[Senate Prints 111-24]
[From the U.S. Government Publishing Office]


111th Congress                                                  S. Prt.
                            COMMITTEE PRINT                     
 1st Session                                                     111-24
_______________________________________________________________________

                                     


 
                       BROADENING THE BILATERAL:
                        SEIZING THE OPPORTUNITY
                       FOR MEANINGFUL U.S.-CHINA
                    COLLABORATION ON CLIMATE CHANGE

                               __________

                                A REPORT

                                 TO THE

                     COMMITTEE ON FOREIGN RELATIONS

                          UNITED STATES SENATE

                     One Hundred Eleventh Congress

                             First Session

                             July 21, 2009

                                     


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                 COMMITTEE ON FOREIGN RELATIONS        

             JOHN F. KERRY, Massachusetts, Chairman        
CHRISTOPHER J. DODD, Connecticut     RICHARD G. LUGAR, Indiana
RUSSELL D. FEINGOLD, Wisconsin       BOB CORKER, Tennessee
BARBARA BOXER, California            JOHNNY ISAKSON, Georgia
ROBERT MENENDEZ, New Jersey          JAMES E. RISCH, Idaho
BENJAMIN L. CARDIN, Maryland         JIM DeMINT, South Carolina
ROBERT P. CASEY, Jr., Pennsylvania   JOHN BARRASSO, Wyoming
JIM WEBB, Virginia                   ROGER F. WICKER, Mississippi
JEANNE SHAHEEN, New Hampshire        JAMES M. INHOFE, Oklahoma
EDWARD E. KAUFMAN, Delaware
KIRSTEN E. GILLIBRAND, New York
                  David McKean, Staff Director        
        Kenneth A. Myers, Jr., Republican Staff Director        

                              (ii)        
?



                            C O N T E N T S

                              ----------                              
                                                                   Page
Letter of Transmittal............................................     v


Executive Summary................................................     1


1. Summary of Climate Change Science.............................     3


2. United States and China Emissions History.....................     5

    Energy Usage.................................................     5

    Energy Production............................................     6


3. A Review of Current Domestic Actions in China.................     7

    Energy Efficiency............................................     8

    Renewable Electricity........................................     9

    Nuclear Power Generation.....................................     9

    Transportation...............................................    10


4. Current Areas of Collaboration................................    10

    Areas of Tension.............................................    12


5. Areas of Bilateral Focus Moving Forward.......................    12

      I. Build a Bilateral Laboratory............................    14

     II. Create Green Landmark Projects..........................    15

     III. Train a Clean Energy Corps.............................    15


                                 (iii)

                                     

                         LETTER OF TRANSMITTAL

                              ----------                              

                              United States Senate,
                            Committee on Foreign Relations,
                                     Washington, DC, July 21, 2009.


    Dear colleague: On Monday, June 27, the United States 
Government will host the inaugural meeting of the Strategic and 
Economic Dialogue, the framework governing our bilateral 
relationship with China. The stakes are high. We must show our 
own governments and our people that our two countries can and 
do collaborate. And we must jointly tackle one of the most 
important and complex global issues: the threat of catastrophic 
climate change.
    As we move toward the U.N. climate change negotiations in 
Copenhagen in December, I am hopeful that our two countries 
will close the remaining gaps in our high-level positions on 
climate change. I also believe we must visibly and powerfully 
extend our cooperation on all levels.
    The attached staff report establishes the scientific 
arguments and domestic emissions and policies in both countries 
and reviews the current areas of U.S.-China energy 
collaboration. It also recommends three areas for the 
Administration to pursue more robust cooperation in support of 
a global climate change agreement.


            Sincerely,
                                             John F. Kerry,
                                                          Chairman.


                       BROADENING THE BILATERAL:
                        SEIZING THE OPPORTUNITY
                       FOR MEANINGFUL U.S.-CHINA
                    COLLABORATION ON CLIMATE CHANGE

                              ----------                              


                           Executive Summary

    Negotiations for a global climate change treaty at 
Copenhagen are only five months away. Landmark legislation has 
passed in the House, and parallel legislation is now being 
drafted in the Senate. In short, climate change has finally 
taken its proper place among the most significant international 
challenges facing this country and the global community.
    With the upcoming launch of the Strategic and Economic 
Dialogue (S&ED)--the talks that govern our bilateral 
relationship with China--on July 27 and 28, 2009, the United 
States and China have acknowledged that their relationship is 
perhaps the most important in the world.
    This report from the Senate Foreign Relations Committee 
looks at these two crucial international issues in tandem, by 
focusing on U.S.-China climate change and clean energy 
collaboration. Our cooperation has the potential both to drive 
global efforts to address climate change and to strengthen and 
deepen our vitally important bilateral relationship. The report 
draws on a series of hearings and briefings conducted by the 
committee, Chairman John F. Kerry's May 2009 visit to China, 
and a host of independent reports on U.S.-China climate 
collaboration.
    There is increasing agreement among policy makers, national 
security specialists, and private sector leaders--and near 
universal consensus in the scientific community--that climate 
change poses a potentially catastrophic threat to the 
environment and to global security. There is also a growing 
realization that addressing the policies and emissions of the 
United States and China is the key to a global solution. Both 
countries have recognized the importance of the threat, and the 
need for their engagement; both have begun taking domestic 
action to alter their energy use patterns and emissions 
profiles. However, neither has yet been willing to take the 
dramatic actions that many experts deem necessary to achieve 
critical mass for a global effort. Many in the United States 
frankly doubt China's commitment to reduce emissions. The 
ranking member of the committee, Senator Lugar, remarked in his 
opening statement on June 4, ``The American domestic debate on 
the issue will be profoundly influenced by perceptions of 
China's willingness to set aside doctrinaire positions and 
agree to verifiable steps to limit greenhouse gas emissions.'' 
\1\
---------------------------------------------------------------------------
    \1\ Opening Statement of Senator Lugar, hearing on ``Challenges and 
Opportunities for U.S.-China Cooperation on Climate Change.'' 4 June 
2009.
---------------------------------------------------------------------------
    The United States has begun to change its stance. President 
Obama has made clear his support for binding emissions 
reductions. In addition, the American Clean Energy and Security 
Act recently passed in the House would require emissions 
reductions of at least 17 percent by 2020 and 80 percent by 
2050. However, the absence of specific emissions reduction 
commitments from China has stoked fears of an unfair economic 
advantage for China, a hobbled U.S. economy, and an 
insufficient response to the threat of global climate change.
    After an investigation by the committee's staff and the 
Chairman's frank conversations with Chinese leaders, it is the 
Chairman's strong view that China recognizes the dangers of 
climate change and is prepared to work with the United States 
and other members of the international community to address it; 
though, as Senator Lugar noted, the American perception of 
China's actions will remain equally important. At the most 
senior level, as Al Gore noted in his testimony on January 28, 
2009 before the committee, China has recognized climate change 
as an issue of paramount importance to itself and the world, 
and is committed to action.\2\ Vice-Premier Li Keqiang in his 
conversations with the Chairman explicitly stated his 
commitment to making the negotiations in Copenhagen a success. 
Over the past several years this leadership has begun to build 
consensus among national policy makers and gain support from 
certain local and provincial government leaders that dramatic 
steps must be taken. Internal hurdles remain, but the Chinese 
Government appears willing to engage.
---------------------------------------------------------------------------
    \2\ Testimony of the Honorable Albert A. Gore, Jr. before the 
Senate Foreign Relations Committee, United States Senate, hearing on 
``Addressing Global Climate Change: the Road to Copenhagen'' 28 January 
2009.
---------------------------------------------------------------------------
    Of course, achieving an agreement on climate change policy 
that includes fixed commitments from China will still continue 
to prove extraordinarily difficult, as evidenced by the 
important, but limited, movement during the recent G8 and Major 
Economies Forum in July 2009. This report therefore has focused 
on the areas where the United States and China should 
concentrate their efforts now, particularly in the context of 
the S&ED, in order to move closer on climate issues and to 
begin incorporating climate change into the bilateral 
framework.
    There exists a strong base on which these cooperative 
efforts can build. Many governmental, private-sector, and non-
profit entities have already succeeded in building strong 
partnerships, and the two countries made a great step forward 
with the signing of the U.S.-China 10 Year Energy and 
Environment Cooperation Framework (10 Year Framework) under the 
previous administration. Today there is an opportunity to 
dramatically expand the collaboration and to include addressing 
climate change as an explicit goal of the cooperation 
framework. China itself has recognized that collaboration, 
broadly speaking, is essential--and desirable. As Foreign 
Minister Yang Jiechi said in March:


          Exchanges, cooperation and mutual benefit should be 
        the defining features of the 21st century. Gone should 
        be the days when countries competed at the expense of 
        each other's interests under a zero-sum mentality 
        because those who preach such a competition approach 
        and model are bound to be the biggest losers today. 
        China and the United States should and can set an 
        example in achieving win-win progress and making 
        greater joint efforts for an even better world.\3\
---------------------------------------------------------------------------
    \3\ http://www.fmprc.gov.cn/eng/wjdt/zyjh/t542505.htm


    By focusing on three areas, (i) Building a bilateral 
laboratory, (ii) Creating green landmark projects; and (iii) 
Training a clean energy corps, the United States and China can 
deepen their ties, build trust, and ultimately catalyze a 
binding, comprehensive, and fair global agreement on climate 
change. We have already seen signs of progress on the first 
area, with Secretaries Chu and Locke's announcement in China of 
a joint clean energy research center.
    If the United States acts now to extend and deepen this 
relationship-and begins incorporating climate change goals into 
its bilateral energy relationship with China, there is a very 
real opportunity for this country, with China, to lead the 
international community to a global solution to one of the 
world's most pressing problems.
    This report addresses these issues in five sections.


  1. Summary of Climate Change Science

  2. United States and China Emissions History

  3. A Review of Domestic Actions in China

  4. Current areas of Collaboration Between the Two Countries

  5. Areas of Bilateral Focus Moving Forward


                  1. Summary of Climate Change Science

    Today, there is near-universal consensus within the 
scientific community that climate change has begun, is 
accelerating, and will have catastrophic effects--both physical 
and human--if efforts are not taken address it.
    Ice core analysis and atmospheric measurements indicate 
that, since 1750, the concentration of carbon dioxide in the 
atmosphere increased 38 percent, from 280 to 385 parts per 
million (ppm). Current levels are higher than at any other 
point in the past 800,000 years. In the absence of limits on 
greenhouse gas emissions (GHG), atmospheric concentrations are 
expected to reach 600-700 ppm by 2100. In order to avoid the 
risk of catastrophic climate change, the scientific community 
led by the Intergovernmental Panel on Climate Change (IPCC), 
the world's authoritative scientific body on climate change, 
recommends that atmospheric concentrations stabilize at 450 
ppm.\4\ This represents a global average temperature increase 
of 2 C above pre-industrial levels, and matches the agreed 
target reached during the July, 2009 G8 meeting.
---------------------------------------------------------------------------
    \4\ IPCC, ``Summary for Policymakers of the Synthesis Report of the 
IPCC Fourth Assessment Report'' (Intergovernmental Panel on Climate 
Change, 2007), at http://www.ipcc.ch/index.htm (accessed November 27, 
2007).
---------------------------------------------------------------------------
    While a number of factors contribute to atmospheric carbon 
dioxide concentrations, the IPCC has concluded that the primary 
cause of this surge in carbon dioxide has been the human use of 
fossil fuels.
    Increasing atmospheric concentration of carbon dioxide has 
already caused temperatures to rise globally, by three-quarters 
of a degree Celsius over the 20th century. In fact, the 10 
warmest years on record have all occurred since 1997. These 
changes have already resulted in significant impacts on the 
physical environment. This is most evident in the Arctic, where 
temperatures are rising at twice the global average and where 
the consequences of warming are immense, as Al Gore made clear 
in his testimony. In 2007, the Arctic experienced record ice 
loss--almost 40 percent below the long-term average. The past 
six years have produced the six lowest levels of winter ice 
coverage on record. Experts project that the North Pole could 
see its first ice-free summer as early as 2013. These effects 
are not restricted to the poles. The U.S. Global Change 
Research Program issued a report in June 2009 demonstrating the 
impacts of climate change on every region of the United States. 
Floods, droughts, storms and other extreme weather events are 
projected to increase throughout the United States. China has 
already seen extended droughts in the north, extreme weather 
events and flooding in the south, and rising sea levels along 
its densely populated coast. According to Elizabeth Economy, 
Director for Asia Studies at the Council on Foreign Relations, 
farmers in rural China often cite climate change as the cause 
of poor land quality and water scarcity.\5\
---------------------------------------------------------------------------
    \5\ Testimony of Elizabeth Economy before the Senate Foreign 
Relations Committee, United States Senate, hearing on ``Challenges and 
Opportunities for U.S.-China Cooperation on Climate Change.'' 4 June 
2009.
---------------------------------------------------------------------------
    While these physical impacts are the most visible, the 
effects of climate change extend far beyond our natural 
environment. Climate change is a threat to public health: 
changing temperatures already have increased the areas 
susceptible to malaria outbreaks worldwide. Heavier 
precipitation events, which are predicted to become 
increasingly prevalent, will lead to increased outbreaks of 
e. coli and cryptosporidium.\6\
---------------------------------------------------------------------------
    \6\  Paul Almendares and Paul R. Epstein, Climate Change and Health 
Vulnerabilities. Climate Change. 2009
---------------------------------------------------------------------------
    Climate change exacerbates conflict. Growing competition 
for scarce resources, due to desertification and water 
shortages, threatens to lead to increased conflict and to 
inflame pre-existing tensions. In South Asia, India's rivers 
are not only vital to its agriculture, but central to its 
religious practice. Pakistan, for its part, is heavily 
dependent on irrigated farming to avoid famine. Both share the 
water that flows from the Himalayas and which could disappear 
completely by 2035.\7\ At a moment when the American Government 
is working to decrease tensions and preparing to invest 
billions to strengthen Pakistan's capacity to deliver for its 
people, climate change is working in the opposite direction.
---------------------------------------------------------------------------
    \7\ (Citing report by Syed Hasnain, a scientist at the Energy and 
Resources Institute (TERI)). http://www.telegraph.co.uk/earth/
earthnews/3458927/Himalayan-glaciers-could-disappear-completely-by-
2035.html
---------------------------------------------------------------------------
    Climate change also leads to massive population migration. 
Estimates of populations displaced by climate change, either 
from natural disasters or evolving changes to the climate, 
range from 25 to 200 million. These migrations put enormous 
strain on governmental institutions, as well as the traditional 
international institutions, like the Office of the United 
Nations High Commission for Refugees, which has traditionally 
worked with these groups.

              2. United States and China Emissions History

    While the United States remains the world's largest 
historical emitter of GHG, China surpassed the United States in 
2007 to become the largest current annual contributor.\8\ 
Combined, China and the United States represent more than 40 
percent of global annual emissions.\9\ Any strategy to address 
climate change that does not include China and the United 
States is doomed to fail.
---------------------------------------------------------------------------
    \8\ Includes CO2 emissions only as China does not report 
non CO2 emissions. http://cdiac.ornl. gov/trends/emis/
top2006.tot
    \9\ ``Energy, Emissions, and National Circumstances'' by the Asia 
Society.
---------------------------------------------------------------------------
    This section lays out the primary sources of emissions in 
each country. Although some observers have expressed concerns 
with the accuracy of Chinese data, most experts agree that 
current estimates are relatively accurate.\10\ The main driver 
globally of GHG emissions is energy--both its production and 
its end usage.\11\ While China and the United States differ 
significantly in their current and projected usage, both 
countries share similar energy production profiles.
---------------------------------------------------------------------------
    \10\ China has officially reported one year of emissions data, 
1994, which was only released ten years later. To estimate emissions, 
most groups use energy consumption statistics; however, due to poor 
reporting at the local level and at times immature data systems, the 
energy data that China does release can often be inconsistent (e.g., 
national data and aggregated provincial level data often vary 
significantly). In general the discrepancies do not appear to stem from 
intentional manipulation.
    \11\ Other important sources of emissions include land-use changes, 
especially forestry issues, agriculture, biomass, and coal fires.
---------------------------------------------------------------------------


                              ENERGY USAGE


    In the United States, the majority of emissions derive from 
the production of electricity. By end use,\12\ transportation 
is the largest share, at just over one third of total 
emissions. Residential buildings and industrial facilities each 
represent about one quarter of total emissions, with commercial 
buildings consuming just under one fifth. Historically, U.S. 
emissions have been affected by two major trends. First, energy 
``intensity''--the ratio of energy consumption to GDP--has 
fallen over time, primarily from the United States' movement to 
a more services-oriented economy. Second, emissions growth has 
historically tracked closely with population growth. Since 
1990, the population has grown 19 percent and emissions have 
grown 16 percent.
---------------------------------------------------------------------------
    \12\ Defined by the EIA as Residential, Commercial, Industrial, and 
Transportation.
---------------------------------------------------------------------------
    China's energy profile, by contrast, is dominated by 
industrial emissions. Of total emissions, around 70 percent 
come from industry. Emissions from this sector have accelerated 
over the past decade, increasing by 46 percent from 2002-05 and 
then another 32 percent from 2005-07.\13\ These dramatic 
increases have been driven by the rapid industrialization of 
the country, including infrastructure development and a surge 
in heavy industry.\14\ In addition, as supply chains have 
integrated across Asia, China has increasingly become a hub for 
final assembly.
---------------------------------------------------------------------------
    \13\ EIA, 2008, Emissions of Greenhouse Gases Report, available at: 
http://www.eia.doe.gov/oiaf/1605/ggrpt/carbon.html; China emissions 
calculated using 1996 revision of IPCC default carbon emission factors; 
commercial fuels only, not including biomass.
    \14\ Zhou, Nan, Levine, Mark, and Fridley, David. Taking out one 
billion tons of CO: the magic of China's 11th five year plan? Energy 
Policy, No. 26. 2008, December 2007. LBNL-757E.)
---------------------------------------------------------------------------
    While industrial emissions currently dominate China's 
emissions profile, two population trends have the potential to 
alter that balance. China's per capita emissions are currently 
only one-fifth of the U.S. figure. However, the ongoing 
urbanization of China will result in 350 million Chinese moving 
to the cities by 2030--the equivalent of a new city of 1.25 
million people every month.\15\ Given that meeting the needs of 
urban-dwellers (including constructing housing and urban 
infrastructure) requires approximately 3.5 times the energy 
required to meet the basic needs of rural Chinese, this mass 
migration will contribute to growing emissions in the 
future.\16\ In addition, Chinese per capita incomes have risen 
rapidly in recent years, driving increased consumption of 
energy-consuming products like vehicles and appliances.
---------------------------------------------------------------------------
    \15\ Testimony of Ken Lieberthal before the Senate Foreign 
Relations Committee, United States Senate, hearing on ``Challenges and 
Opportunities for U.S.-China Cooperation on Climate Change.'' 4 June 
2009
    \16\  John L. Thornton China Center at Brookings. ``Chinese Climate 
Policy.'' Overcoming Obstacles to U.S.-China Cooperation on Climate 
Change. 31-2.
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                           ENERGY PRODUCTION


    While China and the United States are, respectively, the 
first- and second-largest consumers of renewable electricity, 
both countries are also highly dependent on coal. Coal supplies 
about 70 percent of China's energy, and results in 81 percent 
of its CO2 emissions.\17\ Coal generates 22 percent 
of U.S. energy-more than the European Union, Japan, Russia and 
Indonesia-and accounts for 36 percent of its total emissions. 
Half of U.S. electricity is generated from coal; in China that 
figure is 80 percent.\18\ Experts predict that China will 
remain highly dependent on coal as its economy continues to 
grow. Kenneth Lieberthal, a visiting fellow at the Brookings 
Institution, testified on June 4, 2009 in a hearing before the 
committee, ``There is no serious alternative to coal for many 
decades to come.'' \19\
---------------------------------------------------------------------------
    \17\ National Bureau of Statistics, China Statistical Abstract, 
various years.
    \18\ Asia Society
    \19\ Testimony of Ken Lieberthal before the Senate Foreign 
Relations Committee, United States Senate, hearing on ``Challenges and 
Opportunities for U.S.-China Cooperation on Climate Change.'' 4 June 
2009.
---------------------------------------------------------------------------
    With relatively large coal deposits in both countries, the 
question of coal extends beyond emissions and into energy 
security. For China in particular, where 97 percent of its 
fossil fuel base is coal, there is a strong domestic security 
incentive to continue using coal, rather than switching to 
natural gas or oil, both of which are relatively scarce 
domestically.\20\
---------------------------------------------------------------------------
    \20\ National Bureau of Statistics, China Statistical Abstract, 
various years.
---------------------------------------------------------------------------
    In light of this situation, both China and the United 
States have become global leaders in coal technology. China has 
improved upon the most common coal technology to create some of 
the world's most efficient plants, allowing for higher energy 
production from the same quantity of coal. The United States 
has pioneered new technology that also increases efficiency and 
simplifies any subsequent carbon capture and sequestration 
(CCS). Despite these advances, both countries will have to 
address the question of emissions from coal, which will require 
further technological progress and investment, especially in 
CCS.

            3. A Review of Current Domestic Actions in China

    The United States has already begun to tackle the question 
of climate change, and the recent passage of the American Clean 
Energy and Security Act in the House of Representatives 
suggests that the U.S. Government may adopt a cap on emissions. 
While many analyses have explored the range of federal, 
regional and local U.S. action on climate change, changes in 
Chinese policy are significantly less well understood.
    In 2005, China unveiled its 11th Five Year Plan, which 
featured a new focus on energy and the environment. In 2008, 
the environmental agency was elevated to Ministry status, a 
significant internal political move, reflecting the heightened 
priority of environmental matters in the government. Moreover, 
outside observers, including the Chairman, have noted a 
significant change in public and private rhetoric on the 
question of climate change. As the Chairman noted in his speech 
to the Council on Foreign Relations on June 15, 2009:


          What I saw and heard from top Chinese political and 
        military leaders, energy executives, scientists, 
        students, and environmentalists was enormously 
        encouraging. People who, a few short years ago, weren't 
        even willing to entertain this discussion, are now 
        unequivocal: China grasps the urgency of the problem, 
        is eager to embrace clean energy, and is ready to be a 
        ``positive, constructive'' player in negotiations going 
        forward.


    Still, the political situation in China remains complex. 
Senior leaders in Beijing appear to acknowledge tacitly that 
China must eventually sign on to a binding agreement to reduce 
emissions, but they face many hurdles. First, as former Foreign 
Minister Li Zhao-xing made clear to Chairman Kerry in Beijing 
in May, 2009, China is unwilling to take on commitments that it 
may not be able to achieve. And while the central government 
may be close to a consensus on the importance of addressing 
climate change, many regional and local governments, who 
ultimately will be responsible for enforcing emissions targets, 
have a mandate to maximize economic growth. They may not yet be 
convinced that their own interests will be best served by 
moving decisively to implement sustainable growth strategies.
    As in the United States, measures to curb carbon emissions 
face stiff opposition from certain heavily affected geographic 
areas and industrial sectors. The regional mayors and industry 
leaders, often from poorer provinces, have exerted pressure on 
the central government to postpone any binding commitments. To 
them, environmental and emissions restrictions are seen as 
limiting economic growth.
    Slowly, the central government has sought to alter this 
viewpoint. It has made adjustments to the all-important metrics 
by which regional and local leaders are evaluated, decreasing 
the importance of economic growth and increasing the importance 
of environmental issues. Local officials have now been told 
that their jobs will be in jeopardy if they fail to meet 
targets to reduce energy intensity and emissions. It has also 
successfully ``piloted'' greater environmental control in 
specific cities, like Dalian, to demonstrate that economic 
growth need not run counter to environmental health. However, 
it will still take time to build consensus among the 650 cities 
across China that will ultimately enforce any such agreement.
    In spite of the internal political difficulties of 
committing to a binding emissions agreement, China has 
established targets in a variety of areas, including energy 
efficiency, renewable energy, nuclear power, industry, and 
transportation. In fact, as James Rogers, CEO of Duke Energy, 
noted in his testimony on May 19, 2009, ``China now has 
renewable energy, energy efficiency, and fuel economy standards 
that are all more aggressive than our own.'' These targets have 
been repeatedly strengthened as China has exceeded its own 
interim benchmarks. Beyond specific targets, China has also 
continually sought to improve the efficiency of its standard 
coal plants and, in the past few years, some argue China has 
surpassed the United States in power generation efficiency.\21\
---------------------------------------------------------------------------
    \21\ http://www.serc.gov.cn/jgyj/ztbg/200903/
W020090324593421835268.pdf
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    In addition to ordinary funding for these initiatives, 
China has also made significant commitments in its 2008 
economic stimulus program to green efforts, including energy 
efficiency and renewables. While stimulus infrastructure 
spending is frequently allocated with abbreviated environmental 
impact assessments and little scrutiny, the additional funding 
for energy and climate issues is significant. These 
investments--if effective--will shift Chinese patterns of 
energy production.
    To date the progress has been impressive. Investment in new 
renewables capacity is now second in the world, only to 
Germany, with more than $12 billion in 2007 alone.\22\ China's 
wind capacity grew at an astonishing 91 percent in 2008, making 
the country the fourth largest wind market globally. Success in 
solar photovoltaics (PV) has likewise been remarkable: Suntech, 
the market leader, grew from just 20 employees in 2002 to a 
market value of $6 billion, making its founder at one point the 
richest man in China. Today, China is the largest producer of 
PV panels, with more than 200 manufacturers creating 1700 
megawatts of the panels in 2007, which amounts to about half of 
the world's total production.\23\
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    \22\ http://www.renewableenergyworld.com/rea/news/article/2008/03/
powering-chinas-development-the-role-of-renewable-energy-51586
    \23\ http://www.scientificamerican.com/article.cfm?id=chinas-big-
push-for-renewable-energy
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                           ENERGY EFFICIENCY


    Energy efficiency improvements are a focal point for 
Chinese energy policy. For more than two decades, China saw its 
energy intensity\24\ decrease annually by approximately 5 
percent. However, between 2002 and 2005, energy intensity 
increased by 2 percent annually. In response to this new and 
troubling trend, the government announced a 20 percent energy 
intensity reduction target for the period from 2006 to 2010. 
From 2005-08, due to a variety of programs, energy intensity 
has decreased 10 percent, with a 4.6 percent decrease from 2007 
to 2008.\25\ Among the most important programs in this effort 
are the ``Top 1,000'' enterprises programs, which cover a set 
of enterprises responsible for one third of all energy 
consumption in China. This effort requires companies to perform 
and publish energy audits and calculate their energy intensity. 
Each enterprise is then required to draw up plans to achieve 
required reductions, and report annual, measurable results to 
the National Development and Reform Commission (NDRC), a 
government body with broad administrative and planning control 
over the Chinese economy.\26\
---------------------------------------------------------------------------
    \24\ Energy use per unit of gross domestic product.
    \25\ Eleventh Five-Year Plan: Reducing 20% of energy consumption 
per unit GDP by 2010. Energy Weekly. CHINA5E E-Magazine, May 26, 2009, 
Vol. 204.
    \26\ The Challenge of Reducing Energy Consumption of the Top-1000 
Largest Industrial Enterprises in China, Lynn Price, Xuejun Wang, Jiang 
Yun. Page 7-8. Berkeley, CA: Lawrence Berkeley National Laboratory. See 
also, Price, L., Xuejun Wang, Jiang Yun, 2009. ``The Challenge of 
Reducing Energy Consumption of the Top-1000 Largest Industrial 
Enterprises in China,'' Energy Policy.
---------------------------------------------------------------------------
    There is significant funding behind these efforts. Annual 
spending on energy efficiency increased from $244 million in 
2007 to $1.3 billion in 2008 to $1.8 billion in 2009.


                         RENEWABLE ELECTRICITY


    China has one of the most ambitious renewable energy 
programs globally. In 2005, the government released a target of 
10 percent renewable electricity generation by 2010 and 15 
percent in 2020. China has already exceeded its 2010 generation 
target and, in response, tripled its wind production goal and 
increased its solar production goal by five-fold. Zhang 
Xiaoqiang, the NDRC's vice-minister in charge of international 
cooperation, has publicly suggested that the 2020 target, which 
does not include hydroelectric power, may need to be revised 
upward as well. He suggested China could reach 18 percent, or 
even 20 percent, renewable power generation by 2020.
    Much of this success has stemmed from the significant 
investments from the Chinese central government in renewable 
energy, with commitments of almost $300 billion between now and 
2020. China's progress in building local industries for wind 
turbines and solar panels, among other renewable technologies 
has also resulted in vastly lower prices and speedier adoption 
rates.


                        NUCLEAR POWER GENERATION


    China is also investing in nuclear power, committing to 
large deals with the major nuclear providers, including Areva 
and Westinghouse. In their energy planning, they have 
continually increased their nuclear targets, which currently 
stand at 60GW by 2020, but may be increased again to somewhere 
between 75 and 100 GW of installed capacity. During the 
Chairman's visit, officials stated that 110 GW would be 
installed or under construction by 2020.
    These agreements have been among the largest nuclear deals 
ever concluded and include significant technology transfer. 
They may also hasten the advance of new nuclear technologies, 
as the opportunity to build plants results in more efficient 
techniques and greater opportunity for at-scale 
experimentation.


                             TRANSPORTATION


    China has pursued significant improvements in the 
efficiency of its vehicle fleet and has put in place a 
corporate average fuel economy standard of 36 mpg by 2008 
(stronger than the accelerated U.S. target for 2016). China 
also is in the process of setting fuel economy standards for 
trucks and agricultural vehicles.
    In addition, China has heavily invested in electric 
vehicles, with a $1.5 billion subsidy for electric vehicle 
technology. The federal government hopes to pioneer the use of 
electric vehicles in public fleets in thirteen cities over the 
next four years.\27\ In January, for the first time, more new 
cars were sold in China than the United States, and while 
China's installed base remains relatively small, it is likely 
to increase rapidly.\28\
---------------------------------------------------------------------------
    \27\ ``China-made electric cars to enter US market,'' People's 
Daily Online (23 February 2009).
    \28\ http://worldblog.msnbc.msn.com/archive/2009/02/09/1787089.aspx
---------------------------------------------------------------------------
    China is also pursuing an expansive public transit system. 
It plans to extend its high speed rail system by 38 percent by 
2013 and build more than 170 mass transit systems by 2025. 
These investments are transforming the urban landscape and 
fundamentally changing the mobility of the Chinese.

                   4. Current areas of collaboration

    The United States and China are already working together 
through a wide variety of venues and organizations to share 
technology and expertise on climate change and energy issues. 
To date, most of these collaborations have focused primarily on 
energy and energy efficiency, rather than directly addressing 
climate change and greenhouse gas emissions.
    Admittedly, these efforts have proved challenging. Low 
levels of funding, fluctuations in support for programs, and 
lack of continuity of organizations or personnel often decrease 
effectiveness. In addition, the sheer number of programs can 
result in agencies working in overlapping areas and at times 
contradicting each other. But although some programs have been 
undermined by lack of follow-up or coordination, many of these 
efforts have built lasting and productive bilateral 
relationships and concrete results to support future bilateral 
cooperation on climate change.
    Simply at the federal level, there are dozens of bilateral 
agreements, including memoranda of understanding (MOUs) and 
cooperative agreements, which provide political clearance and 
frameworks for technical cooperation. Bilateral programs have 
been supported with federal funds, typically through the 
Department of Energy (DOE) or the Environmental Protection 
Agency (EPA) but are often carried out through national 
laboratories or through environmental or energy non-
governmental organizations and research institutes. Many of the 
successful programs have included broad partnerships among 
different organizations providing special expertise, and have 
involved the private sector as well.
    One of the first major U.S.-China bilateral partnerships on 
energy issues was the U.S. Country Studies Program, which was 
initiated in 1992 under President George H. W. Bush. Under this 
program, officials from DOE, EPA, and others worked with 
officials from China's Energy Research Institute, State 
Planning Commission, and Chinese Academy of Sciences to develop 
a methodology to inventory China's greenhouse gas emissions. 
This effort laid the foundation for China's 1994 inventory 
submission to the UN Framework Convention on Climate Change 
(UNFCCC). The Country Studies Program also assessed the impacts 
of climate change and options for adaptive response policies; 
identified technological options for GHG mitigation and 
analyzed their socioeconomic and environmental implications; 
developed integrated modeling capabilities to support policy 
analysis; and supported climate policy dialogue between the 
Chinese and U.S. governments. Many projects since the mid-1990s 
have grown out of the Country Studies Program.
    Several long-standing partnerships have evolved, including 
several centers established in China as focal points for 
research, training, and information sharing on energy 
efficiency and environmental technologies and measures. DOE and 
EPA have supported technical projects to expand natural gas 
production and use, renewable electricity and nuclear power 
production, energy efficient building codes, and planning for 
carbon capture and storage technologies.
    Among the most fruitful collaborations has been work 
undertaken in China on energy efficiency with help from U.S. 
experts--both from the private sector and our national 
laboratories. Notably, Lawrence Berkeley National Laboratory 
(LBNL) has provided technical assistance to the Chinese 
regarding energy efficiency for over 20 years, including 
assistance related to the development and implementation of 
China's Top-1000 program. Working together with researchers and 
policy-makers in China, LBNL helped design and pilot the 
initial efforts in Shandong Province that lead to the national-
level Top-1000 program. LBNL has also worked closely with the 
China National Institute of Standardization in the development 
of over 20 minimum energy efficiency standards and energy 
efficiency labeling specifications.
    Last year, the two countries consolidated and formalized 
their cooperation with the signing of the 10 Year Framework. 
This agreement represents the closest collaboration thus far on 
climate change-related issues and provides an umbrella 
agreement under which the two countries can address a variety 
of concerns. Notably, from the Chinese side, both President Hu 
and Premier Wen played a significant role in establishing this 
accord and approving all provisions.
    The 10 Year Framework covers six areas: (1) Clean and 
Secure Electricity Production and Transmission; (2) Energy 
Efficiency (3) Clean Water; (4) Clean Air; (5) Clean and 
Efficient Transportation; and (6) Conservation of Forest and 
Wetland Ecosystems. Notably, the agreement does not currently 
include climate change or emission reductions.
    Three breakthroughs in this Framework are worth 
highlighting. First, significant progress was achieved 
regarding technology transfer, as defined in the text:


          For purposes of this cooperation as an exchange of 
        expertise between our two countries and cooperation to 
        jointly reduce or remove barriers including costs 
        associated with technology research and development, 
        commercialization and deployment.


    This definition recognizes the significant efforts, 
including government-to-government transfers of energy 
efficiency technology and private sector transfers of 
technology, which are already ongoing and emphasizes the 
importance of competition and commercialization in lowering 
costs associated with technology.
    Second, the 10 Year Framework has given rise to a large 
number of government facilitated ``eco-partnerships'' that 
continue to deepen the relationship between the two countries. 
Whether between academic institutions like Tulane University 
and East China Normal University, or public-private efforts, 
like those that Denver, Colorado and Ford Motor Company, have 
undertaken with Chongqing municipality and Changan Auto Group 
Corporation, these partnerships increase the density and depth 
of the U.S. relationship with China on energy and climate 
change.
    Lastly, the most recent agreement on the timeline for a 
Chinese roadmap to introduce low-sulfur fuels, despite the cost 
increase that this switch would entail, suggests a growing 
potential for the U.S. and China to work collaboratively to 
address emissions questions.


                            AREAS OF TENSION


    Despite significant progress on clean energy technologies 
and practices, direct collaboration on climate change issues 
and emission reductions continues to encounter resistance. 
Collaboration appears to be constrained due to the entrenched 
positions both countries continue to maintain within the 
UNFCCC. In the lead-up to the Copenhagen negotiating session, 
China has staked out a particularly demanding and 
uncompromising position, calling for 40 percent cuts in 
greenhouse gas emissions by 2020 by developed countries, as 
well as additional assessed contributions, indexed to GDP and 
as high as 0.5-1.0 percent of GDP, for emissions reductions. It 
is also not clear how willing China is to address this problem 
should it require significantly compromising near-term economic 
growth. As Senator Lugar noted in his opening statement to the 
committee on June 4, 2009, China's actions have been ``complex 
and contradictory,'' with a burgeoning appetite for renewable 
energy juxtaposed against a rapid build-out of coal power 
plants and its collaborative relationship with the United 
States on energy in contrast to its often strident rhetoric in 
multilateral fora.

               5. Areas of Bilateral Focus Moving Forward

    This month, the United States and China will formally 
relaunch their bilateral relationship with the meeting of the 
S&ED, the successor to the Strategic Economic Dialogue (SED) of 
the previous administration. As discussed in the prior section, 
the SED successfully launched the 10 Year Framework, and the 
S&ED has the opportunity to broaden and deepen U.S.-China 
collaboration on these issues.
    Over the past year, a variety of institutions have analyzed 
the various areas where the United States and China could 
broaden their collaboration. Among them are the Asia Society, 
the John L. Thornton China Center at the Brookings Institution, 
the Council on Foreign Relations, the Center for Strategic and 
International Studies, McKinsey & Company, the Natural 
Resources Defense Council, the Pew Center on Global Climate 
Change and the World Resources Institute. This committee has 
also conducted a series of relevant hearings and briefings, and 
the Chairman visited China in May 2009 to meet with political 
leaders, academics, businesses, and non-governmental 
organizations to discuss climate change and the bilateral 
relationship.
    One clear conclusion emerges from this broad set of 
analyses: the United States and China must jointly address the 
question of climate change. Without these two countries, it is 
impossible to achieve the global reductions necessary. There is 
broad recognition that achieving this collaboration will not be 
easy. Both countries have been hesitant to accept any binding 
cuts or caps. Neither country is comfortable acting without 
commitments from the other. China, as discussed earlier, has 
unveiled a particularly problematic list of demands.
    The United States recognizes, as Special Envoy on Climate 
Change Todd Stern described in his testimony before the 
committee on April 22, 2009, that developing nations and 
developed nations will undertake different actions, but 
fundamentally China must agree to ``significant national 
actions that . . . they quantify and that are ambitious enough 
to be broadly consistent with the lessons of science.'' \29\ 
Under the guiding principles of the UNFCCC, the commitments of 
all parties to take actions to mitigate climate change must 
incorporate their common but differentiated responsibilities. 
But, as the Chairman has noted, per the negotiations in 2007 in 
Bali, Indonesia, every country should be responsible for 
measurable, reportable, and verifiable commitments.
---------------------------------------------------------------------------
    \29\  Testimony of Todd Stern, Special Envoy for Climate Change, 
before the Senate Foreign Relations Committee, United States Senate, 
hearing on ``Global Climate Change: U.S. Leadership For A New Global 
Agreement.'' 22 April 2009.
---------------------------------------------------------------------------
    These are challenging starting conditions. However, deep 
relationships already exist on energy and environmental issues. 
Moreover, many of the key elements of a climate agreement have 
already been agreed to in the 10 Year Framework. Using the 
Framework as a base, there is a real and significant 
opportunity for the United States and China to reach an accord 
and become leaders on this pressing global issue.
    It is worth noting that these bilateral negotiations 
support and do not supplant the multilateral process. The 
negotiations in Copenhagen will determine the global course of 
action, but without some kind of understanding between the 
United States and China in advance of these talks, it will be 
very difficult to reach a robust treaty. As noted by Todd 
Stern, ``If the two goliaths on the world stage can join hands 
and commit each other--at the highest levels--to a long-term, 
vigorous climate and energy partnership, it will truly change 
the world.''\30\
---------------------------------------------------------------------------
    \30\ Remarks from Todd Stern as Prepared at Center for American 
Progress 6/3/09.
---------------------------------------------------------------------------
    The Chairman strongly encourages the United States and 
China to build upon existing relationships and continue 
deepening and broadening ongoing partnerships, with a goal 
toward an expanded energy and environmental cooperative 
agreement that includes a shared perspective and set of actions 
to combat the threat of climate change.
    The Chairman believes that three areas offer significant 
potential to bring the two countries closer on climate change 
issues and, in turn, lead to a global agreement. Finding 
visible opportunities to work together also reminds key opinion 
makers in China and in the United States (including Congress) 
that our two countries can and do collaborate effectively.


  i. Build a bilateral laboratory focusing on mutually 
        beneficial technologies, such as advanced vehicles, 
        carbon capture, and smart grid technology.
  ii. Create green landmark projects by jointly designing, 
        financing and implementing pilot projects to test key 
        near-commercial technologies, including carbon capture 
        and storage methods and concentrated solar power.
  iii. Train a clean energy corps within each country, focused 
        on energy efficiency, policy design, monitoring and 
        verification, and enforcement of standards.


                    I. BUILD A BILATERAL LABORATORY


    The United States' system of national laboratories has 
proven an extraordinary breeding ground for cutting-edge 
scientific developments. Though China does not have a parallel 
system, the country has a variety of topnotch research 
institutions working on next generation technologies--and among 
the highest research outlays in the world.\31\ By focusing 
talent and resources on the joint problems of the two countries 
in a dedicated bilateral laboratory, the two countries would 
have access to some of the best minds, the best resources and 
the biggest markets. Secretaries Chu and Locke have begun down 
this road, but it remains to be seen how collaborative an 
entity the proposed joint clean energy research center will 
become.
---------------------------------------------------------------------------
    \31\ Shahid Yusuf and Kaoru Nabeshima, Strengthening China's 
Technological Capability (Washington DC: World Bank, Development 
Research Group, August 2007).
---------------------------------------------------------------------------
    To be effective, this new laboratory should, of course, 
take advantage of the deep scientific communities in both 
countries, but also focus on specific areas of mutual interest, 
receive joint funding from the two nations, and include a 
mechanism for reporting on and updating the mission of the 
center. Its primary goal would be the research, development, 
and small-scale demonstration of new technologies with the 
potential to deeply reduce GHG emissions. By working together 
to combine know-how on topics of shared interest, the two 
countries can not only bring about significant change in these 
areas, but also streamline commercialization and deployment 
through joint testing and certification.
    Expert opinion has focused on a few high priority 
technologies: carbon capture and storage, new renewable energy 
technologies such as solar PV and biofuels, ``smart'' 
buildings, electric vehicles, and efficient grid technologies. 
In many of these areas, the United States and China already 
have complementary technologies under development. On both 
sides of the Pacific, giving relatively greater attention to 
``human dimensions'' and related barriers to technology 
deployment could reap mutual benefits--like the installation of 
smart metering. In particular, collaboration may be 
particularly helpful on the design of incentives for businesses 
and households.


                   II. CREATE GREEN LANDMARK PROJECTS


    The United States and China have independently accomplished 
some of the world's most impressive feats of engineering. By 
working together to build ground-breaking environmental 
projects at scale, they can help commercialize near-to-market 
technologies and inspire further commitment to these issues. In 
so doing, they also encourage and facilitate firms in both 
countries doing business in the other.
    Combining the technical, financial and manufacturing 
resources of both countries promises significant breakthroughs. 
By identifying key technologies that are close to market, but 
that have not had either the testing or the scale construction 
necessary, and then realizing these projects at full potential, 
China and the U.S. would prove their technical leadership to 
the world, significantly reduce costs, and accelerate their 
adoption globally. Beyond the choice of projects, this effort 
would also require the United States and China to work together 
to streamline import and export processes for high priority 
advanced technologies, simplify the process for foreign firms 
to do business, and consider supportive provisions under the 
World Trade Organization.
    Coal-fired power generation should be a priority area for 
collaboration. Experts broadly agree that U.S.-China efforts 
should target the construction of commercial-scale, integrated 
carbon capture and storage pilot projects. The U.S. is moving 
forward with the FutureGen project in Mattoon, Illinois, and 
China has three projects at various stages of development. By 
working to improve the efficiency and performance of power 
generation technologies and link them with carbon capture 
mechanisms, the United States and China could bring this 
critical technology closer to financial viability for global 
deployment. And by viewing these projects as more than 
technical feats but as visual landmarks of the bilateral 
relationship, these two countries can inspire the 1.6 billion 
Americans and Chinese to actively engage in solutions to 
climate change.


                    III. TRAIN A CLEAN ENERGY CORPS


    Experts broadly recognize energy efficiency improvements as 
a near-term and cost-effective opportunity for real changes in 
energy use patterns and associated emissions. To capture this 
low-hanging fruit, the two governments should establish and 
train a clean energy corps of efficiency experts, architects 
and students from the U.S. and China to expand access to the 
lowest-cost energy solutions on an accelerated schedule to 
achieve the greatest short-term reductions.
    In China, many of the small-scale ``distributed'' 
opportunities--like energy efficient building practices--have 
proven difficult to implement. These decisions are typically 
implemented at the provincial or municipal level, where there 
is insufficient knowledge about opportunities and practices for 
improvement. The United States has one of the best information 
and monitoring systems of any country, and a track record in 
working with other countries to improve their own. Local-to-
local partnerships can also play an important role. Often, 
where leaders share analogous responsibilities, opportunities 
and challenges, and the implementation capacity is both 
severely lacking and extraordinarily important.
    In addition to our first-class programs at the Department 
of Energy, including the Industrial Assessment Centers as well 
as the Energy Savings Now program, our state utility 
regulators, private energy service companies, and green 
building councils have a broad range of experience conducting 
energy audits and implementing effective, cost-effective energy 
efficiency solutions. By translating our energy efficiency 
expertise to the provincial, local, and business level, the 
U.S. will significantly improve China's ability to implement 
some of the easiest and least expensive reforms.
          
          
    ``The most important single issue for the future . . . 
might be how the United States takes a leadership role to 
encourage, under tremendous international and domestic 
pressure, India and China to join with us in becoming much more 
efficient.'' These were former President Carter's words to the 
committee during his testimony on May 15, 2009. With emissions 
from China more than four times those from India, it is truly 
the United States and China relationship that will dictate our 
success or failure.
    The three action areas highlighted in this report do not 
encompass the full set of activities where the United States 
and China can or should collaborate. But they do represent 
three arenas where concentrated effort to build consensus both 
within and between governments could lead to growing 
understanding and ultimately to agreement on the thorny 
questions of GHG emissions gaps and reductions.
    Ultimately the opportunity at stake, as well as the 
potential cost, is enormous. As the United States and China 
open the first Strategic and Economic Dialogue, just a few 
months before the United Nations climate change negotiations in 
Copenhagen, Chairman strongly encourages both parties to build 
on the impressive work and partnerships already underway and 
begin to lead the world towards a global solution.

                                 

      
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