &tremendous, tremendous leader8 on Darfur. 
 
¶9.  On Iraq, Malloch-Brown said that the UK is committed to 
make the post-war situation &work8 and noted the 
responsibility of the UK and the U.S. for Iraqis who worked 
with them.  Iraq is a less pressing issue in the UK than it 
is in the U.S., he added. On an eventual withdrawal of UK 
troops, he said that PM Brown understands his obligation to 
&do it the right way.8 
 
¶10.  On Afghanistan, Malloch-Brown said that &as the cloud 
of Iraq clears,8 there is more focus on Afghanistan and what 
he called the &collective international responsibility8 to 
address Afghanistan,s reconstruction.  It would be a &long 
slog,8 he predicted. 
 
¶11.  Senator Boxer,s office cleared the content of this 
report. 
 
Visit London's Classified Website: 
http://www.state.sgov.gov/p/eur/london/index. cfm 
LeBaron