VZCZCXRO6793
RR RUEHAG RUEHAST RUEHDF RUEHHM RUEHIK RUEHKW RUEHLN RUEHLZ RUEHMA
RUEHPB RUEHPOD RUEHROV RUEHSR RUEHTM
DE RUEHBS #1770/01 3261724
ZNR UUUUU ZZH
R 211724Z NOV 08
FM USEU BRUSSELS
TO RUEHC/SECSTATE WASHDC
INFO RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE
RUCNMUC/EU CANDIDATE STATES COLLECTIVE
RUCNMEU/EU INTEREST COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE

UNCLAS SECTION 01 OF 02 BRUSSELS 001770 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EAIR ECON EIND ENRG EUN EWWT KGHG SENV TPHY
TRGY, TSPL 
SUBJECT: MEMBER STATES SKEPTICAL ON CLIMATE AND ENERGY 
PACKAGE PASSAGE, BUT LAST MINUTE DEAL STILL VERY POSSIBLE 
 
¶1. (SBU) Summary: Representatives from several EU Member 
States have expressed skepticism that the EU will be able to 
come to compromise on all aspects of the Climate and Energy 
Package in time for an agreement by the end of the year, but 
each stated with differing levels of surety that an eleventh 
hour deal is not out of the question.  In conversations with 
Luxembourg, Malta, Romania, Slovenia, and the UK, only the 
British held to the line that a deal definitely will be 
reached.  The Parliament continues to emphasize the need for 
strong climate legislation in order to achieve the 25-40% 
emissions reductions from developed countries by 2020, as per 
scientific recommendations from the Intergovernmental Panel 
on Climate Change (IPCC).  To that end, the Parliament 
appears to be holding firm to its commitment not to approve 
any Council proposal with which it does not agree.  The last 
piece of the puzzle, the Commission, which appears to be 
limited in its ability to effect change, is remaining firm in 
its belief that there will be an agreement by the end of the 
year, under the argument that a failure to compromise will 
damage the EU's ability to negotiate internationally.  End 
summary. 
 
¶2. (SBU) Among the five Member States, Malta seems most 
convinced that the Climate and Energy Package would fall to 
2009, despite the consensus among all 27 Member States to 
reach an agreement by December.   The Maltese representatives 
believed there were too many differences between the various 
Member States to come to agreement.  If that is the case, it 
appears likely that a deal will not be completed until close 
to the end of 2009.  Luxembourg officials stated it most 
clearly, explaining that Czech representatives declared in a 
closed-door Council working group that they will not address 
the package during their Presidency in the first half of 
¶2009.  The Czech Republic is more focused on the internal 
energy market, and will therefore target the completion of 
the 3rd Energy Package, allowing the Climate and Energy 
Package to slide to the Swedish Presidency in the second half 
of 2009. 
 
¶3. (SBU) From the conversations with the various Member 
States, a clearer picture formed as to where the possible 
concerns fell.  The largest threat to the Package came in 
October, when a group of 11 Member States, composed of Italy, 
Poland, Slovakia, Hungary, Romania, Bulgaria, Cyprus, and the 
three Baltics, joined in opposition to the Package, primarily 
on the grounds that the legislation, specifically the 
Emissions Trading Scheme (ETS), would cause damage to their 
economies.  However, it has become clear that this group does 
not form a tight bloc, but instead is a loose collection of 
countries common in their opposition, but completely divided 
in their goals.  Poland, heavily dependent on coal, is 
targeting primarily a method to lower the cost or increase 
the number of free allowances for its energy sector.  On the 
other hand, Hungary is most concerned with an overall 
redistribution of allowances, or seeking more for the Eastern 
Member States to promote economic growth.  Romania and 
Bulgaria are in the middle, pushing for both additional 
allowances to the energy sector and a redistribution of 
allowances.  To address this division among the 11, the 
French Presidency is approaching several of the Eastern 
Member States first, and will wait until later to negotiate 
with Italy.  Italy is one of the largest manufacturing 
countries in the EU, and according to a few Member State 
representatives, the country with the most to lose from the 
legislation.  President Sarkozy will thus meet with 
representatives from Romania, Bulgaria, Poland, and the 
Baltic States in Gdansk, Poland on 6 December.  The meeting 
with Italy is scheduled to take place on the margins of the 
UN meetings in Poznan, the second week of December. 
 
¶4. (SBU) Beyond the group of 11, Germany appears to be one of 
the largest concerns, despite public statements by Chancellor 
Merkel calling for continued climate legislation in the face 
of the financial crisis.  Specifically, Germany is expressing 
the largest concerns over "carbon leakage" - the departure of 
carbon intensive industries to countries with weaker 
environmental laws - and the need to maintain strong support 
for its industry.  The EU is stressing that an international 
climate agreement should be the first aim to solve the 
problem; if all countries sign up to a universally acceptable 
- maybe not ideal - climate agreement, there will be no need 
to protect against carbon leakage.  Beyond that, it appears 
as though 100% free allocations to at-risk industries will be 
the fall-back, and a carbon border tax will be used as a 
final option if the EU feels it needs to exert further 
influence over foreign industries. 
 
 
BRUSSELS 00001770  002 OF 002 
 
 
¶5. (SBU) There are also several smaller players with smaller 
issues, but none of these are likely to affect negotiations. 
A Member State official explained that Denmark and Finland, 
for instance, disagree with the choice of 2005 as the base 
year - the EU's overall target is in reference to 1990, but 
it needs to use 2005 for individual targets because that is 
the first year where there is sufficient emissions data 
available for all 27 Member States.  The Danes and Finns 
argue that 2005 is a difficult year because they received 
above-average rainfall, leading to a large increase in the 
use and availability of hydroelectric power, and therefore 
lower emissions.  Luxembourg is concerned about its 
renewables target, set at 10%, as it claims to have no 
renewables potential at all, and will therefore need to rely 
exclusively on biofuels.  Malta and Cyprus, both heavily 
reliant on tourism for their economies, have objected to the 
inclusion of aviation under ETS.  However, both the Council 
and the Parliament have made clear that aviation will remain, 
leaving little room for negotiation. 
 
¶6. (SBU) Spain and Portugal have been notably quiet, and 
according to at least one contact, this is because they stand 
to be the biggest winners from the legislation.  They have 
increased their pollution, and they will be allowed to 
continue to increase their pollution, as they will be able to 
use offsets from Clean Development Mechanisms (CDMs) in South 
America, where they each hold very close relationships.  As 
such, through support to developing countries there, Spain 
and Portugal will be able to offset their domestic emissions 
and still meet their targets.  On renewables, both countries 
have a very large potential and should be able to meet their 
targets with little problem. 
 
¶7. (SBU) The European Parliament has continued to work to 
exert its influence during the negotiations, initially moving 
its plenary vote to the first week of December, days before 
the Environment and Energy Councils and a week ahead of the 
European Council of Heads of State.  However, despite recent 
comments from the Hans-Gert Pottering, the President of the 
Parliament, it appears as though the Parliament will await 
the Council decision and vote on the package at its next 
Plenary in Strasbourg, 18-19 December.  It was believed that 
if Parliament waited, then the Council would be in control 
and probably able to strong-arm its position on the 
Parliament.  However, Irish MEP Avril Doyle, the Rapporteur 
for the ETS Revision Directive, clearly stated that the 
Parliament will not vote in favor of a Council position with 
which it does not agree.  It is unclear how firm Parliament 
will stick to this statement, especially as the Council 
position seems to be moving farther away from that of the 
Parliament as France provides further assurances to Poland 
and Italy. 
 
¶8. (SBU) Comment: Despite all of the skepticism, it is very 
clear the French Presidency will stop at almost nothing to 
come to a deal, even if that means trading away the vast 
majority of the strength behind the Package.  This type of 
horse-trading is typical in EU negotiations, and it seems 
everyone is trying to extract as much as possible.  Several 
countries, Poland and Italy key among them, have threatened 
vetoes in Council if their demands are not met.  From a legal 
perspective, these threats do not hold much weight, as under 
EU law, only a qualified majority is necessary to pass this 
legislation.  The block of 11 countries together more than 
exceed a blocking minority, but losing a couple of the key 
countries would eliminate this.  However, both Italy and 
Poland are quick to remind that it promised to pass this 
Package by consensus.  If necessary, France can back off of 
this promise and revert to EU law, but the political capital 
lost by doing this could cause large problems in the future, 
and it seems unlikely France would take this step.  At the 
moment-and details are changing o an almost daily basis-it 
appears as though te Council is going to yield to 
Parliament's position on biofuels sustainability criteria and 
press for the Council position on aspects related to ETS, 
where the Member States have the most concern.  End comment. 
 
SILVERBERG 
.