    [House Hearing, 114 Congress]
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                       ASIA'S GROWING HUNGER FOR ENERGY:
                      U.S. POLICY AND SUPPLY OPPORTUNITIES

    =======================================================================
                                     HEARING

                                   BEFORE THE

                      SUBCOMMITTEE ON ASIA AND THE PACIFIC

                                     OF THE

                          COMMITTEE ON FOREIGN AFFAIRS
                            HOUSE OF REPRESENTATIVES

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                               SEPTEMBER 8, 2016

                                   __________

                               Serial No. 114-231

                                   __________

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                          COMMITTEE ON FOREIGN AFFAIRS

                     EDWARD R. ROYCE, California, Chairman
    CHRISTOPHER H. SMITH, New Jersey     ELIOT L. ENGEL, New York
    ILEANA ROS-LEHTINEN, Florida         BRAD SHERMAN, California
    DANA ROHRABACHER, California         GREGORY W. MEEKS, New York
    STEVE CHABOT, Ohio                   ALBIO SIRES, New Jersey
    JOE WILSON, South Carolina           GERALD E. CONNOLLY, Virginia
    MICHAEL T. McCAUL, Texas             THEODORE E. DEUTCH, Florida
    TED POE, Texas                       BRIAN HIGGINS, New York
    MATT SALMON, Arizona                 KAREN BASS, California
    DARRELL E. ISSA, California          WILLIAM KEATING, Massachusetts
    TOM MARINO, Pennsylvania             DAVID CICILLINE, Rhode Island
    JEFF DUNCAN, South Carolina          ALAN GRAYSON, Florida
    MO BROOKS, Alabama                   AMI BERA, California
    PAUL COOK, California                ALAN S. LOWENTHAL, California
    RANDY K. WEBER SR., Texas            GRACE MENG, New York
    SCOTT PERRY, Pennsylvania            LOIS FRANKEL, Florida
    RON DeSANTIS, Florida                TULSI GABBARD, Hawaii
    MARK MEADOWS, North Carolina         JOAQUIN CASTRO, Texas
    TED S. YOHO, Florida                 ROBIN L. KELLY, Illinois
    CURT CLAWSON, Florida                BRENDAN F. BOYLE, Pennsylvania
    SCOTT DesJARLAIS, Tennessee
    REID J. RIBBLE, Wisconsin
    DAVID A. TROTT, Michigan
    LEE M. ZELDIN, New York
    DANIEL DONOVAN, New York

         Amy Porter, Chief of Staff      Thomas Sheehy, Staff Director

                   Jason Steinbaum, Democratic Staff Director

                                  ---------

                      Subcommittee on Asia and the Pacific

                         MATT SALMON, Arizona Chairman
    DANA ROHRABACHER, California         BRAD SHERMAN, California
    STEVE CHABOT, Ohio                   AMI BERA, California
    TOM MARINO, Pennsylvania             TULSI GABBARD, Hawaii
    JEFF DUNCAN, South Carolina          ALAN S. LOWENTHAL, California
    MO BROOKS, Alabama                   GERALD E. CONNOLLY, Virginia
    SCOTT PERRY, Pennsylvania            GRACE MENG, New York
    SCOTT DesJARLAIS, Tennessee
                                C O N T E N T S

                                  ----------
                                                                       Page

                                   WITNESSES

    Mr. Mikkal E. Herberg, Senior Advisor, director, Energy Security
      Program, The National Bureau of Asian Research.................     5
    David W. Kreutzer, Ph.D., senior research fellow for energy
      economics and climate change, Center for Data Analysis,
      Institute for Economic Freedom and Opportunity, The Heritage
      Foundation.....................................................    15
    Mr. Jake Schmidt, director, International Program, Natural
      Resources Defense Council......................................    22

              LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

    Mr. Mikkal E. Herberg: Prepared statement........................     8
    David W. Kreutzer, Ph.D.: Prepared statement.....................    17
    Mr. Jake Schmidt: Prepared statement.............................    24

                                    APPENDIX

    Hearing notice...................................................    50
    Hearing minutes..................................................    51

                       ASIA'S GROWING HUNGER FOR ENERGY:
                      U.S. POLICY AND SUPPLY OPPORTUNITIES

                                  ----------

                          THURSDAY, SEPTEMBER 8, 2016

                           House of Representatives,

                     Subcommittee on Asia and the Pacific,

                         Committee on Foreign Affairs,

                                Washington, DC.

        The subcommittee met, pursuant to notice, at 3:01 p.m., in
    room 2255, Rayburn House Office Building, Hon. Matt Salmon
    (chairman of the subcommittee) presiding.
        Mr. Salmon. The subcommittee will come to order.
        Members present will be permitted to submit written
    statements to be included in the official hearing record,
    without objection. The hearing record will remain open for 5
    calendar days to allow statements, questions, and extraneous
    materials for the record, subject to the length limitation in
    the rules.
        Asia Pacific nations are predicted to consume more than
    half the world's energy by the year 2035, bringing both
    enormous opportunities and significant challenges as the global
    energy sector seeks to meet the demand. As Asia continues to
    diversify from traditional energy to nuclear, liquefied natural
    gas, and solar power, innovative U.S. suppliers of energy and
    energy-based technology stand to play a pivotal role.
        Today, we will discuss U.S. policy toward the ever
    developing Asia Pacific region as it hungers to fulfill its
    energy needs. This hearing will focus on energy demand,
    production, consumption, security, and policy in the Asia
    Pacific region.
        As we assess the challenges and the opportunities, it is
    important to note that over 700 million people in the Asia and
    the Pacific region lack access to electricity, and nearly 2
    billion burn wood, dung, and waste for cooking and heating
    needs. As Asia continues to modernize and develop a substantial
    middle class, demand for energy will increase exponentially,
    requiring vast investments in infrastructure.
        Energy demand in Asia is largely fueled by enormous
    populations, urbanization, and the transportation industry.
    Newly mobilized and politically active populations are driven
    first and foremost by whether governments are able to provide
    for a better standard of living, a factor driven almost
    entirely by access to dependable and affordable energy. Demand
    will continue to rise by an estimated 2\1/5\ percent annually,
    with oil and gas to remain the prevailing energy source.
        East Asia has become a net oil importer, causing a close
    association of energy needs with national security concerns.
    Much of Asia's energy is imported from volatile regions and is
    transported through vulnerable transit corridors, most notably
    including the highly disputed South China Sea. This
    subcommittee has closely followed the issues of the South China
    Sea and the insecurities of the nations who rely on energy
    transit through these narrow straits, and we believe those
    concerns are well founded. Add to that the estimates of oil and
    natural gas reserves in the South China Sea, with their own
    highly disputed sovereignty rights, and as we are all aware,
    these territorial disputes are very complicated and will take
    time to resolve.
        We continue to urge China and others to respect the rule of
    international law and agreed-upon frameworks for dispute
    resolution rather than resorting to manipulation and bullying
    tactics.
        As diverse cultures and national boundaries affect much of
    the energy infrastructure, regional energy cooperation is
    paramount, but many Asian nations appear to be more interested
    in a go-it-alone approach.
        Attempts have been made to collaborate on energy issues
    within Asia for some time now, including cooperation
    initiatives through ASEAN and the East Asia Summit. These
    dialogues are just that: Talks. Region-wide hesitance to pursue
    multilateral development projects and persistent territorial
    disputes that hinder the efficient use of resources have
    prevented Asian states from working together to resolve energy
    conundrums. Energy options are limited throughout much of Asia,
    and the fact remains that regional cooperation will be
    necessary to overcome the challenge of energy shortages.
        Currently, coal is the region's leading energy source, but
    market demand for nuclear energy and liquefied natural gas
    continues to rise. Skepticism of nuclear energy following
    Japan's Fukushima disaster remains a concern, but a thirst for
    nuclear power thrives in many of the Asian nations. The U.S.
    has various degrees of civil nuclear cooperation in the region
    with China, South Korea, India, Vietnam, Taiwan, Malaysia,
    Australia, Indonesia, Japan, and Thailand. Many in the United
    States have concerns with some of these projects, in particular
    with regard to nuclear proliferation and dual-use repurposing.
        For our part, the United States began shale gas exports by
    sea this year and is projected to become the third largest
    world supplier of LNG within 5 years. Asian buyers have already
    contracted to purchase more than half of U.S. energy's supply
    of LNG and will continue to affect global energy policy on a
    massive scale.
        The Asia Pacific needs American leadership to assist with
    the security concerns of our partners and allies, to maintain
    the rule of law and Freedom of Navigation crucial for energy
    security, and to provide critical energy supplies and access to
    new energy technologies.
        We should advocate for policies that encourage a market-
    driven approach to fill the demand, and I look forward to
    hearing from our witnesses today on how best to facilitate that
    outcome.
        And, I would like to turn the time over to Ranking Member
    Sherman for any comments he might have.
        Mr. Sherman. The gentlelady from New York will give her
    opening statement.
        Mr. Salmon. Thank you.
        Ms. Meng. Thank you, Chairman Salmon and Ranking Member
    Sherman for calling this timely hearing. Asia as a whole is the
    largest energy consuming region in the world. China is the
    single largest energy consumer, followed by the U.S. and then
    India. In a world where our energy needs only increase with
    each passing year, we must take stock of our resources and
    assess our ability to fulfill those needs, while ensuring our
    security and minimizing the environmental consequences.
        Asia's growing energy needs leave many open questions,
    including how well-positioned these countries are to fulfil
    their commitments to reducing greenhouse gas emissions, and
    what the geopolitical implications are for Asia's current
    energy reliance on coal and the Middle East oil.
        I welcome our distinguished panelists today and look
    forward to hearing your thoughts.
        Thank you, and I yield back.
        Mr. Salmon. Thank you. Mr. Sherman.
        Mr. Sherman. When we look at energy and Asia, we see a
    number of foreign policy and national security concerns. The
    first of these is the price of oil. For reasons that God may
    explain to us at some point in the future, he has put oil in so
    many of the wrong places. And, anything that drives down the
    price of oil is not just good for motorists in my district, it
    is good for American foreign policy.
        Second, global warming. China emits twice as much
    greenhouse gases as the United States. We are in second place,
    but we are a distant second. China has made this great
    announcement with much pageantry that they will keep increasing
    their greenhouse gases right up until 2030, and then maybe
    without any enforcement, they will turn the corner, although we
    have no idea how high up they will go before they turn the
    corner, and we do not know whether they will turn the corner
    very sharply at all.
        If you look at the current situation, China is deploying
    and building many coal-fired electric plants. Those plants will
    serve their full useful life. And, coal produces twice the
    greenhouse gases per kilowatt as any other fuel, and so one
    would expect that these plants will be turning out an awful lot
    of greenhouse gases for a long time.
        In addition, China is going all over the world building
    coal-fired electric plants. And, while technically this is not
    Chinese global warming, because the burning of the coal will
    take place elsewhere, it would not occur but for these plants.
        The next national security issue is the transport of oil to
    our allies in Asia. And here, I think, there is an exaggeration
    of the risk and the problem. Where both in Beijing and in
    Washington, we are firing up nationalist concerns about, oh, my
    God, can we figure out a way that both countries can justify a
    larger military by fighting over these islands, uninhabited
    islands. And, we are told that trillions of dollars worth of
    trade passes close to these disputed islands. Keep in mind
    almost all of that trade is going in or out of a Chinese port,
    and if China were able to establish naval bases on these
    islands, they would be able to blockade their own ports,
    something that is not particularly of concern to the United
    States.
        But, in addition, there are oil tankers from the Middle
    East going to Japan and South Korea. Those tankers may choose
    to go close to these islands, but they--in a worst case
    scenario, and they should never have to do this, but in a worst
    case scenario, they could take a slightly different route and
    go far away from these islands. These islands, therefore, have
    a massively exaggerated strategic importance since virtually no
    trade that doesn't go in or out of Chinese ports goes close to
    them.
        And, then there is the economic issue. Much of the reason
    for this hearing is to discuss the export of American natural
    gas. Keep in mind that there are two ways to look at this from
    an economic standpoint. One is to say, hey, if you export some
    natural gas, that creates jobs in the natural gas industry. The
    other approach is to say if you refuse to export natural gas,
    you drive down the price of natural gas in this country, you
    give American manufacturers a big leg up on their Asian
    competition, and then you get a lot of manufacturing jobs.
    There are more jobs involved in using natural gas than in
    producing natural gas.
        Finally, as I think is illustrated by this hearing, there
    is the discussion that by exporting natural gas, we could have
    an effect on Europe and Ukraine's, in particular, dependence on
    Russia. Russia is charging far less for natural gas than Asia
    is willing to pay. So, if we are going to export natural gas
    and we are going to remain a free market country, we are going
    to export natural gas to Asia, where it will have the economic
    effects I have described, both good and perhaps undercutting
    our manufacturers.
        But, we are not going to be exporting natural gas to
    Europe, where they are used to paying far less to Russia for it
    than the Japanese and the South Koreans are willing to pay.
        And with that, I yield back.
        Mr. Salmon. Thank you. Mr. Duncan.
        Mr. Duncan. Thank you, Mr. Chairman. Thank you for holding
    this hearing.
        Energy is a passion of mine, and American energy
    independence, the energy renaissance that we have experienced
    is something that I have advocated for. I was glad to hear Mr.
    Sherman mention natural gas, and it is a fossil fuel that we
    have an abundance of here in this country. And, the export of
    natural gas is critical to the American energy sector. And,
    when you have an abundance of something, then you can put it
    out on the market, and the companies can realize a profit,
    which will, I think, help keep jobs here in this country.
        Asia is definitely a growing area that needs energy to
    provide that 24/7 baseload power needed to manufacture and help
    with the quality of life issues. It is really a global
    phenomenon when you talk about quality of life issues. If you
    want to improve the quality of life of people all over the
    globe, you do it with energy.
        Mosquitos, we talk a lot about Zika. If you want to cut
    down the threat of Zika, then help provide electricity so they
    can have air conditioning in their house, they don't have to
    have the windows open at night, because mosquitos are prone to
    come in. We can do that in sub-Sahara Africa, we can do that in
    Latin America, and a lot of other places that don't experience
    the same sort of energy abundance that we have.
        Twenty-four-seven baseload power provided by fossil fuels,
    provided by nuclear power, hydroelectric, but one thing that,
    going back to the natural gas, is that abundant supply here
    that can provide natural gas-powered electricity generation in
    third world countries and in Asia, and not necessarily in third
    world, but definitely improve the quality of life. Too many
    people around the world are using wood and charcoal to heat
    their homes and cook their food, and they can't keep food for a
    long period of time fresh, they can't have air conditioning, we
    talked about. There are just so many different things that we
    can use American energy to help improve the lives of other
    people around the world.
        You know, we push wind and solar. I think it is groovy
    technology, I really do like it, but it is intermittent, and
    doesn't provide the 24/7 baseload power that helps to keep
    incubators running that help with the neonatal intensive care.
    And, we have an infant mortality rate that is too high around
    the world. When we have the ability to provide energy sources,
    such as natural gas, to help those countries keep those
    incubators running, keep those neonatal intensive care units
    operating that you are not going to get with intermittent
    power.
        So, I am glad that we are having a discussion about energy
    and improving the quality of life of people around the globe,
    focusing on Asia right now, and I am glad of that. So I look
    forward to a robust discussion as we move forward in this
    Congress and the next Congress to provide energy through
    American energy resources as we hopefully will reboot our
    energy renaissance in this country.
        And with that, Mr. Chairman, I yield back.
        Mr. Salmon. Thank you. We are joined today by Mr. Mikkal
    Herberg, senior advisor and director of Energy Security Program
    at the National Bureau of Asian Research. Thanks for coming
    today, Mikkal. And, he happens to come from a wonderful place,
    Arizona. So glad to have you here. The rest of the country is
    great too, it is just Arizona is better, right?
        Mr. Herberg. I like it, I like it.
        Mr. Salmon. All right. Dr. David Kreutzer, senior research
    fellow for energy economics and climate change at Heritage
    Foundation Institute For Economic Freedom and Opportunity.
    Thank you for being here.
        And, Mr. Jake Schmidt, director of international program at
    the Natural Resources Defense Council.
        We are thrilled to have you all here today, and Mikkal, we
    will start with you.

     STATEMENT OF MR. MIKKAL E. HERBERG, SENIOR ADVISOR, DIRECTOR,
     ENERGY SECURITY PROGRAM, THE NATIONAL BUREAU OF ASIAN RESEARCH

        Mr. Herberg. Okay. Thank you, Chairman Salmon, Ranking
    Member Sherman, committee members. I appreciate the opportunity
    to speak with you today about Asia's growing energy
    consumption, some of the implications of U.S. policy, U.S.
    supply, and what role it can play.
        I think it is worthwhile to keep in mind there is a
    fundamental dilemma that Asia faces in energy. It is kind of a
    dual challenge. On the one hand, developing Asia, energy demand
    is growing at extraordinarily high rates. You talked about
    that. It will account for two-thirds of global energy
    consumption growth. So, clearly they are scrambling to mobilize
    the energy supplies they need and to prevent energy from
    becoming a bottleneck to economic growth and job creation.
    Developing countries need the jobs and are pushing for
    development. At the same time, they are looking for affordable
    energy, because remember, these are developing countries and
    they are looking to find affordable energy, and I think here is
    a key to understanding that coal dilemma for Asia.
        And third, at the same time they made all this booming
    demand, they have to shift from a very carbon-coal-intensive
    energy mix in the region, to a much cleaner energy mix, if they
    are going to meet their climate goals, and then probably more
    importantly, meet their air pollution goals, which in China,
    India, Southeast Asia, air pollution is a deadly, quite truly
    deadly problem, obviously for China.
        But, the challenge is how to meet that growing energy
    demand that they need now, but shift to this cleaner energy mix
    when they need the energy now, and so what happens is there is
    a chronic temptation to default to what is an abundant, cheap,
    available energy supply all across Asia, and that is coal, to
    meet that growing electricity demand. So, the pressure to clean
    up the energy mix, but the pressure to have affordable energy
    leads to this problem of constant defaulting to coal, and that
    gets in the way of all these environmental and climate goals
    that we have.
        U.S. energy policy and supplies can make a big difference
    in both energy security in Asia, it already has in a big way,
    but it can also play a big role in Asia's transition out of
    this dominant role for coal and toward a cleaner energy mix.
    And, in my mind, there is no contradiction between using
    natural gas and making progress on moving toward your climate
    goal.
        Just a few metrics. If you look at how much energy demand
    is going to grow in just developing Asia, it is the equivalent
    of adding another China energy consumption to the global energy
    mix just in the next 20 years. Remember, China is the largest
    energy consumer in the world. Just the increase is equivalent,
    at least the latest International Energy Agency forecast, just
    the increase is equal almost to the entire China energy
    consumption. So, these are big, big, big numbers. Two-thirds of
    CO2 emissions, most of the world's nuclear capacity growth,
    most of the natural gas growth, and all of the coal consumption
    growth. So, this is a truly staggering scale to this.
        Now, to switch to energy security. Energy security in Asia
    is national security. It is not like here. I mean, this is at
    the top or near the top of the strategic agenda. The region
    imports two-thirds of its coal, China imports 60 percent of its
    oil supplies--or the region imports two-thirds of its oil;
    China, 60 percent, and that continues to rise; 100 percent for
    Japan, South Korea. So, this is really a serious strategic
    concern for the region.
        And the other dimension of that is the growing and heavy
    dependence on Middle East supplies, and this is where the sea
    lanes come in. China gets half of their imports from the Middle
    East. Japan and South Korea get 85 percent of their imported
    oil from the Middle East. So, these sea lanes between the
    Persian Gulf and Asia are critical sea lanes; and not only the
    South China Sea today, but also increasingly the Indian Ocean.
    As China's blue water capacity begins to be able to project
    into the Indian Ocean, they are building, I don't want to be an
    alarmist about this, because, you know, I am not, but China is
    building a Navy base at Djibouti now, which is part of their
    concern about the security of those sea lanes, particularly for
    their oil supplies.
        What role can the U.S. play in this? Obviously the sea
    lanes issue, we are the most important player. We can have a
    dialogue about the South China Sea, how important they are. I
    agree with Ranking Member Sherman that China is not going to
    block their own sea lanes. That makes no sense whatsoever. But,
    here is the issue. If you go to Tokyo, the notion of turning
    over the security of their oil and LNG supply lines to the
    Chinese Navy, the tender mercies of the Chinese Navy, makes
    them very nervous. Now, we can argue about whether that is a
    reasonable concern or not, but I can tell you it is a very
    worrying notion for planners in Tokyo.
        U.S. unconventional oil supplies are critical for Asia,
    because they are bringing down prices, giving them an
    alternative supply, so anything we can do to continue to grow
    our conventional oil production will be good for Asia's energy
    security. Similarly with natural gas, LNG supplies to Asia
    allow them to diversify their supplies away from Southeast Asia
    and the Middle East. So, all of these things are going to be
    very important to the metrics of energy security for Asia,
    things we can do, continue to work with China on energy
    cooperation. India will be the largest increase, absolute
    increase in energy consumption. We need to do more with India
    in the future.
        So, let me just stop with those brief remarks and let the
    others go ahead.
        [The prepared statement of Mr. Herberg follows:]

                                  ----------

        Mr. Salmon. Thank you. We are going to probably be called
    to vote in the next 15 minutes or so, and we would like to get
    through all the witnesses, at least get a stab at some
    questions, and it is the last votes of the day, so we probably
    won't reconvene afterwards. The little box in front of you
    usually tells you the timeframes.
        Mr. Kreutzer. I got it. I am good with time.
        Mr. Salmon. Okay. When it goes amber, that means, just like
    we drive, drive faster.
        Mr. Kreutzer. No, no. When it goes to the amber, I say the
    end.
        Mr. Salmon. The red means stop. All right. Thanks.

     STATEMENT OF DAVID W. KREUTZER, PH.D., SENIOR RESEARCH FELLOW
       FOR ENERGY ECONOMICS AND CLIMATE CHANGE, CENTER FOR DATA
     ANALYSIS, INSTITUTE FOR ECONOMIC FREEDOM AND OPPORTUNITY, THE
                          HERITAGE FOUNDATION

        Mr. Kreutzer. Okay. Chairman Salmon and Ranking Member
    Sherman, I want to thank you and the other members of the
    committee for giving me an opportunity to address you today
    about the opportunities for American energy.
        My name is David Kreutzer. I am senior research fellow in
    energy economics and climate change at The Heritage Foundation.
    However, what I say today should not be construed as an
    official position of The Heritage Foundation; they are my own
    views.
        America is an energy powerhouse. The last decade has seen a
    phenomenal transformation. As recently as 2008, petroleum was
    trading at over $140 per barrel, natural gas was over $10 per
    million BTU. As oil and gas production was waning a decade ago,
    the peak oilers were in ascendance. The President, Obama,
    joined them in their pessimism. He loudly proclaimed that
    because we only had 2 percent of the world's resources, we
    could not continue to sustain our energy consumption. Further,
    he said we cannot drill our way to lower gasoline prices. And,
    on a more personal note, I was all but called a liar at a House
    budget hearing in September 2008 for proposing that we have a
    target for increasing petroleum production by 2 million barrels
    a day. One of the members held a letter from the head of the
    Energy Information Administration saying that even if we could
    do that, we wouldn't get more than a couple of dollars or a few
    dollars gain in price. Well, we were all wrong. From 2008 to
    2015, America doubled its petroleum production. Natural gas
    production went up by about 60 percent. Not only did prices
    fall more than the $20 I was hoping for, they are $100 below
    the peak level in 2008 right now.
        Today, the U.S. is the world's top producer of petroleum
    and natural gas. However, this energy revolution took place in
    the face of a hostile environment. The Obama administration
    within weeks of taking office cancelled already completed oil
    and gas leases in the southwest. They essentially within a year
    put a moratorium on not only deep water drilling, but shallow
    water drilling as well offshore. They started the clock. They
    tore up the 5-year energy plan, which further delayed access to
    resources on the Federal estate.
        Perhaps most telling was the attitude of an EPA
    administrator in Texas who, taking his version of ancient
    history, claimed that when the Romans went into a town, they
    would crucify the first two people they found so as to get
    everybody else to fall in line, and he used that analogy for
    his strategy in regulation.
        Mr. Sherman. That is not true.
        Mr. Kreutzer. It is on tape.
        It shouldn't be surprising in the face of this sort of
    attitude toward energy production that the energy revolution we
    have seen has taken place almost exclusively on State and
    private land.
        Asia's growing hunger for energy and U.S. supply
    opportunities depend on us being able to produce more. And, if
    we had positive, pro energy policies, it would be interesting
    to see what sort of results we could get from that. Whether for
    domestic consumption or for strategic reasons, moving forward
    with energy policy requires that we open up more of the Federal
    estate than we have to get better access to the resources that
    we own. To get an idea of what would happen if we did that, we
    at The Heritage Foundation, we have a clone of the Energy
    Information Administration's national energy modeling system,
    we ran their high resource case through the macro model and
    compared it to the reference case. And, I should note that the
    high resource case in 2008, its projections for last year were
    more accurate than the reference case was. What we find--the
    high resource case essentially assumes there is a 50 percent
    greater access to energy, the resources are 50 percent greater.
    When we ran that model, we found that between now and 2035,
    aggregate GDP in the U.S. would go up by $3.7 trillion.
        A nominal family of four over that same period would see
    $40,000 additional income. That is roughly $2,000 per year. On
    average, the difference in employment is 700,000 jobs to the
    good if we have 50 percent greater access to energy. Households
    would spend 10 percent less on electricity. And, all of this
    without increasing Federal expenditure or taxation.
        So, I would make a plea to the committee to consider
    proposing policies that would give greater access to our energy
    resources owned by the Federal Government. Thank you.
        [The prepared statement of Mr. Kreutzer follows:]

                                  ----------

        Mr. Salmon. Thank you. Mr. Schmidt.

    STATEMENT OF MR. JAKE SCHMIDT, DIRECTOR, INTERNATIONAL PROGRAM,
                   NATURAL RESOURCES DEFENSE COUNCIL

        Mr. Schmidt. Thank you. Thank you, Chairman Salmon and
    Ranking Member Sherman, and distinguished members of the
    committee. Thank you for inviting me on behalf of the Natural
    Resource Defense Council to present my views on the energy
    opportunities and challenges for the Asia region.
        This region, as was mentioned, is one of the fastest
    growing energy markets in the coming decades, so the actions
    that this region takes on clean energy and climate change will
    be critical in helping the world move to a climate-safe
    trajectory. This region has a huge opportunity to expand
    renewable energy and energy efficiency, and the United States
    has an important role to play in helping this region develop
    its energy future in a responsible and environmentally sound
    manner. I will hit on three points from my full written
    testimony to summarize.
        First, there is a new dynamic emerging in the Asia region,
    as reflected in the historic Paris Agreement. This agreement
    includes new climate commitments from all of the major
    countries in the world, including the countries in the Asia
    region. The countries in the Asia region are already showing
    that they are prepared to help this agreement deliver over
    time. There is, I would say, a very high likelihood that we
    will reach the threshold for this agreement to enter into force
    this year. We have now 59 countries that account for more than
    60 percent of the world's emissions that have formally said
    that they will join this agreement this year. Just last week,
    China and the United States both formally took that step to
    join this agreement, and we expect that more countries in the
    Asia region will take that step this year as well.
        So, key countries as a part of this have put forward robust
    climate and clean energy targets as a part of the Paris
    Agreement. One hudred eighty-seven countries responsible for
    more than 97 percent of the world's emissions put forward
    climate pollution targets as a part of this Paris Agreement,
    including all major countries in the Asia region.
        Second, this region is a major market for clean energy, and
    this opportunity is poised for significant expansion. The Asia
    region has witnessed a huge uptick in clean energy deployment
    in the past few years. According to Bloomberg New Energy
    Finance, clean energy investment in the Asia Pacific region
    totaled $161 billion in 2015, an increase of almost 700 percent
    since 2005.
        The current climate targets, including those contained in
    the Paris Agreement, mean that Asia's largest economies are
    committing themselves to clean energy goals and implementing
    the necessary domestic actions to meet these goals. Significant
    renewable energy expansion is expected in China, India, and
    other countries in the region as a result. As a result, the
    deployment of clean energy in the Asia region is projected to
    continue to surge in the coming years. Again, according to
    Bloomberg New Energy Finance, renewable energy will make up
    nearly two-thirds, or $3.6 trillion, of the electricity
    capacity added over the next 25 years in the Asia Pacific
    region.
        Lastly, what can the United States do to help with this
    clean energy revolution in the Asia region? The U.S. can
    embark, I think, on three key actions, many of which are
    building blocks that the U.S. has already been delivering over
    time. First, the U.S. has active climate and clean energy
    bilateral agreements with a number of countries in the region,
    including China and India. The U.S. should strengthen the
    bilateral clean energy efforts with these countries. At the
    same time, the U.S. should further develop bilateral clean
    energy efforts with others in the region, such as Indonesia and
    Vietnam, since both countries have large untapped renewable
    energy potential.
        Second, it is important to ensure that countries create
    both the right policy framework and the right finance dynamics
    to track the needed private sector investments in clean energy
    space. For example, my organization, NRDC, has found that new
    innovative finance models like green banks and green bonds can
    help unleash even larger amounts of private capital over time.
    The U.S. should play a key role in helping countries in the
    Asia region put in place better policy and finance frameworks
    for clean energy.
        Third, by mobilizing U.S. investments for clean energy, the
    U.S. helps create growing clean energy markets in the Asia
    region. The U.S. should continue to fund contributions to the
    GCF. At the same time, the U.S. can help to mobilize additional
    investments through such mechanisms as the Overseas Private
    Investment Corporation, trade missions, and other venues where
    the U.S. helps to catalyze these private sector investments.
        So, to conclude, in our opinion, the U.S. can help the
    Asian countries meet their growing energy needs in a low carbon
    and environmentally responsible manner. This effort can create
    new markets for renewable energy and energy efficiency
    companies and workers, help secure a more stable region, and
    protect all Americans from the devastating impacts that will
    occur if we don't act aggressively on climate change. Thank
    you.
        [The prepared statement of Mr. Schmidt follows:]
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                                  ----------
      Mr. Salmon. Thank you. Given the fact that we are on kind
    of a truncated timeframe here, I am going to limit members'
    questions to 2 minutes. I apologize for doing so, normally we
    are pretty liberal with that, but I think we will just need to
    do that so everybody gets an opportunity.
        With the opening of the U.S. shale revolution, America has
    become a global supplier of LNG. Adding American natural gas to
    the global market has helped diversify supplies and reduce the
    price of natural gas both home and abroad, especially in Asia,
    which was once the most expensive market in the world. The
    expansion of the Panama canal should also add to the ease of
    LNG shipments abroad.
        Are the regulations on shale gas production and exports
    sufficiently open to facilitate free market flow of LNG? If
    not, what hindrances still remain for the industry, and aside
    from regulations, what is the state of infrastructure to
    facilitate these exports? Anybody want to try and stab at that?
    Dr. Kreutzer, go ahead.
        Mr. Herberg. You know, I think the bulk of the heavy
    lifting has been done on that. I would recommend we move--you
    know, simplify the process of getting these LNG terminals
    approved. It is very--you know, takes much too long, so I think
    we should simplify that process.
        There are some shipping regulations, I am not familiar with
    all the details of it, that would make shipping a little bit
    easier, but I think the heavy lifting is getting these things
    approved. We have made a lot of progress, but we need to speed
    that up. The canal makes that a lot easier to ship that stuff.
    Europe will be able to use some of that LNG. And, I think, as
    they build their re-gas terminals in Europe, they will also be
    able to use it. So, I don't see any huge barriers.
        Mr. Salmon. Typically, how long does it take to approve one
    of these permits?
        Mr. Herberg. Well, it has gone on for about 5 years. Some
    of them have taken--the early ones took up to 2 years to get
    approvals before the DOE approved this as in the national
    interests to export these supplies of gas. They have begun to
    speed that process up administratively, and they had tried to
    reverse, let FERC do the work first and then the DOE, but I
    think that process could be speeded up a great deal more.
        Mr. Salmon. Okay. Dr. Kreutzer.
        Mr. Kreutzer. Yeah. No. I was just thinking the regulatory
    problem is more on the production of gas than, I think, on the
    export terminals at this point. And, there seems to be creeping
    additional regulations on methane and other things, and that is
    worth watching.
        Mr. Salmon. Okay. Thank you. Mr. Sherman.
        Mr. Sherman. Dr. Kreutzer pointed out that we have had a
    decline in energy prices in the entire world, but I don't think
    we can attribute that just to U.S. production. We have had a
    recession in the world. We have conservation in other
    countries, but, obviously, it has helped the world price to
    increase production in the United States.
        And, one thing I think the environmental community loses
    track of, they may focus on an individual production in the
    United States or project and say, ``Look at the local
    environmental effect,'' but also look at the world price
    effect. If we can drive down the price of oil and diminish the
    world's dependence upon the Middle East, we might avoid the
    next Iraq war and the environmental degradation that that
    involves.
        I do also want to comment that we haven't talked much about
    nuclear, but we are seeing Japan, South Korea, and China
    looking to reprocess spent fuel. That makes no economic sense.
    The only reason that South Korea or Japan would do it is to
    open the door to becoming nuclear powers--nuclear weapon states
    at some point in the future if they wanted to go down that
    road.
        I want to talk about solar panels. China is subsidizing and
    taking market share. That puts some of our companies at a
    disadvantage. On the other hand, it drives down the price of
    solar panels and increases their utilization.
        Mr. Schmidt, should we be upset that China is selling its
    solar panels for too little, or rejoice in the fact that more
    solar panels are being deployed in more places?
        Mr. Schmidt. That is a good question. I may not give you
    the yes and no answer that you are looking for.
        I think fundamentally there has been some shifts occurring
    within the Chinese market on this dynamic. And, I think that
    the world of a year or 2 years ago is not exactly the world of
    today in terms of low cost solar being dumped by the Chinese
    for one particular reason. Part of that dynamic was being
    driven at a time when the Chinese were at a very early stage in
    terms of their domestic deployment of their solar panels.
        So, you know, about 4 years ago, the vast majority of
    China's panel production, which was a massive amount at the
    time and has grown since, was actually being used in export
    markets in Europe and elsewhere. And that caused a lot of these
    trade tensions and so forth. That dynamic has shifted quite a
    bit. China now is installing about 20 gigawatts of solar a
    year, which is clearly head and shoulders above everybody else
    in terms of their own domestic deployment, and so much more of
    the Chinese domestic sort of production is actually being used
    within their own domestic context.
        We think it is obviously really critical that we get this
    right. I am not sure that sort of trade disputes over this is
    necessarily the best way to solve it. I know that the Obama
    administration has sought sort of some recourse through, you
    know, some of the routes with India and elsewhere, but what we
    are finding is that it is really critical that we actually get
    these prices, you know, to a low point.
        Mr. Sherman. I yield back.
        Mr. Salmon. Thank you. The Chair recognizes Mr. Duncan.
        Mr. Duncan. Thank you, Mr. Chairman. There are two factors,
    economic factors that affect this, the price of energy: Supply
    and demand. What we saw in the United States was an increase of
    supply based on the Bakken and Eagleford, and Barnett, and all
    these other energy-producing areas. And, even Pennsylvania and
    New York and Ohio increased production.
        And, so you have supply go up locally in the United States,
    but also global supply goes up, because the Saudis saw the
    Bakken eating into their market share, so they increased
    production in defiance of OPEC, and so you had this, and you
    still see it today, an increase of supply, global supply of oil
    and natural gas.
        Then, the other factor is demand. Global demand is down
    because the economy globally is soft. In the United States we
    just saw GDP growth is, what, 1.1, adjusted in the first
    quarter down below 1 to .08. So, the economy is soft, nothing
    has rebounded, so demand is down as well. So, you have got
    increased supply and less demand, you are going to have low oil
    prices and low energy prices altogether.
        The question I have is TPP. So, we are exporting and trying
    to increase LNG exports, but you also have signatories of TPP
    that are LNG exporters as well. I wonder how TPP is going to
    factor in, assuming it passes, in the United States' ability to
    compete with the Asian countries that are LNG exporters
    currently? So, if anybody can speak to that, because that is
    the question I don't have an answer for.
        Mr. Kreutzer. I don't have an answer.
        Mr. Herberg. I don't have an answer to that.
        Mr. Schmidt. I mean, I can. As a fact of how the TPP and
    all trade agreements, once a trade agreement like the TPP goes
    into effect, the ability for the United States--all these
    countries become sort of effectively de facto within the free
    trade, and so the Department of Energy's national interest
    determination is taken off the table. And any of these
    countries will now be sort of subject to this, obviously Japan
    and South Korea, well, you know, are big sort of potential
    demanders of LNG, and so they are a part of it. Vietnam, I
    don't think, is a major sort of potential hub for exports of
    LNG. So, it probably could in theory have a larger impact.
        I suspect, having spent a lot of time working in these
    countries, that the actual amount of demand for LNG is much
    lower than many people would expect, as, you know, countries
    aren't necessarily looking to sort of flip out their dependence
    on the Middle East for dependence on some other, you know, form
    of energy. There is obviously a sort of large interest in a lot
    of these countries to get a lot more homegrown energy and sort
    of become a bit more energy independent to some extent, which
    is you see in China and India as they sort of look to coal
    imports versus coal domestically, versus oil imports, versus
    oil domestically.
        Mr. Herberg. Can I just add one little bit? I missed the
    point of your question, but to the extent that TPP is a free
    trade agreement, the whole DOE approval process was about
    permitting exports to nonfree trade agreement countries. So,
    once the TPP were to pass, then that opens the door to
    exporting wherever you want. You don't have to go through that
    DOE----
        Mr. Duncan. Just a side comment. OPEC is a determining
    factor over the price of energy. So, whether you have a free
    trade agreement or not, the price of energy is going to be set
    by somebody that is not a signatory to the TPP.
        And, Mr. Chairman, I yield back.
        Mr. Salmon. Okay. Ms. Meng.
        Ms. Meng. Thank you. Chairman Salmon is one of the few
    people who pronounce my name according to Chinese tradition,
    and it always throws me off. Thank you.
        Mr. Salmon. You know, I realized even after I said it, you
    know, I speak Mandarin, I lived over in Taiwan, and so I have a
    really hard time, you know, like, saying Wang instead of Wong
    or Chen instead of Chun, and so I am kind of stuck with the,
    you know, Chinese pronunciation. So I apologize.
        Ms. Meng. It is great. It is impressive.
        Mr. Salmon. But, anyway, the Chair recognizes you anyway.
        Ms. Meng. Thank you so much.
        Mr. Connolly. I am Connolly over here.
        Ms. Meng. Connolly.
        Asian countries will need more--may need more types of
    equipment and technology in order to reduce greenhouse gas
    emissions. How can the United States capitalize on some of
    these needs maybe to produce more jobs and exports in the
    United States?
        Mr. Kreutzer. I think our goal is going to be to provide
    them--you know, we have developed technology in a lot of areas
    that they have been able to adopt, you know, for telephones and
    everything else. I don't think it is going to be--we are going
    to have to push it too hard. When we develop the technology,
    they will use it.
        I think the critical question is we need to also develop
    the energy so that it is not coming from places that are
    politically unstable and antagonistic.
        Mr. Schmidt. Yeah. And, just to add a bit more, I think--
    maybe I am an American optimist, but I think that many of the
    technologies that these countries are going to be seeking to
    deploy when you look across energy efficiency, renewables are
    places where the Americans do quite well. For example, in
    India, some of the very first solar projects that really
    started to boom were produced by First Solar, based in Arizona,
    and so that is, you know, obviously a huge opportunity.
        The fastest growing place for job creation in the United
    States is within the clean energy space. And, you know, I guess
    we feel that the U.S. has a huge opportunity to play a role in
    helping these countries, you know, meet their energy needs
    through renewables and energy efficiency. And, that will create
    the sort of downstream supply jobs and so forth that creates,
    you know, huge benefits for Americans across the board. And,
    you know, as an anecdote, often the perception is that, you
    know, countries--even in China where they produce a lot of
    their own things, American technologies are always viewed as
    kind of the best, the gold standard, and so they tend to want
    to get the best and the gold standard in places. And, you know,
    I think that the Americans can compete pretty well.
        Ms. Meng. Thank you. I yield back.
        Mr. Salmon. Thank you. Mr. Connolly, if you want to be a
    Republican today, I will recognize you next, otherwise I have
    to----
        Mr. Sherman. Never.
        Mr. Salmon [continuing]. Otherwise I have to recognize Ms.
    Gabbard.
        Mr. Connolly. You know, there is an old line of a song, you
    know, kind of goes like that, you know, are you a Republican? I
    am right now.
        Mr. Salmon. Well, then I recognize you.
        Mr. Connolly. No. I will wait my fair turn, but thank you,
    Mr. Chairman.
        Mr. Salmon. Ms. Gabbard.
        Ms. Gabbard. Thank you. And, thank you for your kindness.
        I am wondering if you can speak to some of the strategic
    implications of the energy mix right now occurring in Asia, and
    how that may be driving or influencing some of the maritime
    disputes that are occurring there.
        Mr. Herberg. You know, I think that the role of energy in
    some of these maritime disputes is a little bit overestimated
    sometimes and overdramatized. Take the South China Sea, the
    likely resources there, we don't know a lot about them, but
    estimates for the U.S. side are relatively modest in terms of
    the resources there, certainly not worth fighting over. Now,
    Chinese estimates are three, four times ours, so you wonder
    maybe they really believe there is more there than there is.
        I think the bigger dimension of that is the sea lanes
    issue, because so much of Asia's, northeast Asia in particular,
    oil and LNG flows through those sea lanes. That is the bigger
    game and the bigger concern, as I mentioned, for northeast Asia
    about who controls those sea lanes, even though I think it is
    kind of a doomsday scenario to just think they would start
    getting in the way of those shipments, but I can tell you from
    being out there a lot, this worries a lot of the folks in
    northeast Asia as a strategic concern. You know, they want the
    U.S. Navy to still be a big force in those sea lanes for the
    security of their oil supply.
        Ms. Gabbard. Okay.
        Mr. Kreutzer. I would hope their energy policy would be
    more focused on allowing the energy producers to produce
    energy, and they can produce it at a cost less than the price
    at which they sell it. When we start forcing strategic concerns
    on energy producers, then we--at Heritage, we think we have got
    a pretty slippery slope to where should we be subsidizing this,
    should we be? We wouldn't propose that.
        Ms. Gabbard. Thank you. Thank you.
        Mr. Sherman. Can I say something?
        Mr. Salmon. Sure.
        Mr. Sherman. I would just comment that now the oil tankers
    to Japan and South Korea would tend to go west of the
    Philippines. If they rerouted themselves and went east of the
    Philippines, that might add, I have heard estimates of $0.01
    per gallon to what consumers in Japan and South Korea have to
    pay. So, the doomsday scenario is $0.01 a gallon.
        I yield back.
        Mr. Salmon. Thank you. Mr. Lowenthal.
        Mr. Lowenthal. Thank you, Mr. Chair. And, you pronounced my
    name right. I am very pleased.
        Mr. Salmon. I couldn't really think of another
    pronunciation for yours, but----
        Mr. Lowenthal. Chinese pronunciation? Thank you, Mr. Chair.
        I am going to continue this discussion on renewables in the
    region. And, first I want to know, you know, with the recent
    signing United States and China, the joining of the Paris
    climate, do you feel that the Chinese are going to be able to
    transition their energy mix away from coal toward renewable
    sources and able to meet its ambitious goals? Will they be
    actually able to do this, or are they going to really--is this
    a doable thing, Mr. Schmidt?
        Mr. Schmidt. I guess we believe that it is. It won't be an
    easy challenge for them, but to give you, I guess, a couple of
    anecdotes, if anyone that has been in China, air pollution is
    really bad.
        Mr. Lowenthal. We were there, and----
        Mr. Schmidt. Yep.
        Mr. Lowenthal [continuing]. We couldn't breathe in Beijing;
    could not breathe, actually.
        Mr. Schmidt. So you feel the exact same thing that Chinese
    Communist Party officials feel and that everyday citizens feel,
    and so the number one social unrest issue right now in China is
    local air pollution challenges, and that has risen quite a bit.
    So, I think we have seen a huge----
        Mr. Lowenthal. We know that there is that, right. I think
    you have pointed out rightfully so that the Chinese are very
    much aware. I am just saying is it really possible, though,
    given the existing state and reliance on coal, to really do
    that transition in the time?
        Mr. Schmidt. Yes. And, to give you a couple of facts from
    the region, so the last 2 years, China has actually had a
    declining coal consumption year on year. This is the first time
    that that has happened in 10 years. That is a huge trend from a
    growing 7 percent per year to an actual declining amount of
    coal. The expectations are that this year will continue that
    trend. The first quarter of this year saw a declining coal
    consumption, and we have seen huge shifts.
        Yes, China is still building a number of coal plants. They
    don't have a market economy as everyone knows, but what you are
    finding is that the vast majority of these coal plants are
    actually sitting idle, so they are running at about 40 to 50
    percent capacity factors, which for anyone that knows coal, is
    a very bad economic investment to invest a lot in a very heavy
    capital investment and then to only run it less than half the
    time. And, so I think we are seeing huge decline in China's
    coal consumption, which is very tied to their carbon pollution,
    and so we are quite confident that China's CO2 emissions will
    peak well before 2030. There is some debate within sort of
    energy modelers about whether or not China's emissions have
    actually already peaked, and, you know, obviously they need a
    set of policies and continued sort of efforts over time to make
    sure to deliver.
        Mr. Herberg. Can I just----
        Mr. Salmon. Thank you. Mr. Connolly.
        Mr. Herberg. I will just add one point. The forcing issue
    for China is not so much climate, it is air pollution in the
    cities and the east coast. And this is an existential issue for
    the Communist Party. They can't hide this. They can put people
    in jail and other stuff. They can't hide the bad air. And, so
    that is forcing a pace of change by the Communist leadership
    and the contributors to the air pollution, particularly coal,
    that is much faster than, I think, many people actually
    anticipated, and I think you can underestimate it.
        Mr. Salmon. It really got under their skin, I know, when
    the State Department started publishing on a daily basis----
        Mr. Herberg. Yeah.
        Mr. Salmon [continuing]. Those----
        Mr. Schmidt. Air quality.
        Mr. Salmon [continuing]. Those numbers, and it really got
    under their skin. I know. I was there at one of those times.
        The other thing, first time I went to Beijing, had a white
    shirt on. By the end of the day, the color was completely
    black. It is pretty--pretty bad.
        Mr. Connolly.
        Mr. Connolly. Well, first the time I went to Beijing was in
    1986, and there were a lot of bicycles in Beijing. And then I
    went there in March this year, and there were a lot of BMWs and
    Toyotas and whatever. And, part of the problem too was in the
    Maoist period, they built a lot of, like, steel plants, I
    think, outside of Beijing to showcase the industrial might of
    Communist China. And, of course, sitting in a basin, it created
    huge pollution that now they would never do, but they are stuck
    with it, plus normal urban pollution.
        Mr. Schmidt, and, gentlemen, if you could comment to, but
    when I was there in March, one of the bright sides of the
    bilateral relationship that I frankly did not realize the
    extent of was enormous cooperation apparently going on between
    our two governments on environmental and technological
    breakthroughs to try to address pollution, to try to curb both
    air pollution, water pollution, ground pollution, to look at
    new techniques that are environmentally neutral or friendly,
    and that the--apparently--I mean, the Chinese Government is
    quite aggressive about this. They are not being dragged into
    it. And, the collaboration is quite real and has a lot of
    promise. And, I was glad to hear that, given so many other
    aspects of the bilateral relationship.
        Do you want to comment just a little bit about that before
    we all have to go and vote?
        Mr. Schmidt. Yeah. I think one of the bright spots of the
    U.S.-China relationship over the past couple of years has been
    clearly on climate. And, that is not just for me. If you ask
    sort of general Asian hands, they clearly view that that
    relationship is quite well, and is quite well established. And,
    it was, I think, a very critical component of getting the Paris
    Agreement delivered, was the sort of relationship between those
    two. And, that is both at, I think, a political level, which is
    around negotiating agreements and so forth, but also on the
    sort of practical, how do we actually do this stuff. And, so
    the U.S. has a very active working group working with the
    Chinese on helping them deliver on, you know, grid integration,
    high voltage transmission, electric vehicles, and the set of
    things that gets back to the other speaker's question about how
    can American companies kind of play in that.
        And, I think there is, you know, just an ongoing great
    relationship between the two. It is always fraught with
    tensions, but within the clean energy space, I think it is a
    very positive engagement that can kind of continue to build and
    go to the next level.
        Mr. Connolly. So, I would add drinkable water is a problem
    too, because even in the very finest hotels, you need filtered
    water.
        Mr. Kreutzer. I would say that one of the surprising things
    is that we have already developed the technology to reduce
    particulate emissions from coal plants by over 99 percent. My
    understanding is that in some places in China, they have the
    pollution control turned off because there is a slight
    parasitism of the energy. So, I am unfortunately a little
    pessimistic that they are going to push forward with other
    technologies that would be more costly, and I am really
    surprised that they haven't already used the on-the-shelf
    technology that has already been developed that could
    dramatically reduce the pollution from even the coal that they
    are using.
        Mr. Salmon. Thanks. We have got to get over for votes, but
    I am going to allow one last follow-up question of Mr. Sherman.
        Mr. Sherman. Mr. Herberg, obviously they care about air
    pollution in their major cities. Can they build coal-fired
    plants either a few hundred miles west of their major cities
    and the less urbanized, or can they put them right on the beach
    in some windy area where it is all--can they solve their air
    pollution problem without helping the world solve its coal
    slash global warming problem?
        Mr. Herberg. They are moving plants to the west, you know,
    and that is one of the--one of the two steps forward, one step
    back parts of China's policy, you know, allowing building in
    the west but stopping it in the east. But, even so, I think in
    the east, tailpipe emissions are replacing, you know, coal
    emissions in the power plants.
        So, I don't underestimate the scale of this thing, but in
    all the major cities, even as you head west, the pollution
    problem has become a political, social problem for them, and
    that is the forcing dynamic.
        Mr. Sherman. My hope is they can't solve their problem
    without also helping the world solve its problem----
        Mr. Herberg. Well, you kind of get a one-for-one CO2
    benefit from the air pollution effort. That is what I am
    assuming.
        Mr. Salmon. I thank the panelists very much for being here
    today. It has been very edifying and very informative.
        Mr. Kreutzer. Thank you.
        Mr. Salmon. The committee is adjourned.
        [Whereupon, at 3:55 p.m., the subcommittee was adjourned.]

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