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Cablegate: Us-Indonesia Energy Security and Climate Change

DE RUEHJA #2407/01 2430717
R 310717Z AUG 07




WHITE HOUSE FOR CEQ - James Connaughton

E.O. 12598: N/A

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1. (SBU) Summary. White House Council on Environmental Quality (CEQ)
Chairman James Connaughton and U.S. Senior Climate Negotiator Harlan
Watson discussed energy security and climate change strategy with
senior Government of Indonesia (GOI) officials, NGOs and donors
during a series of meetings on August 15-16 in Jakarta. All
interlocutors appreciated the high-level visit and hoped that the
U.S. would play an active role to make the December Conference of
Parties 13 (COP 13) in Bali a success. The GOI and the U.S. agreed
on the importance of using the September 27-28 Major Economies
Conference in Washington to focus on a sectoral approach to
improving energy security and reducing greenhouse gases. The GOI
stressed the need to dovetail the Major Economies Conference process
into COP 13. NGOs and donors urged strong USG attention to
incentives such as carbon trading to help preserve Indonesia's
rainforests. GOI officials also briefed Connaughton on their biofuel
development plans. During a meeting on August 15, United Nations
Framework Convention for Climate Change (UNFCCC) Executive Secretary
Yvo De Boer and Connaughton and Watson compared their planning
assumptions and concerns for COP 13. End Summary.

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US Message: Energy Security and Climate Change Agenda
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2. (U) Throughout the visit, Chairman Connaughton outlined the U.S.
approach to the Major Economies Process. He noted that the September
27-28 conference is the first in a series of (likely five) meetings
pursuant to the President's May 31 initiative for a new
international framework for climate change. The objective for the
September meeting is to seek agreement on the process by which the
major economies would agree on a post 2012 framework. The U.S. is
asking that countries send delegations who can address the
environmental, energy security and economic aspects of climate
change. The U.S. delegation, which will be led by Chairman
Connaughton, will include Under Secretary Dobriansky and senior
representatives from the Department of Energy and Treasury.

3. (U) Chairman Connaughton said that countries invited to the
meeting would prepare reports on their domestic policy and energy
situations that would likely include binding commitments at the
national level - a potentially more effective approach than binding
but unenforceable multilateral outcomes. Based on a review of the
respective country portfolios, the delegations would identify the
highest priority sectors for action plans. For example, coal,
transportation, and land use/forestry are the three most important
sectors affecting climate change. COP 13 in Bali should also focus
on discussions within these priority sectors.

4. (U) Connaughton explained that Indonesia is at the center of the
climate change debate and a key international player that also
happens to be host to COP 13. Indonesia is both a petroleum producer
and consumer, has extensive forests and coral reef assets, possesses
expanding biofuel and agricultural sectors, and is a major
developing economy. Connaughton echoed this theme during press
events with Tempo (Indonesia's leading weekly magazine), Metro TV,
Associated Press and Suara Pembaruan (an Indonesian newspaper).

--------------------------------------------- ----------
Presidential Advisor: Coral Reefs and Forestry Concerns
--------------------------------------------- ----------

5. (SBU) GOI Presidential Advisor Dino Djalal told Connaughton that
the President Susilo Bambang Yudhoyono (SBY) had received President
Bush's invitation for the Major Economies Meeting. The GOI supports
the process and is preparing its official response to the
invitation. Indonesia must balance its economic development with
environmental concerns and has particular interest in expanding
biofuels, protecting coral reefs and seeking financial mechanisms
(such as carbon trading) to protect rainforests. Djalal also
presented Connaughton with a letter from President SBY to President
Bush concerning the impact of climate change on coral reefs. The
letter seeks U.S. support for a new multilateral partnership called
the Coral Triangle Initiative (CTI). President SBY hopes to discuss
the CTI at APEC in September and raise it formally at COP 13. Djalal
also noted that he plans to accompany President SBY to the September
24 climate change meeting, a side event of the 62nd UN General

6. (SBU) Connaughton reported that President Bush supports inclusion
of coral reefs within the climate change agenda and that the U.S.

JAKARTA 00002407 002.2 OF 003

will be including such protection under the Tropical Forest
Conservation Act. The U.S. also recognizes that forestry and land
use are an important part of the sustainable development and climate
change agenda and require careful attention. However, the global
impact of current carbon trading mechanisms such as the Clean
Development Mechanism (CDM) contains perverse incentives for
entrepreneurs to increase emissions in exchange for CDM

Environment and Forestry Ministries Concerns

7. (SBU) During a meeting with senior Ministry of Environment (MOE)
officials, Minister Rachmat Witoelar thanked Connaughton for U.S.
leadership on convening the major economies on climate change.
Witoelar will chair COP 13 and Emil Salim, Presidential Advisor on
Environment, will lead the GOI delegation. Witoelar reported that
the GOI is now formulating a national plan of action on climate
change but will adjust the Indonesian plan in the context of other
national action plans. Witoelar stressed the importance of staying
in close communication on all climate change issues and dovetailing
the Major Economies Process into COP 13 in order to make both
successful. Witoelar also stressed coral reef and marine
conservation issues. Connaughton offered to send to MOE information
about U.S. marine habitat and fish stock restoration programs.

8. (SBU) Connaughton also solicited the views of Ministry of
Forestry officials on how the U.S. could assist Indonesia on illegal
logging and sustainable forest management. The officials appreciated
U.S. assistance to date, and expressed optimism that these issues
would be an important part of the COP 13 discussions.

9. (SBU) During a dinner discussion with key GOI officials, Emil
Salim emphasized the importance of identifying indicators of success
for the COP 13 so that the meetings can be planned accordingly.
Salim also stressed the need for addressing deforestation and
sustainable forestry and stressed the urgency of addressing climate
change immediately; he claimed that 2,000 Indonesians islands will
likely be submerged within 20 years as a result of global warming.

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NGOs and Donor Perspectives: Climate Change Challenges
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10. (SBU) During meetings with NGO and donor representatives,
participants highlighted the challenge in Indonesia of addressing
climate change adaptation (including disaster preparedness) and
deforestation. One NGO representative explained that the GOI has
begun to focus more on adaptation, adding that, for example, the
Ministry of Agriculture has assigned a team to assess the
agriculture industry's technical capabilities to deal with the
effects of climate change. Donors referred to other challenges,
including a lack of statistics on climate change. Donors added that
climate change adaptation and disaster preparedness are key focus
areas and proposed that the international community develop a
private-public partnership to finance disaster insurance for
developing countries, with premiums set based on each country's
disaster preparedness level.

11. (SBU) Participants uniformly saw value in carbon funds for
preventing deforestation, pointing to a lack of incentives for
forest conservation. They noted, however, that questions about
forest land ownership and to whom these funds would be paid
currently limit their feasibility. Meeting participants agreed that
most timber is harvested for products other than fuel but noted that
increasing demand for biofuel development has led to an increase in
deforestation to clear space for oil-palm plantations.

12. (SBU) Both NGOs and donors emphasized the importance of
balancing energy needs and biofuel development with environmental
concerns. Donor representatives noted that the GOI is trying to
address growing energy demand by investing in both new coal plants
and biofuel development, and requires more international assistance
to combat deforestation and address energy demand. They noted the
potential for Indonesia to develop nuclear energy and adopt clean
coal technology. Both the World Bank and Asian Development Bank
(ADB) representatives noted that the two institutions do not
consider nuclear energy projects, but are starting to consider clean
coal projects based on increasing member country requests to

JAKARTA 00002407 003 OF 003

research the economic and environmental impacts of clean coal.

Biofuel Development in Indonesia

13. (U) Indonesia is pursuing policies to increase production of
biodiesel to 20 percent of total consumption by 2025. According to
members of the Indonesian National Biofuel Development Team (NBDT),
this is part of an overall plan to increase biofuel use to 22.26
million KL -- or 5 percent of Indonesia's total energy mix -- by
2025. NBDT Chief Executive Alhilal Hamdi dismissed concerns about
the environmental impact of oil-palm plantation development, arguing
that total acreage under cultivation is relatively small and growth
will be in already non-forested areas. He said that Indonesia and
Malaysia are working to create a certification standard for
sustainable oil-palm production, and that they are considering a
public relations campaign later this year to address the negative
publicity about oil-palm. Hamdi highlighted interest in developing
genetically modified jatropha seed as a biofuel source, and welcomed
U.S. cooperation in this effort. Connaughton affirmed the importance
of establishing standards and setting the right blends of
transportation fuel to ensure the long-term success of biofuel

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UNFCCC: Connecting September Conference to COP 13
--------------------------------------------- ----

14. (SBU) At a side meeting on August 15, UNFCCC Executive Secretary
Yvo De Boer briefed Connaughton on his consultations with various
parties concerning COP 13. De Boer noted that GOI preparations are
proceeding well, and that the GOI is also enthusiastic about hosting
a trade ministers meeting at COP 13, in addition to the planned
finance ministers meeting. They both concurred that a new climate
change agreement should consider options besides the CDM, and that
all parties need to move away from the notion that cap and trade
mechanisms are the only available tools. Connaughton also cautioned
against further complicating COP 13 discussions by bringing in trade

15. (SBU) Connaughton described to De Boer how the September Major
Economies conference would tie into COP 13. De Boer responded that
President Bush's climate change initiative was "significant" and
showed U.S. leadership. He conveyed that the Secretary General has
not yet decided whether the UNFCCC, U.N. Environmental Programme, or
Department of Economic and Social Affairs will represent the U.N. at
the conference. Connaughton and De Boer agreed on the importance of
clearly linking the September conference to the UNFCCC, in order to
overcome the suspicion that the September conference and follow-on
events are separate from the UNFCCC process. Connaughton solicited
advice on how best to portray the conference, and De Boer suggested
using the Secretary General's phrase of "advance negotiations"
(rather than "launch") to allay suspicions that this will be a deal
between the U.S. and its industrialized-country peers.

16. (SBU) Appreciating the U.S. focus on national commitments under
the Major Economies Process, De Boer asked that the U.S. clearly
highlight the links to adaptation, mitigation, technology and
finance in order to assuage the concerns of developing countries. He
noted that the Secretary General's high-level meeting on climate
change on September 24 will focus on these four areas. De Boer and
Connaughton emphasized the importance of being flexible and keeping
all options open, and promised to consult closely in the run up to
the September conference and Bali.


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