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R 101512Z FEB 09
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 05 BRUSSELS 000190 
 
SENSITIVE 
SIPDIS 
 
OES FOR TODD STERN 
STATE FOR OES/EGC 
STATE FOR EUR/ERA 
 
E.O. 12958: N/A 
TAGS: ECON EIND ENRG EUN EWWT KGHG SENV TPHY TRGY
TSPL 
SUBJECT: THE EU'S CLIMATE AND ENERGY PACKAGE; LOOKING BACK, 
HOW DID IT HAPPEN? 
 
REF: A. BRUSSELS 117 
     ¶B. BRUSSELS 1171 
     ¶C. BRUSSELS 1439 
     ¶D. BRUSSELS 1629 
     ¶E. BRUSSELS 1686 
     ¶F. BRUSSELS 1770 
 
¶1. (SBU) Summary:  The European Union, led by the French 
Presidency, completed its Climate and Energy Legislative 
Package in December 2008.  However, what transpired between 
January 23, 2008, when the European Commission proposed the 
four pieces of legislation that made up the Climate Package, 
and December 17, when the European Parliament approved all 
four pieces, along with two related Directives, is an 
excellent example of the inner workings of the EU and its 
legislative process.  Given its complex status as an EU 
"mega-law," this story can provide insight into future 
legislative processes.  EU officials, industry 
representatives, and NGOs are in general agreement that the 
finalization of such a complex package would not have been 
likely had a country other than France, which put the weight 
of its Presidency behind the Climate Package, held the chair. 
 End summary. 
 
----------------------------------- 
Climate and Energy Package-Overview 
----------------------------------- 
 
¶2. (U) Four separate pieces of legislation were proposed by 
the European Commission on January 23, 2008, in what is 
commonly known as the Climate and Energy Package, designed to 
help the EU meet its "20-20-20 in 2020" climate and energy 
goals.  The Climate Package comprises 20% emissions 
reductions from 1990 levels, 20% share of power to come from 
renewable energy sources, and 20% increase in energy 
efficiency by 2020.  The Climate Package was built on: 
 
     (1) a Directive revising the Emissions Trading Scheme 
(ETS), the EU's cap and trade system which applies primarily 
to fixed industrial plants.  The final agreement provided 
some free allowances to carbon intensive industries, to be 
determined over the next year, as well as derogations to the 
power sector in Member States that generate a high proportion 
of their power from fossil fuels; 
 
     (2) a proposal on Burden Sharing, defining the emissions 
reduction requirements for each Member State to meet the 20% 
reduction goal in areas not included in ETS; 
 
     (3) a Renewables Directive to define the renewables 
targets for each Member State.  This directive was best known 
for its definitions of biofuels sustainability; and 
 
     (4) a Carbon Capture and Storage (CCS) Directive that 
establishes a legal framework promoting the development and 
use of environmentally safe CCS technology.  This Directive 
called for up to 12 demonstration projects in the EU.  At 
this time only about five or six appear to have a realistic 
possibility of funding. 
 
¶3. (SBU) Over the course of the year, two separate but 
related directives, defining CO2 emissions standards from 
passenger vehicles and specifying fuel quality standards, 
were added to the Climate and Energy Package (hereafter, "the 
Climate Package"), given their complementarity to the 
original four described above.  After less than a year of 
debate, the Climate Package was approved by all 27 Member 
States on December 12, 2008, and overwhelmingly approved in 
Parliament on December 17 in a first reading agreement, 
extremely rare for complex legislation such as this.  (Note: 
See reftels for further detail on the various pieces of 
legislation and the debate that took place over the year. 
End note.) 
 
--------------------------------------------- --------------- 
France was the key, but other pieces fell into place as well 
--------------------------------------------- --------------- 
 
¶4. (SBU) That France held the Presidency during the final 
negotiations is widely accepted as the single reason the 
Climate Package was able to be completed by December 2008. 
According to many, only France had the weight to require 
negotiation sessions to carry on until the early hours of 
 
BRUSSELS 00000190  002 OF 005 
 
 
morning and to be able to make some of the large concessions 
necessary to achieve full agreement.  Both Commission and 
Parliament officials have stated that the French Presidency 
managed the Climate Package brilliantly, staying one step 
ahead of developments to keep the process moving forward. 
France declared in July, at the beginning of its Presidency, 
that passage of the Climate Package by the end of 2008 was 
essential to the EU's ability to address climate change and 
to prepare for UN climate negotiations and the UNFCCC Summit 
in Copenhagen at the end of 2009.  In addition, the incoming 
Czech Republic Presidency gave additional impetus to finish 
in 2008.  The Czechs informed various PermReps that energy 
security was their priority, and they would focus their 
Presidency on the 3rd Energy Package.  The 3rd Energy Package 
focuses on Europe's energy security priorities, addressing 
Europe's internal gas and electricity markets and 
infrastructure, as opposed to the Climate Package, which 
targets Europe's goals to address climate change. 
 
¶5. (SBU) Apart from the Council, both the Commission and 
Parliament were well positioned to complete the Climate 
Package in an effective manner.  The EU Commission's 
Environment Commissioner Stavros Dimas is one of the 
strongest driving forces in the EU working on climate change. 
 In the midst of the financial crisis, Dimas was the first to 
come out and stress that the Climate Package should not be a 
casualty of the economic situation.  At working levels, the 
desk officers were well experienced to handle the 
negotiations.  Damien Meadows, the DG Environment expert on 
ETS, the most difficult legislative piece of the Climate 
Package, had participated in the co-decision process nine 
times previously, including on another EU "mega-law," the 
chemicals regulation REACH.  In the Parliament, the selection 
of Irish MEP Avril Doyle, a member of the EPP-ED (the 
center-right Christian Democrats), as the ETS Rapporteur, 
helped shepherd through environmental legislation from within 
a party often more concerned about protecting industry and 
the financial sector.  Most importantly, however, both the 
Commission and Parliament were in full agreement with France 
that the Climate Package had to be completed in 2008, as they 
believed any delay would risk the integrity of the 
legislation and hamper EU efforts domestically and 
internationally in addressing climate change. 
 
-------------------------------------- 
Was the Deck Stacked?  Most believe so 
-------------------------------------- 
 
¶6. (SBU) Though at least one Commission official called the 
completion of the Climate Package in December a "miracle," 
and even the French said they weren't convinced it would work 
out, in the end, everyone conceded that it was never really 
that far out of hand.  The first signs of discord arose in 
July when Poland, over 90% dependent on coal for power 
generation, threatened a veto over concerns that the Climate 
Package would irreparably damage its economy.  Shortly 
thereafter, it became clear that most of the other seven new 
central European Member States had similar concerns, and 
reaching agreement began to be called into question. 
Ultimately, when France made the political commitment that it 
would seek full support from all 27 Member States, and not 
only the qualified majority required for environmental 
legislation under EU law, the Climate Package became easier 
to negotiate, as all Member states realized they would be 
heard.  However, as time went on, more Member States voiced 
discontent, most notably Italy, and in the final weeks, 
Germany, as both Berlusconi and Merkel made strong statements 
about the impact of the legislation on their industry and 
economies.   Parliament was equally vocal, particularly when 
it appeared the concerns of the various Member States would 
derail the legislation. 
 
¶7. (SBU) French officials, while now admitting they had some 
trepidation, given all of the competing forces, recognized 
concerns early on, and France was ultimately prepared to 
address them.  In the final text, just about every Member 
State received some concession.  Germany and Italy protected 
their industrial sectors through free allowances to 
carbon-intensive industries; Poland and the Czech Republic 
received support for their coal-based power sectors; almost 
all new Member States were given extra allowances for 
emission reductions since 1990 (though western Europe argued 
this was a result of post-Soviet deindustrialization and not 
 
BRUSSELS 00000190  003 OF 005 
 
 
a concerted effort); the UK and the Netherlands, among 
others, received support for carbon capture and storage 
development; and even Lithuania received concessions to help 
deal with the closure of its Ignalina nuclear power plant. 
According to several EU officials, France was prepared early 
to undertake these commitments to ensure full support. 
 
--------------------------------------------- --------------- 
Parliament gave in; at least that is how it was made to look 
--------------------------------------------- --------------- 
 
¶8. (SBU) The European Parliament often served as the foil to 
the Commission and the Council, both of which were 
increasingly aware of the impact of the legislation on 
industry.  As all but one of the legislative pieces were 
handled by the Parliament's Environment Committee (the 
Renewables Directive was managed by the Industry, Research 
and Energy Committee), many of the proposed Parliamentary 
amendments substantially altered the legislation in a much 
more environmental direction.  In many cases, these proposals 
increased the gap between Parliament and Council.  In 
practice, the Environment Committee often proposes, and 
adopts, amendments out of line with the political current 
across most of Europe, knowing they won't be accepted in the 
end, if only to set down markers for debate. 
 
¶9. (SBU) In public, Parliament made statements affirming its 
power and influence over the proceedings, including 
threatening to hold an extraordinary Plenary session a week 
before the Council convened to ensure that the 27 heads of 
state and government considered Parliament's views. 
Ultimately, the French Presidency convinced Parliament that 
an extraordinary session was unnecessary, and Parliament 
President Hans-Goert Poettering backed off but only after 
publicly asserting that Parliament would not vote for 
anything with which it inherently disagreed, even if all 27 
Member States were in consensus.  Additionally, though, 
during the final weeks, large sections of Parliament, 
including the Greens, Socialists, and Liberals, were in 
agreement, there appeared to be large schisms within the 
EPP-ED, the largest group in Parliament, notably among the 
German MEPs who reflected the growing concern in their 
industry about the impact of the legislation. 
 
¶10. (SBU)  In the end, Parliament only had a few true 
redlines in the negotiation, and the French Presidency was 
diligent in keeping Parliament informed at all times, so the 
potential for surprise was eliminated.  Before the final 
European Council recessed on December 12, Parliament had 
successfully negotiated its key issues, notably: (1) that 
indirect land use change be included in biofuels 
sustainability calculations; (2) that at least 300 million 
carbon allowances (approximately EUR 7 billion) be allotted 
to carbon capture and storage demonstration projects; and (3) 
that a maximum of 50% of greenhouse gas (GHG) emissions be 
offset via the clean development mechanism (CDM).  In the 
process, Parliamentarians were willing to sign off on many of 
the other changes in the final Plenary vote, so long as the 
20% cap was maintained.  Thus, the next day it only took 
three hours for the French to reach an agreement with key 
parliamentarians. 
 
--------------------------------------------- --------- 
Might not be as much of a failure as the press implies 
--------------------------------------------- --------- 
 
¶11. (SBU) Although the press and NGOs (at least publicly) 
claimed the Climate Package was effectively gutted; the 
concessions made by the French may not be as severe as 
implied.  The French Presidency, the Parliament, and the 
Commission argue that the most critical piece of the Climate 
Package, the emissions cap of an EU-wide 20% reduction by 
2020, remained in place.  However, it is important to note 
that the EU benefits from previous efforts between 1990 and 
2005, and the actual target from today's values is closer to 
a 13% reduction across the EU.  Even with free allowances to 
some companies, based on the benchmarking system to be put in 
place over the coming year, and some derogation to the power 
sector, industries still need to reduce their emissions as 
the cap descends annually.  Member States are also required 
to develop national action plans and to meet the national 
emissions goals set by the EU for all sectors not included 
under ETS.  Though it still is not clear how much of the 20% 
 
BRUSSELS 00000190  004 OF 005 
 
 
will actually take place in the EU, as several percent may be 
accounted for through the use of offsets from projects in 
developing counties, the final goal in several countries 
remains ambitious.  Under adoption of an international 
climate agreement in Copenhagen, the EU remains committed to 
increasing its 20% target to 30%, though again, the final 
economy-wide effects are still to be determined. 
 
¶12. (SBU) Irish MEP Rapporteur Avril Doyle and 
representatives from the French delegation in Brussels argued 
that even if many industries and parts of the power sector do 
not need to purchase their emissions allowances, all 
industries remain required to reduce emissions.  A DG 
Environment official added that with the benchmarking system, 
not all companies within a carbon-intensive industry receive 
free allowances, a fact often glossed over by the press.  The 
cleanest companies at the time of benchmarking receive the 
most free allowances, and then the rest have to buy some, or 
most, of their allowances.  (Note:  Despite this subtlety, 
both EU and industry officials opined that full auctioning is 
a better way of managing a cap and trade system; benchmarking 
is very complex and cumbersome.  USEU will approach this 
issue in more depth in a separate cable on ETS.  End note.) 
 
¶13. (SBU) The process for the rest of the legislation 
followed suit from the emissions reduction issue.  The other 
two parts of the "20-20-20" goals remained in the 
legislation, that is, 20% energy share to be derived from 
renewables and a 20% increase in energy efficiency.  Some 
details were amended, but the main goals, at least according 
to EU officials, were left in place, allowing the EU to reach 
several of its targets.  Under the Renewables Directive, left 
largely intact from the original Commission proposal, several 
Member States have expressed concern that their national 
targets are very difficult, but only a few have said they 
don't believe they can do it.  Also under the Renewables 
Directive, there was a large debate over biofuels, and many 
questioned the 10% target for the use of alternative fuels in 
transport (the majority of which will come from biofuels). 
The target for alternative fuels in transport was maintained, 
however, in return for the promise that indirect land use 
change will be included in the sustainability calculations. 
Under the Directive on CO2 emissions for automobiles, the 
final 95 g CO2/km in 2020 was kept, though industry managed 
to obtain a longer phase-in time.  In the end, it will take 
several years to understand fully the effects of all of the 
concessions.  It can be expected that the EU will likely meet 
its goals, at least on paper, but the true emissions 
reductions within the EU's borders, may fall short of the 
final targets. 
 
------------------ 
What can we learn? 
------------------ 
 
¶14. (SBU) Although approval of the Climate and Energy Package 
came under a specific set of circumstances, the insights 
gained into the EU's legislative process of co-decision can 
be applied to future efforts.  Most clearly, given sufficient 
political will in Europe, the EU has the ability to complete 
deals at the eleventh hour, especially when a political goal 
can be achieved despite substantive concessions that 
compromise that political goal.  From the Council, a clear 
knowledge of Presidency priorities will help determine where 
in the legislative calendar an effort will fall.  In this 
case, the French had strong environmental ambitions, which 
were well known, while the Czechs, who were to take over the 
EU Presidency after France, were well known skeptics of major 
environmental reforms.  Thus, the timing of particular 
Presidencies carries in it a special dynamic.  The distinct 
difference between the French and the Czechs probably 
enhanced the adoption of the Climate Package in a relatively 
short timeframe.  Similar consideration likely can be given 
to the Swedish Presidency and its strong environmental agenda 
during the run-up to Copenhagen.  Within the Parliament, the 
choice of rapporteur will also give an indication of where 
the Parliament is likely to go.  Some political groups spend 
a lot of political capital to gain control of certain 
legislation, and assignment of the rapporteur can be very 
telling.  Close cooperation with Parliament, as USEU had with 
the Climate Package, can assist in lobbying and understanding 
of the situation. 
 
 
BRUSSELS 00000190  005 OF 005 
 
 
¶15. (SBU) A greater issue from a U.S. policy perspective is 
the lack of transparency from the Council that accompanies 
these efforts.  The concern that an international negotiating 
position may be weakened was sufficient to keep outsiders at 
bay.  This can leave little room for U.S. influence, 
particularly in the closing stages of the legislative 
process.  The best window for U.S intervention is early in 
the process, either before, or as soon after as possible, the 
release of the initial Commission legislative proposals. 
 
¶16. (SBU) In the meantime, the EU Environment Commissioner, 
Stavros Dimas, convoked USEU Charge on short notice this past 
week to express his desire to coordinate closely with the 
U.S. on climate issues.  Dimas himself acknowledged the 
difficulties of the EU's ETS and said he or his staff are 
ready to share the EU's "lessons learned" with U.S. officials. 
 
MURRAY 
.