US embassy cable - 03OTTAWA687

UNCLAS SECTION 01 OF 02 OTTAWA 000687 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR OES (WATSON), OES/EGC (REIFSNEIDER, DEROSA), 
EB/ESC/ISC (MCMANUS, DUDLEY), WHA/CAN (MASON, RUNNING, 
NORMAN) 
 
USDOC FOR ITA/MAC -- OFFICE OF NAFTA 
 
DOE FOR INT'L AND POLICY (PUMPHREY AND PERSON), IE-141 
(DEUTSCH) AND BPA (ATKINS) 
 
EPA FOR OFFICE OF THE ADMINISTRATOR, INTERNATIONAL AFFAIRS 
AND BRIAN MCLEAN 
 
E.O. 12958: N/A 
TAGS: SENV, ENRG, CA, Kyoto 
SUBJECT:     CLIMATE CHANGE:  CANADA'S KYOTO FOLLOW-THROUGH: 
      SPENDING DECISIONS MAY REQUIRE A NEW PROCESS 
 
REF:  02 OTTAWA 3560 
 
SENSITIVE BUT UNCLASSIFIED - NOT FOR DISTRIBUTION OUTSIDE 
USG CHANNELS 
 
1.    (U) In its FY2003-04 budget, released on February 18, 
the GOC committed C$1.5 billion (about US$1 billion) over 
five years directly to achieving greenhouse gas emission 
reductions (plus modest additional funds for research and 
long-term technology development).  This represents about 
4.3 percent of the new spending promised in the budget 
(which totalled C$34.8 billion over five years, much of it 
for health care). 
 
2.    (U) The budget documents offer no details at all on 
how emission reductions are to be achieved, except that this 
will be done "with provinces and other partners" and will 
draw upon "expert external advice."  The lack of detail 
quickly led to predictions that the C$1.5 billion would be 
tapped by various ministers to fund large "pet projects." 
Examples included a long-touted but expensive high-speed 
rail line between Quebec and Ontario, and a major power 
transmission line from Manitoba to Ontario, either of which 
could reasonably be claimed to reduce greenhouse gas 
emissions. 
 
3. (SBU) Environment Minister David Anderson responded the 
day after the budget by calling for a "control group" of 
ministers to be charged with ensuring that the new spending 
flows to projects which are cost-effective in terms of 
reducing emissions.  Speaking to Econoffs on March 6, Don 
Strange of the National Climate Change Secretariat said that 
the GOC was considering options for ensuring such cost- 
effectiveness - possibly through a newly created function 
within the Privy Council Office, which is a policy co- 
ordinating secretariat to the federal Cabinet. 
 
4. (SBU) Strange noted the difficult squeeze between the 
time required to find and implement a suitable decision- 
making process, and the very brief time "window" available 
in which to get climate change programs started.  Time is 
short, he said, for two reasons.  First, Prime Minister Jean 
Chretien's "selling" of Kyoto implementation to Parliament 
and the public during 2002 created high expectations for 
action among stakeholders throughout Canada.  This could 
soon turn to disillusionment and criticism unless real 
programs materialize by mid-2003.  Second, the race within 
the governing Liberal Party to succeed Chretien as Party 
leader will culminate in a leadership convention in November 
2003 and a change of leadership early in 2004.  This 
transition is liable to interfere with policy decisions and 
could derail any programs not implemented by fall 2003. 
 
5. (SBU) PM Chretien's show of determination during 
2002 to formally "ratify" the Kyoto Accord, which was 
achieved with an act of Parliament in December, was 
intended to display independence from the USG on a 
high-profile, international environmental issue. 
Given Canada's comprehensive economic integration 
with the U.S., many of the GOC's critics emphasized 
the likely high economic price (and low efficacy) of 
any measure which could push business costs up 
relative to those in the U.S. 
 
6. (SBU) COMMENT:  While few details are yet 
available, ironically the pattern of GOC Kyoto 
"implementation" thus far looks quite similar to USG 
climate change initiatives - such as announced 
spending on research/development toward emission 
reduction technologies; announced spending on climate 
monitoring/research; and probable further spending on 
new fuel and transportation technologies (notably 
hydrogen fuel cells) and wind power.  GOC policy 
leaders are sensitive to any cross-border 
differential in business conditions, and no doubt 
intend to keep up with (or ahead of) U.S. initiatives 
in each of these industries so as not to miss any 
opportunities.  GOC officials remain enthusiastic 
about U.S.-Canada cooperation on climate change, 
including carbon sequestration.  Environment Minister 
Anderson has also expressed interest in facilitating 
Canadian-based firms' participation in nascent 
international "carbon markets." 
 
7. (SBU) COMMENT CONTINUED:  One key question still 
unanswered is how the GOC will fulfill a potentially costly 
promise which it made in December (just as its motion 
supporting ratification of Kyoto was being debated in 
Parliament).  The promise was to ensure that industry's cost 
of achieving mandated reductions in carbon emissions would 
be "capped" at C$15 per tonne.  So far, we have seen no 
indication from the GOC as to how much this promise might 
cost, nor whether it is to be funded from the C$1.5 billion. 
Likewise, as noted in para. 2, there are long-standing 
expectations that the GOC will assist with transportation 
infrastructure and with Manitoba's dream of a major new east- 
west power transmission line.  Even making a start in either 
of these areas could absorb all of the GOC's new climate 
change funding.  Climate change funding is certainly among 
the areas where high expectations are liable to be 
disappointed in coming months. 
 
CELLUCCI