VZCZCXYZ0005
RR RUEHWEB

DE RUEHVI #1348/01 2591035
ZNR UUUUU ZZH
R 151035Z SEP 08
FM AMEMBASSY VIENNA
TO RUEHC/SECSTATE WASHDC 0947
INFO RUCNMEM/EU MEMBER STATES
RUEAEPA/EPA WASHDC
RHEBAAA/USDOE WASHDC

UNCLAS VIENNA 001348 
 
SIPDIS 
 
STATE FOR OES/GC AND EUR/AGS 
EPA FOR OIA (ALMEIDA) 
 
E.O. 12958: N/A 
TAGS: SENV ENRG PREL EIND ECON AU
SUBJECT: AUSTRIA TO MISS KYOTO CLIMATE TARGETS, PROMPTING CALLS FOR 
URGENT ACTION 
 
REF: (A) 07 VIENNA 568; (B) 07 VIENNA 2690; (C) VIENNA 110 
 
¶1.  SUMMARY:  Austria will miss its Kyoto Protocol greenhouse-gas 
(GHG) emissions reduction goal by a wide margin again this year -- 
about a third -- according to a recent study.  Austria stabilized 
emissions at 91.1 million tons CO2 equivalent (MtCO2e) in 2006, but 
committed to emit only 68.8 million tons annually during the "Kyoto 
period" (2008 -2012).  High energy prices should stimulate 
investments in energy efficiency, which has been lagging, but have 
not yet shown an impact.  Experts have declared an "urgent need" for 
domestic action including higher taxes and other regulatory measures 
to reduce energy and transportation use while dramatically scaling 
back fossil fuel consumption.  This humbling episode is likely to 
make GOA policy-makers more cautious and realistic in future 
multilateral negotiations.  END SUMMARY. 
 
¶2. In late August, the Austrian Institute of Economic Research 
(WIFO) released a study on "Key Indicators of Climate Change" which 
is likely to shape public debate in Austria over the medium term. 
It points out that while Austria stabilized its greenhouse gas 
emissions in 2006, it has fallen far short of Kyoto goals which are 
themselves too modest to compensate for the rapid increase in GHG 
emissions elsewhere (particularly in India and China).  WIFO experts 
argue that Austria and other industrialized countries must lead by 
example for the world to stabilize GHG emissions by 2020 and cut 
emissions by 2050 to half of the 1990 level. 
 
Austria's Emissions: Transport Sector Is Main Culprit 
--------------------------------------------- ---- 
 
¶3. In Austria, GHG emissions rose by 15% between 1990 and 2006, but 
CO2 emissions (accounting for 85% of all GHG) increased by 25% over 
the period.  Responsible for higher emissions were transportation 
(25% of the increase), industry (24%), building heat (18%), and 
energy (16%).  The fastest emissions growth was in the transport 
sector, up 84% since 1990. 
 
¶4. Per capita, Austria's GHG emissions (11.3 tons CO2e) were 
slightly above the average of the EU-27 (10.5 tons) but relative to 
GDP, Austria trails only Sweden and France in terms of lowest 
relative emissions and the energy intensity of Austrian industry 
declined 21% from 1990 to 2006.  While industrial production is 
decoupling from CO2 emissions, the opposite trend is visible in the 
transport sector, where emissions have grown twice as fast as real 
GDP (43% since 1990). 
 
Emissions Trading: No More Free Lunch 
------------------------------------- 
 
¶5. Results for the first EU Emissions Trading System (ETS) period 
show that the GoA (along with most other Member States governments) 
over-allocated emission permits (by 0.3% overall) for 2005-2007, so 
that most industries did not have to reduce emissions.  WIFO blames 
a "lack of experience" with the new ETS and concerns about Austria's 
competitiveness as the main reasons for the oversupply of 
certificates.  For 2008-2012, projected industry emissions should 
slightly surpass allocated permits -- as in many EU member states -- 
so Austrian companies will have to buy additional certificates whose 
market price is likely to rise further. 
 
Calls to Raise Environmental Taxes and Restrict Transport 
--------------------------------------------- ------- 
 
¶6.  The WIFO report endorses environmental taxation (energy taxes, 
transportation fees, pollution taxes, and taxes on resources) as key 
measures for Austria to tackle GHG emissions.  Environmental taxes 
increased from Euro 2.4 billion in 1990 to 7.0 billion in 2006 (61% 
were for energy, 29% for transportation), they make up only 5.9% of 
total state revenue, a share which has fallen slightly in recent 
years.  This is below the EU average of 6.5% (EU-15) and 6.7% 
(EU-25) and well behind leaders Denmark (12.2%) and the Netherlands 
(10.4%). 
 
¶7.  Before the background of the failed Kyoto targets, the WIFO 
report argues for an ecological tax reform, punishing energy use and 
resource consumption while lightening the burden on labor.  Proposed 
measures are: 
-- raising mineral oil taxes to the level of neighboring countries, 
-- no preferential treatment for diesel fuel, 
-- taxation of fossil fuels according to their emissions intensity, 
and 
-- raising taxes on electricity consumption 
 
¶8.  In a press conference, WIFO chairman Karl Aiginger and the 
study's authors emphasized the need for action to reverse negative 
trends in Austria's climate change development. "Low energy" 
(increase of energy efficiency), "low carbon" (reduction of fossil 
 
fuels in the energy mix) and "low distance" (avoiding unnecessary 
mobility) are their guiding principles.  Most important short and 
medium term actions are raising energy and reducing labor taxes, 
removing of "false incentives" such as subsidies for commuters in 
private cars, and setting dynamic energy efficiency standards for 
buildings. 
 
Business Says Emissions Targets Are Just Too Ambitious 
--------------------------------------------- ------ 
 
¶9.  In contrast to the WIFO study, the Austria Economic Chamber 
(WKO), a lobby organization for businesses and "think tank" on 
economic policies, said that Austria is pursuing unrealistic goals 
for CO2 reductions, given the country's top position on most 
environmental indicators.  WKO energy and environment expert Stephan 
Schwarzer presented an index, based on four international studies, 
ranking Austria number one among 19 EU countries (before even Sweden 
and Germany) on "environmental protection" reflecting the high share 
of renewable energies and organic agriculture, high water quality, 
and good sewage management.  On climate change Austria trails 
primarily "because of its over-ambitious goals". 
 
Austria to Owe At Least EUR 1 Billion Through 2012 
--------------------------------------------- -- 
 
¶10.  Austria's failure to fulfill its binding climate protection 
goals according to the EU burden sharing agreement requires the 
purchase of "emissions reduction units" as foreseen in the agreement 
and under the Kyoto Protocol.  The GoA earmarked Euro 531 million of 
public funds for the purchase of these units until 2012.  The price 
per ton CO2 equivalent was EUR 20 at that time in 2007, and had 
risen to EUR 25 in September 2008.  A contact from the opposition 
Green Party estimates that Austria will have to pay Euro 1.6 billion 
for this sort of "hot air" unless it takes serious measures, 
particularly against transportation emissions.  The Ministry of 
Environment, however, insists that the government has put enough 
resources in the budget to fulfill its Kyoto Protocol obligations. 
 
¶11.  The GOA reaction to its climate shortfalls has been muted. 
Climate change was not a key point of dispute in the coalition 
government and is non-existent in the current election campaign. 
The government's revised 2007 climate change plan (Ref A) has 
obviously fallen short of its mark, prompting Environment Minister 
Josef Proell to introduce a "Climate Change Act" to obligate all 
Austrian stakeholders, particularly the powerful Austrian states, to 
contribute to the common goal.  In Proell's view, the lack of 
progress is due to insufficient coordination and the need for local 
buy-in, for example in the building sector, where local construction 
codes and subsidies could better promote energy efficiency.  Shortly 
before the current federal government collapsed in July, Proell 
introduced a bill to make "climate protection" a priority goal in 
the Austrian constitution (the initiative is in limbo due to 
upcoming elections). 
 
COMMENT: Uncomfortable Role As "Climate Sinner" 
--------------------------------------------- 
 
¶12. Austria's environment is undoubtedly in good shape, but the 
political leadership's campaign to be seen as a pioneer in the fight 
against climate change has been exposed as posturing.  The GOA now 
finds itself bound by ambitious GHG reduction goals that it set for 
political reasons -- and is reluctant to admit that those goals are 
currently unreachable for a transit country whose industries are 
already highly modern.  Given its failure to meet the targets in the 
current Kyoto period, the GoA tried to dilute the EU Commission's 
proposed targets for Austria in the post-Kyoto period (ref C).  The 
outcome of this humbling episode could be a more realistic GOA 
approach within the EU during negotiations on a Kyoto successor 
agreement.  END COMMENT. 
 
GIRARD-DICARLO