U.S.-China Coal Value Chain Exchange Conference How to Move the Coal Agenda Forward

Transcription

1 U.S.-China Coal Value Chain Exchange Conference How to Move the Coal Agenda Forward Thursday, March 7, 2013 Washington, D.C. Moderator: Jennifer Turner, Woodrow Wilson International Center for Scholars Speakers: Fuqiang Yang, China Program at the Natural Resources Defense Council Daniel Guttman, Johns Hopkins University Transcript by Federal News Service Washington, D.C.

2 JENNIFER TURNER: Hello. (In Chinese.) We re about ready to start. (Off-mic exchange.) [00:00:22] Hi there, everyone. Good afternoon. How s the energy level. (Cross talk.) OK, we re going to try to get it we re going to raise it up here because this panel is what all day has been moving towards, right, because we re trying to think about how to move the agenda forward. And I think that every panel had a bit of this, and the last panel hats off to Zhou Nan in particular, who started you know, started to change the conversation, that it s not just about coal, right? It s about the other kinds of energy efficiency, demand-side management. Now oh, I didn t say who I was. I m Jennifer Turner. (Laughter.) It s in the program. I direct the China Environment Forum at the Woodrow Wilson Center, and I ve been working on energy and environmental issues in China there for 13 years. I m actually more of a water person. I ll give my pitch for water energy stuff later. I m just the chair. But I want to make the intros really short because while you ve how many Yang Fuquiang s been introduced about four times today, but he still works for NRDC. He s a senior adviser on climate and energy, 30 years experience. You have so many organizations. It s fabulous. I mean, WWF and national lab you know who he is. You re great. And I m excited because he s going to talk about kick us off on really talking about a road map moving forward. And Dan he s not like he s like Yang Fuquiang, but he has all the affiliations now. He s a visiting professor at Beijing University School of Law and public interest program, senior fellow at Tsinghua U.S.-China Center, fellow at Johns Hopkins University it just keeps going on I think on the board of Roots & Shoots. But so he s going to be giving us a little bit the governance angle of thinking about moving forward, because that also wasn t brought up much earlier today either not faulting the previous speakers. You spoke from your area of strength. [00:02:45] So Yang Fuquiang, you re going to kick us off. And they re very and I ve told them I m very strict. There s 15 minutes because I think there s a lot of there s a lot of smarts out here in the audience. So we want to have a really rich discussion. And you told me you re energy s OK, right? Checking. All right. Yang Fuquiang. Applause for Yang Fuquiang. FUQUIANG YANG: Thanks, Jennifer. NRDC have proposed a coal cap. That is the first time we think that it can be workable in China. So but now what is political atmosphere or political involvement change. So we understanding is China National People Congress is gathering this week, and we hope that new president and new premier will come out next week. But this is not we can predict, because this isn t confirmed yet by the party conference.

3 And so we understand that Xi Jinping will be president, and Li Kequiang will be premier. And they have a very excellent record in environment protection and ecological system protection. So that is for sure. And so the question is asked us, do you think what is the legacy they will leave after 10 years? So they will compete. They will say they will demonstrate their high GDP growth rate compared to the previous administration? No. It s now they say they cannot do it because they don t want do it because, you know, the question is environment and social problem and have to change. [00:04:35] So I think legacy for this new administration is get social harmonized and get environment can be protected well. So they have many political visibility. And couple years ago when I talked to the government official, I say, can I talk to you about coal cap? Nobody listen. They say, ah, that difficult; China need more coal. And then couple months I talk to them, and they say, OK, let s talk. And they d listen, but (inaudible) difficult. But now when we talk to them about the coal cap and they say, yes, give me detail so we can discuss, so we can see if workable and so we can you know, and see we can adapt or not. So I think is a political atmosphere environment has changed. That is a very excellent idea. Two years ago when we (inaudible) in the meeting that organized by the (inaudible) foundation and (inaudible) foundation. And Jennifer and Peggy from (inaudible) and Ailun we get together. And in that time when we talk about how can we you know, to where China off the coal, and everybody just think a couple times they say it s quite difficult. We understand this. We need a very comprehensive approach, not one, not a couple but very comprehensive approach together to the coal cap. And so we can see what is the internal the external cost, what is the coal cost can be increased and what is resources is the limitation for the land and for the water and what is the technology, CCS, and what is other substitution, renewables and natural gas, and what is other international experience, and can we can learn, and how can we still use the coal and but still have the Chinese economy growth? So we think that is very complicated. So fortunately, when we come back, now we have initiate a couple projects. [00:06:56] And Kevin asked me my presentation focus on the NRDC, what project we are carrying out. And first is that we work with ERI, Energy Research Institute, and that is a system analysis center, and to carry out what is a scenario study. The purpose of this scenario study we figure out what is a peak point for the coal consumption? And later on, and when we can start and at least peaking points for the coal consumption that not easy, unfortunately, because China have carry out many scenario studies, and we understand couple years ago we have first scenario study for the carbon emissions, and people think that peak point is now And then we have a more study, and most studies say, how about 2030? And we still have (inaudible) study they say, yeah, 2030, feasible, and can be the carbon emission peak point. But for this new study, we try to focus on the coal, and we try to say, is it possible we have more aggressive scenarios? And second project is we still working with ERI that we call energy economical center. And Chinese government they have established a national cap for the energy. So that is their plan for

4 these 25 years plan, and they will say, how can we disaggregate to the local? Yeah, so our goal is consistent with total energy cap. [00:08:55] The question is how can we integrate this total energy cap? Total energy cap is excluding these renewables and others, but that is important is we have a ceiling for the coal and for the oil, but we have (inaudible) limitation as renewables, natural gas and provide more rather than less. So we can use this one disaggregate and to the provincial level. And this is requirement is quite different with the United States. United States, for the domestic issue, state government can play initial role for that. But in China, centralized government institution and ask the provincial, have to listen or to implement the central government policy and regulation well. Otherwise, they will not can be promoted but will be moved out from their position. So I think is for coal cap is quite difficult quite important as (disaggregate?) at national level to the (provincial?) left, but they have many problem and questions. First one is the data, as I said. How can you because they have a 500-ton of the coal difference, local, you know (inaudible) and the total nationwide, so how can you disaggregate? So first one is that we have to spend a lot of resources and do the data collection well. And third (inaudible) is we have a city coal cap. Unfortunately, because the air pollution came over, that s bad, but it s good for our (inaudible). So everybody know, yeah, this water is good, because we (focus?) on the city, and city is very important because they try to say, how can we use the coal? Is less or no or more? So we have to think have a couple groups, and one is a megacity. And based on our idea in a megacity, no coal can be used, for instance, in Beijing, Shanghai and Tianjin. But now they used coal a lot, so we have to cut coal off and form these megacity. How about larger city? How about small and medium city? So from these (inaudible) we come out these answer. [00:11:24] And fourth is a sectorial coal cap, which (inaudible) and they say they have a you know, do something about the buildings, industry. So this is the same thing in that we have to work with the IIP and WEP (ph), and that is founded by the ClimateWorks Foundations. And we work together and find, in the public sector, what kind of energy efficiency, what kind of (inaudible) and what kind of technology we can use to cut or reduce the coal use. And similar for the iron and steel, cement and coal chemical industry. So I think that s if we take our list, so every enterprises, every plant, they have a coal cap for this coal consumption. And five is we like to use U.S. to permit these is a very good mechanism and to reduce the emissions. And in China, at beginning, we say, for coal mining, we have to really exam what is a coal mine that can get permit and to operation. And so next is, let s say, in the private sector, what coal power plant, their emission can be cut? So how about in other industry, boilers or other, so what is they can use for the coal? So for these permits and that is a powerful, you know, approach and a mechanism and to limit it, these consumers coal consumers to reduce the coal consumption gradually.

5 And sixth is energy conservation and water, and we work with Tsinghua University. We re trying to find out is energy conservation, energy efficiency, particularly for the power-saving, electricity-saving how much the water we can save because we reduced the coal consumption? So we got a good result, but we got in the phase two, we find out what is water reduction can also save energy. So that is phase two, we do that. And seventh is alternative energy to substitute the coal. And so we think it s shale gas and renewables. And for shale gas, we work with Ministry of Environment Protection and see how can we first establish the regulation and standards and for shale gas development. And second is how to how can we enforce these enterprises and to follow to obey these regulations and standards to meet all these requirement. [00:14:30] For the renewable, we form the financial support and financial aid or financial policy to see how can we scale up those renewable development. And because we learn in China, we say, next two decades or three decades, can we say China renewable is account for 30, 40 percent of total energy use? So we have to change our idea. So that is for all these I just talking about, that is a top-down, so we need bottom-up. And in China, we have NGO alliances we call the C Plus program. And C Plus program we have 43 NGOs jointly announce this program. C Plus program is cope with climate change. C is we as an NGO, we like to do more beyond the common commitment. And second is beyond climate change. So C Plus can help enterprises to get in the competition and also change the consumers behaviors. And so we think that s a we have this kind of C Plus program, and we got consensus, everybody saying, we like to have a campaign coal campaign and from bottom up about coal, for instance, for the public health and for the air pollution in a city. So that is a way the NGO can engage in these coal cap. Our conclusion is a coal cap is feasible, and we like to get more study. And then we can remove what is a barrier and for this study. And third is how can we work with Chinese government to design a coal cap and give them some idea and some suggestions and can be worked out and must win the coal cap. So last one is that we have to work together with enterprises and with NGOs. So we believe we have tried fight very hard. One year doesn t work. We need two years more, five years, even 10 years. [00:16:57] So finally, today and Zhou Dadi have said he s very optimistic about a coal cap, because now if he think the peak in point will come over very soon, sooner than I thought. That is good news. Thank you very much. (Applause.) MS. TURNER: So you ve had a lot a lot of positive that was positive. That was good. And no, thank you so much. And he kept to time. And now kind of keeping along with the same

6 theme of thinking that weaning off coal really demands a comprehensive approach and Dan, who is a he s a is a lawyer; he also has a book that no, this is your book was translated into Chinese. DANIEL GUTTMAN: No, it s with the (in Chinese) it s the Peking University law school first comparative (in Chinese). MS. TURNER: So it s the first (laughter) comparing public interest law in the United States and China. MR. GUTTMAN: And China. MS. TURNER: I m like, you know, Vanna White here. All right. [00:18:04] MR. GUTTMAN: (In Chinese) governance. So here today, we all wait for Xi Jingping and (inaudible) Chung (sp) to tell us what they re going to do. Ambassador Roy says we re waiting for the new American leadership. I thought, you mean, President Obama? He was elected. He said, no, no; Secretary-designate Moniz and Secretary Kerry. But we don t have to wait, because Carnegie and Tsinghua have a conference, and NRDC announces a coal cap. So this is this is this is what we mean by governance and leadership, right? Although I should say our I m Barbara Finamore is a good friend, and I had dinner with her in the Luchi Guang (ph) in Hong Kong last week, and she said she s very excited because you re going to announce the coal cap, but there was some dispute inside NRDC. So now we see the result of these secret (inaudible) discussions. The official NRDC policy on the coal cap is announced. So what I m going to talk about is the China-U.S. coal supply chain, translating between operating systems. As (in Chinese) my little brother tells my mom, my Chinese is excellent when it s translated into Chinese. (Laughter.) In search of climate change governance wedges, a framework. Let s see, where s the Kevin oh, here it is. Oh. So very overview. First, the premise I have, as we ve heard today: American coal use may decline, but deep reliance continues elsewhere. There s no imminent technical solutions. There may be people who think there are, but we ve got difficult problems in putting them into effect. Therefore, understanding of the comparative dynamics of China and U.S. governance are is essential to cooperation. [00:19:55] So I want to talk about the core concepts that I m going to use, translating between operating systems, wedge, governance and clues to translation, building blocks for China-U.S. governance comparison and then coal and context, potential governance wedges. So translating between operating system the concept, we all can type an if I m in China, I tell my students to their BF or GF, boyfriend or girlfriend we don t care if it s an Apple or

7 a PC, but if you want to take the software from one system to the other, you ve got to know the operating system. We live in a world where there s a global vernacular of governance. In Beijing, in Washington, people use climate change, rule of law, civil society, CSR, as students say, blah, blah, blah. However, in differing operating systems, the same words often have very different meanings. And so to work between the systems, you ve got to understand the differences. As my Bedah (ph) colleagues always say (in Chinese). Q: Yes. [00:21:01] MR. GUTTMAN: My pronunciation is terrible (laughter) my pronunciation is terrible, but I got to tell you, I don t know what it means (laughter) because I m told (laughter) I m told it means two things. One is that if you plant the seeds from an orange on the other side of the river, it s a tangerine. The other is, no, it s really an orange, but different name. (Laughter.) So I don t even know the translation. But when I so my own core example as a lawyer is I went to China as part of a part of a Xinhua Uchiha (ph) research team on environmental governance, and as American, the question I had is, how does the law work environmental law work in China? And the first thing you learn is there are a lot of environmental laws. The second thing I learned is it s the wrong question. The law (in Chinese) what s the use of law? It s not that there are no rules, but they re not the law. They re the plan, the (in Chinese) they are (in Chinese) they re (in Chinese) blah, blah, blah, but they re not the law So we got to talk about translating between the systems. That s one. Two, governance. What s governance? Basically the idea of making public purposes effective. This is actually a Cold War post-cold War Western concept, and the idea is, we don t like big socialist/communist countries. Government is (in Chinese). You ve got to have it around, but we really need markets and civil society. [00:22:22] At the core of governance is really basic philosophical questions about what is human nature. Do we think people are self-interested shits, as our Founding Father said, who will only do something if you pay them? Or do we think they re good people; if you educate them, they ll do the right thing? What about enterprises? Do they behave the same as individuals? And what about nations? We talk about trust. Is trust between China and the U.S. the same as trust between Jennifer and I? Jennifer and I can trust each other. MR. : (Off mic) trust.

8 MR. GUTTMAN: Then China and the U.S. can trust each other, right? (Laughter.) You all know Socolow in 2004 came up in Scientific American with the wedge concept very similar to what we re talking about today or Amory Lovins in 1976, A Path Not Taken (sic; The Road Not Taken? ). We ve got all the technologies; it s just a matter of putting into place. [00:23:09] But as we all know, and as Socolow wrote in the Bulletin of the Atomic Scientists two years ago, it ain t happened that quickly. Why hasn t it happened? Because of this general we haven t got the governance systems to make them work. So some clues to translation between our two systems: One is pay attention to transitivity. Concepts that seem connected in one system may not be connected in another. I picked up Foreign Policy Carnegie magazine when I was waiting to get in today, and its lead article is guess what? The American foreign policy premise that if you have middle class, you have democracy may be wrong. A lot of countries have middle classes, and it s not leading to democracy. So concepts that are culturally connected in one context may not be in another. Point of entry: Learned that at Xinhua. We have laws; China has laws. But if you want to study how the system works, the point of entry may not be the law. Pay attention to context. Obviously (in Chinese). Words and history matter. (In Chinese.) And attend to (in Chinese). China has everything the U.S. does, with (in Chinese) but is (in Chinese) just a little bit of a change or a (in Chinese) a contradiction, right? Climate change is the example I use when I teach. Point of entry: What s the single most effective climate change rule in the world? Probably the one-child policy. And interesting enough, when you look at the history by Linda (sic; Susan) Greenhalgh, the anthropologist at Irvine, the inside the party think tank that developed it in the late 70s actually read the Western environmentalists, the Ehrlichs The Population Bomb. [00:24:51] The only people that took the Western environmentalists seriously were inside Deng Xiaoping s party, and acted on it. So one-child policy, obviously not about climate change, about too many people too few resources. When you go to China, Chinese obviously can talk about climate change, but too many people too few resources one-child policy, not in law, in a policy. The 11 th five-year plan, the (in Chinese) again, probably most effective climate change rule in the world in the last five or 10 five years, other than the CFC-Montreal Protocol, perhaps, but not about climate change and not in a law. Now, the 12 th five year (in Chinese) obviously is more directly about climate change, but not in a law. Co-benefits, critical in both countries: As Jennifer has been studying, and we re talking about, water energy nexus for example, because to make things work you ve got to have co-benefits, they may differ between countries. Those of us in China last week see the interesting effort to get rid of gutter oil (in Chinese) by turning it into biofuels and tweaking the system. It s a great win-win. We got to tweak the pricing structure.

9 And of course, a deep co-benefit in both countries is tremendous income inequality income inequality. Environmental governance frames wedges. When I teach, I try to organize this is what I use anybody who wants to add or subtract concepts. Different kind of wedges the way that the (inaudible) had technology wedges. The first is Hardin. Many most of you have probably read the tragedy of the commons. The premise is, we are in a world where there are some problems that have no technology fix. The core problem is too many people. [00:26:39] Human beings are self-interested. You can t tell people to be good. The only way to solve we can solve the problem, but we can only do so by limiting freedom limiting the right to reproduce. So ironically, when you read Hardin again, you see it s not about sustainability. Sustainability isn t a problem. It s really, to get to sustainability you have to limit freedom. When I taught Hardin first in the U.S. at AU, I said, well, this is interesting. It ll never happen. But you go to China, that s what China did. That s what the one-child policy is. Indeed, China has a one-car policy in Beijing and Shanghai. It has a one-house policy the house sister, right? It has a one-dog policy in Beijing. We don t do that. And so this is a core difference in systems. Aldo Leopold in my own view coins it Confucius a notion that people are inherently capable of learning. If you tell them to do the right thing, they ll do it. So the possibility people can change. Elinor Ostrom, of course, the great first woman Nobel economic laureate, who sort of responded to Hardin by saying, no, it isn t a tragedy because we can conceive of new ways of cooperating and competing and produce sustainability, that governance, in a way, is a kind of technology that people can create. And McKinsey I like to beat up on McKinsey the Green Revolution. We can do this all with technology, no problem. Except, if you read the report, it says, well, we can t do it because it s going to cost too much and it s very complicated. Using governance frames for comparison: So Hardin, as I explained, is a core comparison between the U.S. and China. In fact, when I hear Fuqiang, the coal cap I mean, this is consistent we re going to do it. We re going to cap coal. And I was talking with Paul Joffe and Paul points out the right to coal would probably not be a right in the U.S. Nobody says there s a right to coal, right? But it s sort of consistent with the notion of, when the central authority wants to limit, it can do that. In the U.S., of course we re greater per capita greenhouse gas, but we avoid direct legal regulation, limits on rights. The Obamacare debate was, well, you know, the government can t tell which grandmother should die, but the market will do it anyway. It s we do it by the market, not by government. [00:28:52] Leopold the ethics frame, again, in China the notion is we can educate through we can educate people. The American Madisonian view is that people are self-interested. You got to pay them off. Now, when I lived in China, most of my friends are actually Madisonian, they believe in interest, not ethics. But we look at PM 2.5, right, and so this is a core question. Now, everybody knows PM 2.5 is indeed PM 2.5, not (inaudible). But the question is, so what? Now that you know it, what do you do? And now Yang Fuqiang is going to tell the NGOs, this is what you do,

10 right? So it s the as I said, the Confucian context, the Leopold context of education, but you need the path. Using Ostrom frame, different rule sets. Again, as I said, a core difference between U.S. and China governance in America, law is the dominate rule set. You want to know how something works, you say, what s the law; does it work? In China, that s not it. It s the plan, it s the (in Chinese) the movement, it s the (inaudible) it s the EGN, it s the (in Chinese) blah, blah, blah. Implementation an example of a core failure and I see Steve Wolfson (ph) out there. We had this dialogue last week. The permit system permits are the bedrock of American clean air, clean water. You ve got too many corporations to regulate. We have a permit system. We don t trust the corporations but we have a legal system to regulate. China has the same laws, in general, but the permit system to take from Steve, I hope it s not yet fully recognized. It s going to be there, right. But the permit system is a core example. It s not in the plan. It s not in the law. Steve and I will discuss it later. Central-local relations a core, fascinating comparison. First thing when you get to China, my colleagues say China and the U.S., very similar; strong traditions of local control. Mountains near, emperors far. We say, well, China, it s unitary. America s federal. No, you got to China (inaudible) Beijing is right; if only these locals would do the right thing right? So we ve got the same kind of tensions and paradox. [00:31:00] Industry pressures for innovation, my own view and I see my Duke colleague here is that the electric industry in America has historically been a slug. The only thing that s forced change in the electric industry has been pressures from outside competitors. Municipal electrics opened up the transmission system; IPPs opened up the vertical disintegration of the system; and industrial generators. Dow Chemical most famously said, we re not going to stick with these high-priced Duke power people; we re going to go Co-Gen (ph), right? So, comparative in industry structures. Shared global supply chains, talk about that. Pressure from the bottom. I don t I think NGOs in China is are notoriously, very famously weak I ve got two minutes. But what we ve got today are a whole new kind of from-the-bottom pressure. People have talked about the (inaudible) is the new NGO. We ve got (inaudible) and then the governance of innovation. [00:31:54] If I could just make let s see, where would I fit this in? Where does coal fit in? So, coal fit in I want to talk a little bit about the supply chain because that s an interesting thing. If I can just finish with this point if the global supply chain because, you know, Kevin says this is about supply chain. So it s, like, I ve got to get harmonious society into the speech; I ve got to get Obama s slogan into the speech; I ve got to get supply chain in the speech. (Laughter.) We re talking about a globalized world. I have not recently been asked by for advice by the secretary of state, the head of (inaudible) or anybody like that. I work from the bottom. I,

11 you know, represent workers; I represent whistleblowers. You ve a global supply chain. China has a very good set of laws. You can t go to the court in China but the laws are good. What you re really going to see in the frontier is the using of China laws and lawyers and NGOs with American courts and American lawyers working together. So, a core example is you ve got a global supply chain where you ve got a company exporting coal to China or you ve got Wal- Mart in China or you ve got Apple in China poisoning people with n-hexane 137 workers in Suzhou you ve got good China laws and you re going to see people using the courts in China and the U.S. as leverage; using American corporate law as leverage on making the China environmental laws work, or in the NREC context, making the cap work if it s in a law. [00:33:15] So, for example, last two weeks ago, Delaware Chancery Court our core full body for regulating American and corporations that want to deal in America the judge chief judge said in a hearing about a China coal company listed in the U.S., if you're going to have a company for domicile for purposes of its relations with investors in Delaware and the assets and operations of that company are situated in China, in order for you to meet your obligations of good faith, you better have retained accountants and lawyers who are fit to maintaining a system of controls over a public company. So, I look at this from the bottom. I look at it as someone who works with consumers, workers, whistleblowers but also investors. That the engines of our cooperation we heard again and again today is 500 billion (dollars) of commercial transactions. And so I don t I don t have access to President Obama, much less Xi Jinping, but we all have access to the people on the bottom. And the laws as an American this is the American perspective, and they re now China laws can be made to work as a lever on the supply chain. [00:34:24] So, the whole point of this exercise, to conclude, is if Duke and (inaudible) can invent new technologies to fix this stuff, that s terrific. But I listen to these conversations and I listen to everybody talk about building efficiency I was around when Jimmy Carter said he was going to change the world and everything would be there would be no coal by It hasn t happened. These are governance issues. And you want to know where are the points of entry, where are the issues. Final point: low-carbon cities; subnational it s very important. I work with Nanjing University; we re advising Suzhou on its low-carbon plan. I m thinking, where is the connection between this conversation and the people who are advising all the (in Chinese) projects in the cities? What is Suzhou s authority and capacity to limit coal use, right? Where does that fit? Now, in the U.S., we know states have authority or power plant siting and things like that with renewable portfolios; China provinces don t have that, but they ve got equally powerful levers: they own the land and they own the companies, right? So you ve got a whole kind of set of governance questions. If you re going to have a cap from NRDC, and Suzhou says, well, what we are supposed to do, right? We don t control the electricity source; it ain t going to work. It s an unfunded mandate, just like in the U.S. It s going to be, you know, fake stuff.

12 So you ve got to begin to look at the system. And that s more than I should I was allowed to talk by Jennifer, and I apologize. Thank you. MS. TURNER: That s OK. (Applause.) OK. At the end of the day here, we have wedges and caps. So I m going to open it up to you guys, but I ll occasionally jump in. So some questions and hold your hand high. [00:36:04] You ve asked a question at every panel, sir. (Laughter.) But the he s a he s a I mean s you re getting my star for the most inquisitive participant here today. Please. Q: The reason I MS. TURNER: Oh, say your name again, because some people weren t here earlier. Q: Yes. Zhong Zhang from Fudan University. The reason I raise the question is because (inaudible) (paid me to speak?) yesterday (inaudible) so I thought, is at least I can get something out of (laughter) I cannot for the taxpayer. MR. : It s OK. Q: You know, my question is my general comment to the (inaudible) is you talk about governance and, you know, as we all observe that the and you see the struggle for the high GDP growth and the local governance and the (inaudible) and so on. You know, it s if you look at the media and all this report, it s giving people the impression that the central government of China hold very high moral standard. Oh, we want (inaudible) the environment. And the people of the local government are very bad, because, you know, you ve got to adjust to you know high economic growth and don t care about environment. I wrote a very lengthy article called the Effective Environmental Protection in the Context of Government Decentralization. One of my big argument there is that this kind of (inaudible) also caused by central government. You know, because central government should take also take a big part of this blame. [00:37:30] The reason I make that is you know, in 1994, China have the tax-sharing reform. And from that year on, you ll find these government revenue central government revenue was the total sum of local and central is 75 percent. But in meantime, central government expensive (inaudible) of local and central government (inaudible) only by 25 percent. There you find this local government only have about 25 (percent) revenue, but you have you have to pay for 75 (percent) expenses. So what happen? The only kind (inaudible) economic growth is trying to cover (inaudible) you know? So that s one of the things where you

13 look at the government as a very broad issues. You should not only blame local government for something go wrong, yeah? [00:38:18] MS. TURNER: Do you have something short in response, or just say, you re right, or? (Laughter.) MR. GUTTMAN: Of course, I agree with you; that s why I say it s a paradox. Two points. One is, where do the central government officials work before they go to Beijing? They work at the local government. So they re bad when they re in the local government and they re good when they re in Beijing? Two, is, as our colleague (name inaudible) says, the remarkable rise of China was, in part, local-local competition. The local governments are very good at GDP competition. The question is, now that they re can they make the transition to green competition? That s you re right. It s a deeply puzzling question, and as a foreigner, I think this is a nice creation to say, we hate our local government, but we love government. Q: (Off mic) can they make the transition? MS. TURNER: Oh, and turn, your mic on, too, (honey?). You push that button down below. Sorry. There we go. MR. GUTTMAN: The answer is, I don t think so if the discussion is at this level of, we re going to and this this is not if it s just, we re going to have a cap unless it s down at the local level of, well, how the hell does this work? If I m a local leader I don t care what city I ve got the law, I ve got the plan, I got what my leader says, I ve got your tax and, you know, local problems. You know, the you ve got too many rule sets. My hypothesis is, China is riding too many horses. [00:39:40] That the the planning system will focus on one or two big items, but if you re going to need all the problems that China has this is just one of them to be addressed, the current rule system is not yet adequate. And that gets into transparency; CCTV asked me to be on this Sunday on the corruption issue. There are obviously you all know the issues. But political change is necessary, by which I don t mean necessarily changing leaders, but, I mean, the rules systems. MS. TURNER: I think that there s a hunger in the room for you, Yang Fuqiang, to maybe talk a I mean, I think I personally was really intrigued by the one of the projects, your city coal cap project. And I wonder if you could maybe tell us a little more about, like, where is that project. You know, is it s you re already on the ground, and just tell us a little bit, I mean, how it s working, who you re engaging. MR. WANG: For this city coal cap, and we work with peoples in university, EII (ph), and the Chinese Academy of Environment Planning together. And we ve trying to figure out for this more or less 300 cities, and that is population is over 500,000.

14 And first is that we re trying to figure what is coal in this city. We understand for these air pollutions mark, and we come out we can see what is Beijing coal consumption; that is 23 million ton. For Tianjin, that is 17 million ton, equal to the U.K. total. So for the Hebei Province is and that is something like state, that is (about?) the 23 billion ton. And for Santung (ph) is near Beijing, not a city, that is 400 million ton. [00:41:31] Total, only these two city, two province equal to U.S. total coal consumption. So that s no wonder their air pollution come out is that (inaudible) is so large. So for the city, I think that is a first area and we like to work with, and that is have a much leverage and to put a coal cap on that. MS. TURNER: But when well, OK. You, you re running it, you OK, go ahead. He needs a mic. Q: Kevin Tu at the Carnegie Endowment. I have a technical issue to ask Dr. Yang Fuquiang. Just now you mentioned, at NRDC, your program either investigating how to disaggregate the national coal cap to provincial level, because you also mention in 2010, if we added provincial coal consumption together, it may be 22 percent higher than the national coal consumption. In such a national circumstance, how could we make the disaggregate the target meaningful at the local government level? MS. TURNER: And pass the mic to her. Answer you can answer that MR. WANG: Answer first or two together? MS. TURNER: Or the two together. Q: Oh, OK. MS. TURNER: Go ahead. Q: (Inaudible.) MS. TURNER: Yes. (Inaudible) is really hard. [00:43:05] Q: Yeah. (Chuckles.) MS. TURNER: OK. What s your Q: My name is (inaudible). I work for (inaudible) Americans. My question is more for Dr. Turner. You said that you work a lot with water, so I have a question regarding the current

15 water situation in China, how those that affect the coal industry, and how do you see it when you apply the coal cap. And together with that, I haven t heard about the labors force. So if the coal industry has been supplying 70 percent or more energy in China, how does that affect the employment (grid?) and the unemployment (inaudible) apply the coal caps on that? Thank you. [00:43:43] off MS. TURNER: It s a good two we got three good questions here. Why don t you start MR. WANG: OK. MS. TURNER: with the first one from and the last one of hers, I think, too. MR. WANG: Well, I will say for the local disaggregation for the coal cap and we work with Energy Research Institute, and because the work with the NDRC about total energy cap, and they find out this problem. And because particularly is oil and coal because these two fossil fuel, we like to have a cap on that. They have no big problem for the oil, but for the coal it is. So I think is we have to find, you know, resources to do is maybe province by province and to get data right. And that take us time, I understanding. But if we don t do that (inaudible) and negotiate with local government is difficult to convince them and to take their number and disaggregate it. And so this is one. But we have to understanding is coal cap is (inaudible) by 2020 if we put 4 billion ton of coal. You cannot you see, that s not my idea. My idea is to say if we work all very hard together, use all the means, all the resources, but we can get something like 4.2 billion ton of coal. But if we have no coal cap, maybe go up to 5 billion. So that is not the accurate number we have to work. But this is a way. And so so far because coal issue, we have try many policies, many years that never work out. So I think this time is come, and they have these political momentum, so we can, like, to work with the government to design the coal cap well. [00:45:47] MS. TURNER: And maybe to jump to her last question, that as and the coal cap it wouldn t it s not doesn t start tomorrow, but the question of the labor I mean, I assume you re talking about the miners and, you know MR. YANG: Yeah, coal cap if we final try to get a peak point so how can we get there? We re personally, I think we have three phases. First phase is how can we reduce the coal consumption growth rate annually? So that is phase. So now because every year the coal consumption is the growth is very high. And second is how can we reduce the coal share in a total energy mix? So we can reduce now from 70 percent to 60 percent to 50 percent gradually. And finally, the coal cap is very important in phase three. So we have to figure out what is the peak point for the coal consumption. So maybe 2020 or by 2025 we don t know, but finally is China now is

16 carbon large carbon emitters. So we hope this can be sooner to get its carbon emission the peak point and the coal cap in that years. [00:47:07] MS. TURNER: Did you want to say something about the labor? MR. GUTTMAN: I can t help but note, because this is obviously a core issue in America, the jobs issue, is that the politically correct answer to the question in both countries is green jobs, right? Now, the and the politically correct answer is it s win-win. So the answer to your question is no problem; we re going to have green jobs. MS. TURNER: (Chuckles.) And yeah, and I was actually going to one of my questions I was going to ask for him you kind of helped me say it I was really excited when I, you know, heard that in your coal cap work that you have you took some of our Choke Point ideas, yes? The idea that water and coal are connected we did a Wilson Center with Circle Blue we ve been working for two years looking at how energy development in China is impacting water. And in China, that s a story of coal. Northern China has almost no water. It s about 20 percent of the country s water, and that s where the coal resources are. And it s creating quite a tight squeeze. It s starting to push off agriculture from north central to the northeast, and there s you know, we estimated, you know, bringing numbers from, like, his ERI partners and the Ministry of Water Resources that, really, the chokepoint that they really don t have enough water to get this coal out, and that in itself is something that probably also encourages your coal cap argument. [00:48:25] But then the flip side, the question of how much energy does water use in China I mean, in the United States, I think I mean, we know in California, moving and cleaning water uses about 20 percent of the state s electricity. We don t know those numbers yet for China. China doesn t even turn on all their wastewater treatment plants. We want them to turn it on. But I think that one thing that in conversations that the Wilson Center, and I think and NRDC wants to start as well is to is to have the Chinese government, business and researchers and NGOs look at the question of the energy footprint of water. I mean, the if you look at it, the water sector is a high energyintensive sector, but it s never been looked at that way. I mean so it s a new way of thinking, and we re hoping to stimulate it. That wasn t what you meant, or Q: No, I agree with you. But I think China has been using building huge dams to (inaudible) MS. TURNER: There s that too. But yeah. Q: (Off mic) it just escalated a lot of problems with their neighbors. MS. TURNER: Yeah, I mean, that s another that s you have to come to my shop and talk about that. I know I ve steered too far away from coal cap today. But some other I got over here. Peggy.

17 Q: (Off mic.) MS. TURNER: Oh, make sure it s on. Q: Sorry. There. Peggy Duxbury with Bloomberg Philanthropies. Good to see you again, Dr. Yang. My question is on the relationship between the public health, the air pollution and coal. And the now they know it s you know, now there s much better data that it s not haze. We know exactly, in real time, the PM 2.5 in various cities, and it s not just from a couple of monitoring devices on top of the U.S. embassy; it s much more ubiquitous now. How much of that is apportioned to the coal generation and I know it differs from different cities but roughly how much of that PM and other pollutants are directly related to coal generation? [00:50:20] And how much sort of second part to that question how much a lot of our EPA rules are health-based standards and are based upon public health. And it seems like in China, it s coming at it from a different perspective. And I d be interested in both of your thoughts on, you know, how much of a game changer is it that it s not haze, it s PM 2.5 with real data. Is that going to change the dialogue and how much will that start to get health-based risk assessment and get involved in some of these rules and laws that are unfolding? MS. TURNER: I think it s you. MR. YANG: For instance, in Beijing, and for this PM 2.5 pollutions, and they have initial study, it s not complete they have to do more, is 16 percent in Beijing area is from coal. And by Beijing area cannot solve the PM 2.5 because they have a (inaudible) and these PM 2.5 from other area. And from outside area, is about 25 to 30 percent. So if we add up, this is coal contributes for Beijing PM 2.5 is about 30 to 35 percent. [00:51:35] MS. TURNER: Dan? MR. GUTTMAN: In fact, this is precisely the question I ve been discussing both with my Johns Hopkins and with my Nanjing classes. We had a teleconference course, which I m doing tonight, and I asked about the PM 2.5. First, it s a cultural perception. The Americans from Johns Hopkins thought out of 20 million Beijingers, 5 million will get sick today and in 15 years, maybe 10 million will die. The Chinese said, nah, not that big a problem, right? So one is a cultural perception. Two is, you know, epidemiology is extremely difficult. It s just expensive and not yet really getting started. Bloomberg Public Health School at Hopkins, where I teach, of course is a leader. And one of the things that came up and this gets to the question, I think, of the coal cap but the many challenges and the priorities. One of my Nanjing students brought the recent Lancet you know, Lancet is the science magazine. In ranking of the health hazards, air was, like, number nine. Number six was diet.

18 So the question is, what s the greater threat to young Chinese people: McDonalds, Coca- Cola, you know, or PM 2.5? And so I guess the point is, we all know PM 2.5 is a deep problem. But in relation to the totality of other health problems, right, what do we know in terms of making public choices is another question. Finally, people are voting with their feet. As you know, people are saying: I m not going to move to Beijing. That may be a bigger effect than the coal cap or people leaving Beijing. MS. TURNER: But we do know that I mean, that asthma I mean, it s skyrocketed in Beijing. Q: And it s number four in China, not number eight. MS. TURNER: And it s number four in China, it s not number eight. Q: (Inaudible) eight or nine, but in Asia it s higher (inaudible) [00:53:22] MS. TURNER: And I was just you know, just heard that in the past decade that lung cancer has gone up 400 percent in China. You know, it s just I mean, there that was on the Diane Rehm show we heard the interview. So it s you know, it s there but that s what s an interesting thing too, in China. In the last few years the ministry of health, it has is no longer silent on the pollution and health issue. And that s something that I thought is is kind of helping to raise the public consciousness and they re kind of you know, their literacy of linkages between MR. GUTTMAN: But let me but this is I have this discussion with Steve (sp) often. Part of a difference, because China s a developing country and we re, quote, developed, is our exposures are small, not acute. The effects are long-term and latent. In China, you get multiple acute exposures. And so my Chinese colleagues, we talk about going to court, they say, yeah, obviously, we re sick because of pollution. But there s so many possible causes, it s hard to separate out. Not least of which is tobacco, which, you know, has a dramatic, compounding effect. So to isolate the coal I mean, I m not a scientist but it s a question of public policy what you re isolating. [00:54:30] MS. TURNER: I think I have time for maybe one more question or two quick questions. All right, no pontificating, just a quick question; I can be strict here. Q: Hi. My name is Reena (sp). I m a student at the University of Maryland. So my question is to Dr. Yang. You in your presentation you mentioned both the provincial disaggregation and also the (inaudible) approach in terms of the coal cap. So based on the studies you mentioned, could you please comment on which method do you think fits better or tends to be more effective in the Chinese context? Thank you. MR. YANG: Yes, why we have a sector approach and a local approach, I think is learned from the previous experience and from energy intensity target. Energy intensity target central

19 government only disaggregate these target to local sector. So think that s maybe is if we have a sector approach, since it s you know, work much efficient, and because in a sector and we understand all these technology well and so we can disaggregate, at least to the enterprises. But if only located these number in the local by local, they have know these kind of capacity. They are (inaudible) every province s government official know cement factory, technology, all. So they are difficult for them to handle these as reduced energy intensity. So we learn that kind of experience, and we think that is a three dimensions you know, is a timing that is a time, horizontal, and then we have a vertical is a sectoral level and a local. So in this case, three dimensions, and we see every enterprises. No way you can escape. (Laughter.) [00:56:37] MS. TURNER: Watch out for Yang Fuquiang. OK, you the last thing, because I m the chair, so I m doing the last question. Are you guys OK with that? Good. All right. Good. You have no choice; I have the mic. The one aspect of yours that s also really intriguing is the bottom-up coal campaign. And you mentioned that there are 43 NGOs involved in the C Plus alliance. Can you give us a couple examples of a few of the types of what does the campaign look like? I mean, there s multiple, I m sure. I m curious. MR. YANG: Yeah, for the C Plus program and that is first time the Chinese NGO (inaudible) program in the international negotiation and because we think the following years and Chinese government, NGO and Chinese enterprises and will play a very important role in the negotiation. And so far we are not ready yet for NGO because EU European NGO is much better. So for this C Plus and we have a couple project now is moving. And first is we have a couple project in (inaudible) and we think that s quite important is educate young people what is climate change, how can we do it ourself. And for instance, I challenge when meeting, I challenge the young people. [00:58:07] I say, if we think in Beijing we if we see every drivers, and they drive car to the work, and so if we ask them what your education level and most people say, I graduated from university. But you have to understand it s PM 2.5, climate change why you still like to drive the SUV or others. And so that is quite important is we learn is in university, how can we work together with the young people? And they understand this concept well. So in the future, that is a long fight for the climate change, so that we hope to educate young people. Another is in the building sector. And the Chinese government they have set for its buildings what is the standards. And so we find out, how can we make more efficient, higher than the government s requirement? And so that is in a building. In (inaudible) we also find enterprises. And the government have asked them to reduce the CO2 or improve the energy intensity. But we say, can you do better, and (inaudible) and finally say, yeah, we can cost-effective we can, you know, the improve the higher target. So in this case, we like to say, for the coal cap and for the public health and I think that is an area NGO can do better than other organizations. And we find out is other NGO get consensus, so for idea like to involve in the coal cap.