[Joint House and Senate Hearing, 111 Congress]
[From the U.S. Government Publishing Office]



 
  TRANSPARENCY IN ENVIRONMENTAL PROTECTION AND CLIMATE CHANGE IN CHINA
=======================================================================

                               ROUNDTABLE

                               before the

              CONGRESSIONAL-EXECUTIVE COMMISSION ON CHINA

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 1, 2010

                               __________

 Printed for the use of the Congressional-Executive Commission on China


         Available via the World Wide Web: http://www.cecc.gov
                             CO N T E N T S

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                                                                   Page
Opening statement of Charlotte Oldham-Moore, Staff Director, 
  Congressional-Executive Commission on China....................     1
Brettell, Anna, Senior Advisor, Congressional-Executive 
  Commission on China............................................     3
Finamore, Barbara, Founder and Director, China Program, Natural 
  Resources Defense Council......................................     4
Gordon, David, Executive Director, Pacific Environment...........     7
Seligsohn, Deborah, Senior Advisor, China Climate and Energy 
  Program and Advisor, Climate Change and Energy Network, World 
  Resources Institute............................................     9
Wara, Michael, Assistant Professor, Stanford University Law 
  School.........................................................    11

                                APPENDIX
                          Prepared Statements

Finamore, Barbara................................................    27
Gordon, David....................................................    35
Seligsohn, Deborah...............................................    38



  TRANSPARENCY IN ENVIRONMENTAL PROTECTION AND CLIMATE CHANGE IN CHINA

                              ----------                              


                        THURSDAY, APRIL 1, 2010

                            Congressional-Executive
                                       Commission on China,
                                                    Washington, DC.
    The roundtable was convened, pursuant to notice, at 2:04 
p.m., in room 628, Dirksen Senate Office Building, Charlotte 
Oldham-Moore, Staff Director, presiding.
    Also present: Anna Brettell, Senior Advisor, Congressional-
Executive Commission on China.

 OPENING STATEMENT OF CHARLOTTE OLDHAM-MOORE, STAFF DIRECTOR, 
          CONGRESSIONAL-EXECUTIVE COMMISSION ON CHINA

    Ms. Oldham-Moore. Welcome. I'm so pleased to see the 
substantial crowd we have today.
    Welcome to the Congressional-Executive Commission on 
China's [CECC] panel on ``Transparency in Environmental 
Protection and Climate Change.''
    For those of you who have not been to our Web site, I 
encourage you to visit it at www.cecc.gov. The Commission posts 
daily analysis, and one can sign up to the Commission's 
subscription list. The Commission releases a monthly brief on 
rule of law and human rights developments in China and conducts 
hearings and roundtables. The Commission also issues an annual 
report on rule of law and human rights development in China, 
which is released in October. So, please do visit our Web site.
    The CECC, today, has convened a panel of experts who will 
discuss government transparency in the areas of environmental 
protection and climate change in China. China has stated 
commitments to 
improve access to environmental and climate change data. These 
commitments include China's passage of the Open Government 
Information regulations in 2008, its revision of the People's 
Republic of China's statistics law in 2009, and its acceptance 
of the Copenhagen Accord in December 2009.
    The question before us is whether there are mechanisms in 
place that encourage transparency so that one can determine 
whether China is indeed meeting its stated commitments. Chinese 
leaders have, since the 1990s, gradually increased the public 
availability of a wide array of data in the environmental 
protection sector.
    Access to environmental data is a cornerstone of public 
participation and for ensuring enforcement of environmental 
laws. Public participation and demands for a cleaner 
environment are important because they are typically necessary 
for any country to achieve environmental protection goals.
    China's environmental groups--some closer to the government 
than others--have increased in numbers since the late 1990s and 
have become more effective advocates and more active in using 
the law to obtain environmental information, and they do this 
with an eye toward improving enforcement of environmental laws 
and promoting more progressive policies.
    As citizens and environmental groups increase their 
monitoring activities, access to information becomes 
increasingly important. Questions remain, however, regarding 
the information available to these groups and to ordinary 
citizens in China, especially at the local levels.
    In relation to climate change, China, among other promises, 
has pledged to endeavor to ``lower its carbon dioxide emissions 
per unit of GDP [gross domestic product] by 40-45 percent by 
2020, compared to its 2005 levels.''
    This pledge to cut China's carbon intensity is closely 
related to its previous commitments to decrease its energy 
intensity, and that's the amount of China's energy consumed per 
unit of GDP. In China, energy accounts for 85 percent of 
China's carbon emissions, so discussions about transparency in 
measuring and reporting China's carbon emissions is largely, 
although not solely, a discussion about transparency and energy 
data.
    Since concerns about the reliability of China's energy data 
surfaced in the late 1990s and again in the early 2000s, China 
has tried to improve its systems for energy and climate data 
measurement, collection, and reporting. China also has agreed 
to participate in several cooperative programs to establish 
principles for improving data transparency and for developing a 
system to measure and report on all of its greenhouse gas 
emissions to the international community.
    We are very fortunate to have a distinguished group of 
panelists who will discuss transparency in the environmental 
protection and climate change sectors from different 
perspectives. Barbara Finamore will open with a general 
overview of access to environmental information in China and 
China's environmental Open Government Information efforts, and 
discuss the relevance to implementation of China's climate and 
other environmental targets.
    David Gordon will discuss the role of environmental groups 
in monitoring China's environmental performance and actions to 
address climate change.
    Debbie Seligsohn will briefly introduce China's systems for 
measuring, monitoring, and reporting energy and climate data. 
She will then discuss the implementation of these systems, 
highlighting remaining gaps and foci of capacity-building 
efforts.
    And Michael Wara, who has traveled from the west coast to 
the best coast, will discuss transparency issues in relation to 
energy projects in China that generate carbon credits for 
foreign investors. He will also discuss China's implementation 
of international Clean Development Mechanism [CDM] guidelines.
    We are grateful that all of you have been able to join us 
today.
    I want to briefly introduce Dr. Anna Brettell. She is our 
senior advisor on these matters, and will introduce the 
panelists with more detail.
    Thank you.

   STATEMENT OF ANNA BRETTELL, SENIOR ADVISOR, CONGRESSIONAL-
                 EXECUTIVE COMMISSION ON CHINA

    Ms. Brettell. Great. I'd like to start with Barbara 
Finamore. She's the Founder and Director of the China Program 
at the Natural Resources Defense Council [NRDC]. She leads 
NRDC's 25-member staff in Beijing, who work on a number of 
projects that focus on climate change, energy efficiency, green 
buildings, advanced energy technologies, open information, 
environmental law, public participation, environmental health, 
and responsible sourcing.
    She has held several positions in the U.S. Government, and 
also the United Nations' Environment Program. She has been the 
president and chair of PACE [Professional Association for 
China's Environment], and is the co-founder and president of 
China-U.S. 
Energy Efficiency Alliance, which is a nonprofit organization 
that works on public-private partnership projects in China to 
reduce its greenhouse gas emissions. Ms. Finamore has had over 
20 years experience working on China's environmental issues.
    David Gordon serves as the executive director of Pacific 
Environment, an NGO that's based in California. They work with 
grassroots organizations in China, Russia, Alaska, and 
California. They help communities have a larger voice in 
environmental decisionmaking.
    Mr. Gordon has helped Pacific Environment partner with 
Chinese groups since the mid-1990s. They have especially 
supported groups across China--all across China--to address 
issues of water pollution, environmental health, and marine 
conservation.
    Deborah Seligsohn is the senior advisor to the World 
Resources Institute's [WRI] China Climate and Energy Program, 
as well as the advisor to WRI's Climate and Energy Network, 
chinafaq.org. Her focus is on deepening research collaboration 
and the development of policy tools to address climate change 
issues. She has also had experience in the U.S. State 
Department, working in several countries including India, 
Nepal, and New Zealand. Her most recent position was as the 
Environment, Science Technology, and Health Counselor on 
Beijing.
    Michael Wara, or I should say Dr. Wara, is an Assistant 
Professor at Stanford University Law School, where he teaches 
environmental law and policy, and also international 
environmental law and property. His research focuses on the 
emerging global market for greenhouse gases in the post-Kyoto 
regime for reducing their emissions.
    His research includes a focus on the carbon credit market 
in a number of countries, including China. He has testified 
before a couple of House committees in the past about carbon 
offsets.
    So, I look forward to listening to everyone's testimony. 
So, Barbara?

  STATEMENT OF BARBARA FINAMORE, FOUNDER AND DIRECTOR, CHINA 
           PROGRAM, NATURAL RESOURCES DEFENSE COUNCIL

    Ms. Finamore. Thank you very much, Charlotte, and thank 
you, Anna. It's my pleasure and honor to be here with all of 
you today. I'm delighted to see so many of you in the room to 
discuss these very important issues, because my 20 years of 
experience in China and 10 years before that in the United 
States have convinced me of the fundamental importance of 
public access to information on energy and environment as a key 
method for improving environmental performance, whether it be 
conventional pollutants, energy intensity, or climate change 
reduction.
    Like many other countries--like the United States in fact, 
when I started doing environmental law in the United States--
China has begun to realize, in an ever-increasing manner, that 
open access to environmental information is a way to bring in a 
variety of stakeholders to help with the process of improving 
enforcement of its 
environmental laws and policies. Also, it's a way to relieve 
the pressure on the already extended Ministry of Environmental 
Protection [MEP] and local environmental protection bureaus, 
and in fact to improve the quality of the information that is 
available.
    Of course, as you heard from Charlotte, the really key 
development was in May 2008, when the State Council passed its 
first equivalent freedom of information act, its Open 
Government Information regulations.
    Now, this came after about a decade of experimentation, 
with everything from the Green Watch program, which I was able 
to be involved in through PACE that had a color-coded method 
for rating factories' environmental performance, to provisions 
for allowing the public to comment on environmental impact 
assets and appear at hearings on certain environmental impact 
projects.
    But this Open Government Information Regulation was really 
sweeping, applying to every government agency. Every government 
agency was, in turn, supposed to develop its own implementing 
regulations. The Ministry of Environmental Protection was the 
first out of the box. They came out with their own implementing 
regulations almost immediately after the State Council issued 
theirs.
    Only a few other government agencies in China have followed 
suit, so that's the first area I just wanted to mention. There 
is room for improvement here for many other agencies to follow 
the good example of the Ministry of Environmental Protection in 
developing their implementing regulations. That's what I'm 
going to focus on, just very briefly.
    The Ministry of Environmental Protection regulations 
require government environmental agencies, from the central 
government down to the provincial and local levels, to 
proactively provide all sorts of environmental information to 
the public and to respond to requests for such information.
    It ranges from everything from how many permits they've 
issued, how many environmental impact assessments they have 
issued, what the impacts are, environmental statistics, 
environmental quality information, what letters of complaint or 
requests for information they've received from the public, all 
the way to information such as a list of violator companies 
that are way above their emission standards, what lawsuits have 
been brought for administrative penalties, and what have the 
resolutions been.
    There is a time limit on responding, but typically within 
15 days. There are exceptions, just like in our Freedom of 
Information Act, for things like state secrets, privacy, and 
commercially sensitive information, and there is a provision 
for appeal. This all is quite progressive, I think, and for 
those who have been working in China a long time, quite a 
surprise that this was implemented on a national level.
    I'm sure you are all aware that information is at a premium 
in China, to say the least, so this was a very important step 
forward. But of course, the key is always: how are these 
regulations being implemented, how are they being enforced, 
what kind of information is being revealed?
    NRDC, very soon after the Ministry of Environmental 
Protection and the State Council issued their regulations and 
measures, began a project with the Institute for Public and 
Environmental Affairs, Ma Jun's organization, whom I'm sure 
many of you know, to really track the progress at the municipal 
level, and we'll continue to do so. What we found was, 
basically, low levels of compliance overall, but very bright 
spots in each of the eight key areas that we did measure.
    In fact, we discovered some really amazing, creative, and 
innovative ways that certain cities were implementing certain 
parts of these regulations, from searchable databases where 
people could go online and pick a point source, a polluting 
factory, and target and track its emissions, to things like 
putting on the Web site hourly monitoring readings of pollution 
levels. Other cities were very good at responding to requests 
for information and others were very forthcoming to talk about 
all the lawsuits and administrative proceedings that were being 
brought. No one city did a very good job on everything.
    But what we're trying to do is similar to something that 
NRDC has been doing for many years in the United States. We 
publish an annual report on the conditions of our nation's 
beaches, in terms of certain pollutants. The first year we did 
that report, it was very bad all across the board. But the name 
and shame value was invaluable, and right away cities took 
action, beach communities took action to improve their 
performance for the next year because they wanted the tourists 
to come back.
    We're already seeing that happen in China. Cities are 
looking at the performance of other cities and saying, ``I 
didn't realize we had to do that,'' or ``I didn't realize we 
could do that,'' or ``I'd better do that, and if I do it's 
going to be safe, I'm not going to get into some kind of 
political trouble.'' So we will continue to do this year after 
year, and we are already getting inquiries from cities about 
each other. We're bringing cities together to discuss China's 
own best practices, and hope to foster them.
    But there are obstacles to greater compliance. They're very 
similar to what we see in many other instances on environmental 
energy regulations: lack of capacity on the part of local 
officials who don't understand what to do or how to do it; the 
vagueness in the regulations.
    Still, I'm happy to say that the Supreme Judicial People's 
Court has issued a draft judicial interpretation to clarify how 
these regulations should be followed, what is the scope, and 
what is the scope of the exemptions. They even ask for public 
comment on their draft judicial interpretations, so we hope 
that will provide more clarity. Most important, how well are 
local officials going to be held accountable for their failings 
to comply with the regulations?
    Just really briefly, I'd like to provide four suggestions 
for ways in which the United States can help to promote China's 
efforts toward greater transparency in this, and other, areas. 
One--and this is already going on but it can be continued and 
strengthened--exchanges on the issues relating to, how do you 
set up the rules of the system, how do you refine the laws and 
the rules for environmental information disclosure? The United 
States has much depth of experience in this area that it can, 
and is, and hopefully will continue to, share.
    Number two, the United States and China, as I'm sure many 
of you know, are already involved in a very large number of 
international exchanges and partnerships on all kinds of 
environmental and energy issues. One thing we hope will happen 
going forward is an effort to build into these partnerships, 
these projects, and these collaborations, efforts to ensure or 
to improve the release of information that's generated through 
these projects to the public, and also to develop the capacity 
of the local officials to make that information available.
    Third, given the interdependency of our two economies and 
the increasing demand for information on the part of U.S. 
consumers and businesses on the environmental impact of the 
goods that they purchase, we think there is tremendous 
opportunity here for collaboration on approaches to greening 
the supply chain of U.S. industries. This benefits the 
consumers, gives Chinese environmental authorities support of 
powerful business allies, and ultimately helps to bring about a 
cleaner environment.
    Finally, as we begin to look at how China is going to meet 
its climate commitments, we think there is tremendous room here 
for technical, non-political exchange between the United States 
and China on approaches on how to improve the methodologies 
relating to greenhouse gas emissions monitoring and 
verification. This is already going on: there is a memorandum 
of understanding between the U.S. Environmental Protection 
Agency and China's equivalent, Ministry of Environmental 
Protection, which has been going on for years. But again, this 
is an area we think is very fruitful and we hope it will be 
continued and strengthened.
    I'll stop there. I look forward to our discussion and your 
questions. Thank you very much.
    [The prepared statement of Ms. Finamore appears in the 
appendix.]
    Ms. Oldham-Moore. Thank you, Barbara.
    Please, David.

    STATEMENT OF DAVID GORDON, EXECUTIVE DIRECTOR, PACIFIC 
                          ENVIRONMENT

    Mr. Gordon. Thank you very much. Thank you for the 
opportunity to provide comments to you today, and to the 
Commission for organizing this wonderful discussion.
    Pacific Environment has worked in China for over 15 years, 
assisting local environmental organizations to grow a mature 
environmental movement that is effective at working together 
with the Chinese Government to address the most pressing 
environmental issues affecting China's development path.
    The majority of our work in China has focused on water 
pollution issues and strengthening local non-governmental 
organizations to effectively work with local government 
agencies to address these critical issues. The lessons we've 
learned through these efforts have relevance to questions of 
transparency and environmental protection and can also help us 
understand how to promote transparency in dealing with climate 
change issues in China.
    One of China's most critical environmental problems, as 
probably most people in the room know, is water pollution. In 
2005, Chinese governmental officials indicated that over 360 
million rural Chinese lacked access to clean drinking water, 
and over 70 percent of lakes and rivers are polluted. Major 
pollution incidents happen on a near-daily basis.
    Now, I do want to point out, this is not meant to single 
out China for these problems. These are similar problems that 
have been dealt with in other parts of the world, including 
here in the United States, and that will be one of the key 
points of my talk, is that, in fact, many of the challenges 
that are being faced in China around transparency and around 
environmental governance are the same challenges that we face 
here in the States, and that offers some opportunities for 
collaboration and learning from each other on these issues.
    We believe that improvements on issues such as water 
pollution will only be successful and sustainable if local, 
regional, and national environmental groups are able to 
establish themselves as strong watchdogs of, and advocates to, 
the government and private business and partner with them to 
find solutions.
    Working with many partner and environmental groups across 
China, we've reached out to local communities concerned about 
water pollution, helping them to conduct public relations 
campaigns, reach out to the media, reach out to the government 
to find ways to make a difference. What's important to note is 
that the Chinese Government has recognized the significant 
nature and the severe nature of these issues.
    There's been a noticeable shift in behavior by the Chinese 
Government as it pertains to environmental issues, particularly 
water pollution, as they've acknowledged that the environmental 
crisis, particularly for water, is coming earlier than 
expected. In this regard, they have looked to non-governmental 
organizations [NGOs] at the local and regional levels to help 
them address some of these issues.
    Barbara did a wonderful job talking about the open 
government regulations and the ways that environmental groups 
are starting to use this transparency in environmental 
information to understand how to gather information about water 
pollution issues, so I'll skip over part of my testimony, with 
one comment that again this is very similar to the experiences 
that we have gone through here in the United States with the 
development of the Freedom of Information Act.
    In the United States, years of precedent-setting litigation 
was 
required to ensure quality implementation of the Freedom of 
Information Act, and while we hope that a similar process is 
not required in China, I think we need to recognize that it 
will take time to build strong and transparent environmental 
governance and that there are ways that we can work together to 
do that to help ensure public trust in government information.
    I'd like to comment on one important model where the 
transparency of government information has been used to create 
some very real environmental improvements. In this model, the 
Institute of Public and Environmental Affairs [IPE] in China 
has made great progress using open government data to publicize 
pollution sources through a national water pollution map. IPE 
then works collaboratively with business, government, and local 
NGO representatives to encourage third-party audits of 
polluting factories that can make recommendations for pollution 
reduction.
    This model demonstrates how Chinese civil society can use 
publicly available information produced by the government to 
achieve environmental progress. IPE has now expanded its model 
to tackle air pollution issues, with evident applications 
within a climate change context.
    So one of the critical questions that we've been asking is: 
how can the lessons learned from civil society's efforts 
against water pollution in China also be applied to climate 
change issues? We believe that public transparency of 
environmental information is a critical underlying component to 
appropriate and effective measurement, reporting, and 
verification [MRV] of climate change mitigation efforts.
    Just as in water pollution, the Chinese Government has made 
a number of significant and encouraging statements about 
reducing greenhouse gas emissions, and we've already heard 
about some of these. A critical part of working with China on 
climate change issues is empowering China's civil society and 
environmental organizations. With the right information and 
tools, communities throughout China can advocate for better 
energy choices. Civil society organizations can encourage 
provincial and industrial leaders to reduce greenhouse gas and 
other pollutant emissions.
    In the United States, we have seen similar actions at the 
local and state levels that have been remarkably successful in 
developing greenhouse gas emissions reduction strategies. 
Indeed, the shift to local- and state-level strategies 
represented an enormous breakthrough in the United States from 
shifting awareness into action on climate change issues, and 
we've seen some of the most innovative efforts developed at the 
city and state levels. In China, provincial-level strategies 
also have the potential to build local action around as yet 
unimplemented central government policies.
    During the Copenhagen negotiations in December, concerns 
were raised about China's willingness to accept MRV 
requirements suggested by developed countries, including the 
United States. These concerns, I think we have to recognize, 
came about as a result of a fundamental lack of trust in 
official government statistics and action in China. These 
concerns are real and we need to find ways to address those. 
But China also raised a number of valid concerns in its own 
right about how international MRV requirements can become an 
intrusion on its own sovereign rights.
    So I'd like to suggest that there could be other ways that 
we can approach the MRV efforts, and that is to strengthen 
multiple systems within China that will verify data and 
information, and especially strengthen local systems within 
China. If these are systems developed within China, then this 
avoids the very tricky problem of intruding on sovereign 
rights.
    A critical component to a healthy MRV system anywhere in 
the world, including here in the United States, is a healthy 
and independent civil society sector. A healthy and independent 
civil society sector can help ensure that the government 
provides and acts upon accurate information, that the sector 
can help partner with all levels of government to find 
environmental solutions.
    So in conclusion, I would just like to say that we've seen 
a significant amount of progress in the last five years on 
water pollution efforts within China. We've seen civil society 
organizations, at the Beijing level and at the provincial 
level, start to make real progress in working together with 
local government agencies to shut down the most egregious 
polluting factories and to improve quality and standards at 
other factories. Over the long run, we'll see that this creates 
a lot of very important public health benefits within China.
    I think the question we can ask today is, how can we take 
these lessons of how civil society organizations have helped to 
engage productively within China to partner well with the 
government, and how can we apply these lessons to climate 
change issues? The conclusion I'd like to leave you with, is I 
think there is a very large area for collaboration in 
strengthening the civil society sector, which in turn will help 
build an international public trust of government information 
within China.
    Thank you.
    [The prepared statement of Mr. Gordon appears in the 
appendix.]
    Ms. Oldham-Moore. Thank you, David Gordon. We appreciate 
your remarks.
    Deborah Seligsohn, please.

 STATEMENT OF DEBORAH SELIGSOHN, SENIOR ADVISOR, CHINA CLIMATE 
   AND ENERGY PROGRAM AND ADVISOR, CLIMATE CHANGE AND ENERGY 
               NETWORK, WORLD RESOURCES INSTITUTE

    Ms. Seligsohn. Thank you very much, Charlotte. I'm 
delighted to be here today to discuss China's efforts to 
measure, monitor, and report on energy and climate data.
    Over the last three decades, I've actually lived in China 
for more than 16 years. I was first a Foreign Service Officer, 
and then I'm now the Senior Advisor to the World Resources 
Institute's China Climate and Energy Program.
    Part of my work involves helping Chinese universities, 
companies, and government agencies develop better ways of 
collecting and analyzing energy and pollution statistics. I'd 
like to outline just four main points right now. All of these 
are covered in much more detail in my written testimony.
    First, what the United States and other countries need to 
assess the success of the Copenhagen Accord is national-level 
information. We have that from China. In fact, China's overall 
energy and environmental data are quite strong by developing 
country standards. Over the last decade, the aggregated 
national-level numbers have become increasingly dependable. 
There are a couple of reasons for this. One, is that China does 
a very good job in tracking big energy producers and users. It 
pays close attention to companies like Huaneng, which is the 
world's second largest power producer, and to the biggest coal, 
steel, and petroleum companies.
    Another reason is the majority of China's energy is 
consumed in its developed eastern provinces. They import their 
energy either from other provinces or internationally. Anything 
that moves across a boundary in China is captured more 
effectively in the statistics. These provinces have the money 
and the manpower to maintain strong statistical information 
systems. As a result, the provinces with the highest energy use 
have the best data.
    Finally, the National Bureau of Statistics aggregates data 
from companies and from local and provincial governments. This 
allows the number-crunchers in Beijing to crosscheck and 
correct their figures. It becomes pretty obvious, for example, 
if power companies report burning more coal than the mining 
companies say they produced.
    The system is not perfect. There are still problems with 
accuracy, timeliness, and transparency, but there is now a 
standardized system for issuing corrections, as we also have in 
the United States.
    Here is an example of how this system works. In the early 
part of this decade, the China Statistics Bureau noticed a deep 
dip in coal consumption that did not align with other economic 
indicators. They fixed that problem and then issued revisions 
for prior years.
    In 2007, we saw another example of this increased 
reliability. International observers mistakenly thought the 
Chinese had misreported a steep decline in electricity use 
after the global financial crisis. In fact, the statistics were 
right, as later confirmed by industrial output numbers.
    This brings me into my second point. At the national level, 
China's energy statistics are already a robust indicator of its 
greenhouse gas emissions. Some three-quarters of China's 
emissions come from energy use. This is important because 
China's national commitment reported under the Copenhagen 
Accord is to control energy-related carbon dioxide emissions. 
So for the moment, we're not focusing on China's emissions from 
farming or chemical processes or other complexities.
    The bottom line is that we can be confident that we are 
getting a good idea of how China's energy emissions are 
changing just by looking at the overall numbers.
    My third point is that China is spending a lot of time and 
money to improve data collection systems. This will allow the 
government to better understand how specific policies and 
programs are affecting energy use and emissions. We know that 
over the last four years China has improved its energy 
intensity, in other words, the amount of energy used per unit 
of economic output. We also know, from detailed program 
evaluations, that almost two-thirds of those improvements came 
from two major programs: One closed small and inefficient 
industrial plants. The other targeted the thousand largest 
industrial enterprises for big efficiency improvements.
    What China needs for better program management, and is 
developing now, is the same kind of data for smaller programs 
and for local governments.
    My fourth point is that China is also moving quickly to 
improve its methods for collecting data on actual greenhouse 
gas emissions, not just energy use. In 1994, China produced its 
first national 
inventory of emissions with the help of the U.S. Department of 
Energy. Now it is working on its second inventory. And under 
the Copenhagen Accord China has agreed to report its emissions 
every two years. They are currently creating a system that will 
allow for much easier updates than was the case under the first 
national inventory.
    Finally, I would like to note that moving from preparing 
just national-level inventories to collecting firm-level 
numbers is quite recent, even in the United States and other 
developed nations. The European system is only one decade old 
and the Unted States required firm-level reporting only last 
year. In China, under the new 40-45 percent carbon intensity 
target, we are likely to start seeing annual reporting from 
local and provincial governments during the 12th five-year 
plan, which begins next year in 2011.
    In sum, China's national data is already good enough for us 
to evaluate its commitments under the Copenhagen Accord. At the 
same time, China is making significant efforts to improve the 
quality and quantity of the data it collects on energy use and 
greenhouse gas emissions.
    With that, thank you very much.
    [The prepared statement of Ms. Seligsohn appears in the 
appendix.]
    Ms. Oldham-Moore. Thank you, Deborah.
    Professor Wara, please.

   STATEMENT OF MICHAEL WARA, ASSISTANT PROFESSOR, STANFORD 
                     UNIVERSITY LAW SCHOOL

    Mr. Wara. Good afternoon. Thank you for inviting me to 
testify before the Commission.
    My testimony concerns the role that carbon markets, and in 
particular the Clean Development Mechanism [CDM], have played 
and can play in increasing transparency in energy and climate 
governance in China.
    The Clean Development Mechanism is a carbon offset market 
created by the Kyoto Protocol. After the EU emissions trading 
scheme, it's the largest carbon market ever created. 
Approximately 12 million tons of carbon dioxide offset credits 
are issued every month in the program, and it's estimated 
roughly that around 800 million tons of offsets will be 
generated prior to the expiration of the Kyoto Protocol at the 
end of 2010.
    Fifty-five percent, roughly speaking, of offset creation 
occurs in China, and that's because rapid growth of emissions, 
in practice, creates the best opportunities for emission 
reduction opportunities. So, offsets tend to follow or to go 
where there is emissions growth.
    The CDM is widely considered to have increased transparency 
in energy and climate governance in China, both in terms of 
public knowledge of the detailed implementation of energy 
policies by the NRDC, and in terms of firm-level greenhouse gas 
emissions within China.
    The CDM creates incentives for information disclosure. In 
order to get credits, project applicants--either energy or 
industrial facilities in China--need to show, need to prove 
within the CDM regulatory process, both an estimate of baseline 
emissions, i.e., the no carbon offset project emissions, and a 
measurement of actual emissions by the project.
    In practice, both estimates--one an estimate, another a 
measurement--are checked by third party verifiers, 
internationally certified under the Clean Development 
Mechanism, and are checked again by the CDM's governing body, 
the executive board, which meets regularly in Bonn.
    Thus, transparency of information is necessary in order to 
determine both whether a project is additional--that is whether 
the credits being generated represent real change in behavior 
from the baseline case. In order to know that, one needs to 
know what the baseline case was for a particular powerplant or 
industrial facility, and transparency is necessary in order to 
determine the level of credit generation that should occur. In 
order to measure the difference between actual emissions and 
the estimate of the baseline.
    Overall, the extent to which information disclosure 
enhancing the transparency of the energy sector in China occurs 
is largely a function of the sense that project developers, 
carbon offset project developers, i.e., large electricity 
generators such as Huaneng Power have, that they must disclose 
this information in order to win approval of their project 
applications under the CDM, and subsequently to generate 
issuance of carbon credits once the projects have operated.
    Thus, the extent to which projects are transparent and/or 
render transparent aspects of the industry in which they 
operate is largely a function of how stringent the third-party 
verifiers--essentially the policemen, the enforcers--of the 
Clean Development Mechanism are in enforcing the rules and in 
checking claims made by project applicants.
    This process of disclosure and review by third parties, in 
practice, has worked modestly well. Many projects disclose 
information that would otherwise be unavailable to the public. 
A wonderful example of this has occurred in the renewable 
energy sector, in particular in the wind sector in China, 
where, prior to the CDM, the tariff rates allowed by NRDC for 
particular wind farms were confidential business information. 
That made it very difficult for new wind farms to understand 
where their negotiating position should be relative to NRDC and 
created uncertainty in the marketplace with respect to returns.
    Subsequent to the CDM, because all project documents are 
placed on the CDM Web site and are available globally, there is 
much greater transparency information about business prospects 
for wind within China. At the same time, a large amount of 
information that would be pertinent to determining baselines, 
to determining the business-as-usual case without carbon 
offsets, changing incentives, has not been disclosed or has 
been disclosed imperfectly.
    I think the best example of this would be dispatch and 
tariff policies for coal-fired powerplants, which really are at 
the base case generation for much of China. In part, that 
disclosure has not occurred because the third-party verifiers 
and the CDM executive board have not asked for it.
    Transparency of verification, transparency of the actual 
measurement of emissions from projects has been much better. In 
general, monitoring documents are available publicly on the 
Web, and those documents provide a wealth of information that 
would otherwise be unavailable with respect to the operation of 
individual facilities within China.
    The United States is not a participant in the Kyoto 
Protocol and so has limited prospects for impacting the 
operation of the Clean Development Mechanism. That being said, 
there are a number of U.S. NGOs that are increasingly 
participating in the process, along with a number of European, 
and to a lesser extent developing country, environmental NGOs, 
and attempting to serve a watchdog role, attempting to, by 
commenting on their registration of projects, increase the 
amount of disclosure that does occur within the CDM, in 
particular with respect to baseline issues.
    In order to increase scrutiny further, the United States is 
likely going to have to become a major participant in global 
carbon markets. Of course, that is a subject of substantial 
debate within the United States at this point, and of 
substantial uncertainty. However, were the United States to 
become a major participant, there are a number of avenues that 
might be pursued to increase the voluntary disclosure and 
transparency that has been created by carbon markets.
    Because of the need to prove a baseline case and the need 
to measure emissions relative to that baseline case, there are 
tremendous opportunities for increasing transparency, both for 
citizens living within China and for the broader international 
community with respect to both Chinese energy policies and to 
the actual practice at the facility level of both operating 
powerplants and measuring and monitoring greenhouse gas 
emissions.
    Thanks very much.
    Ms. Oldham-Moore. Thank you, Dr. Wara.
    Now we are going to turn to the second part of the event, 
which is we'll open to questions from the audience. First we'll 
start with Anna Brettell, and after Anna offers a question to 
the panelists, we'll turn to the audience.
    When you have a question, please raise your hand. Please 
direct your question to one panelist.
    So Anna, please begin.
    Ms. Brettell. Great. My question is probably for David and 
Barbara. I think David noted that there's been a shift in the 
Chinese Government's attitudes toward environmental protection 
over the last few years, but that to sustain the momentum 
toward reaching China's environmental goals, more participation 
by environmental groups are necessary in that process.
    So I'm just curious. Besides the examples that you already 
mentioned in your testimony, are there other examples of groups 
that have been working in cooperation with the government to 
improve the environment and monitor polluters? Are there any 
stories where groups were able to make a difference in a policy 
outcome or where you could see that there was better 
enforcement and environmental quality improved?
    Mr. Gordon. Thank you. Sure. Let me tell you about a couple 
of examples. One thing I think that's important to point out, 
is that when we talk about environmental groups in China I 
think people recognize that the political space within China 
for civil society is a little bit different than perhaps here 
in the United States, and that's important to understand and 
important to recognize.
    The groups that we partner with have found ways to adapt 
their approaches in a way that they can work cooperatively with 
Chinese Government officials, and especially creating those 
partnerships, creating those relationships at the regional 
level, the provincial level, the municipal level has been one 
element that we have seen as truly critical to their long-term 
success and their ability to create real environmental 
improvements.
    In terms of the examples that you're asking for, I'll give 
a couple of examples. One was an example in Anhui Province 
recently, where three chemical factories were shut down. These 
were chemical plants in what's commonly referred to as a 
``cancer village'' along the Hui River that had been polluting 
the waterway for quite some time, and community efforts to 
raise these concerns to the local Environmental Protection 
Bureau had largely gone unheeded for many years.
    The partner organization that we worked with in that 
province worked together with the local community members to 
help find avenues to bring it to the attention both of the 
regional Environmental Protection Bureau, as well as to the 
national Ministry of Environmental Protection. They also worked 
to get some media coverage of these issues.
    Taken together, that helped lead the government to a 
decision, in early 2008, to shut down those factories. There 
was a period of time given for the relocation of those 
factories. True to their word, at the end of 2008, the 
government did follow through on its promise, which resulted in 
some very significant public health benefits and environmental 
benefits to the people living in that community directly.
    Since that time, just to give another example from that 
same province, the partner group that we worked with discovered 
a polluting factory on Chao Lake, and just their work, together 
with the regional Environmental Protection Bureau and the local 
media, helped to get that factory to shut down as well because 
of their pollution practices.
    These were factories that were far out of compliance with 
laws and norms within China, so, in fact, the relationships 
that our partner organization developed with the government 
have turned out to be very friendly because the government was 
relying on our partners to help them carry out these objectives 
of dealing with this level of pollution.
    In one other example in Gansu Province, we have a partner 
organization that was attempting to use the Open Government 
Information laws and gain access to information. They 
approached the Environmental Protection Bureau early last year, 
in early 2009, at which point they were told that, well, with 
the financial crisis, now is a bad time to ask companies to 
provide more information.
    However, even though they got an initial rejection in that 
way--which I think Barbara talked about, the time it takes for 
various government agencies to learn how to implement 
transparency laws appropriately--the long-term result was 
positive in that, as a result of that correspondence and that 
engagement, our partner organization developed relationships 
with that department, with that bureau that has since led to 
the bureau inviting our partner organizations to assist them in 
environmental monitoring efforts with regard to specific 
factories.
    So they've been invited to join in on government-sponsored 
monitoring efforts. They've tied that together with the work 
that I mentioned in my testimony to conduct third-party audits 
of factories. This has led to some specific improvements being 
made in at least one biochemical plant in the region, improved 
standards being applied there. So again, these are important 
examples to understand in terms of how local organizations can 
adapt some of these models to find ways to work effectively 
within the system. Thank you.
    Ms. Finamore. That's a very interesting question. In 
addition to the examples that I gave in my written testimony, 
I'd also like to highlight a couple of small, but very 
promising developments in the use of the court system, both for 
enforcement purposes and for open information, in particular, 
development of a system--currently very tiny, but promising--
for public interest lawsuits.
    Now, I'm sure many of you know that there have been many 
years of lawsuits by groups like the Center for Legal 
Assistance to Pollution Victims, including some class action 
suits that have yielded damages for injured members of the 
public, particularly farmers and fishermen whose livelihood has 
been threatened by pollution.
    But what has happened in the last year or so that's 
different, is, number one, the development of 11 environmental 
courts, mostly focused in three provinces, and interestingly 
enough, located in places you may never have heard of or 
wouldn't expect to see them. But these are areas where there 
have been severe environmental problems, most often water-
related, and where there has been environmental unrest. This 
indicates very clearly the role that the government sees for 
environmental lawsuits as a way to help promote social 
stability, because the alternative is often social unrest.
    Even more exciting to me as an environmental lawyer, is 
that two of the cases that have been resolved in these 
environmental courts have actually been brought by an 
environmental NGO, not on behalf of members of the public, but 
on behalf of the public as a whole. This is the kind of lawsuit 
that NRDC pioneered in the United States 40 years ago and the 
potential, if this is continued and expanded, for improving 
enforcement and environmental information cannot be overstated.
    Now, I hasten to add that this environmental organization 
is what is often referred to as a GONGO, a government-organized 
NGO. It's the All China Environment Federation. This is a 
publicly, government-approved NGO. So I think that's part of 
the reason why these lawsuits were able to go forward.
    One of them resulted in a settlement of a dispute that had 
been ongoing for 15 years, so that shows the power of these 
lawsuits. We believe that they set a precedent. Even though the 
plaintiffs in these two cases were not the types of independent 
NGOs that David was talking about, we think they set a 
precedent that is going to make it possible for other NGOs to 
bring cases in the future.
    Ms. Oldham-Moore. Thank you.
    Now we'll turn to the audience. Yes, please. Can you please 
stand? Please state your name, but project your voice. Usually 
we have microphones. Today we don't, so we've got to project.
    Audience Participant. I thank all of you for a very 
insightful set of discussions. Thank you. I'm (inaudible) with 
(inaudible) Strategies. Rather than tracking absolute emissions 
reduction, China wants to track emissions reductions through 
energy intensity targets. In your opinion--maybe directed to 
Debbie, but all of you could address this--will China really 
get where it needs to be in terms of absolute reductions? Are 
there any challenges with respect to the measurement, 
reporting, and verification that this presents?
    Ms. Oldham-Moore. Great question. Please, Debbie.
    Ms. Seligsohn. Okay. So China's moving from energy 
intensity to carbon intensity in the 12th five-year plan, so 
both are intensity per unit GDP, but what they're measuring is 
going to change. It's going to be energy-related carbon dioxide 
emissions per unit GDP. So I think the reason the Chinese chose 
to use this metric is because the other alternative that a lot 
of developing countries have chosen to use is an offset from 
business as usual [BAU]. That gets you immediately into a 
lengthy and complicated discussion about what business as usual 
is.
    I think Michael illustrated, in his discussion of this on 
the CDM market, that even in what is relatively simple and 
small-scale at the project level, determining what the baseline 
is and determining a BAU is very hard. So one of the tricks or 
advantages of using a carbon intensity metric is it's 
straightforward, it's CO2 per unit GDP, and you 
don't have to worry about what the baseline is.
    It's worth realizing, the CDM market is minuscule compared 
to China's overall emissions, so the type of approach that he 
talked about at the project level is not conceivably scalable, 
even in a developed country like the United States, much less 
in a developing country with resource constraints. So you need 
something that's fairly straightforward, and that's why they 
chose to go with this carbon intensity approach.
    The reason you wouldn't use an absolute emissions approach 
at this point is because China is still a developing country. 
Remember, their per capita GDP is about $5,000 per capita, 
compared to $45,000 in the United States. They are still in the 
period of rapid build-out of infrastructure, rapid urbanization 
as people choose on their own to move from rural areas to urban 
areas seeking jobs, et cetera.
    So I don't think there's any question among anyone who 
observes developing country emissions that China's emissions 
are going to continue to grow for quite some time, and there's 
no one in the climate world who thinks that it would be 
otherwise. So what you're looking for is a way to slow the rate 
of that growth, and then hopefully reach a peak and then 
hopefully find a way to get over to the other side and start 
declining.
    So you want something that is a control on growth rather 
than seeking to decline from a baseline. That was recognized 
all the way back in the U.N. Framework Convention in 1992, and 
it's clearly recognized, first in the Bali Action Plan, and 
then in the Copenhagen Accord. I think everybody understands 
that. So that's why you would choose it.
    I think the other part of your question is, is the way 
China is going about this going to be sufficient? So when we 
look at that question we're really looking at where we're 
trying to get, both by 2020 and by 2050. The Chinese, for a lot 
of reasons, have said they have agreed to the 2-degree goal, to 
keep the global temperature within a maximum rise of 2 +C, but 
they mostly wanted to talk about actual practical measures up 
to 2020. I think that has a lot to do with being a rapidly 
developing country, where it's hard to know what's going to be 
going on beyond 10 years from now.
    If we look at the International Energy Agency's [IEA] 
scenario for what you would need to keep the world within 450 
parts-per-million carbon dioxide equivalent, which is what is 
hypothesized to be necessary to keep the world within 2 +C, 
China's carbon intensity target is basically in line with what 
they suggest would be needed under the 450 scenario up to 2020. 
What the IEA's scenario does is stabilize global emissions by 
2020, and then look for significant reductions after 2020.
    Now, to stabilize by 2020, developed country emissions need 
to be going down now. Remember, in the 1992 convention, what 
all of us as developed countries agreed to was that we were 
going to start reducing our emissions right away, and that was 
18 years ago. So the IEA's scenario is basically all of the 
developed countries would be reducing now, and then you would 
have these various controls in developing countries trying to 
control the rate of increase.
    China's carbon intensity target, as long as average 
economic growth does not go much above 8 percent over the next 
decade, would be broadly in line with that. If economic growth 
winds up being really high, I think they would need to re-look 
at it. If you still have the same carbon intensity target, you 
would definitely see much more rapid growth in emissions.
    The U.S. target of 17 percent is a little shy of the IEA 
450 scenario. It's close. For the United States, about 18 
percent would fit the 450 scenario. I think the Chinese set 
that 40-45-percent goal with some concern that growth might 
actually be well less than 8 percent, and they're always pretty 
cautious in their planning and their predictions, assuming a 
somewhat lower growth rate than they actually wind up with.
    There has been some disagreement among economists on where 
China is going to go in the next 10 years in terms of growth, 
but I think most people don't expect it to be much above 8 
percent. There is a school of thought that thinks it will be 
less. So to some extent we'll have to wait and see. They have 
an opportunity, in the middle of the period, to reexamine and 
adjust because they're going to incorporate this target in 
their five-year plans, so they'll have two five-year plans to 
work with.
    Ms. Oldham-Moore. All right. Thank you.
    Yes. The gentleman with the purple collar. Please.
    Mr. Weis. Hi. Robert Weis with Global Resources Institute. 
My question is for either (inaudible). You both spoke about 
environmental protection and climate change as being basically 
the same thing, or at least moving in the same direction. But 
recent research indicates that they are separate (inaudible) 
for example, sulfur dioxide and also CO2.
    Sulfur dioxide actually has a net cooling effect. In fact, 
our research indicates that aerosol (inaudible) sulfur dioxide 
and organic (inaudible) so there is somehow some synergies 
between (inaudible) and in some of them there is a (inaudible) 
we've seen of (inaudible) environmental benefits, but also 
considering climate considerations as well since (inaudible). 
What are some of the steps that China can take (inaudible)?
    Ms. Finamore. I would hate to think that China's main tool 
for controlling its CO2 emissions was to increase 
its sulfur dioxide emissions. I know what you're saying, 
though. Research has shown a cooling effect on the 
SO2 emissions. When I was saying they were going in 
the same direction I was basically talking about the 
transparency issue, not the actual levels of pollutants, 
whether it be carbon or SO2. So to me, in finding 
ways to reduce CO2 there are synergies, of course. 
If it means using less coal you're going to reduce both and 
you're going to improve the health and economy of China. To me, 
that's the win-win situation.
    One of the ways to do that is, of course, through renewable 
energy. I was just in Beijing last week touring some of the 
very exciting developments on solar power in China, including a 
whole city called Solar City that's designed to promote the 
solar hot water heaters that China leads the world in. But I 
was struck by the fact there and at other solar facilities, 
that the level of particulates in the air made it very 
difficult for the solar radiation to reach these facilities.
    So here's an area where reducing coal is going to have an 
impact in several ways and it makes it more likely that solar 
can increasingly substitute for coal. So to me, that's the way 
to go rather than to say let's just focus on one pollutant and 
try to reduce that. In fact, that's one of, I think, the areas 
where China can improve its air pollution regulation.
    In this current five-year plan it's focused so heavily on 
reducing SO2, and it claims to have met its five-
year target a year ahead of schedule, what we're hearing is 
that that focus on SO2 reduction has meant less 
resources, less attention paid, less accountability for 
reducing a number of other air pollutants, so we're hoping that 
will change in the coming years.
    But I think in general, my view is that a comprehensive 
approach is needed for all pollutants. We have promoted this 
four-pollutant strategy in the United States for many years. We 
believe it's cheaper for powerplants, in particular, to 
regulate SO2, CO2, NOx, and mercury all 
at the same time rather than regulating them sequentially, 
which is going to cost more money and therefore be less likely 
to be implemented.
    I would say also that the equipment that is often used to 
monitor the SO2 in the powerplants can also be used 
for CO2 reduction, another reason to put that 
monitoring equipment in place that can be used to monitor more 
than one type of pollutant. So in general, I think a 
comprehensive approach is the way to go.
    Ms. Oldham-Moore. Debbie, you wanted to say something?
    Ms. Seligsohn. Yes. I, first of all, want to say that I 
absolutely agree with Barbara. We're certainly not suggesting, 
at the World Resources Institute, that we would use one 
pollutant to counter another. In fact, a lot of our work, in 
working at the company at the local level in terms of 
greenhouse gas emissions accounting is specifically to help 
companies and localities plan their energy efficiency moves in 
the hope that it does yield those co-benefits on both local 
pollution as well as on energy.
    The other thing to note in addition to what you said, is 
that in fact a number of provinces have used their experience 
with continuous emissions monitoring of sulfur dioxide under 
the 11th five-year plan to add continuous emissions monitoring 
of NOx as well at their powerplants. There are now three or 
four provinces that have mandated this, even though it's not 
nationally mandated yet.
    I think we are going to see that mandated in the next five-
year plan. It's with the monitoring of NOx where you actually 
have to monitor an additional gas as a diluent, that you have 
to choose either carbon dioxide or oxygen. And therefore most 
places choose carbon dioxide. That's going to give you the 
actual continuous emissions data on CO2 from 
powerplants, and potentially from other big installations.
    So while I completely agree with you that there was this 
kind of mono-fixation on SO2 in this five-year plan, 
some of the learning process from actually focusing on one 
pollutant and making a big dent in those emissions, which I 
think was the Ministry of Environmental Protection's philosophy 
in choosing to do this, has actually helped provinces start to 
think about other pollutants.
    Ms. Oldham-Moore. Yes, please.
    Audience Participant. Hi. My name is (inaudible). I have a 
question for Debbie (inaudible) about the majority of power use 
(inaudible). I wonder if any--we talked about (inaudible) 
energy sources (inaudible) of energy (inaudible) different as 
we see more development (inaudible)?
    Ms. Seligsohn. I mean, I don't know that it's going to 
change the ratio, at least in the short to medium term, because 
the efforts to develop the west have been longstanding, and the 
east has continued to boom. What I think we've seen over time, 
is there's a learning curve on environmental issues where 
innovations tend to happen on the east coast.
    Once provinces get wealthy, the governments get more 
focused on it and they get a lot more pressure from their 
citizens. As these lessons get developed, they get picked up 
sometimes directly by other provinces, but often by the 
national government that then decides to make them national 
policy. So while there has been this tendency globally for each 
country to have to go through its own mistakes and then learn 
from them, that seems unfortunate. It would be better if we 
could all learn from each other's mistakes.
    Within China, there does seem to be sort of a learning 
curve from one place to the other, so that hopefully the 
lessons learned on the east coast can be transmitted to the 
west. But I think in each province, there's going to be sort of 
a period where there has to be some effort and some pressure 
from the center and from others to improve data, et cetera. But 
as what western provinces do becomes more a part of the 
national economy, that data gets picked up better by national 
recordkeeping mechanisms.
    Audience Participant. Do you have any examples of 
(inaudible) that are (inaudible)?
    Ms. Oldham-Moore. Examples of western cities that are 
leapfrogging----
    Audience Participant. Or any examples of (inaudible) and 
implementing (inaudible).
    Ms. Oldham-Moore. Western cities that are making greater 
progress than anticipated, learning from eastern cities.
    Ms. Seligsohn. I have to admit that most of the cities that 
I know of that are working are in the east or in the center. 
There are some in the center that are really focusing on it, 
like Baoding, which is not a wealthy city but has decided it 
wants to be like a low-carbon leader. But I don't actually know 
of any sort of far-west cities. I don't know if Barbara's 
survey has some.
    Ms. Finamore. Well, in answer to your first question, two 
trends that I see of interest are, one, China's very heavy 
investment in what they call a strong, smart grid. A lot of 
that investment is emphasis on the strong. It's building the 
transmission lines that are going to help connect the renewable 
energy resources in the west to the sources of demand in the 
east. But the lessons to be learned from within China are how 
to connect the renewable resources to the grid. That's been a 
real problem, not just in China, but also in the United States. 
This is another area where I think there's tremendous interest 
and potential for collaboration.
    The other area I note is that China's target for non-fossil 
energy of 15 percent by 2020 relies heavily on large hydro, a 
lot of which is planned or being constructed in the west and 
other parts of China. But what we're seeing and hearing is a 
lot of increasing concern within China based on all the 
droughts that are going on right now, and concern that even 
with the dams that they are planning to build, if they build 
them, there's not going to be the water in there to be able to 
generate the electricity at the high rates that are being 
planned. So these are two things to watch.
    Ms. Oldham-Moore. Yes, sir. Please. In the back.
    Audience Participant. I have a question for Barbara and 
Deborah. So what lessons has the United States learned from 
China in terms of data collection and data reporting process 
for energy (inaudible)? And a second question. What can you 
tell us about the progress in China in the second national 
communication in terms of factory inventory?
    Ms. Oldham-Moore. In terms of the inventory? Okay. Great. 
Of greenhouse gases. Thank you.
    Ms. Finamore. Well, maybe I'll address the first question 
and Deborah can address the second.
    I don't necessarily think this is an area where the United 
States can learn from China; I don't think it would work in our 
system. But I think it's important for people to realize that a 
new approach that China is taking to improve accountability, 
and therefore transparency and enforcement, is the job 
performance rating system of provincial governors and the heads 
of the large enterprises. Just for an example, the 
SO2 target in the current five-year plan. There was 
a similar target, actually much larger, a 20-percent reduction 
target, in the 10th five-year plan that was just not even close 
to being reached. Rather than going down 20 percent, 
SO2 emissions went up about 27 percent in the period 
2000 to 2005. What changed between the 10th five-year plan and 
the current one to enable China to meet that SO2 
reduction target? I think one of the main factors was the 
adoption of this new job performance rating system in which 
provincial governors and other leaders are rated not just by 
how well they grow their GDP, but by how well they meet the 
SO2, the COD, and the energy intensity targets.
    There's actually a very complex system, a scorecard that 
the government at the central level has put in place and that 
applies to every province and local government that rates these 
officials and determines what their career path is going to be, 
whether they'll get a bonus, whether they'll be transferred to 
Beijing for a higher level position, or perhaps even lose their 
job. This is almost unheard of; if you think of President Obama 
telling state governors that they're going to be rated on how 
well they meet certain of his environmental targets.
    But China has a different political system and they are 
finding that this is a way of really motivating the local 
governments in a way that's never been seen before. So we hear 
that the carbon intensity targets will probably be added to 
that job performance rating system in the next five-year plan, 
and also several other air and water pollutants. Again, I'm not 
going to say this is something we should adopt in the United 
States, but people need to realize the power of this important 
new tool.
    Ms. Oldham-Moore. Thank you.
    Anybody else? Debbie?
    Ms. Seligsohn. Actually, I think there may well be some 
lessons, whether they're going to be for the United States or 
whether they're useful for other developing countries, because 
in certain areas China is innovating lower-cost ways to do 
things that we're doing. For example, the continuous emissions 
monitoring equipment that they're using, they've installed it 
in a way that's much less expensive than in the United States, 
and U.S. EPA is working with them on it. So if it turns out 
that it gets you as good data, or close enough to as good data, 
it would mean it would become much more useful not only in 
China, but elsewhere in the developing world.
    The Chinese have already shown that they can produce 
scrubbers for powerplants that are slightly less effective than 
those that are used in the United States and Europe for 
radically less cost, and that may be an excellent trade-off for 
developing countries, or certainly in the short- to medium-
term. So there are a lot of innovations there where I think 
there's a lot of cost-saving lessons that people are going to 
be able to take away.
    On the inventories, we know they're actively developing 
them. They launched this project more than two years ago now. 
They have that new memorandum of cooperation with the U.S. EPA 
that they signed during President Obama's visit last October. 
It is specifically working on developing these systems so that 
the inventory is not a one-off exercise, but actually becomes 
something that can be updated every two years.
    Because the big issue--and this was in all developing 
countries--was the way the first set of inventories were done 
in the 1990s, the first set of national communications, is that 
countries got some project financing and they did it once, and 
then they had no system for regular updating. So only one 
developing country has submitted a third national communication 
and less than a dozen have submitted two, so this is sort of a 
global issue. Again, hopefully some of the lessons that the 
Chinese and EPA, together, learn on how to get these systems 
set up for regular updating will be useful to other developing 
countries as well.
    Ms. Oldham-Moore. Thank you.
    Will? Please.
    Mr. Chester. Will Chester--Commission. My question is for 
Mr. Wara and Mr. Gordon. I think in the past, China has taken a 
few different approaches to a lot of environmental issues and 
pollution controls. There's the 2006 Green GDP (inaudible) 
sensitive (inaudible), and then recently in February, the 
Pollution Census was 
released. My question is, the Pollution Census, which was a 
large undertaking, that took two years, reported much higher 
rates of pollution than official numbers had shown currently.
    My question is why there was such a discrepancy in the 
first place, if these figures are going to be reconciled going 
forward, and is there any acknowledgement by the government 
that there might be some discrepancies as to the current 
system?
    Ms. Oldham-Moore. Great. Thank you. Great question. Mr. 
Wara?
    Mr. Wara. Well, my understanding of the cause of the 
discrepancies--and I will confess to not knowing all of the 
detail on this issue, is that the more recent estimates 
included agricultural inputs to water, like non-point source 
biological oxygen demand, whereas the earlier estimates did 
not.
    In a context where the price of fertilizer is heavily 
subsidized, and it's a known issue that there's substantial 
over-fertilization, over-use of fertilizer in agricultural 
settings, it's not surprising that the numbers that include 
that input would be much higher. That may not be the whole 
story, but that's a piece of the story that I have heard.
    Ms. Oldham-Moore. Great. I'm sorry. Will, did you direct 
your question to somebody else?
    Mr. Chester. To Mr. Gordon.
    Ms. Oldham-Moore. Oh. Excuse me.
    Mr. Gordon. I would just add that I think the point I take 
from this is that it's an iterative process. I do expect there 
to be further versions of this, whether it be a new version of 
the Pollution Census or some further approach that is taken. 
Again, this is very similar to the kinds of processes we've 
seen work here in the United States, that not all the 
information is going to be accurate the first time around and 
it's impossible to expect that.
    However, the more you have multiple systems of reporting 
the more you're able to verify, you're able to check between 
them. If those multiple systems are transparent, then you have 
plenty of options for raising some of the questions like you're 
raising now to try to refine those systems over time. I believe 
there's a very strong commitment coming from government levels, 
especially the central government within China, to do that.
    Ms. Seligsohn. May I?
    Ms. Oldham-Moore. Yes. Absolutely.
    Ms. Seligsohn. The extraordinary thing about the Pollution 
Census was getting the active cooperation of the Ministry of 
Agriculture and getting the Ministry of Agriculture actually at 
that table announcing those results. I think that was a 
deliberate effort by the State Council, China's highest 
governing body, to get that part of the pollution picture that 
they've very much known is a big part of the picture, but 
getting different ministries working together and making it 
happen is always a difficult political process. I think the 
census was actually a major step forward and I think we'll 
start to see more collaborative action on agricultural 
pollutants, which of course are a major issue in the United 
States and every other agricultural country as well.
    Ms. Oldham-Moore. Great. Yes, sir?
    Audience Participant. I'm (inaudible) and I am a student at 
the University of Maryland School of Law (inaudible). My 
question relates to what you mentioned earlier that two of 
these cases have been brought by citizen environmental groups. 
Did the local rules that were passed extend to environmental 
groups based in the United States?
    My question is two-part. First, is this the kind of 
(inaudible) you talked about earlier in terms of further 
(inaudible)? And second, is this kind of (inaudible) problem 
for the cooperation (inaudible) in terms of (inaudible)?
    Ms. Oldham-Moore. That's a fascinating question.
    Ms. Finamore. Guiyang is one of the sites of the 
environmental courts. We've been working closely with them on 
these regulations. I did not mean to suggest that the window 
would open for NGOs based outside of China to bring lawsuits, I 
meant NGOs within China. NRDC, for example, has no plans or 
interest in bringing that kind of litigation within China, but 
we do think there is certainly a role for the many NGOs, 
especially in the local areas, that are concerned about their 
local sources of pollution, to take action on behalf of the 
community as a whole.
    One problem I would mention that means this whole process 
is going to move slowly is that, even though these courts have 
been set up under some basic laws in China that allow local 
courts to be established, there is still no specific 
regulations or judicial interpretations in China that allow for 
the types of regulations that you're talking about. So we're 
now working with the higher level courts to try and get them to 
put these court experiments, such as they are, on a more legal 
footing. I think that has to be the next step.
    Ms. Oldham-Moore. Great. Thank you.
    Anybody else? Oh, I'm sorry. David, are you going to 
respond? Oh, great. Terrific.
    Mr. Gordon. Since some of the question was, I guess, 
addressed toward how will this affect our local partners, first 
of all, I very much agree with what Barbara said. Just to be on 
the record, Pacific Environment also would have no plans to 
start any lawsuits in China. It's not our role.
    Now, it is a standard practice for legal systems, including 
the U.S. legal system, to have standards whereby a foreign NGO 
could, under appropriate circumstances, bring a lawsuit here in 
the United States. In fact, there are some efforts under way 
where that's being tried.
    I would just comment that really the development of these 
public interest lawsuits and litigation practices in China are 
very important and they're part of the solution for local 
capacity and building local solutions to these problems.
    The key point here is helping people within China to have 
standing, to have access to the courts, to have access to all 
of the legal ways to resolve any conflicts or differences so 
that the rule of law becomes the mechanisms that they use to 
resolve key pollution issues.
    Ms. Oldham-Moore. One final question and then we'll close. 
Please, sir. Actually, we have two questions. How about both of 
you ask a question, but just very quickly, please.
    Mr. Little. Maybe someone on the panel can respond to this, 
and that would be great. My name is Mark Little, House 
Regulatory Affairs. (inaudible) natural resources (inaudible) 
outside of China, so I was wondering, is there any interest by 
the Chinese Government to buy loans, maybe by Chinese banks, to 
get (inaudible) in Southeast Asia and in Africa on board with 
some of these kinds of----
    Ms. Oldham-Moore. That's a great question. External 
migration of good practices. Is that happening?
    Ms. Seligsohn. Actually, the Export-Import Bank of China 
came out with its first set of principles on that about two 
years ago. It's an area where I think there's a lot more work 
that everybody wants to see done. It's an area where even some 
of the Chinese local NGOs have been talking to various 
ministries, including the Ministry of Commerce, about how to 
set up good practices for companies moving outside of China. 
The Ministry of Commerce has set some up on forestry, actually. 
It is an area that we are working on in terms of working with 
the IFIs [international financial institutions] and with other 
Export-Import Banks to try to work globally on this question, 
so I think it is a developing area.
    I don't think it's going to be an easy one, necessarily, 
for China, as it has not been easy for other countries. I think 
people often overestimate how much knowledge the Chinese 
Government has of what its companies are doing when they go 
abroad, and there's an awful lot that is going on that involves 
small, private Chinese investors that the government may have 
no knowledge of. So it's definitely a work in progress, but 
it's something that is increasingly on their radar screen.
    Ms. Oldham-Moore. Thank you.
    And sir--oh, excuse me. Did you want to say something?
    Mr. Gordon. Just quickly, to add to that, that's all very 
much a work in progress and it's very good that the Export-
Import Bank of China regulations were mentioned. It's an area 
that is getting a lot of attention right now. One important 
area worth mentioning is the Chinese Government has adopted 
rules to try to prevent financing of egregious polluters within 
China, and that's been an effective tool used to try to control 
pollution domestically. Many of the NGOs see an opportunity to 
take that over into the international arena and educate the 
Export-Import Bank of China, and others, about that. It is 
going to be a long process but I think it's a very worthwhile 
one.
    Ms. Oldham-Moore. I cut you off. Please, young man. Thank 
you.
    Mr. Coates. My name is David Coates. I'm with the Natural 
Resources Defense Council. This is a question for Michael Wara.
    Dr. Wara, I was wondering whether you could share with us 
some lessons from (inaudible) regarding the concept of business 
as usual, or a baseline. This is something that's much more a 
mainstream question following China's announcement of its 
decision to reduce carbon intensity in the lead-up to the 
December Copenhagen Conference. What's tricky is kind of the 
lack of standard methodologies or accepted principles 
(inaudible). I was wondering whether the (inaudible) experience 
might (inaudible).
    Ms. Oldham-Moore. You have the last word.
    Mr. Wara. I would tend to agree with what Debbie said 
earlier. To the extent that it's possible, baseline setting is 
an approach where we try to project far into the future some 
business-as-usual baseline. It's one that we should be very 
cautious about.
    The CDM to this day struggles with this issue and it leads 
to some of the most difficult and controversial decisions that 
the executive board has to make. There are no signs that that 
problem is going away, is going to get any easier anytime soon. 
The same problem is likely to bedevil red programs, if and when 
they are implemented at scale. I think we saw some of the same 
issues coming up in Copenhagen with respect to base years from 
which to judge emissions reductions.
    So it's a problematic concept because we do not know the 
future terribly well, especially projecting out 10 to 20 years. 
So I would just say that if there's one lesson the CDM teaches 
with respect to baselines, it's be careful, be cautious, and 
recognize the uncertainty that's inherent in an unobservable.
    Ms. Oldham-Moore. I want to thank the panelists for an 
absolutely fascinating discussion today. Thank you for 
traveling and being with us today.
    Thank you to Anna Brettell for pulling this event together. 
You did a terrific job.
    Have a great afternoon. Thanks.
    [Whereupon, at 3:34 p.m., the roundtable was adjourned.]
                            A P P E N D I X

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                          Prepared Statements

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                   Prepared Statement of David Gordon

                             April 1, 2010
    Thank you for the opportunity to provide testimony to you today on 
the subject of transparency in environmental protection and climate 
change in China.
    Pacific Environment is a U.S.-based NGO that protects the living 
environment of the Pacific Rim by promoting grassroots activism, 
strengthening communities, and reforming international policies. Our 
successes over the past 20-plus years stem from a deep and abiding 
trust that local people, armed with the right tools and solid support, 
are the best hope for protecting the world's environment. As such, we 
support the development of grassroots organizations, prioritize 
community-based advocacy, and leverage international resources in 
service of our local partners. Together with these grassroots 
advocates, we have protected tens of millions of acres of wilderness, 
spearheaded campaigns to protect endangered species, launched efforts 
to fight water pollution, reformed environmental and social standards 
for export credit agencies, and publicized critical environmental 
issues around the Pacific Rim. We support communities in China, Russia, 
Alaska and California to have a larger voice on the critical 
environmental issues that affect them, including climate change which 
increasingly impacts their livelihoods.
    Pacific Environment has worked in China for over 15 years, 
assisting local environmental organizations to grow a mature 
environmental movement that is effective at working together with the 
Chinese government to address the most pressing environmental issues 
affecting China's development path.
    The majority of our work in China focuses on strengthening Chinese 
non-governmental organizations to address water pollution issues. The 
lessons we learned through these efforts have relevance to questions of 
transparency in environmental protection, and can also help us 
understand how to promote transparency in dealing with climate change 
issues in China.
    One of China's most critical environmental problems is water 
pollution; In 2005, top Chinese governmental officials indicated that 
over 360 million rural Chinese lack access to clean drinking water; 
over 70 percent of lakes and rivers are polluted; and major pollution 
incidents happen on a near daily basis.
    Water pollution not only strains the environment, but also severely 
impacts public health. Today, China has an alarmingly growing cancer 
rate, with hundreds of ``cancer villages'' sprouting up near polluted 
water sources. The World Health Organization recently estimated that 
nearly 100,000 people die annually from water pollution-related 
illnesses in China, and 75 percent of disease comes from water quality 
issues.
    China's water pollution crisis made international headlines 
following a 2005 petro-chemical plant explosion which released 100 tons 
of benzene into the Songhua River, a major waterway in Heilongjiang 
Province and a water source for millions of people. Such spills are not 
rare in China, yet the accident and ensuing cover-up opened a new space 
for encouraging the Chinese government to change its approach to water 
pollution, specifically as it relates to public access to information, 
enforcement of pollution laws and accountability, and international 
information-sharing and cooperation.
    Over the past several years, there has been a noticeable shift in 
behavior by the Chinese government as it pertains to environmental 
issues, particularly water pollution. Pan Yue, a Vice Minister of 
China's Ministry of Environmental Protection (MEP), openly acknowledged 
that ``the environmental crisis, particularly for water, is coming to 
China earlier than expected.''
    Pacific Environment believes that improvements will only be 
successful and sustainable if local, regional and national 
environmental groups are able to establish themselves as stronger 
watchdogs of, and advocates to, the government and private industries.
    Working with many partner environmental groups across China, 
Pacific Environment is reaching out to local communities concerned 
about water pollution and helping them to conduct legal, public 
relations, and advocacy campaigns to reduce the impacts of water 
pollution on public health and the local environment. Through these 
actions, our partners are playing a pivotal role to ensure clean water 
for China's future.
    Just as in the United States, China's decades of economic and 
industrial growth have brought major environmental challenges, 
including pollution, deforestation, biodiversity loss, and 
desertification. In response to these ecological challenges, a public 
environmental movement has emerged and grown.
    China's water crisis includes overall ecosystem degeneration and a 
lack of public access to clean drinking water. Despite strong national 
policies to address water pollution, lax implementation of these laws 
inhibits local progress. These policies can become successful and 
sustainable, however, especially if NGOs can establish themselves as 
resources and experts that assist regional environmental protection 
bureaus to monitor and report on water pollution. The time is 
especially ripe for this type of public involvement in the wake of the 
implementation of China's environmental information disclosure law--a 
powerful tool for environmental groups to 
assist their communities in accessing information on polluting 
enterprises and to ensure public participation in environmental 
decision making.
    Using China's new Public Disclosure of Environmental Information 
law, groups can request pollution information from local enterprises 
and governments and achieve water quality improvements at the local 
level by using this information to ensure that polluters are 
accountable to the law and to local communities. This strategy helps 
communities to understand issues related to water pollution and engages 
them in local environmental issues. It also ensures that those working 
for 
pollution reductions are involved directly in local ecological and 
public health 
improvements and that they are accountable to local communities. Over 
time, increased public participation in pollution monitoring will 
result in governmental action to enforce pollution control and improve 
water quality.
    The Public Disclosure of Environmental Information Law is, in many 
ways, similar to the U.S. Freedom of Information Act. Just like the 
Freedom of Information Act, it will take time for Chinese government 
agencies to learn how to fully implement the law. Last year, when a 
partner organization in China requested information from a local 
environmental protection bureau, they were told that the time was not 
right to provide information due to the economic crisis. However our 
partner used the opportunity to build closer relations with the local 
government agency and since has been invited by local government 
officials to participate in pollution monitoring.
    In the United States, years of precedent-setting litigation was 
required to ensure quality implementation of the Freedom of Information 
Act. While our partners hope that litigation is not required within 
China, they recognize that it will take time and patience to encourage 
the release of environmentally relevant information to the public. We 
are already seeing progress. Public transparency of environmental 
information within China is a critical step toward ensuring public 
trust in government information.
    In one important model, the Institute of Public and Environmental 
Affairs (IPE) in China has made great progress using open government 
data to publicize pollution sources through a National Water Pollution 
Map. IPE then works collaboratively with business, government, and 
local NGO representatives to encourage third-party audits of polluting 
factories that can make recommendations for pollution reduction. This 
model demonstrates how Chinese civil society can use publicly available 
information produced by the government to achieve environmental 
progress. IPE has now expanded its model to tackle air pollution, with 
evident applications within a climate change context.
    How can the lessons learned from civil society's efforts against 
water pollution in China be applied to climate change issues? We 
believe that public transparency of environmental information is a 
critical underlying component to appropriate and effective measurement, 
reporting, and verification of climate change mitigation efforts.
    Just like the United States, China has the potential to either make 
the climate crisis more severe, or lead the world in finding solutions. 
As in the United States, climate change is impacting the people of 
China with increasingly erratic and severe weather patterns that create 
environmental and economic damage and reduce the amount of arable land. 
A significant portion of China's greenhouse gas emissions comes from 
major industrial development, which in turn pollutes waterways, dirties 
the air, and ruins ecosystems; these externalities are ultimately being 
paid by Chinese citizens.
    China's central government has made encouraging statements about 
reducing greenhouse gas emissions. The National Development and Reform 
Commission stated that China aims to ``integrate energy conservation, 
environmental protection, and control of greenhouse gas emissions into 
regional economic development.'' Despite such central government 
commitments, valid concerns remain about what actions are being taken 
at the local level to address climate change. To be effective, measures 
to reduce greenhouse gas emissions must be implemented both centrally 
and provincially.
    Pacific Environment believes that a critical part of working with 
China on climate change issues is empowering China's civil society and 
environmental organizations. With the right information and tools, 
communities throughout China can advocate for better energy choices. 
Civil society organizations can encourage provincial and industrial 
leaders to reduce greenhouse gas and other pollutant emissions.
    In the United States, actions at the local and state levels have 
been remarkably successful in developing greenhouse gas emissions 
reduction strategies. Indeed, the shift toward local and state-level 
strategies represented an enormous break-through in the United States 
from shifting awareness to action on climate change issues. In China, 
provincial-level strategies also have the potential to build local 
action around as-yet unimplemented central government policies.
    During the Copenhagen negotiations in December 2009, concerns were 
raised about China's willingness to accept measurement, reporting, and 
verification (MRV) requirements suggested by developed countries, 
including the United States. These concerns were raised out of a 
fundamental lack of trust in official government statistics and action 
in China. These concerns are real and must be addressed. However, China 
also raised valid concerns about how international MRV requirements can 
become an intrusion on its own sovereign rights.
    A different approach to MRV is to strengthen multiple systems 
within China that will verify data and information. A critical 
component to a healthy MRV system anywhere in the world is a healthy 
and independent civil society sector. A healthy and independent civil 
society sector can help ensure that the government provides and acts 
upon accurate information. A healthy and independent civil society 
sector within China is compatible with China's sovereign interests; 
indeed, the organizations with which we partner are very interested in 
collaborating with all levels of government to find environmental 
solutions.
    Historically, both the United States and China have lacked 
credibility in international climate change negotiations. However, it 
is clear that we can make the most progress in mitigating climate 
change if both the United States and China lead by example within their 
own countries to set a high standard that other countries can meet. 
This can help build each country's international credibility and 
together we can work to save our planet from the climate crisis.
    As we have heard today, China is emerging as a leader in clean 
energy production. China also needs to voluntarily ramp up its coal 
reduction measures and 
address short-lived climate forcers, if it is to both provide 
significant health and economic benefits to its population and combat 
climate change.
    The key to mitigating the threat of climate change in China and 
around the world is to help China develop an independent civil society 
that will support the government in MRV, ensure that national 
environmental regulations are implemented locally, and improve the 
availability, credibility, and transparency of environmental 
information overall.
    Thank you for the opportunity to address you on the important 
subject of transparency in environmental protection and climate change 
in China.
                                 ______
                                 

                Prepared Statement of Deborah Seligsohn

                             April 1, 2010
    Thank you for the opportunity to contribute to the deliberations of 
this Commission. My name is Deborah Seligsohn, and I am Senior Advisor 
to the China Climate and Energy Program at the World Resources 
Institute. The World Resources Institute is a non-profit, non-partisan 
environmental think tank that goes beyond research to provide practical 
solutions to the world's most urgent environment and 
development challenges. We work in partnership with scientists, 
businesses, governments, and non-governmental organizations in more 
than 70 countries to provide 
information, tools and analysis to address problems like climate 
change, the degradation of ecosystems and their capacity to provide for 
human well-being.
    I am delighted to speak with you today about China's systems for 
measuring, monitoring, and reporting energy and climate data, how these 
systems have been implemented and the opportunities for continuing to 
build capacity and improve these systems.
    Measurement and reporting systems provide information for a number 
of different purposes. It is important to distinguish the functions we 
expect the system to provide--both in the development of the system 
itself, and in the evaluation of the 
system's effectiveness and utility. Energy and climate data can be 
collected or disseminated for three purposes:

          1. Measuring overall progress through national-level data. 
        This is the essential level for evaluating any country's 
        commitments to any international climate regime. It is the 
        level at which we compare country commitments. It is also 
        essential for the country's own purposes in considering energy 
        and climate policy in the context ofoverall macro-economic 
        policy.
          2. Measuring the impact of specific programs or players--in 
        other words the data needed for energy and climate policymakers 
        to track progress toward specific policy goals. This includes 
        measuring at the sub-national level since China allocates 
        provincial and local quotas. It would include sectoral or 
        company-level reporting to enforcement bodies (to the extent 
        that enforcement is at those levels). Finally, it includes 
        programmatic data--metrics collected to assess the progress of 
        specific energy or climate programs.
          3. Providing data that civil society can access (public 
        transparency). The transparency function can occur at all 
        levels from national to the local.

    It is important to distinguish these three functions and the types 
of data needed to meet each goal, as well as the separate history of 
each type of data collection and dissemination in the international 
sphere.
                         1. national level data
    In contrast to traditional environmental pollutants, where in the 
developed world there is now a 40-year history of collection and 
dissemination of all three types of data listed above, in the energy 
area until very recently data collection has focused mainly on the 
first area--the development of national-level, aggregated data sets. 
China's history with collecting and producing energy data for an 
international as well as domestic audience is much lengthier than its 
focus on environmental issues. If one goes to the website of the 
National Bureau of Statistics (NBS) of China, one can find production 
data from 1952 and consumption data, starting in 1957. Over the years 
this data becomes substantially more sophisticated. Energy data in this 
regard is collected as part of overall national accounts data 
collection, an area that China has focused on during the past 30 years.
    National-level energy data is relatively easy to collect--there are 
relatively few major suppliers and some very large demand centers--and 
production (from the major energy suppliers, coal and oil companies) 
and consumption data (power plants, major industry, transportation 
information) can be cross-checked. The consensus of scholars we have 
interviewed as part of our ChinaFAQs program both in the United States 
and China is that (1) it is unlikely that energy data will depart from 
reality for long before the gap between supply and demand numbers, 
which are collected through separate networks, becomes very clear and 
requires a correction, and (2) the best way to track Chinese data is to 
observe the trend rather than focus on an specific short-term result. 
The most recent data may well need to be corrected in the normal cycle 
(as is true in other countries, as well), and especially in China there 
are some rapid fluctuations (such as the precipitous rate at which 
electricity demand dropped immediately after the 2007 Financial Crisis) 
that really need more time and context to analyze.
    Both of these points are illustrated in the most commonly raised 
concern about the quality of China's national energy data, a period 
between 1998 and 2001, where the Chinese National Bureau of Statistics 
(NBS) substantially underreported Chinese energy data, primarily 
because of an underreporting of coal production and use. By 2002 data 
collection had improved sufficiently so that what had previously looked 
like a trend toward rapidly improving energy intensity instead looked 
like a peculiar dip followed by a rapid rise in consumption. NBS 
recognized the aberration, and published a correction, along with a 
revision to national accounts data in 2005. This incident shows the 
need to look at long-term trends and not rely on single year data, to 
recognize the ability of the Chinese system to self-correct, and the 
formal systems enabling such self-corrections to occur predictably. In 
2005, NBS initiated a new program of 5-year economic censuses, 
specifically to assess and revise economic data.
    It is worth noting that since the early 2000s there has not been a 
similar period of apparent drift in Chinese energy statistics and the 
variability in energy intensity improvements have been much more easily 
explained in terms of current policy or global economic conditions than 
was the case in the late 1990s. Moreover, the last period when Chinese 
energy and indeed GDP statistics were questioned by international 
analysts--directly after the global financial crisis in 2007--it turned 
out that China's statistics reflected the unusual way the crisis played 
out in China, with a rapid drop in heavy industrial demand that led to 
a short-term and dramatic drop in electricity generation, followed by a 
much more rapid and robust overall GDP rebound than in any other 
country.
    These statistics can thus act as a reasonably reliable guide to 
national energy accounts and conditions, ones that can be used both by 
the Chinese national government in making policy decisions and by other 
countries looking to see how China is implementing its energy 
efficiency and renewable energy programs.
    There is no doubt data could be improved. While NBS has become much 
more willing to revise its data sets--a practice standard in other 
countries, as well, (for example, US GDP figures have a cycle with 
three revisions)--Chinese revisions of recent-year data do not always 
include revisions of prior-year data, making time series analysis 
difficult.
    In contrast to energy data, China has substantially less experience 
collecting and reporting greenhouse gas emissions data. China produced 
one Greenhouse Gas Inventory of its 1994 emissions, which it submitted 
in its First National Communication to the United Nations Framework 
Convention on Climate Change (UNFCCC) Secretariat in 2004. This work 
was done with assistance from the U.S. government during the 1990s. 
China is currently in the process of preparing its Second National 
Communication, including a new inventory. During President Obama's 
visit to Beijing in October 2009, the United States Environmental 
Protection Agency (EPA) signed a Memorandum of Cooperation (MOC) with 
the Chinese National Development and Reform Commission (NDRC) for 
capacity building in preparing this inventory. Our understanding of the 
capacity building needs as perceived by both sides is that it is not in 
the area of data collection per se, but rather in data analysis, and in 
creating a replicable and updatable system, so that China can update 
and submit an inventory every two years as provided by the Copenhagen 
Accord.
    One of the issues with national inventories not just in China, but 
in most developing countries, is that the first versions, conducted 
with project support from organizations like the Global Environmental 
Facility (GEF), were conducted as one-off exercises, rather than 
conducted with systems creation in mind.\1\ As a result few developing 
countries that conducted these first inventories in the 1990s found 
them easy to repeat. Needless to say, there are other issues involved, 
including negotiating issues about who pays for inventories, but as a 
practical matter the first inventory exercises did not leave in place 
easily replicable systems.
    Since China has not conducted regular inventories since 1994, its 
own GHG emissions figures that it uses for internal policy purposes are 
based on estimates. Since China's current national policy as reported 
to the Copenhagen Accord relates only to energ-yrelated CO2 emissions, 
it can make reasonably good estimates based on its energy data. From 
interviews with Chinese energy researchers, we understand that the 
Chinese government has a complete set of local emissions factors (the 
amount of CO2 emitted per unit energy, differentiated by type of energy 
and type of technology used to consume it) with which they use 
internally to make these estimates.\2\ Its next inventory, currently 
underway, should enable it to assess the accuracy of overall GHG 
emissions estimates. It is not clear whether China will be 
publishing a new inventory in 2010 or 2011, but in the Copenhagen 
Accord it agreed to every two years.
      2. tracking sub-national governments, companies and programs
    China can assess overall progress toward meeting its energy 
intensity, renewable energy and carbon intensity goals by looking at 
national-level data; however, to manage targets and influence the 
behavior of sub-national governments and firms, the Chinese government 
requires more detailed data. Over the last several years, the Chinese 
government has developed its energy information systems to track this 
data in a more detailed manner than was previously the case. Changes 
include more frequent reporting--up to twice a year for China's largest 
companies--as well as detailed auditing procedures.
    China's programs for promoting energy intensity and the greater use 
of renewable energy are complex and to some extent overlap. For 
example, a program to improve industrial boiler efficiency will assist 
some companies in the 1000 Enterprise Program, but might also assist 
smaller companies outside the scope of that program, and both programs 
serve the overall energy intensity goal. At the level of the national 
targets these do not cause double-counting, but tracking individual 
programs is more complex. Table 1 below details some of the major 
programs that contribute to controlling carbon dioxide emissions. There 
are dozens of other programs. Some of the successful national programs 
have been replicated at the provincial level, and there are also 
separate provincially-initiated programs, making a comprehensive list 
almost impossible to compile.\3\

 
----------------------------------------------------------------------------------------------------------------
                                                                     Reporting      Assessment
              NAMA                     Scope          Metric         Mechanism       Mechanism      Time Frame
----------------------------------------------------------------------------------------------------------------
Five-Year Plan                    National        Qualitative     Annual work     Monitored and   New targets
                                   comprehensive   evaluation of   report by       assessed by     set every
                                   planning        policy          Premier and     standing        five years
                                   document        implementatio   by each         committee of
                                                   n               Ministry        National
                                                                                   People's
                                                                                   Congress
----------------------------------------------------------------------------------------------------------------
Energy                            National, with  Energy used     Calculated by   Collected from  Five year
Intensity                          targets given   (MTCE/Unit      NBS and         multiple        goal. Many
                                   to each         GDP)            published in    sources to      data are
                                   province,                       a semi-annual   ensure cross-   tabulated
                                   locality and                    statistics      checking        monthly.
                                   stateowned                      bulletin                        Provinces are
                                   enterprise                                                      required to
                                                                                                   report semi-
                                                                                                   annually
----------------------------------------------------------------------------------------------------------------
Renewable Energy                  National, with  Renewable       Energy Bureau   Internal data   Goals to year
                                   targets given   energy          aggregates      quality         2010 and
                                   to provinces    portfolio       data from       assurance       2020,
                                   and power       standard        NBS, various    system within   calculated
                                   generation      (specified      Ministries      various         annually
                                   companies       percentage of   and             Ministries
                                                   renewable in    industrial      and cross-
                                                   total output)   associations    checking
----------------------------------------------------------------------------------------------------------------


 
----------------------------------------------------------------------------------------------------------------
                                                                     Reporting      Assessment
              NAMA                     Scope          Metric         Mechanism       Mechanism      Time Frame
----------------------------------------------------------------------------------------------------------------
The Thousand Enterprise Program   National,       Energy          Enterprise to   NDRC            5-year program
                                   targeted at     Intensity per   local DRC to    inspection      with annual
                                   1,000 largest   unit output     NDRC            teams           targets;
                                   enterprises                                                     progress
                                                                                                   reports twice
                                                                                                   a year
----------------------------------------------------------------------------------------------------------------
Individual                        Set by Sector   Intensity per   Industrial      Aggregated      Annual and 5-
Industrial                         Energy          unit physical   association     data from       year
Sector Targets                                     output          to NBS/NDRC     individual      reporting
                                                                                   companies
----------------------------------------------------------------------------------------------------------------
Program to Close Small            National,       GW capacity     Provincial      NDRC conducts   5-year
 Enterprises                       specified       for power,      government      onsite         targets,
                                   closures in     tons of         and related     verification    annual
                                   electricity     production      enterprises                     progress
                                   and other       capacity in     reporting to                    reports
                                   sectors         industry        national NDRC
----------------------------------------------------------------------------------------------------------------

    Much of the effort in the 11th Five Year Plan (2006-2010) was 
focused on the large programs that would yield the energy intensity 
improvements needed to meet the national targets, in particular the 
1000 Enterprise Program, whose enterprises use one-third of China's 
primary energy, and the closure of small and inefficient enterprises. 
From our own work with local researchers and an upcoming assessment of 
the 11th Five Year Plan by the China Energy Group at Lawrence Berkeley 
National Laboratory, it is clear that the data from these programs is 
significantly better than that related to other programs. For these 
programs not only can specific program-related targets, such as setting 
up energy plans, or closing specific units be tracked, but they can 
also be related to a specific amount of energy savings. While for other 
programs, the specific program elements might be tracked (for example, 
number of compact fluorescent light bulbs distributed), they might not 
be linked back to the actual amount of energy saved. The challenge is 
that programs were established without necessarily being linked to the 
metrics collection needed to assess program outcomes in terms of energy 
use. The programs that have the best metrics used fairly labor-
intensive evaluation techniques, in particular regular inspections. 
Table 2 below provides the evaluation metric used by inspectors to 
firms in the 1000 Enterprise Program and shows the level of detail 
national officials could focus on for such large energy users. The 
State Statistical Bureau is focused on improving statistical 
approaches, which would be beneficial.

 
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Energy conservation target (40 points       100 percent of target
 maximum)                                    achieved: 40 points;
                                            90 percent achieved: 35;
                                            80 percent achieved: 30;
                                            70 percent achieved: 25;
                                            60 percent achieved: 20;
                                            50 percent achieved: 0
------------------------------------------------------------------------
Energy conservation measures (60 points     Energy conservation leading
 maximum)                                    group: 3 points
                                            Energy conservation
                                             management department: 2
                                            Decomposition of target to
                                             unit and person 3
                                            Assessment of energy
                                             conservation target 3
                                            Reward and punishment system
                                             4
                                            Energy efficiency
                                             performance in 1000
                                             enterprises: 10 for top 10
                                             percent and 5 for top 50
                                             percent
                                            Energy conservation R&D fund
                                             4
                                            Annual energy conservation
                                             plan 4
                                            Closure of backward
                                             equipment 7
                                            Retirement of outdated
                                             equipment
                                            Implementation of local
                                             regulation 2
                                            Implementation of energy
                                             consumption norm 4
                                            Norm management for energy
                                             consuming equipments 2
                                            Implementation of energy
                                             conservation design 2
                                            Energy audit and monitoring
                                             system 2
                                            Energy statistics manger and
                                             account 3
                                            Energy monitoring appliance
                                             3
                                            Energy conservation training
                                             2
------------------------------------------------------------------------

    Further developing these program evaluation approaches might help 
China in addressing its future carbon mitigation targets and programs. 
As it moves from energy to carbon targets, there will be a need for 
integrated carbon accounting at the enterprise and possibly at the 
municipal and provincial level. The World Resources Institute has been 
working with Chinese partners on enterprise-level greenhouse gas 
accounting for four years. We have focused mainly in heavy industries, 
and our standards have been adapted for the cement and petroleum and 
petrochemicals sectors and are now being adapted for the power sector. 
These types of tools will enable Chinese enterprises and the Chinese 
government to better track their greenhouse gas emissions.
    It is also likely that the Chinese government will assign carbon 
dioxide intensity targets to provincial and local governments. The 
current energy intensity target is distributed to each of the 
provinces. The challenge for provinces is tracking all the economic 
activity within their boundaries, a much more difficult task in all 
countries than tracking national data, since provinces do not have 
enforced borders, control of a currency or customs agents. Current 
provincial energy data actually derives in part from bottom-up data 
from localities and local enterprises, but also top-down data from the 
central government, which receives data directly from many national-
level companies.
    This complexity will continue to exist with the move to carbon 
intensity. Calculating CO2 emissions at the sub-national level is more 
difficult that accounting at either the national or the firm level, 
because the ``boundaries'' of the organization are not so clear. A 
program like the European Union Emissions Trading System (EU ETS), for 
example, accounts at the national and the firm level. Because of the 
need in China, a number of international groups are working in this 
area. We at WRI are currently examining the existing tools available 
internationally, including the French Ministry of Environment's Bilan 
Carbone (Carbon Balance), and a tool produced by Local Governments for 
Sustainability (or ICLEI) to provide advise on how to best address this 
need.
    NBS is actively developing its carbon dioxide reporting 
requirements for China. These are not yet public, but from 
presentations at various conferences it seems clear that they are 
carefully studying the European system as well as the EPA's GHG 
reporting rules. One area in which they seem to be looking closely at 
the EPA's rules is in monitoring CO2 from coal-fired power plants. The 
EU system is an estimation system, based on energy use and emissions 
factors. EPA requires continuous emissions monitoring on coal-fired 
power plants, because of difficulties in measuring coal input as well 
as variation in the coal itself. While we do not yet know what China 
will choose to do, we know that researchers have been considering the 
costs and complexity of adopting the U.S. approach. In the last two 
years China has required continuous emissions monitoring for SO2 from 
coal-fired power plants, and now a few provinces have introduced 
monitoring for NOx. The equipment that monitors NOx also measures CO2, 
but as yet it is limited to a few provinces. US EPA has provided some 
assistance to Chinese localities in areas such as calibrating SO2 
monitors. If China were to rapidly deploy NOx/CO2monitors, more 
technical assistance of this sort might help the program significantly.
    What types of metrics China will need for domestic implementation, 
as opposed to overall national accounts described above, in the future 
will be determined in part by the types of mechanisms it chooses to 
use. In our current research with Tsinghua University we are looking at 
the different requirements needed if China were to choose at some point 
to use a cap and trade system, a carbon tax or additional emissions 
standards, in contrast or in addition to the current emphasis on 
quotas. While both cap and trade and carbon tax require regular 
monitoring and reporting, a carbon tax, for example, offers the choice 
of imposing it upstream or downstream in the energy production chain. 
These two would both require more facility-level verification--at 
whatever level the allotments or tax is being imposed. In contrast, 
standards will require separate systems for different types of 
standards verification, a seemingly more complex option, but one where 
China already has significant experience.
             3. providing data to the public (transparency)
    Traditionally energy data is treated quite differently from 
environmental data. Energy agencies like the U.S. Energy Information 
Administration aggregate data, and the public are unable to see 
specific firm-level or facility-level information. Firms have 
traditionally viewed this data as confidential business information, 
which they give to governments, but governments then protect. 
Aggregated data is widely available and used, and in the energy area 
this aggregation was never considered a barrier to transparency.
    In recent years there has been a movement for transparency in 
climate data, which WRI supports. Transparency is a principle of our 
Greenhouse Gas Protocol, which we began to develop with the World 
Business Council on Sustainable Development in 1998.\4\ The earliest 
public mandate to provide facility-level climate data is within the 
European Emissions Trading, a system only established in the past 
decade.\5\ The U.S. EPA GHG reporting rule went into effect only in 
2009. With an EPA requirement, this information is now public, but as 
you can see, this is very new.
    Private groups have also promoted the idea of carbon transparency. 
In particular, the Carbon Disclosure Project (CDP) surveys companies 
listed in 29 stock indices around the world. 2009 marked its seventh 
annual report.\6\ Participation rates range from 8 percent in Central 
and Eastern Europe to 95 percent among the UK's FTSE 100.\7\ The China 
100\8\ reported 10 firms or 10 percent reporting in 2009, double the 
number in 2008. While China's number was quite low, it reflected a 
broader trend, with Russia and India also both below 20 percent; even 
Japan had only a 37 percent reporting rate. The idea of GHG 
transparency in the Asian region is clearly just beginning.
    The general argument for making pollution data available is so the 
public can know the risks they are exposed to. Since climate change has 
global impacts, global totals are the best indicator of the public's 
risks, and national-level data the best indicator of how each country 
is contributing to mitigating the risk. However, CDP's argument is that 
investors need to know a company's climate change risk (including both 
risks from dependence on GHG-generating energy and processes and from 
impacts) as part of the transparent information needed for a healthy 
market.
    Transparency can also facilitate better analysis and can actually 
help promote innovation in GHG mitigation. As noted above China has an 
uneven record with program assessment. Freely available data sets that 
enabled academics and others to develop new approaches to assessing and 
evaluating data would assist national and local level policymakers. At 
present much of the information needed for companies to make 
independent assessments, such as access to the actual emissions factors 
the government uses, are also difficult to access.
    Greater access to disaggregated data could thus facilitate investor 
and others' evaluations of specific companies, innovation in the use of 
the data and tools, and the companies' own efforts to manage their GHG 
emissions. This issue is not directly related to national-level 
accounting for inventory purposes, where national-level energy data can 
be used to calculate energy-related CO2 emissions, but rather is 
related to program assessment and once sub-national targets are 
assigned to target enforcement.
    In summary, there is a difference between calculating energy and 
emissions data at the national level to track how a country is doing 
overall and the country's own needs domestically for implementing, 
assessing and enforcing specific domestic programs and mandates.
    China has a long history of national-level energy accounting, and 
the reliability of this data has increased significantly, especially in 
recent years, when new systems were put in place to implement the 
energy intensity target under the 11th Five Year Plan (2006-2010). GHG 
Emissions accounting is relatively newer, going back to 1994, but China 
is actively involved in improving its systems in this regard, and 
because its international commitments are for energy-related CO2 
emissions, it will be able to fully use the dataimprovements in its 
energy information systems to support its GHG data collection and 
analysis.

                               __________
    \1\ Taryn Fransen, ``Working Paper: Enhancing Today's MRV Framework 
to Meet Tomorrow's Needs: The Role of National Communications and 
Inventories,'' The World Resources Institute, June 2009.
    \2\ From interviews with the Energy Research Institute we 
understand these emissions factors to be more technology specific and 
less aggregated than the type that would generally be released to 
assist companies in making their own accounting.
    \3\ This information and the table are drawn from, Fei Teng, et al 
``Working Paper: Mitigation Actions in China: Measurement, Reporting 
and Verification,'' the World Resources Institute, June 2009.
    \4\ See www.ghgprotocol.org for details on the program.
    \5\ Information on the EU ETS is available on the web at http://
ec.europa.eu/environment/climat/emission/index--en.htm
    \6\ Carbon Disclosure Project 2009: Global 500 Report. 
www.cdproject.net
    \7\ The CEP is a voluntary report and the level of participation 
varies with many companies submitting full GDP accounting, while others 
provide only much more general information.
    \8\ This appears to be CDP's own selection of 100 top companies. It 
is not one of the standard stock indices, in contrast to the others in 
CDP's compilation.

                                 
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