VZCZCXRO9230
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHVI #2690/01 2981409
ZNR UUUUU ZZH
R 251409Z OCT 07
FM AMEMBASSY VIENNA
TO RUEHC/SECSTATE WASHDC 8869
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHMO/AMEMBASSY MOSCOW 2217
RUEHKV/AMEMBASSY KYIV 0038
RUEHSW/AMEMBASSY BERN 1130
RUEHNY/AMEMBASSY OSLO 0467
RUEAEPA/EPA WASHDC
RHEBAAA/USDOE WASHDC

UNCLAS SECTION 01 OF 03 VIENNA 002690 
 
SIPDIS 
 
SIPDIS, SENSITIVE 
 
STATE FOR OES/GC AND EUR/AGS 
EPA FOR OIA (ALMEIDA) 
 
E.O. 12958: N/A 
TAGS: SENV ENRG PREL EIND ECON AU
SUBJECT: AUSTRIAN CLIMATE CHANGE EXPERT: POST-KYOTO AGREEMENT SHOULD 
GO BEYOND CAPS 
 
REF: VIENNA 568 
 
Summary 
------- 
 
¶1.  (SBU) While Austria portrays itself as a crusader against 
climate change, it is falling significantly short of its own 
commitments under the EU's Burden Sharing Agreement (BSA) to the 
Kyoto Protocol.  With 93 million tons of CO2 equivalent emissions in 
2005, Austria is a whopping 25 million tons above the EU goal of a 
13% reduction (compared to 1990).  Within the EU, only Denmark has a 
wider deviation from actual emissions and targets.  The GoA has 
committed 9 million tons per year to Clean Development Mechanism 
(CDM) and Joint Implementation (JI) projects abroad, but domestic 
measures will most probably produce a reduction of only 5 million 
tons.  If current trends continue, Austria will have to buy up to 
Euro 2.5 billion in permits from surplus countries.  Austria has 
created a Euro 500 million Energy and Climate Fund to give new 
impetus to its efforts to reduce greenhouse gas emissions.  The head 
of the fund, Stefan Schleicher told post that any post-Kyoto 
agreement needed to go beyond caps, allowing countries, within the 
UN framework, to employ their own strategies to reduce emissions. 
Schleicher opined that the international community should put more 
focus on technology and sectoral reduction targets.  Schleicher said 
that Austria was eager to step up U.S-Austrian contacts and 
cooperation on environmental research with both governmental and 
business.  End summary. 
 
 
Austria Failing to Meet Kyoto Targets 
------------------------------------- 
 
¶2.  (U) Austria continues to fall well short of its greenhouse gas 
reduction goals under the Kyoto Protocol.  In 2005 (latest available 
figures), Austria's emissions were 18% above 1990 levels and 37% 
above its own Kyoto commitment of 68 million tons of CO2 equivalents 
in the period 2008-2012.  Within the EU, Austria has the second 
greatest percentage deviation from its stated reduction goals; only 
Denmark has a greater deviation.  In terms of EU reduction goals for 
2020 (minus 20% emissions compared to 1990), Austria is 43% above 
the target. 
 
 
GoA Creates Energy and Climate Fund 
----------------------------------- 
 
¶3.  (U) Austria's efforts to reduce emissions have primarily focused 
on energy efficiency measures (reftel), which will only reap 
benefits in the longer-term.  In an attempt to breathe new life into 
its climate change policy, the GoA created a Euro 500 million Energy 
and Climate Fund in June 2007.  The fund aims to promote research 
and marketing of green technologies and to encourage the use of 
public transportation.  The GoA appointed four well-known scientists 
to the fund's Supervisory Board.  Emboffs recently met with the Head 
of the Board, Stefan Schleicher, to discuss Austria's climate change 
policy and the possibility of cooperation with U.S. entities in this 
area.  Schleicher is a Professor of Economics at the University of 
Graz and staff member of the Austrian Institute for Economic 
Research.  He is one of the most knowledgeable experts on climate 
change in Austria. 
 
 
Paying Billions for Missed Targets 
---------------------------------- 
 
¶4.  (SBU) Schleicher told us that, contrary to claims by the 
Ministry of Environment, Austria will not meet its greenhouse gas 
reduction goals for the period 2008-2012.  In Schleicher's view, the 
1997 goal (13% reduction from 1990 levels) was "too ambitious," 
although it was based on reasonable emissions projections at that 
time.  In 2000, greenhouse gas emissions began a steady upward trend 
to the current situation in which Austria is 25 million tons above 
its goal.  The GoA hopes to reduce up to 9 million tons per year 
through increased use of the Joint Implementation (JI) procedure (1 
million tons) and the Clean Development Mechanism (CDM) (8 million 
tons) to promote green investments abroad.  Schleicher maintained 
that Austria could realistically only save 5 million tons 
domestically.  Given the remaining 11 million tons, the EU could 
institute infringement proceedings for breach of the EU's Burden 
Sharing Agreement (BSA).  To abide by the BSA, the GoA would have to 
buy allowances from countries with an emissions surplus.  According 
 
VIENNA 00002690  002 OF 003 
 
 
to Schleicher, Austria might have to spend Euro 2.5 billion at the 
current price of Euro 20 per ton on the trading market. 
 
¶5.  (SBU) Schleicher, who participated in the initial Kyoto 
negotiations, faulted the U.S. for supporting overly generous 
emission limits to Russia and Ukraine.  Schleicher opined that the 
Clinton Administration had hoped to receive equally generous limits 
for the U.S., before the USG decided not to ratify the Kyoto 
Protocol.  Nevertheless, Schleicher stressed that it was crucial to 
integrate Russia into the next phase of emissions trading under 
Kyoto. 
 
 
EU Emissions Trading is a "Disaster" 
------------------------------------ 
 
¶6.  (SBU) Schleicher conceded that the first phase (2005-2007) of 
the EU's Emissions Trading Scheme (ETS) was a "disaster."  Due to 
the over-allocation of free allowances to emitting companies in 18 
of 25 EU countries (not in Austria), there were no incentives for 
industries to reduce CO2 emissions.  Schleicher added that the EU 
has apparently learned from this experience, prodding Member States 
to set tougher targets for the next phase.  Even Austria has been 
forced to reduce allowances for CO2 emissions by 6.4% compared to 
Austria's proposal for the 2007-2009 period. 
 
¶7.  (SBU) Schleicher emphasized that ETS in its current form would 
not be able to reduce emissions sufficiently, as it covers only 
around 50 percent of total emissions.  In Schleicher's opinion, to 
expand the ETS mechanism, the next step is to include aviation 
emissions.  However, Schleicher acknowledged that aviation emissions 
were only responsible for a small amount of total emissions.  It was 
even more important to tackle transportation emissions, which 
produce almost a third of overall CO2 emissions.  Schleicher posited 
that stricter CO2 emissions standards for the automobile industry 
were therefore vital. 
 
 
Creative Programs to Reduce Domestic Emissions 
--------------------------------------------- - 
 
¶8.  (U) As head of the Energy and Climate Fund, Schleicher hopes the 
GoA will put "new money" into the fund, rather than shifting money 
from existing climate change programs.  Schleicher and other 
environmental experts drafted a paper entitled "Innovative Climate 
Strategies for the Austrian Economy."  The paper recommended 
incentives for increased use of public transportation, massive 
investments to renovate buildings to become more energy-efficient, 
and emission reduction programs for industry in the form of 
"Domestic Offset Projects," i.e., national compensation projects 
analogous to JI and CDM projects. 
 
 
Post-Kyoto: Sector Agreements Instead Of Caps 
--------------------------------------------- 
 
¶9.  (SBU) Schleicher stressed that the international community 
needed "to go beyond caps" in the post-Kyoto period after 2012. 
(Comment: This is an interesting perspective from a GoA advisor, 
given the GoA's consistent public support for a continuation of the 
current cap system in any post-Kyoto strategy.  End Comment.) 
Schleicher opined that the EU championed strict and binding 
follow-up targets as a vehicle to promote the development of 
non-fossil fuel energy.  Schleicher maintained that it was important 
to support different approaches to reach greenhouse gas reduction 
targets. 
 
¶10.  (SBU) In Schleicher's view, there are three lessons to be 
learned from Kyoto.  First, focusing on caps alone has undermined 
discussions about the use of innovative technologies that are 
compatible with caps.  Second, the ETS unfairly affected certain 
sectors, while it did not sufficiently cover others 
(transportation).  Finally, incentives to entice the U.S., 
Australia, and newly industrialized countries to participate are 
crucial for the next phase to reach global emissions reductions 
goals. 
 
¶11.  (SBU) Schleicher recommended replacing binding caps with 
sector-specific agreements for industries, e.g., steel, and for the 
creation of technology platforms.  (Note: A major Austrian steel 
producer, Voest, made the creation of an alternative measuring model 
for emissions after 2012 a condition for further investments.  End 
 
VIENNA 00002690  003 OF 003 
 
 
Note)  Schleicher envisages a "Kyoto core group" of countries 
continuing to set caps.  However, Schleicher also foresees that a 
UN-based agreement could allow individual countries or groups of 
countries to employ measures other than caps, as long as they 
contribute to a reduction of greenhouse gasses in the atmosphere. 
 
 
Potential U.S.-Austrian Cooperation 
----------------------------------- 
 
¶12.  (U) Having taught in the U.S., Schleicher is an advocate of 
U.S.-Austrian cooperation on environmental research with both 
government and business.  Schleicher is convinced that new 
technologies are crucial for emissions reductions, and that U.S. 
universities and industries are leading the way.  Polygeneration 
technologies, nano-save batteries, low-carbon energy systems, and 
tesla motors are examples where U.S.-Austrian cooperation and joint 
ventures could be productive.  Austria has strong firms in the 
environmental technology sector. 
 
 
Comment 
------- 
 
¶13.  (SBU) Though the GoA supports a continuation of the cap and 
target process embodied in the Kyoto Protocol, there has been very 
little discussion about how Austria will realistically meet its 
emission reduction obligations.  We find it encouraging that 
Schleicher, one of the GoA's primary policy advisors on climate 
change, is advocating a more realistic, multi-faceted approach for 
the post-Kyoto period.  There are promising opportunities for joint 
U.S.-Austrian cooperation on environmental technology issues. 
Success in this work may give added credibility to those, like 
Schleicher, who see a need for a more flexible approach than just 
"cap and trade."  End Comment. 
 
MCCAW#