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Cablegate: Climate Change: Canada's Kyoto Follow-Through:

This record is a partial extract of the original cable. The full text of the original cable is not available.

121844Z Mar 03

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
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

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