[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]


                   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

                               __________

        Printed for the use of the Committee on Foreign Affairs
        
        
        
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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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