[Senate Hearing 111-80]
[From the U.S. Government Printing Office]
S. Hrg. 111-80
CHALLENGES AND OPPORTUNITIES FOR U.S.-CHINA COOPERATION ON CLIMATE
CHANGE
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
JUNE 4, 2009
__________
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COMMITTEE ON FOREIGN RELATIONS
JOHN F. KERRY, Massachusetts, Chairman
CHRISTOPHER J. DODD, Connecticut RICHARD G. LUGAR, Indiana
RUSSELL D. FEINGOLD, Wisconsin Republican Leader designee
BARBARA BOXER, California BOB CORKER, Tennessee
ROBERT MENENDEZ, New Jersey JOHNNY ISAKSON, Georgia
BENJAMIN L. CARDIN, Maryland JAMES E. RISCH, Idaho
ROBERT P. CASEY, Jr., Pennsylvania JIM DeMINT, South Carolina
JIM WEBB, Virginia JOHN BARRASSO, Wyoming
JEANNE SHAHEEN, New Hampshire ROGER F. WICKER, Mississippi
EDWARD E. KAUFMAN, Delaware
KIRSTEN E. GILLIBRAND, New York
David McKean, Staff Director
Kenneth A. Myers, Jr., Republican Staff Director
(ii)
C O N T E N T S
----------
Page
Chandler, William, senior associate and director of the Energy
and Climate Program, Carnegie Endowment for International
Peace, Washington, DC.......................................... 20
Prepared statement........................................... 22
Responses to questions submitted for the record by Senator
Barbara Boxer.............................................. 44
Economy, Elizabeth, C.V. Starr Senior Fellow and director for
Asia Studies, Council on Foreign Relations, New York, NY....... 11
Prepared statement........................................... 15
Responses to questions submitted for the record by Senator
Barbara Boxer.............................................. 48
Kerry, Hon. John F., U.S. Senator from Massachusetts, opening
statement...................................................... 1
Lieberthal, Kenneth, visiting fellow in foreign policy, Brookings
Institution, Washington, DC.................................... 6
Prepared statement........................................... 9
Responses to questions submitted for the record by Senator
Barbara Boxer.............................................. 45
Lugar, Hon. Richard G., U.S. Senator from Indiana................ 4
Additional Material Submitted for the Record
Boxer, Hon. Barbara, U.S. Senator from California, prepared
statement...................................................... 44
(iii)
CHALLENGES AND OPPORTUNITIES FOR U.S.-CHINA COOPERATION ON CLIMATE
CHANGE
----------
THURSDAY, JUNE 4, 2009
U.S. Senate,
Committee on Foreign Relations,
Washington, DC.
The committee met, pursuant to notice, at 10:01 a.m., in
room SD-419, Dirksen Senate Office Building, Hon. John F. Kerry
(chairman of the committee) presiding.
Present: Senators Kerry, Cardin, Casey, and Lugar.
OPENING STATEMENT OF HON. JOHN F. KERRY, U.S. SENATOR FROM
MASSACHUSETTS
The Chairman. The hearing will come to order. Thank you for
joining us today.
Delegates from 192 nations are going to be spending the
rest of this year doing the vital work of crafting a global
climate change treaty to be negotiated in Copenhagen this
December. But, make no mistake, those 190-plus nations are
inevitably going to be taking their queues from just two
nations.
The reality is that a robust American partnership with
China will do more than anything else to ensure a successful
global response to the urgent threat of climate change. America
is the world's largest historical emitter of greenhouse gases
that cause climate change. And China recently passed us to
become the world's No. 1 current emitter. So, together we are,
today, responsible for nearly half of all global climate
greenhouse gas emissions.
Obviously, the full extent of our responsibility goes well
beyond the numbers. Our words and our actions will set the
tone. And Washington and Beijing have a unique opportunity here
to be able to lead. Either we're going to create the necessary
momentum right now--June, July, August, September--leading into
Copenhagen to galvanize a legitimate global response or we
truly risk a global catastrophe.
Last week, I visited China to assess where that country
currently stands on climate change and what the realities of
their position are. And it's interesting, because I've been
engaged with the Chinese on this topic for almost 20 years now,
going back to Rio, the original Earth Summit in 1992, and
really it was a kind of one-way discussion for about 15 of
those 20 years, where you could sit with Chinese delegations,
but there wasn't much feedback, there wasn't much engagement,
there wasn't much discussion, and frankly, there wasn't much
happening on the positive side in China itself. That has
changed dramatically, I might say, over the course of the last
years. And both in Bali as well as in Poznan, I met with
Minister Xie, their lead negotiator on climate change, as I did
meet with him last week in Beijing, and it is striking the
degree to which they are energized, enthusiastic, embracing new
technologies, setting goals and standards, and moving
aggressively in a new direction.
Last week, I met with top Chinese political leaders, energy
executives, scientists, students, and environmentalists, and
what I heard was, in fact, very encouraging. Now, words are
words; I understand that. And I'm meeting today with Todd Stern
and John Holdren and others to discuss how we translate the
words into specific actions. But the fact is that the Chinese
decisionmakers insisted to me, repeatedly, that China grasps
the urgency of this problem. People who, a few short years ago,
were not even willing to entertain this discussion are now
unequivocal. China is eager to embrace low-carbon development
pathways and is ready to be, in their words, a positive,
constructive force in Copenhagen and in the negotiations, going
forward.
My message to the Chinese was very direct, simply that
America understands that we have an obligation to lead, as the
historical largest emitter, but that China needs to understand,
point blank, that if America went to zero tomorrow, China has
the ability to obliterate every gain we make unless it is also
part of the solution, as well as other developing countries.
And so, the message is clear. America is no more likely to
enter into a legally binding global solution in 2009 than it
was back in the 1990s, when we debated Kyoto, unless China is
part of the solution and unless there is a global solution in
the making through the Copenhagen process. I might add, that
this can be achieved by filling out the already-adopted
language of U.N. process, which refers to ``common, but
differentiated, responsibilities,'' and, most importantly,
filling out the three words that came out of the Bali and
Poznan process, that emissions reductions must be ``measurable,
reportable, and verifiable,'' MRV, as it is referred to in the
negotiating process.
The Chinese are beginning to realize that addressing
climate change and pursuing sustainable energy policies is very
much in their own national interest. China's ballooning growth
has resulted in a resource dependency that comes with very real
strategic costs. In a sense, China and the United States find
themselves in a similar kind of strategic box. Both of us have
increasing economic demand, increasing power-production demand,
and both of us are predominantly dependent on foreign sources
of fuel. So, to the degree that we both move aggressively to
create bioalternative, renewable, wind, solar, clean coal, et
cetera, we are significantly advantaged, because we both have
significant supplies of coal and an ability to burn it,
providing that it is clean.
Of course, the costs of environmental devastation are also
being felt in more than strategic terms for China. Air
pollution causes the premature deaths of 750,000 Chinese people
every year. Farmers are experiencing declining crop yields
right now. And scientists are now warning that the Himalayan
glaciers, which supply water to almost a billion people, could
disappear completely by 2035. Everyone I spoke to recognized
these risks.
So, it's time to retire, once and for all, the old outdated
stereotype and myth that China doesn't care at all and China
won't act. They do care, and they are acting. They may not
embrace exactly the same schedule immediately that we do, but I
believe that if you give those concepts of ``verifiable,
measurable, reportable'' the life that they can be given, we
are going to see very significant emissions reductions from
China. And I'm willing to bet any of my colleagues in the
United States Senate that if we don't get our act together
significantly over the course of the next few years, we're
going to be chasing China, 4 or 5 years from now, because
that's the rate that they are moving at.
I had the pleasure of riding on a 200-mile-an-hour bullet
train from Beijing to Tianjin, steel on steel. Nancy Pelosi was
also there. We met one evening and chatted, and she had the
pleasure of riding on a 300-mile-an-hour Shanghai maglev train
from the airport to downtown. Folks, those are cars that are
off the road and people who move in a low carbon footprint
lifestyle, and our Acela train has yet to be able to go more
than 18 miles of the entire way to New York at 150 miles an
hour.
So, the challenge is pretty clear to me. The old train in
Beijing took 8 hours, and it ran on diesel. The new one takes
29 minutes. And in the next 4 years, China will extend its
high-speed rail system by 38 percent.
Earlier this year, while America spent $80 billion in green
stimulus measures, the largest such investment in our history,
China invested $200 billion. In the past few years, China has
tripled its wind energy-usage targets and quintupled its solar
energy-use targets for 2020. They set an energy intensity
reduction target of 20 percent by 2020, and they are already
moving ahead of that in certain sectors of their economy, and
they've surprised themselves at the ease and rapidity with
which they were able to do it.
China has actually begun dynamiting--blowing up--some of
its small dirty coal plants, because they're so inefficient,
and replacing them with new technology and newer plants. But,
as China builds and expands its industrial base, we obviously
can't expect them to simply dynamite dirty sources of energy;
we need to ensure that China starts building clean. Both
countries have a great deal to gain from bilateral cooperation
to develop and deploy clean energy sources. We have the chance
to commercialize some of the most promising technologies and
make clean energy advances that can literally be
transformational.
I raised these issues with Chinese Vice Premier Li Keqiang,
and he was enthusiastic, literally saying, ``Let's do it. Why
don't you get the names of those businesses to our people and
we'll work together and see if we can start to joint venture
and specifically describe how we could proceed forward.''
So, the opportunity for Mr. Stern and the State Department
team is immense, and we should collaborate on multiple
demonstration projects of near-to-market clean-energy
technology, from solar to thermal to carbon capture and
storage. We should combine forces in driving toward next-
generation battery and electric-vehicle technology. I might
add, China has already set a daunting goal; daunting both with
respect to the challenge of doing it, but also with respect to
us, because they are setting out to be the world's No. 1
electric-car manufacturer. And at a time when we see the woes
of Detroit, we ought to take a message from that and, likewise,
get our act together.
Most importantly, we need to inspire the 1.6 billion
Americans and Chinese to take ownership of this challenge and
prove to the world that we can rise and meet it together.
Now, make no mistake, bilateral cooperation with China is
not an alternative to the global treaty process. On the
contrary, it is an essential component of the larger effort.
Our two countries, representing more than 40 percent of the
emissions globally, have stood aside from this effort for too
long, and now it falls to us to take the helm. And if we lead,
if we prove our ability to be able to reach agreement on many
of these issues in these next few weeks, that will have a
profound impact on the negotiating positions and the capacity
to move much more easily in Copenhagen.
We're very fortunate to have with us today a respected
panel of experts. Ken Lieberthal served as senior director for
Asia on the National Security Council under President Clinton
and is a visiting fellow at the Brookings Institution.
Elizabeth Economy is a senior fellow and director for Asia
studies at the Council of Foreign Relations. And Bill Chandler
is director of the Energy and Climate Program at the Carnegie
Endowment for International Peace.
Let me just comment on one other thing we mark today also.
Today is also the 20th anniversary marking the violent
crackdown against democracy advocates in Beijing's Tiananmen
Square and in dozens of other cities over China, and it would
be inappropriate to simply gather here today and talk about the
relationship with China without mentioning that and remembering
the sacrifice of those who lost their lives in pursuit of
greater freedom.
Obviously, much remains to be done in that regard, and, as
we continue to build a closer relationship with China, it's
important for us to continue to urge the Chinese to unleash the
dynamism of the Chinese people through further political
liberalization and strengthening the rule of law and making
government fully accountable to the people. And I think that
China's success in that endeavor is also of profound interest
to our relationship and to the United States.
My visit last week confirmed for me China's indispensable
role in tackling a host of international problems, from the
global financial crisis to the subject of today's hearing. And
I look forward to growing this relationship. It is perhaps the
most important bilateral relationship on the planet today, and
there's much that we need to do with respect to nuclear
proliferation, North Korea, as well as the other issues I've
mentioned.
Senator Lugar.
STATEMENT OF HON. RICHARD G. LUGAR, U.S. SENATOR FROM INDIANA
Senator Lugar. Well, thank you very much, Mr. Chairman. I
congratulate you on your trip to China, your diplomacy;
likewise, your survival at 200 miles an hour----
[Laughter.]
Senator Lugar [continuing]. In addition to the Speaker of
the House's feat.
Let me just say, I join you also in welcoming our
distinguished panel, and we look forward to discussing the
subject with you.
As the chairman has pointed out, China's actions are
critical to the success of any global effort to meaningfully
reduce carbon emissions. Not only is China the largest source
of greenhouse gases, its negotiating position is influential on
the G77 developing nations and others. Chinese responses to
climate change and to global negotiations on the subject have
already been complex and sometimes contradictory. The words and
actions of Chinese leaders indicate that they see climate
change as a risk to the stability and development of their
country.
And yet, this focus on stability also reduces China's
willingness to limit carbon usage in ways that might impede
economic growth. China has demonstrated a strong appetite for
developing and deploying cleaner energy technologies, including
solar and wind energy systems, yet it continues to build coal-
fired powerplants at a rapid rate. It has issued forward-
looking regulations and mileage standards designed to produce a
greener economy, yet it remains unclear whether China will
develop the capacity to effectively implement its new
regulations, or even whether it can accurately measure their
impact.
China has productively discussed some climate change issues
in bilateral negotiations, yet it is association with the G77
that routinely engages in strident rhetoric that blames the
West for climate change and supports counterproductive policy
demands, such as having consumers in the West pay for the
carbon content of products they buy from China.
China's position on climate change is more than a
diplomatic problem for the United States. The American domestic
debate on this issue will be profoundly influenced by
perceptions of China's willingness to set aside doctrinaire
positions and to agree on steps to limit greenhouse gas
emissions.
China's status as a nondemocratic nation which lacks the
checks and balances provided by a free press and other
democratic institutions will complicate the verification of any
climate change agreement. Moreover, the fundamental trends in
China toward industrialization, urbanization, higher standards
of living will have far more impact on the growth of emissions
than government policy.
Now, a starting point for our discussion is what can
realistically be achieved through bilateral talks with the
Chinese Government. In my judgment, there is no doubt that such
talks should be pursued, probably in a format that can include,
not just energy and climate, but also economic, security, and
other issues.
Even apart from climate change concerns, our Nation has a
strong interest in improving our communications with Beijing
and making progress on common interests. I appreciate the
diplomatic efforts already undertaken by the Obama
administration, and especially the efforts of our chairman,
John Kerry. As I have mentioned in past hearings, it is
critical that the American people have a much clearer picture
of the overall elements of the climate change problem and the
administration's strategy in structuring a potential agreement.
American participation in any global climate agreement is
likely to bring profound changes to the American economy and
culture that require the achievement of much greater consensus
than we now have. Absent a reasonable consensus on how we
structure our response and what sacrifices we have to make,
implementations of a climate change policy is far more likely
to be ineffective, economically damaging, and divisive if we do
not have a common consensus.
Part of this understanding involves how American efforts on
climate change fit into global efforts. And the overall volume
of greenhouse gases released by China, India, other rapidly
developing countries, is expected to continue to grow, under
almost any scenario. If this is the case, the American people
will require much greater confidence than mitigation steps
taken by the United States and other developed nations,
combined with commitments by China and other developing nations
to slow the growth of their greenhouse gases, will finally
produce a meaningful result.
I thank the chairman again for calling the hearing, and we
look forward to the insights of our witnesses.
The Chairman. Thank you very much, Senator Lugar. And thank
you for your personal comments. And I appreciate the questions
you've raised, and, needless to say, they've got to be answered
as we go forward.
Mr. Lieberthal, if you would lead off, and then Elizabeth,
and we'll just go down the line.
Thanks.
STATEMENT OF KENNETH LIEBERTHAL, VISITING FELLOW IN FOREIGN
POLICY, BROOKINGS INSTITUTION, WASHINGTON, DC
Mr. Lieberthal. Thank you, Mr. Chairman, Senator Lugar. I
appreciate the opportunity to comment on the critical issues of
challenges and opportunities for United States-China
cooperation on climate change.
China's rate of growth of carbon emissions, especially
since 2002, has been extremely steep, and pollution problems in
China, I think, are rightly viewed as severe. Most Americans
seem to believe that China is, therefore, ignoring its carbon
emissions while pursuing all-out economic growth.
But, as you just explained, Mr. Chairman, the reality is
that the leaders in Beijing have adopted serious measures to
bring growth in carbon emissions under control, even as they
have tried to maintain rapid overall expansion of GDP.
To engage effectively with the Chinese and achieve the best
outcomes on carbon emissions with them, it is important to have
a realistic understanding both of the reasons their emissions
are growing so rapidly and of the types of efforts they're
making. It is critical for the United States and China to find
ways to work as effectively as possible to reduce overall
greenhouse gas emissions, and this requires reality-based
approaches by each side toward the other.
Why are China's greenhouse gas emissions increasing so
rapidly? Fundamental to the answer is that, first, China's
economy is based overwhelmingly on coal. And second, China
retains many of the problems of a developing country.
Coal currently provides about 70 percent of China's energy,
and there is no serious alternative to coal for many years to
come. Without development and deployment of technology to
reduce coal's carbon footprint, the future looks grim for
China's carbon emissions, and this, I believe, provides a major
area for potential United States-China cooperation.
China describes itself as a developing country, and it's
more than half right. It makes sense to envision China as a
group of relatively developed islands with a cumulative
population of over 400 million people that are scattered around
in a sea of over 800 million people who live very much in
developing-country conditions. The interaction between the
developed areas and the developing regions is pervasive, and it
affects every dimension of economic, social, and political life
in China. Every Chinese leader views the developing part of the
country as a constant and pressing reality.
One of the results of this developing-country context is
that China encounters more fundamental problems regarding human
capital, infrastructure, social malaise, and technical
capabilities than most of us appreciate. Put simply, China's
leaders lack the institutional and technical capabilities to
achieve many of the improved energy outcomes that they seek.
Indeed, the issue of capacity-building is critically important
for China's future outcomes in the clean energy and climate
change arenas and provides a major area of potential United
States-China cooperation.
Another reality of China's developing-country context is
that Beijing is also focused on managing perhaps the greatest
migratory flow in human history as urbanization proceeds on an
almost unimaginable scale. Since 1992, nearly 200 million
Chinese have shifted from rural to urban life, and the current
pace of migration of about 15 million people per year moving
into the cities is likely to continue for another 15 to 20
years. The resulting requirements for new power generation,
building construction, transportation, education, health
services, and so forth means that, effectively, China has to
build urban infrastructure and create urban jobs for a new,
relatively poor city of 1.25 million people every month, and
that will likely continue for the better part of the next two
decades.
The key industries that support the related infrastructure
development--cement, steel, petrochemicals, power, and
aluminum--have been among the fastest growing industries in
China over the past half decade and are also the most important
sources of greenhouse gas emissions.
In addition, as more Chinese achieve higher incomes, they
want comfortable transportation, including private cars. Many
are also upgrading their homes, making them larger, and filling
them with appliances. Carbon emissions growth reflects,
therefore, extremely fundamental forces in China's development.
China's leaders also have competing environmental concerns,
especially focused on water distribution and quality, and on
extremely severe air pollution, and those divert serious
resources from attacking the issue of carbon emissions.
In sum, while visits to Beijing or other major coastal
cities may create the impression that China's a relatively
developed country, the reality is far different. The
underdeveloped parts of China have a population nearly three
times the size of our own population, and that population's
needs and capabilities inevitably shape major outcomes in
China.
None of the above should be interpreted as indicating that
controlling greenhouse gas emissions is not on Beijing's
priority list. That would be very far from the truth, as China
sees itself as one of the countries most vulnerable to damage
from climate change. In fact, when you look at the policies and
programs already in place, they are very impressive, and they
are constantly growing. Even the following short list of key
official targets, every one of them backed up by substantial
commitments of resources, suggests the reality that China's
taking these issues very seriously.
The targets include seeking a 20-percent reduction in
energy intensity for all of GDP during the 11th 5-year plan,
from 2006 to 2010. According to Chinese authorities, meeting
this target will reduce total carbon emissions by roughly 1
billion tons of CO2 over the course of the plan, as against a
business-as-usual model.
Adopting the target of having renewable fuels account for
10 percent of China's total energy consumption by 2010, and 15
percent by 2020. As part of this, there are major programs and
mandates in solar, wind, nuclear, and hydro, and there is much
work being done on biofuels.
Taking serious measures to reduce the emissions from coal-
fired power generation facilities, including shutting down
small-scale plants and deploying, on a large scale, the most
advanced technologies on all new coal-fired plants.
Investing over $88 billion in ultra-high-voltage
transmission-smart grid projects by 2020. And there are other
targets on various additional measures in electric vehicles,
mass transmit, electrified trains for freight-hauling, and so
forth.
The bottom line is that China faces enormous pressures via
urbanization and other aspects of development to continue
massive creation of infrastructure. It takes reduction of
greenhouse gas emissions, as against a business-as-usual model,
extremely seriously. And it has more problems, in terms of lack
of capacity, than is true for developed countries.
There are serious implications for the United States and
China, and for Copenhagen, in the above remarks. These include,
first, United States-China cooperation on clean energy can be
in both of our interests. We have many complementary
capabilities, but such cooperation has to be based on the trust
that grows out of realistic understandings of each other's
actions, problems, worries, capabilities, and goals. That
trust, I believe, is not yet there.
Second, at Copenhagen, China should be pushed hard to
accept targets for greenhouse gas emissions that require major
efforts for them to achieve, with full verification
requirements. But China will, in my judgment, not accept caps
at this point, as it does not see how it can actually cap
emissions growth in the face of ongoing urbanization and other
demands. Beijing does not accept international obligations that
it does not think it is capable of meeting.
And finally, the United States and China should work to
develop a major clean energy partnership. Achieving such a
partnership will provide new momentum for the Copenhagen
effort.
I hope these comments are helpful. I look forward to your
questions.
Thank you, sir.
[The prepared statement of Mr. Lieberthal follows:]
Prepared Statement of Kenneth Lieberthal, Visiting Fellow, the
Brookings Institution, Professor of Political Science and Professor of
Business Administration, the University of Michigan
Mr. Chairman and members of the Foreign Relations Committee. Thank
you for giving me the opportunity to comment on the critical issue of
``Challenges and Opportunities for United States-China Cooperation on
Climate Change.''
China's rate of growth of carbon emissions, especially since 2002,
has been extremely steep, and pollution problems in China are rightly
viewed as very sobering. Most Americans seem to believe that China is
therefore ignoring its carbon emissions while pursuing all-out economic
growth.
But the reality is that the leaders in Beijing have adopted serious
measures to bring growth in carbon emissions under control, even as
they try to maintain rapid overall expansion of GDP. To engage
effectively with the Chinese and achieve the best outcomes on carbon
emissions with them, it is important to have a realistic understanding
both of the reasons their emissions are growing so rapidly and of the
types of efforts they are making. It is critical that the United States
and China find ways to work as effectively as possible to reduce
overall greenhouse gas emissions, and this requires reality-based
approaches by each side toward the other.
First, why are China's greenhouse gas emissions increasing so
rapidly? Fundamental to the answer is that: One, China's economy is
based overwhelmingly on coal; and two, China retains many of the
problems of a developing country.
Coal currently provides about 70 percent of China's energy, and
there is no serious alternative to coal for many decades to come.
Without development and deployment of technology to reduce coal's
carbon footprint, the future looks grim for China's carbon emissions.
This provides a major area for potential United States-China
cooperation.
China always describes itself as a developing country, and it is
more than half right. It makes sense to envision China as a group of
relatively developed islands with a cumulative population of over 400
million people that are scattered around in a sea of over 800 million
people who live very much in developing country conditions. The
interaction between the developed areas and the developing regions is
pervasive and affects every dimension of economic, social, and
political life. Every Chinese leader views the developing part of the
country as a constant and pressing reality.
One of the results of this developing country context is that China
encounters more fundamental problems regarding human capital,
infrastructure, social malaise, and technical capabilities than most of
us appreciate. Put simply, China's leaders lack the institutional and
technical capabilities to achieve many of the improved energy outcomes
that they seek. Indeed, the issue of capacity-building is critically
important for China's future outcomes in the clean energy and climate
change arenas and provides a major area of potential United States-
China cooperation.
Another reality of China's developing country context is that
Beijing is also focused on managing perhaps the greatest migratory flow
in human history as urbanization proceeds on an almost unimaginable
scale. Since 1992, nearly 200 million Chinese have shifted from rural
to urban life, and the current pace of migration of about 15 million
people per year moving into cities is likely to continue for another
15-20 years.
The resulting requirements for new power generation, building
construction, transportation, education, health services, etc., means
that, effectively, China has to build urban infrastructure and create
urban jobs for a new, relatively poor city of 1.25 million people every
month, and that will likely continue for the better part of the next
two decades. The key industries that support the related infrastructure
development--cement, steel, petrochemicals, power, and aluminum--have
been among the fastest-growing industries in China over the past half
decade and are also the most important sources of greenhouse gas
emissions. In addition, as more Chinese achieve higher incomes, they
want comfortable transportation, including private cars. Many also are
upgrading their homes--making them larger and filling them with
appliances. Carbon emissions growth reflects, therefore, extremely
fundamental forces in China's development.
China's leaders also have competing environmental concerns,
especially focused on water distribution and quality and on extremely
severe air pollution, that divert serious resources from attacking the
issue of carbon emissions.
In sum, while visits to Beijing or other major coastal areas may
create the impression that China is a relatively developed country, the
reality is far different. The underdeveloped parts of China have a
population nearly three times the size of ours, and that population's
needs and capabilities inevitably shape major outcomes in China.
None of the above should be interpreted as indicating that
controlling greenhouse gas emissions is not on Beijing's priority list.
That would be very far from the truth, as China sees itself as one of
the countries most vulnerable to damage from climate change. In fact,
when you look at the policies and programs already in place, they are
very impressive--and they are constantly growing. Even the following
short list of key official targets--every one backed up by substantial
commitments of resources--suggests the reality that China is taking
these issues very seriously. China is:
Seeking a 20-percent reduction in energy intensity for all
GDP during the 11th 5-year plan, which covers 2006-2010.\1\
According to Chinese authorities, total carbon emissions would
decline by roughly a billion tons of CO2 over the course of the
plan as against a ``business as usual'' (BAU) model, if this
target were fully met. At present, progress toward the target
is behind schedule, but the gap between targets and performance
is closing.
---------------------------------------------------------------------------
\1\ ``The Energy Development Plan for the 11th Five-Year Period,''
the National Development and Reform Council (NDRC), Government of the
People's Republic of China, April 2007. Available at: http://
www.ccchina.gov.cn/WebSite/CCChina/UpFile/File186.pdf.
---------------------------------------------------------------------------
Adopting the target of having renewable fuels account for 10
percent of China's total energy consumption by 2010 and 15
percent by 2020.\2\ As part of this:
---------------------------------------------------------------------------
\2\ ``The Medium and Long-Term Development Plan for Renewable
Energy,'' the National Development and Reform Council (NDRC),
Government of the Peoples' Republic of China, August 2007. Available
at: http://www.ccchina.gov.cn/WebSite/CCChina/UpFile/2007/
20079583745145.pdf. China passed a renewable energy law in 2006. In
2007 renewables accounted for 8.5% of China's energy production.
Establishing major programs to improve technology in solar
and wind power. China has rapidly become the world's
leading producer of solar panels, although solar power's
installed generating capacity is to increase to only
300,000 kW in 2010. For wind power, tax breaks and other
forms of government support are already in place as of
2008. The installed generating capacity of wind power is to
increase from 1.26 million kW in 2005 to 10 million kW in
the year 2010.\3\
---------------------------------------------------------------------------
\3\ ``The Renewable Energy Development Plan for the 11th Five-Year
Period,'' NDRC, PRC. March 2008. Available at: www.ccchina.gov.cn/
WebSite/CCChina/UpFile/File186.pdf.
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Enhancing China's hydropower generation (despite the fact
that the country already has the greatest concentration of
hydropower facilities in the world). The installed
hydropower generating capacity is to increase from 117
million kW in 2005 to 190 million kW in 2010 \4\ and will
provide 6.8 percent \5\ of the country's anticipated energy
consumption in the latter year.
---------------------------------------------------------------------------
\4\ ``The Renewable Energy Development Plan for the 11th Five-year
Period,'' ibid.
\5\ ``The Energy Development Plan for the 11th Five-Year Period.''
Taking serious measures to reduce the emissions from highly
polluting power-generation facilities. Coal remains king in
China, and about 70 percent of power still comes from coal-
fired plants. Over the past 5 years China has built the
equivalent of America's entire coal power generation system.
These plants will stay on line for another 30-50 years while 60
percent of U.S. coal-fired powerplants will be over 50 years
old by 2025. The technologies involved in generating power in
these new plants are thus very important. Fortunately, China is
building many of these plants to be relatively clean \6\ and is
investing in development and deployment of clean coal
technologies.\7\ Despite these measures, specific problems
often result in emissions far above the level that would be
anticipated from plant technology alone. This is the unintended
result of economic pressures at the powerplant level that lead
many operators to purchase and burn low-quality coal that
undermines the efficiency capabilities of the advanced
technologies in their plants.\8\
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\6\ Government regulations now require that: New plants be
synchronously equipped with flue gas desulfurization (FGD) technology
before 2010; existing plants begin to be retrofitted with FGD
technology before 2010; all plants meet SO2 requirements before 2015;
and new plants set aside space for future flue gas denitrification
equipment installations. New power-generation units are equipped with
low-NOX burners, and many existing units have been
retrofitted with this technology: Zhao, Lifeng and Gallagher, Kelly
Sims, ``Research, Development, Demonstration, and Early Development
Policies for Advanced-Coal Technology in China,'' Energy Policy, Vol.
35, 2007, 6467-6477.
\7\ This includes, for example, substantial work on direct
hydrogenation of coal, with production starting up in the Inner
Mongolian Autonomous Region in 2008. Beijing is also focusing on coal
gasification and is constructing 35 plants using this technique.
\8\ Edward S. Steinfeld, Richard K. Lester, and Edward A.
Cunningham, ``Greener Plants, Grayer Skies? A Report from the Front
Lines of China'sEnergy Sector'' (Cambridge, Mass.: China Energy Group,
MIT Industrial Performance Center, August 2008).
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Aggressively expanding nuclear power capabilities, with a
target of building nine new generators in the next 2 years and
at least 30 over the coming decade. Nuclear is slated to
provide 5 percent of China's total installed power-generating
capacity by 2020.\9\ There have been recent suggestions that
the nuclear output target has been raised from 40 GW to 70 GW
by 2020.\10\
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\9\ ``The Nuclear Industry Development Plan for the 11th Five-Year
Period,'' the Commission of Science, Technology, and Industry for
National Defense (COSTIND), the Peoples' Republic of China, August
2006. Available at: http://www.caea.gov.cn/n602669/n602673/n602687/
n607857/appendix/200741310370.doc ``China Ups Targeted Nuclear Power
Share From 4% to 5% for 2020,'' Xinhua News, August 5, 2008. Available
at: http://news.xinhuanet.com/english/2008-08/05/content_8967806.htm.
\10\ China Daily, November 19, 2008: http://www.chinadaily.com.cn/
bizchina/2008-11/06/content_7180851.htm.
---------------------------------------------------------------------------
Investing over 600 billion RMB ($88 billion) on ultra-high
voltage transmission projects by 2020. The installed capacity
of China's clean energy will be increased to 579 billion kW
when the smart grid is completed by 2020.\11\
---------------------------------------------------------------------------
\11\ China Daily (May 29, 2009).
The bottom line is that China faces enormous pressures via
urbanization and other aspects of development to continue massive
creation of infrastructure, it takes reduction of greenhouse gas
emissions as against a BAU model extremely seriously, and it has more
problems in terms of lack of capacity monitoring and other needs for
high quality efforts than is true for developed countries.
There are serious implications for the United States and for
Copenhagen in the above comments. These include \12\:
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\12\ For a fuller explanation of potential avenues of future United
States-China cooperation to address climate change, see: Kenneth
Lieberthal and David Sandalow, ``Overcoming Obstacles to United States-
China Cooperation on Climate Change'' (Washington: The Brookings
Institution John L. Thornton China Center, 2009), available in .pdf at
www.brookings.edu.
---------------------------------------------------------------------------
There are numerous areas in which United States-China
cooperation on clean energy can be in both our interests. We
have many complementary capabilities. But such cooperation has
to be based on the trust that grows out of realistic
understanding of each other's actions, problems, worries,
capabilities, and goals. That trust is not yet there.
At Copenhagen, China should be pushed hard to accept targets
for greenhouse gas emissions that require major efforts to
achieve. Beijing should also accept full verification
requirements, which include transparency, clear metrics, etc.
But China will, in my judgment, not accept caps at this point.
It does not see how it can possibly actually cap emissions
growth, given the ongoing urbanization and other developments
noted above, and Beijing does not accept international
obligations that it does not think it is capable of meeting.
Chinese quantitative obligations are, therefore, likely to
focus on improvements in energy intensity per unit of GDP,
perhaps bolstered by some sectoral requirements, along with
targets on use of renewables. China cannot avoid an overall cap
on carbon emissions indefinitely, but it is not in a position
realistically to accept a cap at Copenhagen.
The United States and China should work to develop a major
clean energy partnership. Achieving such a partnership will
provide new momentum to the Copenhagen effort. It will
demonstrate that the United States and China are serious about
improving their records on clean energy. It inherently will
also highlight that, despite the differences in principle that
separate the industrialized from the developing countries over
responsibilities for greenhouse gas emissions, the most
important developed and most important developing country can
find significant ways to work together. But a United States-
China clean energy partnership and the Copenhagen effort should
be developed separately, as the negotiating framework for the
latter is far more complicated than that for the former. Close
linkage, therefore, may complicate both issues.
The Chairman. They are, indeed, very helpful, thank you.
Ms. Economy.
STATEMENT OF ELIZABETH ECONOMY, C.V. STARR SENIOR FELLOW AND
DIRECTOR FOR ASIA STUDIES, COUNCIL ON FOREIGN RELATIONS, NEW
YORK, NY
Ms. Economy. Thank you very much, Mr. Chairman and Senator
Lugar. It is a pleasure to be here to have the opportunity to
discuss how the United States and China can best work together
to address the challenge of global climate change.
Within this very broad mandate, I was asked to talk about
two specific issues this morning. First, how can the United
States help support measuring, reporting, and verification in
China? And second, what might be some of the priorities for a
clean energy partnership between our two countries?
In terms of MRV, these are, of course, the very building
blocks of an effective domestic climate program for China, as
well as China's commitment to a robust international regime.
China is still at a very nascent stage of capacity in these
areas. The central government, for example, has called for the
provinces to develop their own climate action plans, but many
of these provinces have very little idea about how to proceed,
other than to copy blindly what Beijing has already issued. I
think this offers some real opportunities for United State-
China cooperation.
First, we can begin by helping the provinces to develop
inventories of their greenhouse gas emissions. We can assist
China with both the technology and the methodology, from ground
sampling for methane emissions from rice production to
advanced-stage continuous emissions monitoring. It's not going
to be easy. Beijing has many strictures on information
transmission, not only to its foreign partners, but also within
the government. But this is an essential first step for any
real commitment that China might be willing to sign on to.
Second, I think we have the opportunity to work with
Chinese companies to begin to develop a registry of their
greenhouse gas emissions and mitigation measures. I think this
is an important resource for China and for Chinese companies as
the country moves toward a time when it will have to assume a
cap on its emissions, and perhaps it will eventually adopt a
cap-and-trade system. Some Chinese companies, mostly those with
ambitions to be global leaders, are already moving in this
direction. I sit on a board of a Chinese group that scorecards
multinational and Chinese companies on their sustainability
initiatives. Two years ago, we only had a multinational
scorecard; this year we had two dozen Chinese companies that
wanted to be evaluated; and, of those, I would say five or six
actually had greenhouse gas mitigation measures listed as part
of their sustainability initiatives. Their initiatives were not
systematic, systemic, or comprehensive in any way, and
certainly the number of companies in China that is undertaking
these kinds of efforts is still small. But I do think, here in
the United States, we have extensive experience with this, and
we can begin to share this expertise on a company-to-company
basis. Again, this is very important as China moves toward a
true carbon commitment and a capped emission system.
Third, and in some ways most difficult, is verification.
There are few incentives within China's political system to
enforce environment-related laws and regulations. Even when
Chinese factories and powerplants have pollution-control
equipment, they often don't use it, or they may use it only
when the inspectors appear. There is very poor data collection,
transmission, and transparency at every level of the Chinese
system, and the incentive is often to hide negative
information. We saw this in the runup to the Olympics, when the
Beijing city government simply moved the air-pollution
monitoring equipment from one part of the city to another in
order to put forth better air-quality statistics than were
actually there.
So, I think that this effort to help China develop a more
transparent, accountable, and rule-based system will be a long
process, but an absolutely critical one. California is
beginning an initiative that is going to try to address some of
this problem. It has a climate governance partnership that it's
trying to establish with a number of provinces, in which
members of different parts of the bureaucracy at the local
level will form climate action task forces, and to encourage
information-sharing and transparency and accountability at the
local level. Again, this is going to be a very long process,
but it is an absolutely essential one.
The second area I was asked to discuss was what the
priorities might be for a clean energy partnership between the
United States and China. As Ken was indicating, the partnership
needs to look ahead over the next 10 to 20 years at the
profound changes, both within China and in terms of China's
role abroad, and structure the partnership in that context.
Within China, this means working closely with the Chinese
Government as it is transforming the country from a rural- to
an urban-based society. Ken mentioned they plan to urbanize 400
million people between 2000 and 2030. Significantly, urban
residents use 3\1/2\ times more energy than their rural
counterparts. With this as our future, I think we need to be
looking at partnerships that focus on alternative energy
vehicles. We already have an ecopartnership on this issue under
the Strategic Economic Dialogue between Chang'an Motors and
Ford Motor Company and the cities of Denver and Chongqing. We
should be looking aggressively at what's taking place with that
initiative, seeing what the obstacles are, what the
opportunities are, and whether this is something that can be
replicated throughout other parts of China. If it's not
working, how do we revise it?
Another priority for both our countries would be capacity-
building for the enforcement of energy-efficient building
codes, as well as the deployment of new building materials.
Half of all new building space in the world is going up in
China. We are missing an enormous opportunity right now.
Currently China is at about a
5-percent compliance rate with their own energy building
efficiency codes.
Ken also mentioned energy-efficient appliances. This may
sound insignificant, but if you imagine about 800 million more
people using air-conditioners and dishwashers and refrigerators
and televisions, you begin to get the picture that this is
going to be quite a significant source of new energy use within
the country. I recently spoke with a major retailer in China
who told me that energy-efficient appliances make up only 1
percent of their appliance sales in China. There's a lot of
work to be done in terms of promoting an Energy STAR rating
system within China, and educating the Chinese consumer about
such standards.
Last on this point, there's a lot of discussion about
technology transfer, joint R&D, and making clean-coal
technologies in China commercially viable. These are all very
important, and I think there are a lot of already very
interesting partnerships emerging.
Before I came to provide this testimony, I spoke with a
friend of mine, Patrick Jenevein, who heads a wind power
company based in Texas and has a joint venture in China. The
company makes the blades for wind turbines, and it just
received $300 million in financing from the parent company of
his Chinese joint-venture partner to develop wind farms here in
the United States. Forty percent of the components will be made
here and 60 percent of the components will be made in China.
This is the kind of partnership and development that we want to
see happen, and we need to think through how to do that on a
larger scale.
Still, I think it's important to remember that technology
doesn't matter unless the political and economic systems are
there to support it. When I speak with United States companies,
what they talk about in their dealings with China is contract
sanctity, enforcement, and certainty of regulation. That all
takes us back to governance and capacity-building.
Finally, I mentioned that the partnership ought to address
the profound changes in China's role abroad. Something not very
many people have been thinking about is how China's drive for
resources--timber commodities, food crops, oil, and gas--has
brought tens of thousands of Chinese companies to Africa, Latin
America, Southeast Asia, along with millions of Chinese
workers, with very little to no environmental supervision.
China is now the largest importer of timber in the world and
the largest importer of illegally logged timber in the world.
It is contributing to rampant deforestation in places as far
flung as Cambodia, Myanmar, Mozambique, Russia, and Indonesia.
Even as China is undertaking positive climate mitigation
efforts with its forest program within its own borders, it is
contributing to the opposite in many countries abroad.
Again, I think that as we think through a climate
partnership with China, it ought to be in the context of a
global sustainability program that would encourage China, the
United States, and developing countries to discuss the actions
of Chinese multinationals abroad.
The Chairman. Would you say it's contributing to the
opposite; is that just by virtue of demand?
Ms. Economy. It's contributing by chopping down all the
old-growth forests.
The Chairman. Right.
Ms. Economy. There are many areas in which the United
States and China can cooperate on global climate change. And
from my perspective, as my remarks have indicated, the most
important is building capacity and transparency, official
accountability, and the rule of law. I think these are the
essential elements of a Chinese system that's going to be able
to deliver not only on its promises for global climate change,
but also on issues like intellectual property rights, or as
Senator Kerry mentioned--and I think it's important to remember
today, on June 4--for the protection of individual rights and
freedoms.
Thank you.
[The prepared statement of Ms. Economy follows:]
Prepared Statement of Elizabeth Economy, C.V. Starr Senior Fellow and
Director for Asia Studies, Council on Foreign Relations, New York, NY
Chairman Kerry and distinguished members of the committee, I am
delighted to have the opportunity to discuss China's efforts to address
climate change and the prospects for United States-China cooperation on
this critical issue.
i. introduction
China's climate policy is driven by the belief, widely shared
within the government elite, that a lower carbon economy will be good
for economic modernization, that there is money to be made through the
development and sale of climate-related technologies, and that domestic
energy security depends in part on expanding the role of renewable
energy resources at home. When useful, China's leaders also link
climate change mitigation to domestic environmental concerns such as
air quality and flood prevention.
Many in China also appreciate the serious challenges the country
will face if the global climate is not stabilized: An estimated 37
percent decline in agricultural output of three of the country's four
major grains by 2050; rising sea levels that threaten hundreds of
millions along China's wealthy coastal region; and increasing
desertification that already plagues more than 20 percent of the
country. In interviews, farmers in rural China will often attribute
their poor land quality and growing water scarcity to climate change.
Nonetheless, few within China's elite discuss climate change with a
sense of urgency; the priorities remain continued rapid economic growth
and social stability. To the extent that these priorities coincide with
addressing climate change, China's leaders are enthusiastic about
moving forward to address this global challenge.
Within these parameters, the range of initiatives that China has
undertaken to mitigate its contribution to global climate change is
vast. In fact, the number of actors in China now engaged in climate-
related activities has exploded over the past several years. Beijing
issues top-down targets for energy efficiency and provides subsidies
for research and development on climate-related technologies, while
local officials in China become climate entrepreneurs, actively seeking
partnerships with cities abroad or bidding for their cities or
provinces to become experimental low-carbon zones. Some of China's best
known companies, such as Haier, Lenovo and Baoshan Iron and Steel have
also begun to publicize their efforts to reduce their carbon footprint.
One voice still largely missing in China's climate discussions,
however, is that of Chinese environmental NGOs, who, with a few
exceptions, remain focused exclusively on domestic environmental
concerns.
ii. the landscape of china's climate initiatives \1\
Many of China's Greenhouse Gas (GHG) reduction efforts have been
highly publicized and are well-known. These efforts include: Reducing
energy intensity (energy consumption per unit of GDP) by 20 percent
during 2006-2010; increasing the role of renewable energy within the
primary energy mix to 10 percent by 2010 and 15 percent by 2020; a top
1,000 program to improve the energy efficiency of the top 1,000 energy
consuming enterprises in nine sectors (iron and steel, nonferrous
metal, chemicals, petroleum/petrochemicals, construction material,
textiles, paper, coal mining and power generation); a fuel consumption
tax on gasoline of 1 rmb per litre; \2\ replacing and adding to the
country's stock of coal-fired powerplants with more efficient models;
and a massive afforestation program that has raised the level of forest
coverage in the country from approximately 12 percent in 1998 to 18
percent in 2009.
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\1\ The number of climate-related initiatives underway in China--as
a result of central and local government, as well as international
effort--is far too great to detail. This represents a sampling of some
of the broadest and most highly publicized of China's GHG reduction
efforts.
\2\ Testimony of Barbara A. Finamore before the select committee on
Energy Independence and Global Warming, United States House of
Representatives (March 4, 2009).
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New targets and policy initiatives are also announced with striking
frequency. For example, the government has discussed more than tripling
its wind-power generating capacity to 100 GW by 2020 from its previous
target of 30GW; floated a proposal for a 40-percent Renewable
Electricity Standard by 2050; pushed forward new rules on compulsory
green procurement for local governments; and raised the possibility of
a carbon tax and a carbon trading regime at some undisclosed time in
the future.
China is also actively investing in new technologies that will help
slow the rate of growth of the country's GHG contribution. It has
announced a US$1.5 billion research subsidy for automakers to improve
their electric vehicle technology. (China's leaders have called for
500,000 ``new energy'' vehicles, such as hybrids and electric vehicles,
to be produced this year. Shenzhen is reportedly already establishing
twenty 220-volt charging pillars in office and residential areas.
According to one international consulting firm, Frost and Sullivan, it
will take a minimum of 10 years for China to transition to electric
vehicles.) State-owned power developer China Huaneng Group has
announced that it will pursue the development of technologies to
capture and sequester carbon (CCS) with the assistance of the ADB and
the Chinese Government.\3\ Shenhua Group is also pursuing CCS
technology in conjunction with its planned coal-to-liquid fuels plant
in Inner Mongolia. Moreover, powerplant efficiency technology may soon
also make its way from China to the United States. In April 2009, Xi'an
Thermal Power Research Institute, a subsidiary of Huaneng, signed a
preliminary agreement to supply Houston-based Future Fuels with a two-
stage pulverized coal pressure gasification technology for an IGCC
plant to be built in Schuylkill, PA, in 2010.
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\3\ ``Green Hops: New Renewable Energy Targets, More Carbon Tax
Chatter, Singapore-Nanjing Eco-city Announced,'' Green Leap Forward
blog (May 8, 2009). http://greenleapforward.com/2009/05/08/green-hops-
new-renewable-energy-targets.
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China has also become the test bed for the rest of the world's GHG
reduction efforts, technology development and transfer, and capacity-
building. Forty-two percent of the world's Clean Development Mechanism
projects under the auspices of the Kyoto framework are in China. These
projects have helped China expand its wind power capacity, develop
coalbed methane capture projects, and provided a profit of several
billion dollars for the Chinese Government. (The windfall is slated for
a green technology fund.) The international community is also actively
pursuing ecocity or province partnerships (e.g., the European Union
with Jilin, Chongqing and Guangdong, Singapore with Tianjin and
California with Jiangsu). While these partnerships are not yet well
defined, they all will likely embrace both capacity-building for the
Chinese Government as well as the development of industries that will
serve a low carbon economy (e.g., producing wind turbines). Certainly,
the private sector, including multinationals and international NGOs are
all deeply engaged in climate-related activities in China: BP has a
clean energy research center at Qinghua University in Beijing, Wal-Mart
has launched a campaign to reduce significantly the energy used by its
stores and factories; the Natural Resources Defense Council is working
to promote energy-efficient buildings and demand-side management; and
the Environmental Defense Fund has a pilot project to help reduce GHG
emissions from the agricultural sector.
iii. the challenges ahead
Despite the commitment of China's leaders and the rest of the world
to move the country aggressively to a low carbon economy, however, the
rate and nature of China's economic growth suggest that without
significant new investment and international assistance, the country
will fall well short of what it needs to do to help stabilize the
global climate.\4\ Part of the challenge is related simply to the
magnitude of the task at hand. Under a business as usual scenario, the
International Energy Agency estimates that China's energy-related CO2
emissions will be twice that of the United States by 2030. If China
succeeds in meeting its target of reducing its energy intensity by 20
percent by 2010, it will avoid emitting approximately 1.5 billion tons
of CO2, the greatest contribution to GHG reduction currently underway
in the world.\5\ Yet despite this effort, China is on track to
overwhelm the global effort to address climate change. In 2006, China
added 90 GW of coal-fired power capacity--enough to emit over 500
million tons of CO2 per year for 40 years \6\; by comparison, the
European Union's entire Kyoto reduction commitment is 300 million tons
of CO2.\7\
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\4\ The Tyndall center, for example, argues that China's energy
portfolio will need to be 60 percent renewable by 2050 to stabilize the
climate. The McKinsey report's baseline scenario for China's GHG
emissions, in which China doubles its carbon emissions from 2005 by
2030, necessitates that China has 100GW of wind generating capacity by
2030. In its abatement scenario, however, in which China limits the
growth of its carbon emissions to 10 percent above 2005 levels by 2030,
McKinsey suggests that China would need 300GW of wind generating
capacity.
\5\ ``Coal and Climate Change Facts,'' Pew Center on Global Climate
Change. http://www.pewclimate.org/global-warming-basics/coalfacts.cfm.
\6\ Statement of Stephen Chu, Director, Lawrence Berkeley National
Laboratory, before the U.S. Senate Committee on Finance (March 27,
2007).
\7\ ``Fact Sheet: China Emerging as New Leader in Clean Energy
Policies,'' The China Sustainable Energy Program. http://
www.efchina.org/FNewsroom.do?act=detail&newsTypeld=1&id=107.
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Beyond the sheer magnitude of the problem at hand, China's GHG
reduction efforts are greatly complicated by emerging trends in the
pattern of economic development, competing priorities within China's
political system, and weak capacity for monitoring and enforcement. An
effective climate program in China will need to address these issues.
Emerging Trends in Economic Development
Urbanization--China plans to urbanize 400 million people
during 2000-2030. This will translate into significant growth
in energy demand: Urban residents use 3.5 times more energy
than rural Chinese. China already is building two billion
square meters of floor space each year, half the world's total.
Lighting, heating and appliance use will all add to China's
energy bill: Despite efforts by retailers and by the Chinese
Government to promote the use of energy efficient appliances,
one major retail chain reports that only 1-2 percent of the
appliances they have sold over the past quarter qualify as
energy efficient.
Transportation--China's transportation sector is exploding.
Its fuel economy standards (36mpg) are significantly higher
than those in the United States (30mpg in 2010), but passenger
car sales in 2008 were just shy of those in the United States:
6.76 million compared to 6.79 million; and this year China is
on track to surpass the United States in car sales.\8\ In April
alone, China sold 1.15 million cars. By 2020-25, it is
anticipated that China will have more cars on its roads than
the United States.
---------------------------------------------------------------------------
\8\ ``US LDV Sales Down 35.5% in December, 18% for the Year,''
Green Car Congress (January 5, 2009). http://www.greencarcongress.com/
2009/02/us-ldv-sales-fa.html.&
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Increasing population--After decades of an aging and largely
stable population, China may well experience some significant
population growth. Children of one-child families who marry
each other are permitted to have two children. Particularly in
urban areas, where family planning has been strictly enforced,
virtually all children 27 years old and younger are only
children. The potential for a population boomlet should be
incorporated into future climate scenarios.
China Going Global--China's going out strategy has
encouraged thousands of Chinese enterprises to exploit natural
resources in Africa, Latin America, and Southeast Asia, often
with devastating environmental consequences for the local
environments. China's global logging practices are particularly
relevant to climate change. Although China has a significant
afforestation program at home, its companies often log
indiscriminately abroad. China has become the largest importer
of timber in the world, half of which is estimated to be
illegally logged. A global sustainable forestry program should
be part of China's portfolio of climate activities.
In Competing Priorities, the Economy Wins
China's ``Green'' Fiscal Stimulus Package--China has
received significant international acclaim for its ``green''
fiscal stimulus package. Both HSBC and the World Resources
Institute claimed that slightly under 40 percent of the package
is green (included in this was $98.65 billion for railroad
construction; $70 billion for electric grid construction;
$51.15 billion for water and wastewater treatment plants; and
$1.5 billion for low-carbon vehicles). Yet as the Shanghai-
based lawyer, Charles McElwee, has pointed out, ``It is
admirable that China is building more railroads and more grid
infrastructure, but to suggest that with these investments
China is engaging in a major shift of the focus of its economy
to a sustainable one is far fetched. China is building more
railroads to move more products. There is nothing in China's
stimulus package that will prevent it from more than doubling
its 2005 carbon emissions by 2030.'' \9\ According to Vice-
Minister Li Ganjie of China's Ministry of Environmental
Protection, during the first quarter of 2009, only 10 percent
of the 230 billion yuan (US$30 billion) of central government
funds for the stimulus package targeted environmental
protection, energy efficiency or emissions control.\10\
---------------------------------------------------------------------------
\9\ ``Fast & Loose,'' China Environmental Law blog (April 21,
2009). http://www.china
environmentallaw.com/2009/04/21/fast-loose/.
\10\ Jing Fu, ``Local Governments May Ignore Standards,'' China
Daily (April 27, 2009).
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Economic Growth vs. Environmental Protection--In the midst
of the global economic slowdown, Chinese environment officials
have expressed serious concern as to whether provincial and
local governments are ignoring environmental standards. In the
rush to launch investment projects, over 150 large-scale
infrastructure projects have been subjected to a ``green
passage'' process, which is a highly abbreviated environmental
impact assessment process. In addition, provincial and local
governments in a number of regions have ignored the
accountability system that links government officials
performance to energy saving and emissions control to their
careers.\11\
---------------------------------------------------------------------------
\11\ Jing Fu, op. cit.
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The Capacity Challenge
Compliance--Compliance with environmental laws and
regulations is a longstanding challenge in China. China's top
environmental lawyer, Wang Canfa, estimates that only 10
percent of China's environmental regulations and laws are
actually implemented. In 2006, for example, compliance with
building energy efficiency standards was roughly 5 percent. A
recent MIT study that surveyed 85 coal-fired powerplants
discovered that although many plants installed state-of-the-art
desulfurization control technology, they did not appear to be
operating the equipment.\12\ Moreover, when companies are
penalized for failing to comply with environmental laws or
regulations, the central government reports that it collects
only 30 percent of the fees. As the United States considers how
best to assist China in moving aggressively to combat climate
change, building in effective monitoring and compliance
incentives and constraints will be essential.
---------------------------------------------------------------------------
\12\ Steinfeld, E.S., et al., ``Greener Plants, Grayer Skies?'' A
report from the front lines of China's Energy Sector, Energy Policy
(2009).
---------------------------------------------------------------------------
Weak Overall Monitoring Capacity--Although China has
administrative measures for pollution monitoring in place, the
guidelines provide no specific rules for monitoring or
sanctions for failing to do so. According to Renmin University
Professor Song Guojian, there are no documents detailing how
many times per year a factory must be monitored. As a result,
there is no assurance that a Chinese facility will remain in
compliance on a sustained basis. Factories might well use their
pollution control equipment or monitor their emissions only
when there are inspectors present.\13\
---------------------------------------------------------------------------
\13\ ``An Assessment of Environmental Regulation of the Steel
Industry in China,'' Alliance for American Manufacturing (March 2009),
p. 32-33.
---------------------------------------------------------------------------
Underdeveloped Climate Modeling Capacity--Despite over 15
years of experience in climate modeling in China, significant
barriers to best modeling practices remain. According to one
Chinese analyst, climate modeling is controlled by a few
analysts who do not necessarily have the most expertise. The
sensitivity of greenhouse gas emission-related issues also has
undermined the integrity of some climate research projects. In
October 2008, for example, the Chinese Academy of Sciences
released a report projecting that China's national GHG
emissions may more than double within the next two decades, but
they failed to report the current level of emissions. There are
also concerns that the global financial crisis will undermine
funding for climate modeling in China from the West, which has
been a significant source of support in the past.\14\
---------------------------------------------------------------------------
\14\ Jianjun Tu, ``Future Prospects of China's Policy on Climate
Change,'' China Brief, Vol. 9, Iss. 1, (January 12, 2009).
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iv. how can the united states accelerate the positive trends in china?
Critical to the success of the international community in meeting
the challenge of global climate change is helping China forge a new
developmental path. As one European analyst has noted, the United
States and the rest of the world need China to do more than any other
country in terms of deviating from business as usual.
This will not be cheap. McKinsey & Company estimates that to
realize its abatement scenario for China (a 10-percent increase in
carbon emissions in 2030 over 2005 levels) will require that China
spend on average between US$195-$260 billion annually in incremental
capital investment over the next 20 years. Of these investments,
McKinsey estimates that one-third will have positive economic returns,
one-third will have a slight-to-moderate economic cost, and one-third
of the technologies will have a substantial economic cost associated
with them.\15\
---------------------------------------------------------------------------
\15\ McKinsey & Company, ``China's Green Revolution'' (February
2009), p. 10.
---------------------------------------------------------------------------
It will also not be easy. United States-China cooperation on
climate change will not be a panacea for all the other difficulties in
the relationship, no matter how much we would like it to be so. Climate
change is already laden with very challenging political and economic
dynamics both within China and between China and the United States.
Moreover, unlike China's WTO accession, which raised many similar
issues of sovereignty, verification, and compliance, intellectual
property rights, and China's relative economic status, there is no one
in China that has yet stepped up to seize global climate change as his/
her issue and to shepherd it through the bureaucracy in the manner of
former Chinese Premier Zhu Rongji.
With that said, it is nonetheless imperative for the United States
to step up to the plate. A number of organizations and experts have
already weighed in with specific recommendations for high profile
cooperative projects such as CCS joint research and development, smart
grid technology and deployment, assisting in China's monitoring
capacity, promoting building energy efficiency, etc.\16\ All of these
are critically important avenues for cooperation.
---------------------------------------------------------------------------
\16\ These include ``Common Challenge, Collaborative Response: A
Roadmap for US-China Cooperation on Energy and Climate Change,'' Asia
Society and Pew Center on Global Climate Change (January 2009);
``Overcoming Obstacles to U.S.-China Cooperation on Climate Change,''
Brookings Institution (January 2009); and ``Strengthening US-China
Climate Change and Energy Engagement: Recommendations for Leaders and
Policymakers in the US and China,'' Natural Resources Defense Council
(February 2009).
---------------------------------------------------------------------------
Equally important, however, is thinking through the political
context of how best the United States can affect China's climate change
path.
Lead by Example--Although China will find its own path to a
low carbon economy, the United States has the opportunity to
demonstrate how it can be done, whether through best urban
planning practices, the rapid development and spread of energy
efficient building codes and new building materials, the
development of alternative fuel vehicles and/or the rapid
deployment of renewable energy and smart grid technology. The
United States will have no credibility in pushing China to
forge a new path if we, ourselves, are not already well down
that road. Moreover, we will lose a critical opportunity for
our own environmental and economic future if we do not seize
this moment to develop our own clean energy economy.
Help Transform China's Urbanization Process--While most
international attention has been focused on the role of heavy
industry and the power generation sector in China's
contribution to climate change, the urbanization of 400 million
Chinese by 2030 will have a profound impact on China's energy
use patterns. Energy efficient buildings (including new
building materials) and appliances, electric cars, renewable,
smart urban planning should be top priorities for United
States-China collaboration. These partnerships, which may
develop into ecocity or province/state partnerships should
target first off China's national environmental model cities
(about 10 percent of China's 660 cities) because the leaders
and businesses in these cities have a proven track record of
commitment to environmental protection in their cities.
Similarly, companies that are members of China's Green
Companies Program have begun to develop a track record of
running their businesses in more efficient and environmentally
sound ways. These should be the first candidates for joint
projects.
Listen to the Chinese--China knows what it needs and what it
can deliver. Do the Chinese place a priority on assistance with
their monitoring capacity for example? Understanding the
priority issues for China will prevent the United States from
squandering valuable financial and human capital trying to push
against a closed door. For example, in a previous United
States-China Strategic Economic Dialogue, the Chinese have
stressed the importance of water scarcity, watershed
management, etc. Helping China conserve and make more efficient
use of its water is a critical aspect of climate adaptation,
and will affect China's future agricultural opportunities as
well as address growing concerns throughout South and Central
Asia over China's river diversion efforts in the Qinghai
Tibetan plateau as the glaciers in the region melt.
Buildup from the Strategic Economic Dialogue--The United
States should avoid the temptation to think it must create an
entirely new structure for cooperation with the Chinese on
energy and environment issues. The SED has outlined many
important climate-related issues and initiated some
collaborative public/private projects, such as a partnership on
electric cars and grid management. Cooperating with China is
difficult and time consuming. The United States should take
advantage of the foundation that has already been established.
Conduct an Off-the-Record ``lessons-learned and where-to-
from-here'' summit with U.S. NGOs and Businesses--Many NGOs and
multinationals have well over a decade of experience working
with China on environmental and energy issues related to
climate change. Their experience should be tapped to understand
what works, what doesn't and why. They will also be the United
States Government's emissaries for much of the climate
partnership work that is eventually established with China.
Coordinate with Japan and the European Union--Japan and the
European Union already have extensive cooperation with China on
climate issues either underway or in development. The United
States should not waste its time and energy duplicating or
undermining others' efforts. We should develop at least loosely
coordinated strategy to help move China much more aggressively
to a low carbon economy. This coordination should extend to
developing frameworks of assistance for other large developing
country emitters such as India and Brazil.
The Chairman. Thank you very much, Ms. Economy.
Mr. Chandler.
STATEMENT OF WILLIAM CHANDLER, SENIOR ASSOCIATE AND DIRECTOR OF
THE ENERGY AND CLIMATE PROGRAM, CARNEGIE ENDOWMENT FOR
INTERNATIONAL PEACE, WASHINGTON, DC
Mr. Chandler. Thank you, Mr. Chairman, Senator Lugar. I
very much appreciate being included in this important session.
I'm happy to say I agree with everything you both said in
your opening statements. And, Senator Kerry, I agree with you
that, as your visit demonstrated last week, we have, now, a
historic opportunity to make a climate deal with China that
will make a big difference. If we succeed, we can protect the
global environment. If we fail, we will suffer grave damage to
our coastal cities, our energy, food, and water supplies, and
the majesty of our parks and wildlands. If we succeed, we'll
also create American jobs and American businesses.
Why do we have this historic opportunity now? Three
important reasons: Newly energized leadership in the United
States; and second, it's clear that China recognizes the
importance, as you said, of responding to the threat of climate
change; and, third, because of efforts on both sides to discuss
the important elements of how we can cooperate, I think we are
beginning to make some progress.
Over the past couple of years, American and Chinese
experts, with the support of this committee, I'm happy to say--
and I want to thank you for the staff time and the support the
committee has provided to these Track II discussions--they have
helped get past what Senator Lugar described as an important
problem of the public presentation of China's position, versus
what is said in private. So, in moving beyond the camera lights
and trying to get out of the glare of the lights, we hoped we
could arrive at a consensus on the kinds of things that would
make a difference.
The Chinese delegation reciprocated our expressions of
interest with enthusiasm and placed Minister Xie Zhenhua at the
head of these discussions, and he, as China's chief global
climate negotiator, made an important contribution.
The three areas on which we felt we came away with
consensus, in which we should begin our cooperation, included
the following things: First, rapid deployment of energy
efficiency technologies to achieve quick wins in reducing
greenhouse gas emissions. And in that area, building capacity--
human capacity, particularly at the provincial level, as Liz
said, is a top priority.
Second, joint research and development, both on low carbon
automobiles, transportation, and coal-fired powerplants. A
mechanism something like what we did in Russia at the end of
the cold war with the Civilian Research and Development
Foundation, where we have joint funding with both United States
and Chinese support, might be a good mechanism to pursue those
kinds of R&D approaches.
And third, collaboration--again, to the extent that we can,
in frank and honest discussions--to reach a global deal in
which both the United States and China can participate.
I think they--the Chinese side clearly wants to work with
the United States in these areas. And if they do, we can
implement scenarios such as those produced by the Energy
Research Institute, which is the leading think tank in China,
as a part of the National Development and Reform Commission, in
which they suggest that what China can do--on a different
schedule from ourselves, but on an important and compressed
schedule--reducing growth in emissions over the next decade or
so, to half the rate of growth of the economy, and then from
that level, making an absolute reduction in emissions by the
middle of the century. If we can get on such a trajectory, we
have a serious chance of achieving an atmospheric concentration
below 500 parts per million, which many of us think is really
crucial.
Cooperation in science and technology is going to be vital
for China, but it's not enough. China needs the benefit of our
experience in using market mechanisms to achieve environmental
goals. And we would urge this committee and the Chinese
Government to consider the following policy changes that might
make a big difference: No. 1, encouraging investment in more
efficient industry and buildings; two, providing tax holidays
and easing foreign exchange and foreign investment restrictions
on clean energy companies and services; and three, making it
easier for banks and the financial system in China to do risk-
based lending for clean energy projects. These are things we
sometimes take for granted, but they don't work very well, and
they contribute to barriers that frustrate American clean
energy companies trying to do business in China.
Our own top priority should be--again, in an asymmetric
way, but an important thing to show to China that we are
serious--is to enact cap-and-trade legislation to control our
own greenhouse gases. And the draft legislation in the House of
Representatives has already made a strong impression on China
that we are serious.
As Ken and Liz both said, I agree we should recognize the
strenuous efforts China has already made. It frustrates the
Chinese to think that many people outside the country don't get
how hard it has been for them to take serious efforts to close
down, not just powerplants, but many old, inefficient
industries. I go to China once a month, and I see it every time
I go. There are many old factories closed down, and new
standards imposed on the new modern systems.
So, we can ask China to take further action, not
necessarily to cap their emissions in the short term, but to
set ambitious emissions targets with verifiable and enforceable
measures to achieve them.
The Chinese are practical. If we make it in their interest
to work with us, they will do so. Just to reiterate, I think
it's important that, first, we show leadership, and if we do,
then the rhetoric of the G77 countries--that it's all our fault
and all our responsibility--loses its power.
The Chinese Government accepts the science and threat of
climate change, and I believe they will work with us.
Thank you.
[The prepared statement of Mr. Chandler follows:]
Prepared Statement of William Chandler, Director, Energy and Climate,
Carnegie Endowment for International Peace, President, Transition
Energy, Washington, DC
The United States has a historic opportunity to forge a climate
partnership with China as a result of the convergence of new climate
leadership in the United States, China's recognition of the serious
threat that climate change represents for its future, and the hard work
of specialists and leaders in both countries to make climate change
cooperation a reality.
Together, China and the United States produce 40 percent of global
greenhouse gas emissions. Their actions to curb or expand energy
consumption will determine whether efforts to stop climate change
succeed or fail. If these two nations act to curb emissions, the rest
of the world can more easily coalesce on a global plan. If either fails
to act, mitigation or adaptation strategies adopted by the rest of the
world will fall far short of averting disaster on large parts of the
Earth.
These two nations, until recently, have been locked in what energy
analyst Joe Rohm aptly called ``a mutual suicide pact.'' Neither China
nor the United States has made binding commitments to reduce emissions.
American leaders point to emissions growth in China and demand that
Chinese leaders take responsibility for climate change. Chinese leaders
counter that American greenhouse gas emissions are five times their own
on a per capita basis and say, ``You created this problem, you do
something about it.'' Mainstream Americans fear that China is gobbling
up oil and driving up the price of gasoline. Chinese fear that the
Americans control Middle East oil and shipping lanes to China.
United States-China cooperation on climate change can help both
countries play a role in global change befitting global leaders.
Leadership can stem from central governments, states, provinces,
business, and scientific institutions. Effective leadership, however,
requires understanding both Chinese and American energy realities, and
grasping the need for immediate action to reduce carbon emissions. This
approach will be intrinsically valuable to each country, and can help
facilitate a post-Kyoto global climate treaty.
Failure to act will expose these two nations to sanctions from a
global community increasingly alarmed by the speed of climate change.
That the European Union recently considered sanctions on trading
partners lacking greenhouse gas emissions policies spotlights the
geoeconomic risk.
For the past 2 years, the Carnegie Endowment for International
Peace has sponsored a United States-China Climate Track II Dialogue to
provide leaders from each country the opportunity to speak frankly and
discuss the types of collaboration likely to produce results. Over the
course of this dialogue, it became clear that Chinese experts believe
that China could cut its current emissions growth rate by half through
2020, and from that level reduce absolute emissions by one-third by
2050. This scenario would put within reach a global goal of stabilizing
atmospheric concentration of carbon dioxide below 500 ppm. Such a
commitment would represent a profound shift in China's position, and
could be pivotal in reducing the worst risks of climate change.
Given China's new recognition of the threat posed by climate change
and of the opportunities to avert that threat, participants in the
dialogue identified two key outcomes for bilateral cooperation:
1. Consensus on realistic carbon emissions reduction targets
and timetables for each country, and
2. Mutual understanding of the strategies for implementing
those targets and timetables that are most likely to overcome
political hurdles in China and the United States.
With these goals in mind, participants also identified three
priorities for action:
1. Building human capacity to accelerate market deployment of
technologies, including evaluating policies such as the
creation of low carbon economic development zones and creating
incentives for clean energy investments;
2. Assessing priorities for joint United States-China
research and development cooperation, as well as considering a
framework for cooperation; and
3. Discussing elements of a global climate deal in which both
the United States and China may participate.
Dialogue participants also agreed that successful cooperation will
require contributions from many types of United States and Chinese
institutions. These include:
1. State and provincial leaders;
2. Nongovernmental environmental and business associations;
and
3. Scientific and technical experts.
The Carnegie Endowment and the leading Chinese environmental
nongovernmental organization, the Global Environmental Institute, are
working together to support these objectives, which we hope are now
becoming mainstream thinking in both countries. Our initial analyses
have focused on developing a technology deployment protocol that will
eliminate specific policies favoring energy consumption over energy
efficiency; support the development of market-based tar and regulatory
policies; and facilitate finance for energy efficiency. We are
currently concentrating on Guangdong province, a major energy consumer
and home to 110 million people, by providing organizational, planning,
and financial expertise to train leaders in a learning-by-doing model.
Further, we aim to accelerate market-based deployment of cost-
effective, proven energy-efficiency technologies. The central
government in China requires provincial leaders to cut ``energy
intensity'' by an average of 20 percent by 2010, relative to 2004. To
achieve this goal, China would have to be more successful in energy
efficiency policy than any nation in history.
Yet the priorities of local leaders often diverge sharply from
those of national leaders. National leaders are more concerned with
security, stability, macroeconomic balances, and equity than local
leaders. Local leaders are far more concerned with growth, meeting
demand for services, and generating revenues to pay the cost of
operating their agencies. While clean energy development generates
national benefits that cannot be fully captured by a city or province,
the time and cost of promoting efficiency falls on local leaders. This
mismatch of expectation and benefit is a fundamental flaw in Chinese
sustainable energy policy, and undermines the effectiveness of
otherwise admirable policies.
Local authorities have the responsibility, but not the authority,
to implement energy efficiency policy. Moreover, responsibility for
action is dissipated across agencies and bureaus. The local economic
and trade bureaus and the local development and reform commissions
jointly regulate energy-intensive industry. These agencies are often
uncoordinated and implement conflicting policies. Approval authority
for projects and regulations is split between the economic and trade
bureau and the local development and reform commission. For example,
the economic agency may seek to shut down old energy-intensive industry
and replace it with more modern and efficient firms. The development
and reform commissions, however, are intent on not giving business
licenses to new energy-using firms.
The expertise provincial leaders need to acquire is a combination
of specialized legal, economic, technical, and financial skills. These
skills are used elsewhere--in American regions like the Northeast and
Northwest or the State of California, for example--to choose priority
technical measures and design behavioral incentives necessary to
achieve energy efficiency goals. To further the goals of the dialogue,
we are facilitating peer-to-peer cooperation at the state and
provincial levels. We are encouraging cooperation on:
Rationalizing and coordinating regulation of industrial
energy use.
Providing value added tax (VAT) and income tax holidays or
exemptions for clean energy companies and services.
Making it worthwhile for banks to do risk-based clean energy
lending.
Replicating the successful experience of the International
Finance Corporation (IFC) in providing loan guarantees for
energy-efficiency projects in China.
Reducing the paperwork necessary to make clean energy
investments in China.
Strikingly, given the urgency of climate action, resources are
meager within both China and the United States for energy efficiency
and power sector decarbonization. Technology deployment gets little
support within either nation. Official funding for clean energy
cooperation between the countries amounts to only about 1 million U.S.
dollars per year. The private U.S. Energy Foundation provides 20 times
more grant money than this, but even this level of funding is far below
the need.
United States-China collaboration should not be envisaged as a
threat to the climate leadership of any nation or to global
cooperation. It should not challenge existing or planned emissions cap-
and-trade systems. Rather, it would be, and should be, considered an
act of mutual self-preservation, helping both the United States and
China to avert climate disaster and the eventual sanctions of other
countries if they do not act, and laying the basis for successful
global action.
[GRAPHIC(S)] [NOT AVAILABLE IN TIFF FORMAT]
The Chairman. Thank you. Thank you, all three of you.
Let me try to establish, here, sort of a baseline, if you
will. One of the things that I run into a lot--and it's
understandable--is people sort of viscerally react and say,
``What do you mean China's a developing country?'' And they
assert that notion because most people obviously don't see the
800 million people who are living on $2 a day or less, who are
yet to come into the urban society. They see only the Beijing,
Shanghai, Quanjiao, so forth, that are these unbelievably
energized, teeming manufacturing centers, and they see ``Made
in China'' on all the products coming in here, and there's an
automatic sense, ``Well, they may not be fully developed, but
they're not like other developing countries, either.''
So, what do we do here? Create a different category, try to
reach an understanding that, indeed, they're not yet a fully
developed industrialized country, but, on the other hand, nor
are they the undeveloped country that we contemplated when we
designated Annex 1 and Non-Annex 1 countries during the climate
treaty negotiations in the Kyoto? It's something new and
different now, and they need to understand that. Is that fair?
Mr. Chandler. I think that's fair. I think the thing that
Chinese leaders wake up worrying about at night is instability
in their own country, and that is generated, as much as
anything, by disparities in income. So, providing China with a
way to achieve its economic ambitions and to grow, while, at
the same time, separately achieving emissions reduction goals
through identifiable and enforceable measures, is going to be
key. Different schedule, different approach of measures and
policies, but enforceable ones.
The Chairman. Well, I understand that. But, the key is also
for China. One of the things that I emphasize every time I get
into that discussion--and we've done this for a long time now--
is, this whole notion of tying them to a standard as an effort
to try to restrain growth in China. And I think it is finally
dawning on people that, no, we're not out to restrain growth;
we want China to grow. We'll all be better off. China will
grow. We want it to grow clean, just as we need to grow clean.
I mean, what we're really talking about here is the
transformation to a sustainable economy.
And so, when you talk about the building codes, Ms.
Economy, buildings are roughly 40 percent of global greenhouse
gas emissions. And so, in order to reduce greenhouse gas
emissions, you don't just look at the transportation sector or
the manufacturing sector, you have to look at buildings, also.
And the question is, How do you get them in this process,
in these next days, to buy in more to this--to bending over
backward to embrace the new components, new materials--new
building materials, new building codes, new standards by which
you can very dramatically reduce emissions, and, in fact, make
it pay for itself? This is not out-of-pocket money; it pays for
itself to do these things. How do we achieve that?
Mr. Chandler. Well, it's not very hard to convince them
that it's in their best interest to make those changes. I do
think they need assistance with capacity-building at the
provincial level in writing the kinds of codes and incentive
policies that the private-sector needs to put those
technologies into place.
I think there's a disconnect between the provincial level
and the central government--the central government makes orders
and asks the provincial level to achieve the goals to meet
those targets. Provincial leaders don't have the tools to
achieve those goals, the ones that they need. They don't have
authority over changing taxes. They can't implement standards
on their own, organizing finance for the private sector to make
investments. Working with the central government to help them
close that gap with the provincial leaders, who are under the
gun to make improvements, will help the provincial leaders
achieve their own goals.
The Chairman. Yes, Mr. Lieberthal.
Mr. Lieberthal. If I can add a couple of comments to that.
One, I think that it's obviously important to get the
provincial leaders more positively engaged in this, but I think
you have to keep in mind that China has five levels of
governance: Center, province, city, county, and township. Each
of those levels is important. And for purposes of building
codes, I think the most critical level is actually the
municipal level. There are over 650 municipalities in China,
and a lot of the building takes place within that jurisdiction.
One of the biggest problems at municipal level is simply
the lack of human capital to understand, for example, energy
audits. China has 220 local energy centers around the country.
They have almost no one at any of those centers who knows how
to do an energy audit. That's a wonderful area for us to get
engaged in and train some of the auditors in what we know about
doing energy audits. It can have an enormous impact.
They have the codes--but sometimes the incentives are
wrong. I very much agree with Bill on that. But, beyond that,
they just simply lack the technical human capability at the
critical nodes in their system. And that's where I think we can
come in--in very positive and not very expensive fashion--to
work with them to try to realize some of these gains and help
them to acquire the tools to do so.
Finally, going back to your original question, I think it
is very important for us to get out of this kind of
categorization of treating the developing countries as a block.
When it comes to carbon emissions, they are anything but, and
we need to individualize that much more.
One of the proposals in China is to think in terms of the
human development index and what percentage of the population
in each of the major countries is at what level on the human
development index, and therefore, how should you sculpt policy
or sculpt obligations around this, country by country. I say
that simply to say there is creative thinking going on
regarding this, and we ought to try to join that and encourage
it.
The Chairman. So, as the team goes over there to negotiate,
next week--what would you want to see them achieve? What are
the priorities that you'd lay out, in terms of that negotiating
process?
Mr. Lieberthal. Sir, I'd answer that on two levels. First,
we have a kind of two-track negotiation going on with the
Chinese. One is to develop a United States-China clean energy
partnership. This would be a bilateral agreement. The other is
to try to get more forward-looking stance at Copenhagen. And if
we can do the clean energy partnership, I think that will add a
lot of momentum going into Copenhagen. But, those are two
different negotiating contexts. When you raise Copenhagen with
the Chinese, the Foreign Ministry gets deeply engaged, and G77
and related considerations move to a prominent position on the
agenda.
So, I would first of all encourage our team to keep those
two tracks distinct, because I think we can make much more
rapid and effective progress in the coming months if we focus
on the clean energy partnership. And then, hopefully, when the
President goes to China toward the end of this year, before
Copenhagen, we'll be able to announce a clean energy
partnership and have the two Presidents address Copenhagen in
that context. I think that's simply the more effective
negotiating track.
Second, on substance, I think the Chinese really are now
looking for, ``Let's do a partnership, but let's not just make
it rhetoric. We've had about 42 bilateral energy agreements
with the United States in the past. None of them has met the
goals of the agreements.'' So, they're asking, ``What will you
concretely be interested in committing to?'' And, to my mind,
the three big areas--there are obviously more priorities that
warrant attention, but the three big areas are coal--carbon
capture and sequestration for coal power generation--electric
vehicles, and energy efficiency in buildings. And I think if
you can do something serious in each of those three areas, you
are going to make a significant dent in the problem, and they
are interested in all three.
Mr. Chandler. Mr. Chairman, can I jump in and underline
what he just said?
In the past, in the 1990s, I sat across the table from
Chinese--our counterparts--trying to implement many of these
memorandums of understanding. Too often they end up just being
talking, talking, talking. If you try to do too many different
things without enough resources, then everyone gets frustrated.
That's why I think it's important to focus on the things that
really matter and take them seriously. Focus on those things
that the United States and China have to do together if we are
going to solve those problems.
The Chairman. Well, a key to solving this, under any
circumstance, and particularly to getting Copenhagen to come
together, is going to be the MRV--measurable, reportable,
verifiable. Ms. Economy, you've talked about the difficulty of
getting some of the accountability that you need here, and the
capacity for that. So, it would seem to me that one of the
urgent needs here that ought to be discussed over the course of
the next days is how we're going to work on that together so we
don't wind up, in November or September, sitting there saying,
``Well, gee, that sounds nice, but we're just not able to do
it,'' or we're sitting there saying, ``Thanks for saying that,
but we have no way of measuring what you've just said you're
going to do.'' We've got to now set up a structure to build the
capacity and have confidence that we can come in with something
that is truly measurable and verifiable. Now, how do we do
that?
Ms. Economy. As I mentioned, I think California is taking
the lead, at least in looking at this issue, and I think they
see this as a long-term process. I would imagine that the best
you're going to be able to offer within 1 month or 2 or 3
months is going to be the framework of agreement for moving
forward on MRV. Beijing has certain provinces in mind where
they want to have test cases. These may not be the most
progressive places, which means it's likely that we could be
knocking our heads against a closed door rather than an open
door. The situation changes from province to province and
municipality to municipality.
One of the suggestions that I often make is that, when we
look to cooperate with China--and I think this would be true
with MRV, as well--is that we look to the national model
environmental cities. These are cities where the local
leadership is already committed to doing much more, frankly,
than the vast majority of cities in the country in terms of
meeting their own domestic environmental laws and regulations.
About 10 percent of China's 660-odd cities meet these national
model environmental targets. I would suggest that we go to
those cities and begin with this process of MRV. I think these
cities are where we'll have an open door--or a relatively more
open door, because they're already more transparent, and
they're already looking to turn the corner, in terms of their
own environment. That would be my primary suggestion for how we
would move forward.
The Chairman. Senator Lugar.
Senator Lugar. Well, thank you, Mr. Chairman.
Mr. Chandler, you mentioned the 500-parts-per-million limit
in which many scientists feel that, if the world comes to that
with regard to CO2, there are catastrophic results. Now, the
question I ask this morning is one of how you, as thought
leaders, and we, in the political realm, can try to bring some
case to the American people of what the catastrophe is, or even
how the catastrophe is progressing. The reason I say this is,
that in the intelligentsia in the scientific community and the
think tanks, there's a given, that we're progressing toward
catastrophic results; therefore, as you inform us today,
there's no doubt in your minds that action plans are required,
and they are very difficult. We're discussing a very large part
of that problem of Chinese-American relations today.
But, now, very specifically, here in this country we have a
debate going on; the cap-and-trade legislation that you've
mentioned is now being discussed by the House of
Representatives and its various committees. Some of you may
have noted, as I did, an editorial in Monday's Washington Post
by economist Martin Feldstein, who cited the Congressional
Budget Office analysis that reducing U.S. carbon dioxide
emissions by 15 percent would cost the typical American
household $1,600 a year, immediately and proceeding. And he
asks--Americans should ask whether this tax of $1,600-plus per
family is justified by the very small resulting decline in
global CO2 since the CO2 production, he says, is now less than
25 percent, and its projected decline--as China and other
developing nations grow, a 15-percent decline in United States
CO2 would lower global CO2 output by less than 4 percent. And
the impact on global warming, therefore, he says, is
unnoticeable.
Now, he reflects a skepticism, not just among certain
economists, but I would say perhaps even a majority of my
constituents. And they see the $1,600 coming along, and they
see us discussing, theoretically, how the United States and
China and others might meet in Copenhagen. But, the case has
not been made demonstrably by the American people as to what
the problem is, why this is worth $1,600 a year, or more, as
the case may be, as we progress.
Now, just discuss broadly what kind of a public education
situation is conceivable in this particular timeframe, or
really, for that matter, for the next few years, so that there
is, in fact, a general feeling in the country that action
should be taken, and the debate then comes down to the specific
measures of meeting something that is really seen to be, by a
majority, a perceived need?
Does anybody have a thought--yes, Dr. Lieberthal.
Mr. Lieberthal. Thank you for raising that question,
Senator. We've discussed it before, and it is crucially
important.
I think that, first of all, we have to communicate to the
American public that they are already paying a high price for
carbon emissions, whether it is the reality that California now
has a fire season that extends 12 months a year, or the reality
that we have lost hundreds of square miles of forests in the
Northwest, or the reality of increasing storms and their damage
in the gulf coast, or the reality of prolonged drought in the
Southeast--you name it, we are already paying a high price.
The problem is that the price is not structured in a way
that there's any incentive to reduce carbon emissions. And so,
part of what we have to communicate to the American people is
not this kind of broad, ``polar bears are going to have a
tougher time,'' and ``100 years from now, we may be in
trouble'' type of message; it's got to be articulated, in part,
in terms of current pocketbook issues, with some reasonable
numbers attached.
Second, I believe very strongly that the President
personally has to lead the charge on this and that the rhetoric
is not going to resonate if it focuses on Copenhagen or on
global obligations and that kind of thing. We have a President
who has extraordinary communications capabilities. He's going
to do even better than Al Gore did a few years ago in bringing
home the reality of what we are confronting, the risk to the
next generation, and the cost to our current generation.
And third, in terms of our reductions only being a very
small part of global reductions, the reality is that if America
is going to have a leadership position in the world, it must
recognize that this is one of the most important issues the
world faces as we go forward. And if we don't lead here, we
aren't going to lead very effectively anywhere else, either.
So, I think those themes have to be articulated in a vivid
fashion, led by the President, backed up by the Cabinet,
hopefully with support of articulate Members of this body, in
order to get the message across to the American people and
change the politics of the issue.
Senator Lugar. Ms. Economy.
Ms. Economy. I agree with everything that Ken just
mentioned. There's a second part to that, which is the idea
that climate change, in essence, is also an opportunity. I
think that President Obama began very early on, even before he
took office, to talk about green energy and a clean energy
future for our country. This has to be an integral part of how
we put forth a message on climate change to the American
people. It is what will get them excited about moving forward
on this issue. In addition to the ``watch out'' message, there
should be an opportunity presented to the American people to
move our country forward into the 21st century and to take a
leading economic role so that, as Senator Kerry mentioned,
we're not chasing the Chinese, 5 or 10 years from now, on
electric cars and a vast array of other renewable and energy
efficient technologies.
Senator Lugar. Mr. Chandler.
Mr. Chandler. I want to thank you for giving me the
opportunity to correct any impression that I may have given
that 500 is OK, because I'm more and more coming to agree with
Jim Hansen that 500 may be even too much.
Senator Lugar. And where are we now?
Mr. Chandler. Oh, 380--I forget the latest number, but
increasing a couple of ticks per year.
Senator Lugar. And what do you think, then--reduce 500 to
what?
Mr. Chandler. Well, I've always been an advocate for 450,
but Jim Hansen tells me that's not ambitious enough. So--the
point about 500 is, if you go beyond that, because of
acidification of the oceans, you lose the barrier reefs, you
lose the protein source for tens of millions of people, the
exclusive protein source, a third of the world's fisheries. I
mean, it's clearly a threshold. But even that may be too high.
As for the cost of responding, I simply don't believe those
numbers, about the high costs. I don't believe them, for two
reasons. One, I spent 30 years of my career doing energy and
economic modeling for a national laboratory in which we
estimated those costs, and none of the credible analyses I have
seen suggest that the costs would be much more than a fraction
of a percent of GDP.
But also on the personal level, I don't do very
sophisticated things at my house; I don't have solar panels or
even a solar water heater. But, I have simple things like a
clock thermostat and a timer on my water heater. And--well, I
do have LED lights now, I'm proud to say. But, it's relatively
easy to cut your emissions by 40 percent, relative to the
American average, as we've done in our home.
The President is the person to make that case, both to
dispel the doubt--any remaining doubt--that this is a
potentially catastrophic issue, and that we don't have the
means to deal with it. We do have the means.
Senator Lugar. Let me shift quickly, in my time, to the
International Energy Agency. It appears to me to be--and
Secretary Clinton has discussed this in testimony--that Chinese
membership in the IEA would be a constructive development,
because the Chinese can come together with various others, in
terms of both of the verification situation, as well as an
understanding of international predicament. It's not a cure-
all, but in our talk about cooperative diplomacy and movement
ahead, the lack of Chinese membership in the IEA is
conspicuous. Have any of you given any thought to the efficacy
of its membership or its importance?
Yes?
Mr. Lieberthal. I actually wrote about that roughly 3 years
ago and encouraged United States leadership to try to get China
invited to join the IEA and to accept the invitation. A major
problem, as I understand it, is that because the IEA grew out
of the OECD, it----
Senator Lugar. Right.
Mr. Lieberthal [continuing]. Has requirements for
membership that China objectively does not meet. And certainly
in the past, a big stumbling block has been some of the
European members of the IEA who simply will not bend on those
requirements. I understand that we have in the past few years
diplomatically been encouraging the IEA to do something to get
China in. China does in fact engage in some cooperation with
the IEA, but it is not a full member with membership
responsibilities.
My sense is, we may have to try to develop a special
category of membership--perhaps something like a
``partnership'' that would effectively bring China fully in,
but would not run into the qualifications issue. If we succeed
in offering that, I think it will then take a lot of articulate
diplomacy to get the Chinese to accept second-class membership,
which is what that effectively would mean, and I don't know
whether that would be successful or not.
So, I agree with you, the problem is real. I think the
problem doesn't lie here; it lies in Europe. And we just have
to try to work with that.
Senator Lugar. Well, you raise an important point about our
diplomacy with European friends, in addition to the Chinese. In
other words, if we're all going to approach this as a worldwide
effort, we somehow will have to get over the nit-picking that
is involved here. And I use that word advisedly. But, at the
same time, as you say, the Chinese may be reticent to join,
anyway.
This is the whole problem of the diplomacy, and I think
Secretary Clinton understands this. But, I was encouraged, at
least, that she was at least prepared to begin to tackle it.
Yes?
Ms. Economy. Can I raise one issue? I had a visit from a
staff member from IEA last October. He suggested to me that
they're actually not that interested in having China join the
IEA right now, because of issues of transparency, and that
the----
Senator Lugar. Yes.
Ms. Economy [continuing]. Chinese are not ready to
participate in that respect.
Senator Lugar. Precisely.
Ms. Economy. There needs to be some capacity-building done
before the Chinese join, in any form.
Senator Lugar. Yes. Well, we're back to transparency, which
you've illustrated so well. But, clearly this is critically
important. If we're talking about 380, 450, 500--at some point,
I would hope, even in this country, we will have visible
thermometers or some illustration so the American people have
some idea, Where are we this year? We're at 390, heading to
391, or so forth. This takes for granted, by that point, a
majority of us feel that it's important whether we're at 390 or
not. But, let's say we establish that that really becomes a
pretty critical element in all of our longevity, and that of
our children and our grandchildren. Then this transparency
becomes very acute to illustrate whether really 390 is the
figure. How do we know, in this vast area of China, what, in
fact, is going on, in terms of CO2 emissions? But, in any
event, I really appreciate your answers.
And I ask, Mr. Chairman, as a matter of privilege, that a
letter that I've written to the administration asking for much
greater exposition, be made a part of the record.
The Chairman. Absolutely. It will, indeed.
Senator Lugar. Thank you.
[The letter referred to follows:]
April 22, 2009.
Dr. Jane Lubchenco,
Administrator, National Oceanic and Atmospheric Administration,
Washington, DC.
Dear Dr. Lubchenco: I write today in support of your comments
noting the need for the Administration to dramatically increase
education efforts on climate change for the American public and for
policymakers, as quoted in CQToday on April 21, 2009.
I am in complete agreement with your statement, ``What everybody
wants to know is, What does this mean to me and the decisions I'm
making?'' While many people claim that the scientific debate on climate
change is settled, in fact for my constituents the question is not
settled. Hoosiers want to be good stewards of the environment, but they
also want to have jobs. Without solid information about how climate
change will affect them and the economic opportunities entailed in
meeting the climate and energy challenge, it is unlikely that the
majority of Americans will choose to embrace higher energy bills during
this time of economic uncertainty.
Passing and implementing far-reaching legislation requires that
elected officials explain clearly to the American people why it matters
in their daily lives. Americans need detailed information on state-by-
state, district-by-district and county-by-county levels on what the
impacts of climate change would be on them and what opportunities exist
in a new energy economy. Such information should be based on the best
science and economics available, and it will have maximum credibility
if it is not biased toward a particular policy agenda.
I encourage you and your Administration colleagues with scientific
and economic expertise to speed and augment delivery of such unbiased
information to members of Congress and, more importantly, directly to
the American people. I look forward to working with you.
Sincerely,
Richard G. Lugar,
United States Senator.
The Chairman. Thank you, Senator Lugar.
If I could just comment, Senator Lugar, on the Feldstein
numbers and the CBO analysis, the Feldstein number of $1,600.
What I hope, here, is, as we go forward in this debate, which
is critical, that we're going to have a kind of baseline, if
you will, of how we're judging some of the costs that people
are throwing around, because there's a range. First of all, the
Feldstein numbers from the CBO report do not factor in any
energy efficiencies and they do not factor in any of the final
rebates to consumers that are given in the Waxman-Markey
legislation. So, it's not, in fact, a fair representation of an
increase of costs.
The EPA has estimated, based on the actual Waxman-Markey
bill, that, as it currently--and this was prior to even some
additional changes being made which reduced the costs further--
that you were looking at about $98 to $140, and that's before
further changes were made that reduced the costs even more.
It's interesting to note, you've got the EPA saying $98 to
$140, you've got the Heritage Foundation, which says $1,500 a
year for average family, and you've got the Republican National
Committee saying $3,100 a year. So, we're going to have a
range, here, that is obviously going to be based on interests
that people are trying to express in the process.
What I want to do, and I think we all have a responsibility
to do it, is to get a real economic model, here. It is clear,
with the $80 billion that we are investing in clean energy,
alternative energy, renewable energy, et cetera, energy
efficiency--as noted in the McKinsey & Company report that has
created a carbon cost abatement curve which shows that about 35
percent of these reductions, for the first 10 to 15 years, pay
for themselves. That's not reflected in these models. Nor are
any of the household income benefits--i.e., let's say more
families are switching, as they will, I'm confident, as Detroit
goes through a transformation--a lot more families are going to
be buying hybrids and getting better mileage in their car. None
of these studies reflect how much household income they're
going to be keeping as a consequence of paying less for fuel.
So, while the per-unit kilowatt hour may go up to some small
measure--and, as I've shown, I think it's a small measure, in
the end--the actual out-of-pocket expenses of the household is
going to be less because of the other efficiencies and gains
that are going to come.
Now, we have to, obviously, show this as we go forward.
But, there was an analysis of Indiana recently, which I will
obviously get to you, that shows that, with whatever cost
increase there will be, there'll still be a continued economic
growth in Indiana, recognizing what the Waxman-Markey bill is
doing and what we're going to try and do in the Senate, which
is significant mitigation against coal costs, where I know you
are dependent on Indiana.
And so, I think that there's about a billion dollars a year
of dedicated funding just for clean coal technology over 10
years, and there's a wait period before that even cuts in. So,
while the bill would be passed--I think there's about a 5-year
period before it even becomes active that those reductions
would have to take place. So, you get $5 billion of clean coal
technology effort before there's even a requirement that they
comply.
Our hope is that, in the end, we're going to be able to
show that this is going to have a really marginal--in fact, may
even have, in the first 15, 20 years, very beneficial net gain
to households because of the efficiencies and other gains we
put in.
Would any of you like to comment specifically on that, or
on any of that modeling?
[No response.]
The Chairman. I see a huge willingness to leap into the
fray, here. [Laughter.]
Mr. Chandler. Well, again, that's what I used to do for a
living. And I think if you take the net costs and the net
benefits, and include all of those factors in a general
equilibrium model that is sophisticated enough to include
exactly those technologies, the answer you get is exactly the
one you articulated. I agree with that--with your analysis
completely.
The Chairman. Mr. Lieberthal.
Mr. Lieberthal. The additional layer I would stress is
that, as we move to the future, a lot of the competition in the
global economy is going to be focused on innovation around
cleaner energy and cleaner appliances, et cetera, and so there
are job opportunities out there. It is hard objectively to
factor in, you know such as, ``What jobs will we not get
because the next Microsoft is being developed in China, not in
the United States?'' But, if there's anything that's clear
about the global future, it's that there is going to be an
increasing premium on being able to be more energy efficient
and more low carbon. And we're going to benefit from that if
we're moving ahead, and we're going to miss that and be buying
other folks' products if we aren't. So, if there's a way to get
that into the model, my guess is, Senator, it would make your
argument still stronger. And I very much agree with your basic
points.
The Chairman. Mr. Chandler, when I visited a American-owned
wind power company in China, they're now going to go after the
provincial government rather than the central government
because the central government did not seem willing to buy from
the American companies, at least in the bidding that went out.
It was only awarded to Chinese companies. Now, that's obviously
one of those market-access, market-share issues that are going
to be very important in this process. And I wonder if you could
share with us any thoughts about how that might be addressed
here in the next months.
Mr. Chandler. That's a subject close to my heart. In a
different incarnation, I started a business developing clean
energy projects in China. It's still going, it's still
successful. But, getting a clean energy business started in
China is very time consuming, very frustrating, very expensive.
I think we spent $\1/2\ million in legal fees before we even
had the business plan in place. That's a function of having to
get the business license, to get the approval for the foreign
exchange, the foreign investment, to get all the provincial and
municipal leaders to stamp and chop the documentation. And
then, once you have all of those things, enforcing contracts,
getting utilities to treat you fairly vis-a-vis the
competition--these are issues on which the U.S. Government
ought to, and could, help companies like ours, like that wind
company.
I think that probably wouldn't take a lot of arm-twisting,
but it does require paying some attention to those issues,
understanding them and talking to the Chinese Government about
them, and asking for their help. I, frankly, think that, at the
very highest levels, many of the leaders in China simply don't
get it, because, you know, they haven't been in those trenches.
So, bringing those problems to the attention of the leadership
would be a contribution.
The Chairman. I think, Ms. Economy, you specifically talked
about--not ``I think,'' I know you talked about the lack of the
institutional technology capacity of the Chinese to do some of
these things. A lot of people sort of don't understand that the
Chinese are doing unbelievable buildings, they're building
these railroads, et cetera, and they have great technical
capacity. So, can you describe more what you mean by that? And
in addition to the California example, can you to try flesh
out, a little more, how we might define those capacity-building
tasks and go at it.
Ms. Economy. Thank you. Let me first go back to what Bill
said. I would take a slightly different tack, and I think it's
going to take a lot of arm-twisting for that wind power
company. China puts into place many requirements--for example,
70-percent local content for wind power producers in China. In
China's most recent stimulus package, there was a big push to
say that anything related to infrastructure development was
going to have to be bought from Chinese companies. There is
significant work that will need to be done on those market-
access issues.
In terms of exactly what we could----
The Chairman. Well, is it a mistake to confuse a trade
issue that belongs over here, and meanwhile we've got to get
the capacity-building and do the other pieces that belong to
the global climate change?
Ms. Economy. Capacity-building is such a large and broad
term. It's all going to be difficult. The easiest thing to do
is to begin with the Chinese laws, as they're stated in
regulations, and then look to the Chinese to enforce those, and
then help them enforce those laws.
Above and beyond that, addressing what we perceive to be
unfair Chinese laws and regulations is another step.
The Chairman. Well, do you believe that, come Copenhagen,
we will have an ability to be able to measure sufficiently, and
that they will be able to report, based on how we're measuring,
and it'll be verifiable?
Ms. Economy. No.
The Chairman. You don't.
Ms. Economy. No.
The Chairman. You believe there's no capacity to do that.
Ms. Economy. Not right this minute.
The Chairman. No, I mean by December.
Ms. Economy. Well, no, not by December. For example, they
have almost no capacity in rural areas to measure emissions.
There's no inventory of greenhouse gas emissions.
The Chairman. I'm not talking about measuring them all
across the country. What I'm talking about is measuring the
reductions. If they come to Copenhagen and say, ``We are going
to reduce emissions, and we're going to reduce them in the
following sectors and try to achieve the following amounts,''
while they're not going to sign up to the same Annex-1 standard
per the prior negotiations, there's no way we're going to get a
legally binding agreement, through the U.S. Senate or
elsewhere, if they're not reducing their emissions. And we're
going to need to know that they are.
Ms. Economy. What we would like to have is a baseline,
which we don't have for all the sectors across the Chinese
Government. Even with the targets that Ken mentioned, in terms
of Chinese energy intensity reduction targets and the top 1,000
company program, in the first year they didn't meet their
target, then in the second year they came closer, and in the
third year they met it, and now they're going to surpass the
target.
The Chairman. Well, let me stop you for a minute. When you
say we don't have a baseline, we measured that China's
emissions went up by some 300,000 megatons last year, and that
they are now surpassing us by X amount. And we are measuring
their annual total emissions.
Ms. Economy. Right. But that's largely from inputs of their
energy use. I don't know whether that factors in emissions from
methane in different kinds of soil and other variables. The
kind of measurement that takes place in this country, for
example, doesn't take place there. In terms of the program that
they initiated, the Lawrence Berkeley National Laboratory is
currently trying to determine the reality of a verification of
those energy intensity reduction targets. It will be
interesting to see how well they do in their efforts,
especially given the issues with Chinese data.
The Chairman. I have heard that, and I understand that, and
I know that is an issue, which is why I'm trying to get at this
now, because if we don't get it adequately, I think you have a
problem trying to persuade some colleagues here that they're
doing their share. You're going to have to have the ability to
be able to measure.
Mr. Chandler,
Mr. Chandler. There are two different categories of
measurement. There are these aggregate measures, the energy
intensity numbers, and then there are the specific measures of
specific investments and specific projects. And in those cases,
you have meters on the waste heat recovery power generators,
you have meters on the wind turbines. You know how much they
produce. You have to get approval for every RMB of investment,
so you know how much investment is going in. You follow the tax
data on how much coal is being consumed.
I personally think that this larger issue of additionality
and measurement is an overrated issue. I think it's relatively
easy to follow specific actions and measure their success. And
if we're talking about enforceable and verifiable measures, I
think you can follow those.
The Chairman. My judgment is that, based on what we're
aware they're doing, and once we expand this cooperation, which
is the purpose of these meetings, we should be able to. It's
going to take a team of people to be able to have access and to
be able to share information, and we're going to have to work
at it. I'm not suggesting it's like that. But, it's doable. And
we have to make sure it's done. That's what I'm trying to
emphasize, here, just because of the politics of this. I mean,
how are you going to get this done? You're going to have to be
able to have some standard in place.
Mr. Lieberthal.
Mr. Lieberthal. I think the Chinese are providing the best
numbers they have. And I think they'll continue to do that. So,
I don't think that you're going to run into a problem--I hope
I'm correct on this--I don't think you'll run into a problem of
their making commitments at Copenhagen and then simply
purposely lying to fake that they aren't meeting those
commitments. But, there are severe institutional limitations.
Some of these are technical--monitoring devices and that kind
of thing; some are the way the political system operates, where
reporting goes up the political hierarchy level by level. I
mentioned the five levels earlier--the township reports to the
county who reports to the city who reports to the province who
reports to the center. There's a lot of room for distortion in
this multilayered reporting system.
On balance, I think the trends tend to be correctly
reported, but the absolute numbers grow out of a very imprecise
system. There are ways we can be helpful. I think if we develop
a clean energy partnership with China, that will give us much
more access to this process, to the ability to work with them
to improve these things. The national-level leaders in China
want desperately to get better numbers. So, where we can help
with database management systems and training and that kind of
thing, I think we have partners there in that. Also, I think
one of the big tasks at Copenhagen is to develop better
objective measurements, globally. A lot of what goes on
globally now, in CDM and other things, de facto enable
participants to play with the numbers a lot, and that will
apply to China, too.
The Chairman. It will apply across the board.
Mr. Lieberthal. Yes.
The Chairman. We have to find a mechanism.
Senator Lugar.
Senator Lugar. Just following through on this line of
questioning, Mr. Chairman, it seems to me that Ms. Economy has
brought forward a point of view which is important, that is, if
you're trying to gauge whether you're going up or down, there
has to be a baseline to begin with, and there isn't one here.
Now, I think your point, Mr. Lieberthal, is that, as we
cooperate with the Chinese, we get a better idea of their
measurements, a better idea of how they might even go about it.
But, it still doesn't get to the rural China problem and the
lack of measurement, or almost any indication of whatever may
be happening with hundreds of millions of people in the
country. This is why I think we have to be careful in our
statements, as public officials, to give an impression that
somehow we've quantified this down to any particular degree.
We're sort of generally in the ballpark.
But, to get back to Mr. Chandler's point, whether we're in
the ballpark or not, we believe that there are worldwide
indications, in this parts-per-million business, that we are
still adding, year by year, and getting closer to what I hope
will be a more comprehensive debate among scientists--and the
public--so we understand why that is important, whether it's
450 or 500 or so forth.
I think if the American public really did understand even
indications you've given, that California has 12 months of fire
these days or that parts of our country already are
experiencing severe agricultural difficulties--perhaps these
were not the most productive sections, but, nevertheless, we
can see sort of a creeping. Facts of this sort are not well
understood; not very well publicized with regard to this
situation. So, I appreciate the debate or discussion we're
having.
At the risk of blatant self-advertisement, let me just say
that the Lugar Center for Renewable Energy at Indiana
University Purdue University in Indianapolis--I have no vested
interest in it, I do not manage the center, but, it was named
for me a while back because of my enthusiasm for the subject--
and they're going to cooperate with Sun Yat-Sen University in
China, host a forum for energy and environmental leaders,
really for the purpose of trying to bring some understanding to
Midwestern States that will be participating in this. And
Midwestern States have coal. And Midwestern States have a
number of situations that are critical to this debate, whether
we're doing a domestically--so, this forum will occur in
October, not too far from now, and before Copenhagen, or in the
midst of it.
And I mention, also, something outside of that. An NGO
known as CHASP has been effectively working with Chinese
officials to implement efficiency energy standards similar to
our Energy STAR Program. This is still just another movement
among many, but one which I endorse, because it does get down
to such things are refrigerators, air-conditioners,
televisions, ways in which NGOs who are subscribing to this can
be helpful with Chinese residential occupants in reducing
whatever they're doing over there.
I would just simply ask, as we've discussed this subject
back and forth today, whether we've got accurate measurements
or a perception of how bad the situation is. Can you help us
quantify this in the future? We've talked about things
occurring in climate change already in our country, and I don't
stress that just simply in a nationalistic way, or that climate
change is unimportant to Africa. But, in terms of our foreign
policy, we do reach out to other countries. We've had very good
discussions--and Senator Casey, who was here earlier on today,
has been partner in a bipartisan bill to try to reorganize our
food programs, both from the standpoint of emergencies, but,
likewise, in terms of productive agriculture, especially in
Africa and Southeast Asia, where about 800 million people are
perpetually hungry, and will remain that way, without very
substantial advances in their production, quite apart from any
emergency food aid we can do.
Now, even while we're going about this, we're having this
debate in another forum in which several of these countries are
affected, at least many of the articles about Africa, for
example--so that this is a pretty grim situation, even with,
the one hand, if we're going to constructively try to help the
Green Revolution occur in Africa, which never occurred, for a
variety of reasons, including lack of productive agriculture.
Single women trying to farm less than an acre, with not very
good seed and no fertilizer, and often very little prospects,
and having to cart whatever they do 2 kilometers to get to the
next road. These are the realities in the world that is facing
climate change.
So, I ask you, as we proceed, we can understand this
better, in terms of American agriculture, and therefore,
transpose it, if we know really what to expect. For instance,
to be very parochial again, in my home State of Indiana, a big
agricultural State--soybeans, corn--on my own farm; I'm
interested in how climate change is going to affect that in
this generation or the next. Now, some have said ``not very
much.'' Conceivably even the growing season may be longer. On
the other hand, you may have torrential rains that wash out the
whole crop so that, growing season or not, you've got a
problem.
I just want to try to reduce this to something that is
manageable, in the understanding of all of us, as to why this
is important.
There are charts, graphs, data that indicate how
agriculture in America, for example, might be affected, how the
growing seasons, or even the probability of crops, whether it
be in the Midwest or the South or the West or New England or so
forth, will be affected? Do you--are you aware of literature or
a good book that we could all read or--help us out, if you can.
Ms. Economy. I'm a China expert, but I will say that
beginning as early as the early 1990s, at least, there were
climate modelers based at Princeton and other places that were
doing precisely this kind of work and trying to sketch out,
within the United States, by region, how agriculture would be
affected, not only from droughts and floods, but also from
increased pestilence, for example. I am sure that there is
literature out there, and I am happy to go and try to find it
for you. I know the Chinese have done this kind of work, so
there's no doubt in my mind that we have, as well.
Senator Lugar. Yes, sir.
Mr. Chandler. I should add that in the modeling that I've
seen done for the Intergovernmental Panel on Climate Change,
and that we did in the Pacific Northwest National Lab when I
was there, moisture distribution, which is so crucial to
agriculture, is notoriously difficult to model and to forecast.
And so the uncertainty of the impacts, region by region, is
very high, which in some ways makes the situation even worse,
because if you knew that you were going to dry out or if you
know you were going to have torrential rains on a regular
basis, then you could adapt. But the uncertainty in the models,
the large scale of the grids, makes it very difficult to deal
with and increases the risk.
Senator Lugar. Well, that's important for us to know, too,
as people plan how to use their land over the course of time or
what to anticipate in the next generation, for example, in
probabilities.
Let me just--and I appreciate, as you say, Ms. Economy,
you're an expert on China--this is related to China only so far
as--before we get very far with China we're going to have to
resolve some of these problems in the United States, at least
in terms of our own understanding and our advocacy, or we will
have diplomats out there in Copenhagen, or wherever they may
be, who are doing the best they can, but back home it's not
really certain what the political atmosphere is, backing
whatever they are saying. And this is why the credibility of
all of our activities at the grassroots is very important.
Let me just add one more factor. Once again, a blatant
self-advertisement. My staff have very skillfully calculated
how much money I'm saving each year by driving a Prius car.
Now, many Senators drive Prius cars, so this is not a unique
experience coming into the Hart lot every day, but they've
calculated, at 49 miles to the gallon over the course of 4
years of time, a figure, which we have shared with our
constituents. Now, this doesn't mean everybody has rushed out
to buy a Prius or another hybrid car or something of that
variety. In other words, demonstrably there are savings in
this. Hopefully there will be in other things we do, different
kinds of light bulbs we're putting in and all sorts of
renovations of buildings.
But, let me just ask, at what point, even if there are
savings involved for households, lifestyles in the United
States or in China take over, really, in people's
decisionmaking--at what point is the economic thing important?
At what point is fear of what is going to happen, in terms of
world catastrophe, more important? In other words, what are the
motivating factors that, in our democracy, we will have to
contend with? Even in China, as you say, stability is the key
factor. How much political pain can occur in the countryside or
somewhere else before the government says, ``Although we had
the most noble ambitions here, Communist Party retentions comes
first--stability--as opposed to what we're doing''?
Yes, sir.
Mr. Lieberthal. I'd like to make a comment about the United
States side and a comment about the Chinese side, although,
like Liz, I am a China specialist and a United States citizen.
I frankly think that on the United States side, there is
enormous capacity--and I mean this very seriously--I think
there is enormous capacity to motivate people positively to do
the right thing without depending primarily on fear and on
comments about lifestyle. Americans like to be good people. I
think, if this is framed correctly, therefore, there is a lot
of positive motivation that can be generated. And then, if it's
backed up with things like smart metering in homes so that
people can see, every day, whether they're doing the right
thing or not, I think that that is a combination that could
produce at least some of the results we're seeking.
In China, the reality, I think, is that leaders
increasingly see climate change itself as a threat to
stability. Let me just give you an example of that. Currently
just a little under 50 percent of China's GDP is produced in
three coastal areas--the Pearl River Delta, the Yangtze River
Delta, and along the Gulf of Bohai. Two of those are
extraordinarily vulnerable to sea-level rise. The Yangtze River
Delta--Shanghai and the surrounding areas--is about 1 inch
above sea level. The Chinese have modeled out how much flooding
will occur with each degree of rise in sea levels, and it is
almost mind-boggling when you look at the results, especially
in the Yangtze area.
Melting glaciers in the Hindu Kush affect the major rivers
that run all across China. This is fundamental to the Chinese
water system. And no one quite knows what the actual
consequences will be, but they are very worried about them. And
they see these as potentially producing large-scale
displacement that can be catastrophic for the country.
So, I think actually the leaders don't view the issue as
stability versus climate change--that is in terms of, ``Should
we focus on stability or focus on climate change?''--they have
their ways of trying to assure stability, but they see climate
change as something that they've got to adapt to and mitigate
or there will be no way to maintain stability over the long
run. I think that argument is one that they accept very
readily.
Senator Lugar. Thank you, sir.
The Chairman. Thank you. That was an important point, and
we appreciate it.
Senator Cardin.
Senator Cardin. Thank you, Mr. Chairman.
I thank our witnesses for being here today. I'm working
with the chairman in an effort to try to advance climate change
legislation in this Congress.
I think that we need to move forward on this, even if we
are the only country in the world to do so, because I think it
would be good for our Nation, it would create clean jobs here
in America, keep the technology here, and it's important for
our economy.
But, I want to go into an area that I hear frequently in
the State of Maryland, a State that had a proud tradition in
textiles, a State that used to be more heavily involved in
manufacturing than it is today, in which many of my
constituents say, ``Well, if the United States enacts strict
standards on carbon emissions, all it's going to do is make it
easier for China to have a larger penetration into the United
States market because they won't impose the same strict
standards, and then you're putting United States manufacturers
and producers at a disadvantage in regards to international
competition.''
Now, this issue was recognized last year in the Lieberman-
Warner bill that made its way through the Environment and
Public Works Committee. In that bill, there was a provision
that would have triggered some form of an import tariff against
countries that exported products into United States that didn't
meet the U.S. standards on carbon reductions, to try to provide
a level playing field for products entering America from
countries that were not dealing with the global climate change
issue.
Now, that trigger was sufficiently far down the road so
that many of us thought it would not generate a lot of
interest, as far as the challenges within the WTO or public
relations issues with countries that we deal with.
I want to get your views as people who understand more than
I do what's happening in China. There are two ways we could go
on this issue, and perhaps three. One is to do nothing. The
other is to try to impose some type of a unilateral tariff to
reflect what we believe should be the international commitment,
perhaps using standards adopted later this year in Copenhagen.
The third would be to try to negotiate within the World Trade
Organization some recognition of the fact that it is legitimate
for countries that have an interest in advancing global climate
change to establish this type of regime.
So, I guess my question to you is, How would this go over
in China? Now, our relationship with China is somewhat mixed.
Trade issues have been subject to a great deal of debate over
time. China, of course, has the largest surplus, with the
United States, of any country. We certainly are concerned about
this balance of payment. There are legitimate concerns that we
don't want to enact legislation here that would exacerbate the
trade imbalance we already have with China.
Mr. Lieberthal. First of all, Senator, I understand the
sentiment behind the legislative proposal. The Chinese are very
worried that American environmental efforts will be used to
establish protectionist walls around the American market. You
hear that sentiment all the time in China. The current global
economic stress has heightened that worry.
But, second, there's a more fundamental issue at stake.
Senator Kerry raised this earlier. It is the question of
whether the United States is seen as using concern about the
environment to try to slow down China's economic growth because
we're worried about China as a global rival. The chairman
indicated that has been a major concern in China; now that is
fading somewhat. I think, at the central leadership level, it
is fading considerably, but at a popular level, it is still a
very, very widespread concern.
If we do establish barriers at the border as part of our
cap-and-trade legislation, I think that will be seen by many in
China as kind of confirming their view that this is really
aimed at China, not, as it's seen up here on the Hill, as being
focused on economic competitiveness. Rather, many Chinese will
see this as a strategic move to try to keep China from
realizing its own rightful potential.
My own sense is that if China were to do nothing or do very
little to control its own carbon emissions, then I agree that
we really need to worry about the future impact on
competitiveness. But, if China is making a maximum effort that
is verifiable, then I think that we ought to back off a little
bit. I think we need to be more sensitive to the reality that
we have more money, we have higher tech industry, we are
somewhat late to the climate game, and we are not fully trusted
out there on this issue.
Senator Cardin. I would just point out that Americans would
believe that we are already helping China with money, since we
have such an imbalance with them, so they clearly have a cash
surplus with the United States.
Mr. Lieberthal. That's absolutely true. Behind those trade
statistics----
Senator Cardin. Some would also argue that China has
arbitrarily kept its currency low, holding down the wealth of
its country, at the cost of the United States, so that we
really are contributing to China's development. So, aren't we
already contributing to what they--what we think should have
been used to deal with reducing its carbon emissions?
Mr. Lieberthal. Well, there are three points in my response
to that, sir.
First, is China's exchange rate below what a market would
have dictated? I agree with you that the answer is, ``yes.''
Second, is the trade imbalance with China something that we
should take extremely seriously as a bilateral issue? I think
the answer to that is, ``not quite.'' Our trade deficit with
Asia overall as a percentage of our global trade deficit has
actually gone down virtually every year since the early 1980s.
But our trade deficit with China, within Asia, has gone up.
That is because the other countries of Asia that formerly ran
huge trade surpluses with us--Japan, South Korea, Taiwan, Hong
Kong, Singapore--have all shifted substantial final assembly to
China. As a consequence, two-thirds to three-quarters of the
value of the average Chinese export to the United States
consists of Chinese imports from elsewhere in Asia that are
bolted together in China, packaged, and sent to the United
States. Our trade calculations attribute all that value to
China, but this misses the underlying reality. So----
Senator Cardin. I understand what you're saying, but still,
the trade imbalance of the United States, internationally, is
troublesome.
Mr. Lieberthal. Absolutely.
Senator Cardin. And China's the major player in that.
Mr. Lieberthal. Well, actually, China is now part of a
regionally integrated Asian manufacturing system. I don't want
to split hairs, here, sir, but our trade deficit with that
Asian regionally integrated manufacturing system has actually
gone down, as a percentage of our global trade deficit,
steadily for 20 years now. So, I think pointing to the China
component of that and saying, ``Well, that's explaining our
problem,'' doesn't fully identify the problem. Our problems are
more that we don't have enough domestic personal savings, and
there are a lot of systemic issues involved.
The China figure is very attractive to point to, because
it's so dramatic. But, it really masks the real supply chains
and flows of goods that describe what's actually taking place
out there.
Senator Cardin. But, you did say that if China does not
take respectful action in regards to carbon emissions, then it
may be appropriate for the United States to take some action.
What action?
Mr. Lieberthal. I believe it is actually already doing
quite a bit, and I think it is prepared to do quite a bit more.
If the United States and China cannot begin to cooperate on a
serious level to address carbon emissions to produce some real
results that are verifiable, that are not just rhetorical, I
would agree with you that the political case for some kind of
trade action, especially in the future, so that it incentivizes
the Chinese, would be hard to resist. I personally wouldn't
favor it, but I can certainly understand the political case for
it. But I do believe that there is now an opportunity to engage
the Chinese very substantially. And I would add that the
Chinese are already, at a national level, doing more than most
Americans realize in concrete programs to reduce their carbon
emissions to below what they would have been without those
efforts.
Senator Cardin. Our chairman reminds us of that frequently
here, sir.
Mr. Lieberthal. Well----
Ms. Economy. Could I just add one thing to that?
Senator Cardin. Absolutely.
Ms. Economy. I think there are real issues in our trade
relationship with China. We should address them, whether it's
intellectual property rights, market access, or the currency
issue, as you suggest.
My fear is that establishing some kind of carbon tariff on
goods coming from China is going to provoke a whole round of
similar issues and tariffs and other kinds of penalty measures,
not just between the United States and China, but it could
happen around the world. That would be very counterproductive
to what we're trying to do with this global climate change
regime.
When you look at the history of international environmental
treaties, some of them have sanctioning mechanisms. The
Montreal Protocol on ozone-depleting substances has a
sanctioning mechanism in it, for example. My feeling is that if
we want to try to develop a sanctioning mechanism within the
framework of Copenhagen, then that's where we should do it, but
not as a bilateral punitive measure against one country. It
will have all sorts of far-reaching negative ramifications for
the United States-China relationship, as well.
Senator Cardin. But, if China does not become party to
that, then, of course, the mechanisms would not have any
impact.
Ms. Economy. When we weren't party to Kyoto, the Europeans
were talking about what they might do to us.
Senator Cardin. They might. But, then they had the WTO to
fall back on. Unless you have some other agreement--it seems if
they're not party to it, enforcement would be very difficult.
Even within the WTO, America's record hasn't been great on
enforcements issues.
Ms. Economy. That's true, we haven't been great on
enforcement. But you can certainly find ways to penalize
countries that are not part of the agreement.
Senator Cardin. I'm not sure.
Thank you.
The Chairman. Well, the key is obviously to have a
framework where they're part of the agreement. And that's what
we're all aiming for. That's the effort, here. And hopefully
we'll get there.
I believe that that is going to be possible, albeit, as we
have all articulated, with the differing responsibilities that
we accept, at least in the first years, there has to be a
melding, here, and that's one of the things that I tried to
make as clear as I could within my portfolio to the Chinese,
that, you know, whatever happens there, we're going to get
together every year, we're going to be reviewing it, and we're
all going to have to be ready to react to the scientific
realities as they continue to come in. And I think that the
issue of how many years, is going to be up to the negotiators
and the administration, and their relationship with China. But,
clearly that's going to be part of this.
Are there any other issues to come before us?
Senator Lugar.
If not, this has really been helpful and informative, and I
hope we can continue to call on you as we go forward in the
next months. And I thank you very, very much for being here
today. Thank you.
We stand adjourned. Thank you.
[Whereupon, at 11:55 a.m., the hearing was adjourned.]
----------
Additional Material Submitted for the Record
Prepared Statement of Hon. Barbara Boxer, U.S. Senator From California
Thank you for convening this hearing today, Mr. Chairman, and thank
you for your ongoing leadership on the issue of global warming.
The world is looking for American leadership on this issue, and
they are watching closely what we are doing here in the Congress.
When it comes to China and global warming, we have several
important challenges. China has likely become the world's largest
emitter of carbon pollution. If we want to influence China's
participation in an international agreement on climate change, we must
demonstrate America's commitment to take real action to cut our own
greenhouse gas emissions. When we act, we will renew our leadership--
and our leverage--on this issue in the international community.
We must also seize the economic opportunities in clean energy.
Legislation to curb U.S. global warming pollution will put us on a path
toward a new clean energy economy that creates millions of American
jobs and breaks our dangerous dependence on foreign oil. America has
led nearly every technological breakthrough in recent years--there is
no reason why we should not lead the clean energy revolution. But China
is not waiting for us to act.
China is reportedly making enormous investments in renewable
energy, energy efficiency, and less-polluting vehicles and transit, and
has indicated a goal of 40 percent renewable energy by 2050. In
addition, the New York Times (May 11, 2009) reported that China's
latest coal-fired powerplants are both more efficient and less
expensive than their U.S. counterparts.
Thomas Friedman put it concisely in his most recent book, ``Hot,
Flat and Crowded'': ``. . . the ability to develop clean power and
energy efficient technologies is going to become the defining measure
of a country's economic standing, environmental health, energy
security, and national security over the next 50 years."
Again, thank you for holding this important hearing today.
______
Responses of William Chandler to Questions Submitted by Senator Barbara
Boxer
Question. Please describe the actions that China is now taking to
reduce its greenhouse gas emissions.
Answer. China's energy efficiency effort--including shutting down
many inefficient factories and powerplants--is without precedent in the
world. China's 5-year plan for 2006-2010 contained a number of
significant energy efficiency goals and programs, including the
ambitious target of reducing energy intensity (the amount of energy
consumed per unit of GDP) by 20 percent by 2010, compared to 2005
levels. The plan focuses on increasing efficiency in the industrial and
power generation sectors, with a combination of incentives and
regulations that will save the equivalent of hundreds of millions of
tons of coal every year.
Furthermore, China aims to increase its share of clean energy by
expanding its nuclear capacity, hastening coal-bed gas development, and
boosting renewable energy capacity to supply 10 percent of all primary
energy as early as 2010. Thanks in part to a set of economic policies
that prioritize renewable energy, China already ranks fifth in the
world in installed wind power capacity--installed wind capacity has
more than doubled each year for the past several years--and it is the
world leader by far in installed solar thermal capacity. The government
also aims to control methane emissions with improved agricultural
methods and plans to increase forest coverage 20 percent by 2010,
compared to 2005 levels.
The Chinese Government is investing monumental sums of money in
energy efficiency and other green technologies. The stimulus package
released in late 2008 included $31 billion for energy conservation,
emissions reduction, and ecosystem reconstruction projects, plus over
$200 billion for infrastructure such as dams, high-speed railways and
electric grid improvements that will ultimately reduce emissions. The
government is also in the process of drafting another stimulus package
focusing specifically on renewable and low-emission energy sources,
although the official amount of this investment has not yet been
announced.
Question. Please describe ways that China and the United States can
work together to reduce greenhouse gas emissions.
Answer. Key areas for cooperation include:
Building human capacity to accelerate market deployment of
technologies, including evaluating policies such as the
creation of low-carbon economic development zones and creating
incentives for clean energy investments--especially energy
efficiency technologies that can obtain ``quick wins.''
Facilitating joint United States-China research and
development cooperation; for example, on low-carbon cars, coal-
fired powerplants, and carbon sequestration technology. As part
of this effort, we should foster closer links between American
laboratories and Chinese markets, and vice versa. We will need
to develop models that ensure equitable cost-sharing, fair
access to the use of intellectual property, and protection of
intellectual property.
e.g. Establish a jointly funded civilian research and
development foundation for clean energy technology, where
the United States and China would share both the costs and
the associated intellectual property rights.
Lending our expertise to help China develop market-based tax
and regulatory policies and market-based energy pricing, to
remove perverse incentives and encourage energy conservation.
Facilitating finance for clean energy and energy efficiency
technologies within China (details provided in written
statement submitted for the record).
Establishing state-to-province and private sector
partnerships to accelerate market deployment of low-carbon
technologies; and expanding existing programs.
Under this type of partnership, Chinese provinces could
become observers of United States state and regional cap-
and-trade programs. Ultimately, this model might even
provide the basis for broader United States-China
cooperation on emissions trading.
Working with China to jointly propose more effective,
streamlined CDM regulations for the next global treaty.
Making climate cooperation integral to trade policy, and
establishing agreements to prevent either country from taking
advantage of the other.
e.g. Both countries could agree that after 2015 they would
export only appliances, cars, and equipment with efficiency
levels higher than the world average today, they could
jointly set production standards to limit the energy used
in manufacturing exports, and they could both agree to
provide tax breaks for investment and impose tax penalties
on high-carbon energy.
Question. There is universal agreement that China must curb its
emissions if the world is to avoid unchecked climate change. Some argue
that the United States should not reduce its emissions until China does
so. Do you agree with this argument? Would a ``wait for China''
approach help persuade China to take on international climate change
commitments?
Answer. While it is true that China must curb its emissions, it is
equally true that the United States must curb its emissions if the
world is to avoid the worst effects of climate change. If either
country fails to act, the mitigation strategies adopted by the rest of
the world will fall far short of averting disaster for large parts of
the earth. United States refusal to act will absolutely not persuade
China to agree to international commitments; rather, it will continue
to give China an excuse to point fingers while they wait for us to take
the lead. If we lead, on the other hand, then the rhetoric of the
developing countries loses its power.
Question. Given the serious threat that global warming represents
to our country, and the dynamics of international climate negotiations,
would you agree that the United States must act regardless of the level
of commitment from China?
Answer. Yes, the United States must enact strong climate policy
that can stand on its own two feet and is not held hostage to other
countries' actions. Bold action on our part is essential not only
because it is our moral responsibility and an environmental necessity,
but also because of the effect it will have on China. Draft legislation
in the House of Representatives has already made a strong impression on
the Chinese, indicating to them that we are serious about climate
change. Strong leadership on our part will encourage China to follow.
United States-China cooperation, in turn, is our best hope for
achieving a successful outcome at Copenhagen.
______
Responses of Ken Lieberthal to Questions Submitted by Senator Barbara
Boxer
Question. Please describe the actions that China is now taking to
reduce its greenhouse gas emissions.
Answer. China is taking many measures, including increasing mileage
standards and providing government incentives to purchase smaller cars,
developing an electrified rail system in central and western China,
shutting down small and inefficient coal-fired powerplants, creating a
few model ``ecocities'' in order to gain experience in low carbon urban
development, upgrading building codes (China constructs about 50
percent of world's new floor space each year), and so forth. The most
significant national level policies, each of which is backed by
substantial levels of funding, include:
Seeking a 20-percent reduction in energy intensity for all
GDP during the 11th five-year plan, which covers 2006-2010.\1\
According to Chinese authorities, total carbon emissions would
decline by roughly a billion tons of CO2 over the course of the
plan as against a ``business as usual'' (BAU) model, if this
target were fully met. At present, progress toward the target
is behind schedule, but the gap between targets and performance
is closing.
---------------------------------------------------------------------------
\1\ ``The Energy Development Plan for the 11th Five-Year Period,''
the National Development and Reform Council (NDRC), Government of the
People's Republic of China, April 2007. Available at: http://
www.ccchina.gov.cn/WebSite/CCChina/UpFile/File186.pdf.
---------------------------------------------------------------------------
Adopting the target of having renewable fuels account for 10
percent of China's total energy consumption by 2010 and 15
percent by 2020.\2\ As part of this:
---------------------------------------------------------------------------
\2\ ``The Medium and Long-Term Development Plan for Renewable
Energy,'' the National
Development and Reform Council (NDRC), Government of the Peoples'
Republic of China, August 2007. Available at: http://
www.ccchina.gov.cn/WebSite/CCChina/UpFile/2007/20079583745
145.pdf. China passed a renewable energy law in 2006. In 2007
renewables accounted for 8.5 percent of China's energy production.
Establishing major programs to improve technology in solar
and wind power. China has rapidly become the world's
leading producer of solar panels, although solar power's
installed generating capacity is to increase to only
300,000 kW in 2010. For wind power, tax breaks, and other
forms of government support are already in place as of
2008. The installed generating capacity of wind power is to
increase from 1.26 million kW in 2005 to 10 million kW in
the year 2010.\3\
---------------------------------------------------------------------------
\3\ ``The Renewable Energy Development Plan for the 11th Five-Year
Period,'' NDRC, PRC. March 2008. Available at: www.ccchina.gov.cn/
WebSite/CCChina/UpFile/File186.pdf.
---------------------------------------------------------------------------
Enhancing China's hydropower generation (despite the fact
that the country already has the greatest concentration of
hydropower facilities in the world). The installed
hydropower generating capacity is to increase from 117
million kW in 2005 to 190 million kW in 2010 \4\ and will
provide 6.8 percent \5\ of the country's anticipated energy
consumption in the latter year.
---------------------------------------------------------------------------
\4\ ``The Renewable Energy Development Plan for the 11th Five-year
Period,'' ibid.
\5\ ``The Energy Development Plan for the 11th Five-Year Period.''
Taking serious measures to reduce the emissions from highly
polluting power-generation facilities. Coal remains king in
China, and about 70 percent of power still comes from coal-
fired plants. Over the past 5 years China has built the
equivalent of America's entire coal power generation system.
These plants will stay on line for another 30-50 years while 60
percent of U.S. coal-fired powerplants will be over 50 years
old by 2025. The technologies involved in generating power in
these new plants are thus very important. Fortunately, China is
building many of these plants to be relatively clean \6\ and is
investing in development and deployment of clean coal
technologies.\7\
---------------------------------------------------------------------------
\6\ Government regulations now require that: New plants be
synchronously equipped with flue gas desulfurization (FGD) technology
before 2010; existing plants begin to be retrofitted with FGD
technology before 2010; all plants meet SO2 requirements before 2015;
and new plants set aside space for future flue gas denitrification
equipment installations. New power-generation units are equipped with
low-NOX burners, and many existing units have been
retrofitted with this technology: Zhao, Lifeng and Gallagher, Kelly
Sims, ``Research, Development, Demonstration, and Early Development
Policies for Advanced-Coal Technology in China,'' Energy Policy, Vol.
35, 2007, 6467-6477.
\7\ This includes, for example, substantial work on direct
hydrogenation of coal, with production starting up in the Inner
Mongolian Autonomous Region in 2008. Beijing is also focusing on coal
gasification and is constructing 35 plants using this technique.
---------------------------------------------------------------------------
Aggressively expanding nuclear power capabilities, with a
target of building 9 new generators in the next 2 years and at
least 30 over the coming decade. Nuclear is slated to provide 5
percent of China's total installed power-generating capacity by
2020.\8\ There have been recent suggestions that the nuclear
output target has been raised from 40 GW to 70 GW by 2020.\9\
---------------------------------------------------------------------------
\8\ ``The Nuclear Industry Development Plan for the 11th Five-Year
Period,'' the Commission of Science, Technology, and Industry for
National Defense (COSTIND), the Peoples' Republic of China, August
2006. Available at: http://www.caea.gov.cn/n602669/n602673/n602687/
n607857/appendix/200741310370.doc. ``China Ups Targeted Nuclear Power
Share From 4% to 5% for 2020,'' Xinhua News, August 5, 2008. Available
at: http://news.xinhuanet.com/english/2008-08/05/content_8967806.htm.
\9\ China Daily, November 19, 2008: http://www.chinadaily.com.cn/
bizchina/2008-11/06/content_7180851.htm.
---------------------------------------------------------------------------
Investing over 600 billion RMB ($88 billion) on ultra-high
voltage transmission projects by 2020. The installed capacity
of China's clean energy will be increased to 579 billion kW
when the smart grid is completed by 2020.\10\
---------------------------------------------------------------------------
\10\ China Daily (May 29, 2009).
Question. Please describe ways that China and the United States can
---------------------------------------------------------------------------
work together to reduce greenhouse gas emissions.
Answer. The potential menu here is long and varied. Types of
potential cooperation include:
Codevelopment of new technologies. This involves taking
ideas from the lab and bringing them through test beds, scaling
up and development of viable business models. In many critical
areas, both the United States and China have made technical
advances, but much remains to be done to make those
technologies applicable in the market and at scale. American
and Chinese capabilities are largely complementary, and working
together can move things forward more rapidly and at less cost
than working separately. Two prominent examples are in carbon
capture and sequestration and in electric vehicles.
Foster local-to-local cooperation. Various municipal
governments in both countries have done a great deal to improve
urban transit, upgrade building stocks, optimize energy
provision, etc. There is some United States-China city-to-city
cooperation now under way, but a great deal more can be done.
Establishing a national level platform to foster that local-to-
local collaboration (e.g., by providing data repositories,
facilitating communications, providing some translation
services, etc.), could greatly enhance the ability of local
officials in each country to cooperate with and learn best
practices from the other.
Create activities to galvanize the public's imagination.
Forming, for example, a binational Clean Energy Corps with
volunteers from both countries to work on upgrading and
retrofitting buildings in both countries (and eventually
elsewhere, too) could have an impact akin to that of the Peace
Corps for an earlier generation.
Cooperate to lower the costs in both countries to moving to
a low-carbon economy. For example, adopting common metrics and
standards (e.g., in appliances) where feasible will make it far
easier for new products to gain necessary scale.
Cooperate to reduce the obstacles to overall cooperation
between developed and developing countries on reducing carbon
emissions. The differences between the United States and China
on principles (concerning the responsibilities that should be
assigned because of historical cumulative emissions versus
current emissions, per capita emissions versus total national
emissions, and the current stage of economic development) are
the key divisions over principles that have plagued global
climate change negotiations. If the United States and China can
find ways to cooperate despite these disagreements over
principles, it should have a beneficent effect on the global
negotiations and therefore on global carbon emissions
reduction.
Question. There is universal agreement that China must curb its
emissions if the world is to avoid unchecked climate change. Some argue
that the United States should not reduce its emissions until China does
so. Do you agree with this argument? Would a ``wait for China''
approach help persuade China to take on international climate change
commitments?
The United States absolutely should not adopt a posture of waiting
for China before undertaking its own emissions reductions. In part, the
science drives this response--emissions from anywhere move the world
toward potentially unmanageable climate challenges in the future, and
the United States accounts for more than 20 percent of global emissions
annually. Waiting for China is therefore directly increasing the
dangers faced by every American and all others around the globe.
The United States should, though, use its own demonstrated
willingness to take very serious measures to address climate change as
a vehicle to move China along to greater efforts. To date, in terms of
national level policy the Chinese have done considerably more than
America has done on reducing carbon emissions (but American localities
have undertaken many serious programs on their own). China has not been
simply standing by waiting for others to act. But failure of the United
States at a national level to address this issue seriously to date has
made it far more difficult for China's leaders to do what they should
do on this. The arguments heard in China have been: 1. The United
States is rich and technologically advanced--why should we move on low-
carbon efforts before America does? 2. The United States seeks to slow
or halt China's rise--and America's pushing China to reduce carbon
emissions is simply part of this strategic United States effort.
Now that the United States is demonstrating that it is serious at
home, China is changing its own tune very rapidly. In many meetings I
have had (and our officials have had) with Chinese officials this year,
the positive change has been obvious--and the Chinese point to
America's shift in position since January as an important ingredient.
In addition, in a very important way American life styles define for
middle-class Chinese what ``being modern'' is all about. As we raise
the importance of considerations of reducing emissions, that
potentially impacts on the types of pressures China's leaders are under
from their own population.
Put simply, America's taking the lead moves China in the right
direction, while waiting for China increases very significantly the
power of voices in China that say China should wait for the United
States.
Question. Given the serious threat that global warming represents
to our country, and the dynamics of international climate negotiations,
would you agree that the United States must act regardless of the level
of commitment from China?
Answer. Absolutely, but I think we can also do better than that. We
should be able to build a bilateral United States-China Clean Energy
Partnership this year that in turn imparts momentum to the Copenhagen
negotiations and positions China to take a more forward-leaning
attitude toward those global talks.
______
Responses of Elizabeth Economy to Questions Submitted by Senator
Barbara Boxer
Question. Please describe the actions that China is now taking to
reduce its greenhouse gas emissions.
Answer. China's Greenhouse Gas (GHG) reduction efforts include:
Reducing energy intensity (energy consumption per unit of GDP) by 20
percent during 2006-2010; increasing the role of renewable energy
within the primary energy mix to 10 percent by 2010 and 15 percent by
2020; a top 1,000 program to improve the energy efficiency of the top
1,000 energy consuming enterprises in nine sectors (iron and steel,
nonferrous metal, chemicals, petroleum/petrochemicals, construction
material, textiles, paper, coal mining and power generation); a fuel
consumption tax on gasoline of 1 rmb per litre; \1\ replacing and
adding to the country's stock of coal-fired powerplants with more
efficient models; and a massive afforestation program that has raised
the level of forest coverage in the country from approximately 12
percent in 1998 to 18 percent in 2009.
---------------------------------------------------------------------------
\1\ Testimony of Barbara A. Finamore before the select committee on
Energy Independence and Global Warming, U.S. House of Representatives
(March 4, 2009).
---------------------------------------------------------------------------
New targets and policy initiatives are also announced with striking
frequency. For example, the government has discussed more than tripling
its wind-power generating capacity to 100 GW by 2020 from its previous
target of 30GW; floated a proposal for a 40 percent Renewable
Electricity Standard by 2050; pushed forward new rules on compulsory
green procurement for local governments; and raised the possibility of
a carbon tax and a carbon trading regime at some undisclosed time in
the future.
China is also actively investing in new technologies that will help
slow the rate of growth of the country's GHG contribution. It has
announced a US$1.5 billion research subsidy for automakers to improve
their electric vehicle technology. (China's leaders have called for
500,000 ``new energy'' vehicles, such as hybrids and electric vehicles,
to be produced this year. Shenzhen is reportedly already establishing
20 220-volt charging pillars in office and residential areas. According
to one international consulting firm, Frost and Sullivan, it will take
a minimum of 10 years for China to transition to electric vehicles.)
State-owned power developer China Huaneng Group has announced that it
will pursue the development of technologies to capture and sequester
carbon (CCS) with the assistance of the ADB and the Chinese
Government.\2\ Shenhua Group is also pursuing CCS technology in
conjunction with its planned coal-to-liquid fuels plant in Inner
Mongolia. Moreover, powerplant efficiency technology may soon also make
its way from China to the United States. In April 2009, Xi'an Thermal
Power Research Institute, a subsidiary of Huaneng, signed a preliminary
agreement to supply Houston-based Future Fuels with a two-stage
pulverized coal pressure gasification technology for an IGCC plant to
be built in Schuylkill, PA, in 2010.
---------------------------------------------------------------------------
\2\ Green Hops: New Renewable Energy Targets, More Carbon Tax
Chatter, Singapore-Nanjing Eco-city Announced,'' Green Leap Forward
blog (May 8, 2009). http://greenleapforward.com/2009/05/08/green-hops-
new-renewable-energy-targets.
Question. Please describe ways that China and the United States can
---------------------------------------------------------------------------
work together to reduce greenhouse gas emissions.
Answer. Clean energy and capacity-building are two major areas
where the United States and China can cooperate on climate change.
First, a United States-China clean energy partnership needs to look
ahead over the next 10 to 20 years at the profound changes, both within
China and in terms of China's role abroad, and structure the
partnership in that context. China plans to urbanize 400 million people
between 2000 and 2030, which will have a profound impact on China's
energy-use patterns (urban residents use 3\1/2\ times more energy than
their rural counterparts). Energy efficient buildings (including new
building materials) and appliances, electric cars, renewable, smart
urban planning should be top priorities for United States-China
collaboration. These partnerships, which may develop into ecocity or
province/state partnerships should target first off China's national
environmental model cities (about 10 percent of China's 660 cities)
because the leaders and businesses in these cities have a proven track
record of commitment to environmental protection in their cities.
Similarly, companies that are members of China's Green Companies
Program have begun to develop a track record of running their
businesses in more efficient and environmentally sound ways. These
should be the first candidates for joint projects. We already have an
ecopartnership on this issue under the Strategic Economic Dialogue
between Chang'an Motors and Ford Motor Company and the cities of Denver
and Chongqing. We should be looking aggressively at what's taking place
with that initiative, seeing what the obstacles are, what the
opportunities are, and whether this is something that can be replicated
throughout other parts of China. If the initiative is not working, we
should consider how to revise and strengthen it.
It is important to remember that technology does not matter unless
the political and economic systems are there to support it. United
States companies in China want contract sanctity, enforcement, and
certainty of regulation, which circles back to governance and capacity-
building. To this end, the United States can begin to work with China
by assisting with emissions monitoring, reporting, and verification.
United States efforts to help China develop a more transparent,
accountable, and rule-based system will be a long process, but an
absolutely critical one. California is beginning an initiative that is
going to try to address some of this problem. It has a climate
governance partnership that it is trying to establish with a number of
provinces, in which members of different parts of the bureaucracy at
the local level will form climate action task forces, and to encourage
information-sharing and transparency, and accountability at the local
level.
Finally, the partnership ought to address the profound changes in
China's role abroad. Something not very many people have been thinking
about is how China's drive for resources--timber commodities, food
crops, oil, and gas--has brought tens of thousands of Chinese companies
to Africa, Latin America, Southeast Asia, along with millions of
Chinese workers, with very little to no environmental supervision.
China is now the largest importer of timber in the world and the
largest importer of illegally logged timber in the world. It is
contributing to rampant deforestation in places as far flung as
Cambodia, Myanmar, Mozambique, Russia, and Indonesia. Even as China is
undertaking positive climate mitigation efforts with its forest program
within its own borders, it is contributing to the opposite in many
countries abroad. I think that as we think through a climate
partnership with China, it ought to be in the context of a global
sustainability program that would encourage China, the United States,
and developing countries to discuss the actions of Chinese
multinationals abroad.
Question. There is universal agreement that China must curb its
emissions if the world is to avoid unchecked climate change. Some argue
that the United States should not reduce its emissions until China does
so. Do you agree with this argument? Would a ``wait for China''
approach help persuade China to take on international climate change
commitments?
Answer. The United States should not wait for China and should act
regardless of China's commitment at Copenhagen. President Obama began
very early on, even before he took office, to talk about green energy
and a clean energy future for our country, including his promise to
build 5 million green jobs in the next decade. This must also be an
integral part of the U.S. leadership's climate change message to the
American people. It is what will get them excited about moving forward
on this issue. China, despite its recalcitrance, is not waiting to
develop its clean energy market. It is already forging ahead in
developing electric cars and renewable energy technologies. There
should be an opportunity presented to the American people to move our
country forward into the 21st century and take a leading economic role,
so that 5 or 10 years from now, the United States does not lag behind
other countries, including China, on electric cars and a vast array of
other renewable and energy-efficient technologies.
Equally important is the need for the United States to lead by
example. Although China will find its own path to a low carbon economy,
the United States has the opportunity to demonstrate how it can be
done, whether through best urban planning practices, the rapid
development and spread of energy efficient building codes and new
building materials, the development of alternative fuel vehicles and/or
the rapid deployment of renewable energy and smart grid technology. The
United States will have no credibility in pushing China to forge a new
path if we, ourselves, are not already well down that road. Moreover,
we will lose a critical opportunity for our own environmental and
economic future if we do not seize this moment to develop our own clean
energy economy.
Question. Given the serious threat that global warming represents
to our country, and the dynamics of international climate negotiations,
would you agree that the United States must act regardless of the level
of commitment from China?
Answer. Please refer to response to previous question above.
Question. Do you believe that China's political leaders are aware
of the impacts and consequences for China that would result from
unchecked global warming?
Answer. The Chinese Government has called on experts within the
bureaucracy to assess the impacts and consequences of climate change
and conducted extensive studies on the issue. In April 2007, Beijing
published a three-part National Assessment Report on Climate Change,
the result of a 4-year collaborative study between China's Ministry of
Science and Technology, Meteorological Administration, and the Chinese
Academy of Sciences. In June 2007, China released its National Plan for
Coping with Climate Change, in which Beijing outlined for the first
time a blueprint for how the country should address the challenge.
Nonetheless, few within China's elite discuss climate change with a
sense of urgency; the priorities remain continued rapid economic growth
and social stability. To the extent that these priorities coincide with
addressing climate change though, for example, energy efficiency and
energy security, China's leaders are enthusiastic about moving forward
to address this global challenge. Beyond this, however, the rate and
nature of China's economic growth suggest that without significant new
investment and international assistance, the country will fall well
short of what it needs to do to help stabilize the global climate. \3\
Part of the challenge is related simply to the magnitude of the task at
hand. In addition, China's GHG reduction efforts are greatly
complicated by emerging trends in the pattern of economic development,
competing priorities within China's political system, and weak capacity
for monitoring and enforcement. Moreover, there is a lack of political
will in Beijing to make the necessary fundamental changes to tackle the
climate change challenge effectively, such as the rule of law,
transparency, and official accountability.
---------------------------------------------------------------------------
\3\ The Tyndall center, for example, argues that China's energy
portfolio will need to be 60 percent renewable by 2050 to stabilize the
climate. The McKinsey report's baseline scenario for China's GHG
emissions, in which China doubles its carbon emissions from 2005 by
2030, necessitates that China has 100GW of wind generating capacity by
2030. In its abatement scenario, however, in which China limits the
growth of its carbon emissions to 10 percent above 2005 levels by 2030,
McKinsey suggests that China would need 300GW of wind generating
capacity.
---------------------------------------------------------------------------
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