US embassy cable - 04MADRID4020

UNCLAS SECTION 01 OF 02 MADRID 004020 
 
SIPDIS 
 
SENSITIVE 
 
DEPARTMENT PASS TO ESTH COLLECTIVE; DEPARTMENT ALSO FOR 
OES/EGC (ED FENDLEY) AND EUR/WE 
 
E.O. 12958: N/A 
TAGS: SENV, ENRG, ECON, PGOV, SP 
SUBJECT: KYOTO NOW MATTERS TO SPAIN 
 
REF: A. MADRID 3273 
     B. MONTEVIDEO 1390 
 
1. (SBU) During an October 13 courtesy call by newly arrived 
ESTHOFF, Environment Ministry General Coordinator for Climate 
Change Teresa Rivera stressed that the Kyoto Protocol enjoyed 
the strong support of the entire cabinet of the "new" Spanish 
Government, and that Spain was determined to do its utmost to 
fulfill its CO2 emissions targets under the terms of the 
agreement.  Rivera (please protect) said that the previous 
center-right Aznar Government found Kyoto "inopportune" and 
had thus "parked" any serious effort to meet Spain's target 
of limiting CO2 emissions to 15 percent above 1990 levels. 
Instead, emissions were allowed to grow unchecked and have 
arrived to the level of 40 percent over 1990 levels.  By 
contrast, the "new" (elected this past March) center-left 
Zapatero Government views Kyoto compliance as one the 
principal planks of its "return to Europe strategy."  (Note: 
During the election campaign, Zapatero consistently 
criticized Aznar's emphasis on strong ties with the U.S. and 
made several gestures toward France and Germany immediately 
after taking office.  End Note.) 
 
2.  (U) Rivera acknowledged that it would be "very difficult" 
for Spain to meet the 15 percent above 1990 levels target, 
but that Zapatero and the rest of his cabinet were determined 
to do the best they could to limit CO2 emissions.  The first 
part of the Government's compliance strategy was to complete 
its National Emissions Compliance Allocation Plan, as 
required by EU Directive 87/2003.  This was submitted to 
Brussels in September (Ref A).  The second step was to create 
a National Emissions Rights Register which allocates CO2 
emissions rights to the sectors of the economy covered by the 
EU Directive.  Requests for emissions rights were required by 
September 30 and the Environment Ministry is in the process 
of finalizing the register.  Both steps will allow Spain to 
participate in the EU's CO2 trading regime which will debut 
in January 2005. 
 
3.  (U) The harder part of the equation, according to Rivera, 
is not the bureaucratic framework but instead the 
industry/government reform and transformation required to 
actually reduce CO2 emissions.  The Government's strategy 
focuses on three areas:  (1) significantly reduce the amount 
of electricity generated by burning coal (replacing it with 
natural gas "combined cycle" generation); (2) reform tax 
policy to encourage greater energy efficiency; and, (3) use 
multiple tools available to government to greatly increase 
the percentage of energy generated by renewable energy 
sources.  Rivera stressed that all three areas required 
significant inter-ministerial coordination and that this was 
already under way.  She noted that Minister of Economy and 
Treasury Pedro Solbes, the holder of the Government's purse 
strings, was strongly behind the effort.  Rivera did stress, 
however, that Government's efforts could not succeed without 
the cooperation of Spain's autonomous regions and that 
efforts to get them on board were only now getting underway. 
 
4.  (U) Rivera said the goal of the above strategies was to 
reduce CO2 emissions from the current 40 percent over 1990 
levels to 24 percent over 1990 levels by 2012.  The remaining 
nine percent required to meet the 15 percent over 1990 target 
would be obtained via domestic carbon sink credits (two 
percent) and credits obtained on the international market 
(seven percent).  Rivera said Spain would not limit itself to 
credits obtained on the soon-to-be-born European CO2 credits 
market, but would also look further afield.  She said the 
September Spain-Uruguay greenhouse gas emissions reduction 
MOU (Ref B) would be replicated with other nations and would 
provide Spain with significant credits.  Rivera also noted 
that Russia's October decision to ratify Kyoto should serve 
to depress the price of emissions credits, thus facilitating 
Spain's efforts to acquire credits on global markets. 
 
5.  (U) Rivera stressed that Spain recognizes that any 
serious/successful effort to address the problem would 
require attention to the 60 percent of traditional Spanish 
C02 emissions not covered under the National Emissions 
Compliance Allocation Plan.  Her office was working on a new 
plan for these non-covered sectors as well.  She concluded by 
asserting that the many voices in the private sector had 
exaggerated the economic costs to Spain entailed by Kyoto 
Compliance.  Rather than focusing on purely business costs, 
the new government believes a serious effort to comply with 
Kyoto could actually help induce a "technological revolution" 
in Spain, particularly in electricity generation.  This could 
in turn have a long-term positive impact on the economy. 
 
6. (SBU) COMMENT:  Rivera, while quite friendly and open, is 
clearly a "true believer" in Kyoto.  We think she provided an 
accurate snapshot of Zapatero's intentions vis-a-vis Kyoto. 
But this government is young and inexperienced and still 
faces tough tradeoffs further down the road.  Opposition from 
within and outside the government will certainly grow once 
the economic costs of Kyoto compliance become more apparent. 
That said, we believe that Zapatero will endeavor to prevent 
Spain from continuing as an EU "outlier" with respect to 
Kyoto compliance.  He takes this "return to Europe" stuff 
seriously and likely believes that Kyoto is one litmus test 
of his Government's Europeaness (sic). 
ARGYROS