u.s.-china coal value chain exchange conference how to clean

U.S.-China Coal Value Chain Exchange Conference

How to Clean the Chinese Coal Value Chain

Thursday, March 7, 2013

Washington, D.C.

Moderator:

Kevin Tu,

Carnegie Endowment for International Peace

Speakers:

Ma Linwei,

Tsinghua-BP Clean Energy Research and Education Center

Qiang Liu,

National Center for Climate Change Strategy and International Cooperation

Fuqiang Yang,

China Program, Natural Resources Defense Council

Transcript by Federal News Service

Washington, D.C.

Transcript Not Checked Against Delivery

JESSCIA MATHEWS: Good morning, all. Jessica Mathews. I’m the president of the Carnegie Endowment for International Peace. It’s a great pleasure to welcome you here today for this dialogue. And I want to especially welcome our Chinese colleagues who have made a very long trip, some of them with hours diverted in unpleasant airports, to be here. And we’re very grateful to you.

[00:00:31] Our goal for this meeting is to explore best policies and practices in coal development and

management in both the United States and China and to identify how best to strike a balance between exploiting coal’s energy value and protecting the climate. Protecting our energy and climate futures are, of course, a global issue, but coal is primarily now a U.S. and China issue. And so it’s appropriate that we are discussing it in this context.

Together our two countries represent 60 percent of global coal consumption, but it won’t be

long before others particularly catch up – India, of course, very much on all of our minds. And if – but if the United States and China can chart together a cleaner path for developing and managing coal, it will set a direction for the rest of the world and that doubles the importance of this enterprise.

Currently, however, China and the U.S. are going in almost exactly opposite directions.

China has more than tripled coal production since 1990 to 3.7 billion tons and is now the world’s biggest energy – coal importer. The United States has reduced coal production over this same period to less than 900 million tons and is now a net coal exporter. Coal represented 70 percent of China’s direct energy use in 2011 and less than 22 percent in the United States and falling.

Both countries, of course, have a major problem with coal emissions and coal is a primary –

sorry, with carbon emissions and coal is a primary source. So we do need to address this problem together, although coming from very divergent contexts right now. And that’s why we are here today, to share respective experiences in coal management and to explore how we can work more closely and more effectively together.

[00:02:40] This is, I should emphasize, an urgent need. The International Energy Agency, the IEA,

warned this year that business as usual trajectories on carbon emissions lead to a 4 to 6 degree Celsius increase in global temperatures in this century – that means, with current life expectancies, in the lives of your children. The World Bank recently released a report documenting the impact of a 4 degree increase, and it is catastrophic.

If the world is to avoid this fate, then it is on the backs of the United States and China’s

leadership that it will do so. Just a word on the context of this meeting, it is the second of two coal value chain dialogues between the U.S. and China teams that we have convened. The first took place in Beijing in last October.


We are very pleased to be working to be – to have initiated this dialogue in collaboration with the Tsinghua-BP Clean Energy Research and Education Center under the leadership of Dr. Linwei Ma in Beijing and under the co-leadership of Kevin Tu on our team here in Washington at Carnegie.

The project – the product will be a report recommending policies to clean up, cap and

eventually reduce coal-related carbon emissions in both countries. We will also make recommendations for reducing air and water pollution and for improving the health and welfare of communities up and down the coal value chain. Before I close and turn the microphone over to Kevin Tu, I do want to thank the Energy Foundation and the Henry Luce Foundation, whose generous support made this exchange possible.

[00:04:38] Finally, I want to thank all of you for joining us. We are delighted to have you here.

Welcome. With all that said, Kevin, let me turn the microphone over to you and to the first panel. (Applause.)

KEVIN TU: Thank you, Jessica, for your welcome address. When I was in China, people

often ask me why I work for the energy sector. So the answer is pretty simple because both my father and my mother work for CNOOC, the Chinese national oil company. And people also keep asking me why are you so interested in coal? The reason actually is not very complicated. My home back in China is very close to a petroleum refinery, but in about two kilometers distance there is a coal-fired power plant. When I was young, my mother often complained about, there are so many dust in the room so she needed to constantly clean the room. So that’s my first personal impression of the Chinese coal.

After I went to Canada for my graduate study on resource management, I started to

understand the profound energy and environmental implication of China’s heavy reliance on coal, which is 70 percent – (inaudible). And after I attended so many international climate negotiations, I also became very concerned about the rising carbon emissions from the Chinese coal. In 2010 coal-fired carbon emission in China were 17 percent higher than the national carbon dioxide emissions in the United, which is the second-largest carbon emitter in the world. So that’s why.

I’m very glad I can have this opportunity to work with so many of the leading experts in

China, United States and Europe. So I’d like to introduce the first panel: How to clean the Chinese Coal Value Chain. Dr. Ma Linwei is a deputy director the Tsinghua-BP Clean Energy Research and Education Center. He is also the co-organizer of this event with me. And on October 24, 2012, we organized the first coal value chain exchange in Beijing, which has been well-received by the Chinese energy and the climate communities.

[00:07:46] The second guest is also from China, Dr. Liu Qiang who is the director of the Strategy and

Planning Department at the National Center for Climate Change. He previously worked for the Energy Research Institute under the National Development and the Reform Commission. We have worked with each other for many years.


And the last commentator is Dr. Yang Fuqiang. Before I organized this event in China, Dr. Yang is one of the experts that don’t need any introduction. And I would – (inaudible) – any of you in this room – (inaudible) – whenever you organize an event with the NGO community in China, Dr. Yang should never be invited to speak as the first speaker. Really pretty simple, after he talks everyone will say, I agree with him. So that’s why – this time we invited Dr. Yang to serve as speaker. He will only serve as the speaker for the last panel.

[00:09:13] Now, I’d like to talk about how to manage Chinese coal. My talk will be divided into three

segments. The first one is those most important drivers when the Chinese decision makers to think about national energy and environment diplomacy. The first one is economical development. Second one, energy security. The third one is environmental protection. Then I will briefly give some more background information on Chinese coal value chain, followed with some of those recommendations that will be in our final report.

If we compare the major economic and energy indicators between the United States and

China from 1980, that’s basically shortly after Deng Xiaoping opened the Chinese economy to the outside world, to 2011, we can certainly see China has quickly developed from a developing country to a hybrid economy. It really is pretty simple. If we look at the size of Chinese economy, it’s approaching the United States. But if we look at the per-capita GDP, per-capita energy consumption, it’s lagging far behind.

So that’s why China need to keep developing its economy. And other reason is currently

only half of Chinese population live in the city. So the population expansion in the urban center will become very important driver to underline Chinese energy consumption growth.

If we look at another issue, the energy security, it’s become increasingly serious in China. In

2011, 82 percent of Chinese crude oil imports were passed Strait of Malacca. And if we look at how many percentages of crude oil are sourced from Middle East, that’s more than 50 percent. And about 56.5 percent of Chinese crude are imported. So the country certainly needs to do more in order to secure its energy supply.

[00:12:03] There are two complicating development in this regard. If we look at what’s going in the

United States, on the one hand because of the unconventional oil and the gas development in this country – so the dependence rate on foreign oil in the United States quickly decreased from 60 percent in 2005 – that’s when CNOOC’s unsuccessful bid of UNICO happened – to 45 percent now. In 2012, CNOOC was able to successfully buy Nexen in Canada. That might have some relationship with the – this type of development in the United States.

On the other hand, if we look at the U.S. rebalancing in Asia, this certainly makes the

Chinese decision makers very nervous. In the future, if the mistrust between U.S. and China can be reduced, China may be able to rely more on international market instead of the domestic resource for energy consumption.

[00:13:28]


The third issue is environmental constraints. In this room, we all understand carbon

emissions is a very important environmental concern. However, back in China the environmental concern for air pollution and for water contamination actually have much higher policy priority than climate change. That’s the affect we need to take into consideration.

Now, I’d like to quickly go through the Chinese coal value chain from coal reserves. China

actually has the second-largest coal reserves, just behind the United States. However, the distribution of the Chinese coal reserves are far away from the consumption center. That’s why most of the Chinese coal needs to be shipped long distance from production center in Shaanxi Shanxi, Inner Mongolia to coastal ports such as Xingang (ph) then goes through the marine transportation to consumption center in Shanghai, Guangzhou and other part of China.

So shipping coal from central China to a coastal province must be more energy intensive and

also more expensive than importing coal from Indonesia or Australia. China currently consume and produce about half of global coal. In early 2000s, the safety record was terrible, but now the government has made a significant improvement. Half of Chinese coal are produced by key state-owned enterprise, one-third of them are from the private industry. And currently China held both the best coal mine and also the worst coal mine in the world.

Transportation bottleneck is one of the most important diplomacy concern in China. After

March – (inaudible) – the ministry of railway may be merged with the ministry of transportation. However, even if deregulation happens in this sector, the Chinese decision maker need to pay attention to affect. This is a sector the government actually can manipulate a little bit in order to keep the price – coal price in coastal provinces relatively high in order to depress consumption in those regions.

[00:16:43] And coal is the most important energy in China. The reason is very simple, because China

basically have no – not so much other source of fuel in terms of oil or gas. China only have – only 2 percent of China’s fossil fuel reserves are oil. And it’s only accounts for less than 1 percent of the world total. The picture for natural gas is the same. So that’s why the country have to continuously rely on coal fossil fuel for – in the future.

If we look at the size of China’s consumption growth, and the size of the global coal trade

and the global crude market and the global gas market, China cannot entirely rely on international energy trade to meet its own domestic energy consumption. So that’s another reason coal need to be better managed in this country.

After Fukushima – (inaudible) – in China had been scaled back. And shale gas and the coal

bed methane are relatively difficult to develop. And – (inaudible) – actually can cause many environmental concerns and also there’s water dispute with those neighboring economies. And China has a trade dispute in the wind and the solar sector with the U.S. and now with the EU. And overcapacity in the transmission sector are policy concerns the government needs to deal with.

So when we look at Chinese coal imports, in 2012 41 percent of Chinese coal are from

Indonesia. If we look at the United States, only 3 percent is from U.S. And according to China


customers, it’s less than 10 million tons per year. So that’s not huge. However, if we look at the intention of the industry in this country because they understand it pretty well, the future of coal in this country won’t be beautiful. So there are currently six coal export terminal proposed in the west coastal region in the United States, but because of the strong environmental opposition in this country, none of them can get a construction permit so far.

[00:20:04] Now, I’d like to talk about several policy recommendations that are likely to appear in the

final report. The first one is about how to govern the Chinese energy sector, because recently, there is a rumor about the promotion of the National Energy Administration to a ministry-level agency, but still under the supervision of the National Development and Reform Commission. I was once a big fan of a super energy ministry (sic: energy super-ministry) in China, but after a while, I realized, this actually shouldn’t be the emphasis of energy reform in China, because what’s more important is how the energy sector can be governed by the government. If the market consumption, the government certainly needs to review – (inaudible) – to the market and focus more on the environmental externalities, and also create a – to introduce competition by allowing market (engines ?) or private company and international cooperation in the energy sector.

The second issue is almost an open secret in the Chinese energy and environmental expert

community. Everyone understands the statistical distortion in China’s energy sector sometimes can be quite confusing. For example, if we look at China’s coal imports from Indonesia, if we use data from the Chinese source, it’s 51 percent lower than the data provided by the Indonesia source. This needs to be fixed as soon as possible.

[00:22:17] And some – or additional policy recommendations: As we all know China is famous for its

five-year development plan, but what the country needs to do next is to have a medium-to-long-term national energy and economic strategy that aims to accelerate the peaking of both national coal consumption and the greenhouse gas emissions.

If we look at the carbon trade panels in China, there will be – (inaudible). This is very

important for Chinese governments, especially those no-coal governments to understand the importance of MRV in the energy sector. But meanwhile, I personally prefer a carbon tax to be imposed in China in order to – (inaudible) – greenhouse emissions in the country.

And finally, I would say China needs to actually encourage energy imports in order to – (inaudible) – coalmining, long distance transport of domestic coal and the coal energy use across the country. When I talk about energy imports, that means both natural gas and also coal. However, for that to happen, mistrust between China and the United States needs to be further – (inaudible) – in order for the country to become more confident to rely on international energy trade, instead of mining all the domestic coal.

So this is a schedule of how the final report will be released. Doctor Ma Linwei and I will

co-organize the final report in this event in Washington, D.C., and Beijing in (9th ?) May to 20 June. And also on June 14th I will speak at the Coal – (inaudible) – West Coast to share my research finding with the coal industry in the United States. And I will also speak about this report in our EU center and also in the Global Energy System Conference in U.K.


This concludes my presentation. Thank you very much. (Applause.) Dr. Ma. [00:25:37] MA LINWEI: Good morning, ladies, gentlemen, yes. It’s my honor here to present a

(strong ?) speech to all of you. And thanks for Carnegie Endowment for organizing the meeting. So – (inaudible) – my task here is very simple, only to give a talk. And my talk is about sustainable development of coal value chain in China and the U.S. but with a focus on China.

So first, I will present you some facts about energy use of coal in China and also a

comparison with U.S. And then I will propose three strategical issues I think is very important for sustainable development of coal value chain in China and also some policy implications for Sino-U.S. cooperation.

[00:26:26] And first slide just reminds us the role of coal in these two countries. And these two figures

are the primary energy consumption by source in these two countries, China on your left and U.S. in your right. And noticing the green line, the green line is consumption of coal in these two countries. So it reminds us that coal is dominatory (ph) resource in China over nearly 70 percent. And consumption is still rapidly increasing. And for U.S., it’s third largest in resources, but the consumption is slightly decreasing in recent years.

And so how coal is used in China, it could be illustrated by mapping the energy flows along

the coal value chain. In these – in these two diagrams, in the top is a diagram for 2005 and the bottom is a diagram for 2010. And in each diagram, the coal value chain is divided in two stages from left to right by local supply and then coal product supply together with coal washing, and then coal conversion, and then (end use ?) and then final factors. And you will see that dark (flows ?) is raw coal, and the deep gray is washed coal and light gray is coke and the light blue is electricity, the red is heat.

So from these two diagrams, it’s very easy to catch the main characteristics of the coal value

chain in China in local supply where it really depends on domestic underground mining. And we’re – China has very diversified energy and the use of coal, for example, half used for power generation, 30 percent used for coal cooking and the last 30 percent, direct fuel use of coal by boilers for industry and residential heating.

And you can see that – here, yeah, sorry – you can see here that the four final factors –

because this map does not show energy losses, so there is a possibility for consumptions very obviously that (industry ?) is the biggest, dominated and especially for heavy industry such as steel and – (inaudible) – largest user of coal, energy from coal.

And from these two diagrams, the ongoing chance is that from 2005 to 2010, China has

increased service mining because coalmining now is moving to the West where the coal resource is better. And we have more coal imports, as mentioned by Kevin. And the coal – the portion of coal


washing is increasing very rapidly. And also a definite increase for the portion – for a portion that’s used coal for power generation.

[00:30:06] And just two diagrams that show you that a little increase of the coal use for power

generation in these five years. And for the energy sector, the (purging ?) of energy sector, that kept – still no big change.

And also the efficiency of the coal use in China, you can see that the main energy losses

actually first come from power generation. And next is boilers, burning coal as fuel (use ?) such as radiation and (industry ?). And as measured by this diagram, the total efficiency of coal use is increasing in recent use from 52.5 percent in 2005 to 53.1 percent in 2010. And the main contributor is that the improving efficiency of power generation in China shows here that in 2005, the power generation efficiency is about 33 percent, and in 2010, it has improved close to 37 percent very rapidly. Also, there’s a little increase in (power ?) efficiency and which cannot show be here that in recent years, we have achieved very good improvements of the – also the – and intensity of our industry product.

[00:31:45] And this one may be interesting. They compare that – the coal use in China and U.S.

together, in the left in the bottom is that coal value chain – coal energy flows for the coal value chain in the United States and in the right, in bottom is China’s – (inaudible). So besides the difference of the scale, because China consumed so much coal, the major difference that the United States has more underground mining, which I think the cost is much lower, and is a likely exporter of coal.

For coal conversion, the United States mainly used coal for power generation, over 90

percent, while China has some more diversified structure of coal conversion, including coke and direct fuel use.

And for energy use, United States has more diversified usage, including one third for

industry or has one third for the (inaudible) – and one third for commercial. But for China, dominant sector is still industry.

[00:33:00] So next, I will propose three strategic issues. First is that how do you control the energy

demand from coal? And the next is how to avoid overcapacity problem? And the third is how to use coal more efficiency – (inaudible) – sorry for language problem – (inaudible).

So first, how to control energy demand from coal: Why it is important, because as

mentioned by Kevin, we are – actually the indigenous coproduction capacity is restricted by manufacturers in China, including ecology, transportation and also industry doctrine. And we know coal contains more potential pollutants and carbon to use in energy, and – but the problem is that – it’s not that because we like coal, but we have no other choices once we have a very huge new energy demand generated.


So underlying mechanism that actually the demand of coal is decided by the demand for (any of these ?) energy and also skill of alternative energy sources. As illustrated by this diagram, the scenarios, future scenarios, so there are – you can see there are four scenarios for power generation in the future, and the green part in bottom is coal consumption for power generation, and in the – in top is the power generation for all the energy sources.

Yeah, and actually, from top to – from top to bottom is that if they reduce the demand for

electricity, that depends on energy saving, from the right to left is that we increase a scale of nuclear and other renewable power and also natural gas power. So we can see that in the worst case here, in the worst case here, (continuously ?) increasing coal consumption before 2030, and in the best case, a really safe energy very well and develop alternative power in a large scale, it is also possible to control our coal demand for power generation before – around 2020.

So actually, the future is very uncertain in China. I think that may be a future between the

worst and the best. [00:35:29] OK, so next, underlying mechanism for this issue is that the huge end use energy demand in

China is mainly because of infrastructure building and the products’ exports. And that means – as discussed in China, because Asia now will become more and more important as the industry leaders try – (inaudible) – as the main energy demand driver.

As showed by this diagram, this is an energy flow diagram for China in 2005. Those data

with a better structure is still – is still kept in recent years. You can see that you – end use – end use – actually about 40 percent of energy in China is consumed for the production of structure material, including steel, cement, other metals and materials. And recently, it’s mainly because of the export of any intensive product, and also a lot of skill, infrastructure building. As we can become close, the energy consumption of the whole society in China, actually one third of the energy consumed in China is used for products exports, as energy is – (inaudible) – in the products exported. And one third is used for infrastructure building, so energy is –(inaudible) – in fixed assets, such as buildings and materials. And then one – (inaudible) – one third is used for domestic consumption, which I think is very large in developed country.

[00:37:07] So the (strategic ?) suggestions and the collaboration opportunities that I think Japan (sic:

China) and the U.S. can work together to promote the development for energy saving and the low-carbon towns, regions to shape a low-carbon economy and society, though maybe it is far from the topic we are talking about, the coal. But I still think it’s very important to control the demand for coal. And actually in China, though the development of low-carbon towns, regions, still at early stage, but it is developed very rapidly. This diagram just shows you some towns already have some activities of the low-carbon town, we call the LCT, in China. Actually, the real number should be much larger than that.

And as concluded from the town practice in China, in the – in the bottom – in your bottom

right, actually the way to implement low-carbon towns, what I think is essential that for a region, how to – how to produce products and service through earning money more efficiently with less


energy consumption is essential. There’s a problem is you have your structure in the future, and another issue is that living style and energy service level in the future, because China is growing and where China will be in the future is still uncertain and we can do something to control it. I don’t think that China can live so comfortable like you, yes, because we have very, very limited resources and environment space.

[00:39:03] And also, in China, we also have some regions rich of coal resources and other resources,

but as the energy demand is increasing very rapidly, these regions began to – began a rapid development. But the problems, I think, that for this – in these regions rich in coal, for example, in the area of eastern Asia, all those and – (inaudible) – province, they all – they all have a very ambitious plan about coalmining and the power – coal power generation and also coal chemicals. As planned, only three years after, this region, the production of raw coal will be more than 1 billion tons, actually. And I think close to half of the coal will be converted power in the chemicals in this region. And we know that in the West, we are lack of water resources. And also, that may be cause that very bad competing between this region, because they are all doing the similar thing.

So next issue is how to avoid overcapacity problems. As driven by rapid growing market,

overcapacity problems are occurring the whole coal value chains. Actually, in China, we can observe a rapid expansion of capacity of coal production, power generation and the coal chemicals. And not all the facility is used well.

And in the development, actually, we have constructed some very high cost capacity. And

the underlying mechanisms that – once if – the demand is released too rapidly – and the production capacity will increase very rapidly, especially in China – maybe we will (boost ?) some capacity with very high costs, and it will make the increase in average price of the products. And then, maybe, harmful for the future competitiveness of the economy, and then cause – finally cause price fluctuation.

And in the end, I do think it – I think it is harmful for both supply and demand side. It’s

not only a problem for China, but globally, because everyone is – (inaudible) – huge demand of China, and a lot of countries is constructing production capacities according to the market increase in China, not only in coal, but also others: steel and others.

So strategic solution here is that China and U.S. should work together to probably expect a

future demand of energy and coal, and guide their demands. And we should – (inaudible) – be balancing supply capacity, including the China’s supply and the global supply to realize a minimum life cycle cost.

This diagram – this diagram is just show you the problem of overcapacity. If we build

production capacity referring to the peak demand – so in most of time, the price capacity will be wasted. If we are (only ?) developing (luxury ?) capacity to meet a part of the demand and to meet the rest demand by import, energy will be saved. And also, I think, it’s good for economic growth.

[00:42:40]


So this just an idea that – actually, we know that China has a very huge demand, and it is also demanding other countries – especially in emerging economy – and China could satisfy demand by indigenous supply. However, the resource in China is limited, and cost not the lowest. Some are very high.

And we globally – actually, in other countries, we have a lot of low-cost resources. So the

problem is that, I think, for China, it’s better to balance the supply capacity from indigenous supply and also global supply to pursue a minimum cost. Because in the past, in making – (inaudible) – China always think we should satisfy the energy demand by ourself. But in the future, I think, is that inevitable increase of the import of energy for China. Not in the oil, but the natural gas or the coal in the future.

So last – (inaudible) – is how to use – last issue is how to use coal more efficient and cleaner.

I will not introduce this in details. Actually, in China, we have a lot of thing to do – actually, we have more work to do comparing to U.S. because we use coal in such a large scale. For example, the – (inaudible) – mining, coal mining, and the (introduction ?) – of – (inaudible) – promote – (inaudible) – according to coal types or promote (polygen ?) and also carbon capture storage maybe through the U.S.; not only CCS. We must use coal and use CO2 – actually not storing underground.

[00:44:30] And also, improving the efficiency – (inaudible) – power. And I think that, for Sino-U.S.

cooperation, is a very important direction to cooperate on the retrofits and the management of existing coal power plants. OK. So I will stop here. Thank you. (Applause.)

MR. TU: Thank you, Linwei for your presentation. Now, back to – (inaudible) – Liu

Chiang for comment. You have five minutes. [00:45:06] QIANG LIU: Thank you, Kevin. Good morning, everyone. Actually, I think it’s quite

high-pressure for me to give these comments, because coal is always biggest problem in China. I’m from the National Climate Change Strategy Center, so I’m mainly working on low-carbon strategy and low-carbon planning now. So I’m thinking, from my personal perspective, low-carbon development is now this quite key issue in China, and we want to develop our low-carbon strategy for next 10 year or next 20 years. So I do some homework to read their presentation today, and I’m thinking that how coal can play role in the low-carbon development in China in the future.

Kevin and Dr. Ma – they gave a very comprehensive picture of the low-carbon coal

revolution, and also gave lots of recommendation. So for my thinking, I think it’s – for China, we need coal. It’s definitely – we know – we know about 70 percent – (inaudible) – of energy consumption is from coal. But I think we have to consider how to use coal efficiently. That is actually – I think is most of the key issues for coal value chain – clean coal value chain.

First one, actually, that if we want to clean coal value chains have to be that – reduce

(environmental ?) effect of the coal use, including some, like, air pollutants, including the carbon emission – now China is the largest emitter in the world. So I think that we need to consider this. But I want to emphasize that – actually, from my understanding, the clean coal value chains means


that we need to use coal more efficiently – much more efficiently than before. So considering that, I think it’s – one key issues for Chinese governments of – and for Chinese industry to consider is to give more serious cap on coal consumption in the future. That’s what I think is quite important.

[00:47:11] So I think it’s – that is – if we can give some, like, cap on coal consumption in the future,

then that means – can give very good incentive or signal for industry to increase their efficiency to use coal. So how to control the consumption? From my personal views – I just shared some common opinion from mine. I think it’s – first of all, Chinese government should – we already emphasize that we will do – (inaudible) – for every aspect of the energy consumption – also, the carbon reduction – (fuels ?). So I think that we also need to consider how serious decision we want to make on the control of the coal consumption in the future.

I think that the earlier we can make this very real decision – hard decision and strong

decision – that the earlier the coal problem can be solved. So based on that, I think we should have very clear political signal. We also need to have very clear roadmap, and we also have good policy incentives. That is like top-level designing, and also that’s quite clear picture for China. So second one – I think that we need to also consider in the cost of using coal. Actually, it’s – I think many people already hear of the air pollutants problem in China recently – especially in very short periods, we have very serious air pollutant problem in some areas.

[00:48:42] So I think if we include this environmental cost into coal use, that coal might be more – not

the cheaper choice for China. So I think that in the future – we already have some resource tax. We already have some environmental tax. Like Kevin mentioned, we are discussing the carbon tax. So I think, in the future, if – like this carbon pricing or some environmental cost can be introduced to the system – not coal – maybe not cheaper choice – it’s – we need to consider another alternative.

And the third one – and I think – and it’s for China – we also need to consider, from the

long-term perspective rather than from short-term perspective – we need to change. Now the central government’s already in the – in the – (inaudible) – plan, and also the 18th Congress reports – we already advertised that. We will change our economic growth pattern. We will update our economy structure. So I think it’s a most important thing that we need to consider that the long-term costs – (inaudible) – the short-term costs.

If we can reduce the use of – reduce the dependence of coal, maybe from short time, it’s

quite high cost, but from long-term perspective, I think it’s more cost-effective compared with other choices. And especially, I think a most important thing – last night, we also discussed this issue – I think it’s quite important to award the cost – high-cost, which is – in the future – in the long future, if we need to unlock the dependence of coal, that might be very, very high cost. So I think we need to consider now.

[00:50:18] And finally, I think it’s OK – and we need to consider from different perspective. But do

we have the solution – do we have the alternatives? I think it’s – we are now considering how to


diversify Chinese energy supply. I think we have alternative. But the problem not so easy to solve, but at least I think we have some choice, like natural gas – now that’s the quite ambitious target in China, and also that renewable energy increase very fast – including some others.

So I think that we need to – we need to have different – find some different channel,

different solutions to solve this. From my personal view, I think – I’m not totally, you know, quite optimistic, but I’m not pessimistic on that.

So I think additionally, based on this considering – I’m thinking it’s based on also the two

speakers – their thinking. I think if we want to, in the future, cap the coal consumption, if we want to increase the efficiency of the coal use, what kind of policy and what type of measure we need to do in the future? I just want to emphasize two points. One is – which – the – (inaudible) – system which Kevin mentioned. I totally agree that – (inaudible) – is now quite important. But I’m also the – (inaudible) – review the national inventory and do the national inventory work and also have to – is involved with some – (inaudible) – negotiation. But I know that we need time for China to increase our capacity to do this. But I think – I want to emphasize – if we want to – (inaudible) – the most important thing that – we need to monitor the results. For example, for the coal use, we have data – it’s – we need to improve the data quality, but we have to consider – to monitor improvements of the coal use – for example, if the air quality is still so – you know, so serious and so bad, we need to consider – really consider – we need to monitor if there is some areas still very serious problem, so we need to check back to the data resources, and we need to check everything. That is quite important.

[00:52:30] And also, another example is building sector. (Inaudible) – policy is based on – in China,

based on the – if some actions is adopt or implemented in some area – but I think most – more important is, we need to consider if there is some energy-saving benefit we already got from these kind of measures. This is one point. The second point – I think it’s quite – (inaudible) – it’s good we need to provide very good policy environment in China for market-driving actions. I just want to have two example. One is that – I think it’s – electricity pricing reform. We already considered this for several years. I think that is quite important for China for renewable energy power, use – for many things, to use electricity more efficiently. So I think we need to really serious consider this electricity pricing mechanism.

Another one is the standards. I heard that United States already have very good standards –

emission standards, energy saving standard for transportation sector. So I think in China, we also need to consider how to – (inaudible) – effectively. For example, now we just – if we want to build new project yearly, we just – you know, using political authority to approve that based on some standards. But I think we need to consider – use them like emission standard and environmental standard in the future to control this new project development.

So I think that is – might be – for some areas, is a big change, but we need to do now. So I

just stop here, and I hear the Professor Yang’s comments. Thank you. (Applause.) MR. TU (?): Fuqiang.


FUQIANG YANG: Thank you, Kevin. My comment is trying to find what is the key issues between China and U.S. and we can work together in the existing cooperation and the potential cooperation in the future.

And we’re talking about the coal value chain, and so we have to understand is, what is the

data? If we have no data correct and accurate and reliable – so if you develop a policy and have a tax or other, you know, mechanism, it doesn’t work, because, you know, maybe your data is not reliable.

[00:54:59] So in 2000 – and we find out – if we have a national data for coal, and we still have local data

for coal – so the difference between these two statistic data is about 100 million ton, but now people think, it may be 300 million (tons), 500 million (tons) – even people say 800 million ton of coal. There is a difference. So I think – (inaudible) – introduce, what is data and statistic – this kind of approach, and to avoid, you know, these local or other enterprises and they submit data, and we can find out what is a problem in that data.

So I think this is quite important for China to develop a data collection and (carrying ?)

system. And second is, we have to scale up use of – (inaudible) – and natural gas. In China, Chinese leaders is very concerned about energy security – and particularly for oil, natural gas and even coal now is about – 6 percent of coal is imported. So for natural gas, we encourage this kind of policy adoption to use the – (inaudible) – the pipeline from Russia – now they have a new agreement to important natural gas – this pipeline – and also LNG from Malaysia, from Australia, from Middle East.

[00:56:40] So we think the first important issue is not security now, is replace the coal with the natural

gas. And U.S. and – have developed shale gas; now Chinese now trying to learn, how can we develop a shale gas in China? We think that is – find out, is China have a good reserve or resources for shale gas – (inaudible) – gas or all these nonconventional gases. But we also concerned about environment impacts, and we think it is about water issues, methane, land and chemical fracking, you know. A lot of the community, they are concerned.

All these we have to put in the priority rather than say we only develop the shale gas. So for

the renewable – and people think that is a long-term (strategy ?) – I don’t think so. In the world, if we think in the future, they have a couple important issue will change the world patterns. And first is, they have a couple options. In the U.S., of course, shale gas, probably, and for the – for the EU – is carbon price. And for China, maybe – you know, I will say the renewables. Maybe that’s people’s surprise, because simply, China can make its renewable technology very, very much cheaper – is very competitive. And third is, I still like to promote market reform in coal sector. And Kevin and have – talked something, but I will say we like to further reform.

And another is, we like to see – the coal market is very competitive. So in this case, you can

find out, in China – many local government, they have a set barrier for this competition. They say, for instance, in (Shanxi ?) – that is a coal-based provinces, and they say, if any coal from – shipped from our Shanxi, the price is not lower than some – (inaudible) – price. So that is actually – (local


carbon ?) – have a – very strongly and heavily – (inaudible) – the price of the local coal. So we think that we have to remove this barrier.

[00:59:20] Another question is, say, U.S. – the coal is very competitive, and they like to ship more coal

to China. Why? Because China – the price in a coastal area is very high. But that is – that is one side of story. But another side – actually, cost is – actually is not competitive – (inaudible) – cost lower ton, but in a coastal area, if you find out wholesale and retail price, and they have some companies monopolize the local coal market. So I think that’s important.

And for the market reform – and I guess is – the resources tax and carbon tax and other is

quite important, and so I think that is another.

Third and finally, I think of course they have a manufacture we can limit coal demands; for instance, the carbon tax or have a cap. But in UNIS (ph) we learn is actually – (inaudible) – is public health. So I think it’s now in China the large-scale and the very dangerous smog happen in China. That is good, because that educates policymakers and public. We have to put public health first. Thank you. (Applause.)

[01:00:55]

MR. TU: Thank you, Fuqiang. Before I open the floor to the audience and actually ask a couple of questions. The first one is about – (inaudible) – pollution and carbon emissions issue. The Chinese environmental minister – (inaudible) – once said: I’m responsible for carbon monoxide but not carbon dioxide. In China, economy issue and – (inaudible) –pollution – (inaudible) – between the National Development and Reform Commission and the Ministry of Environmental Protection. In the future, what could we do in order to better coordinate the environmental protection activities between these two agencies?

Fuqiang. (Laughter.)

MR. YANG: That’s hard question. But I will say because you try to ask me to find out what difference are they fight between these two agencies, but I will like to say, how can we find the area actually they get consensus. And one area you just mentioned about the carbon tax. And carbon tax is under jurisdiction of the Ministry of Finance, but Ministry of Finance very proactive and to promote a carbon tax, and that is an area we call the environment tax – is one of the environment tax. And of course, Ministry of Environmental Protection welcome this idea. They definitely is – there are alliances to promote this carbon tax.

And second is for the – for the NDRC, and also they have a concern about what is social and economical losses and due to – due to the environment damage. So I think that is a area that you can see how coal, you know, have costs for the public health and environment. And Greenpeace and the (energy foundation ?), we – (inaudible) – our study, and that is – actually is a 7.1 percent of the annual GDP is losses due to the coal uses.

[01:03:30]

MR. TU: Thank you, Fuqiang. The reason why I ask this question is because I’m writing a report entitled “The Simultaneous Control of our Coal – (inaudible) – Pollutant and the Carbon


Emissions in China,” and I personally feel it may be relatively easy to sell this type of idea to one agency if – (inaudible). And thank you very much for your suggestion.

And another question is about the national energy consumption and national coal production and consumption caps, which is proposed by the National Energy and Administration. As you’ll – (inaudible) – the central government has set our national coal production target at 2.6 billion tons. But in the end, the number, the real production figure is 3.2 billion tons.

I wonder what’s the rationale behind the government thinking they’re so serious about this type of policy – (inaudible) – any idea?

MR. LIU: And actually, previously also mentioned that this cap of the coal consumption is quite important. From energy perspective, I don’t think that’s – you know, it’s quite difficult for China. We’re still increasing. We’re still growing. But I think now it’s quite serious, most serious problem and – (inaudible) – from our perspective is to – how to reduce the gross speed of the carbon emission. In that sense, the controlling of the coal consumption is quite key issues.

[01:05:21]

Karen (ph) mentioned a very good point that previous – (inaudible) – do have some planning. We do have some prediction. But finally, we pass that point. But I think that is the real problem with what – China, that we have some, but usually it’s just we – we just want to follow the tradition of (past way ?). So I think that we need to consider now if we want to really cap the coal consumption in the future. I don’t know when, but I hope it should be short time. We need to consider now seriously how to change our growth pattern. That is quite important.

For example – (inaudible) – capacity now is quite – you know, there is overcapacity problem in China. So in the future, if we want to control the consumption, one option is to – we fund some many alternative options, like renewable energy, nuclear and also the natural gas. But I think that’s another very important issues to control the demands, which Dr. Ma also mentioned in his slides.

[01:06:29]

The (building ?) sector, for example , in the future, in next 10 years, based on our prediction and also based on announcements or some research by Ministry of Construction, imagine maybe next 10 years every year is about 1.4 (billion) to 1.5 billion square meters every year in China will be built. I think maybe too much for China. And we need to consider how to control what kind of lifestyle we need. I think we cannot copy United States living style, to live very far away and driving car. That is not appropriate for China.

And also, that’s like – (inaudible) – what we really need in some industry sector. And I think – I think many Chinese expert already agree that we will achieve the peak of our (steel ?) in very soon time. So I think that kind of issue can help us to consider how to change basically our economy structure, our economy basis. We need to change to more dependence on the – on the consumption, but we also need to change to considering some other problems is – how to make this dependence on consumption in a very local manner. That’s my point. Thank you.

MR. TU : Thank you. I’ll agree with you. If –


MR. MA: I would like to say – I would like to say something about this issue, because several years ago – several years ago (tracking ?) the problems in the energy strategic supply in China, I found two important things missing. While we have mentioned everything – I mean – (inaudible) – energy emissions. There are two things missed in previous strategic planning is to – to aspects. One is that we have to not have a clear target of the consumption – the total primary energy consumption, and another thing is that we do not have a cap of coal consumption. I think that’s the problem, at least from the strategic planning aspect for the energy problem in China. So I think it’s very important to put these two thing into a strategic planning for sustainable development of China. Yes, thank you.

[01:08:37]

MR. TU: Yeah, thank you. I’ll agree with you, Qiang, that if every Chinese aims to duplicate the lifestyle in the United States, the planet may be doomed.

So now I’d like to open the floor to the audience. First of all, please wait for the microphone and then identify yourself and ask a question – a real question please, of course.

Yeah, Ken (sp). Please wait a moment.

Q: Thank you. Ken Lieberthal with the Brookings Institution. It’s been a terrific set of presentations and comments. If you don’t mind, I have two very concrete questions and one broader one. Concrete question, one for Kevin, which is that – I’m sorry, I forgot what I was going to ask you so – (laughter) – I’ve had it in mind for so long. But anyway, for – (inaudible) – I was very surprised when you told us that we have now seen an enormous expansion of coal washing in China, given China’s growing water shortage, I don’t quite understand where the water is coming from for this vast expansion of washing of coal. So I wonder whether you would comment on that.

The broader question is you’ve laid out a lot of very good ideas about what China ought to do in terms of ready use of market forces, cap on coal consumption, target for primary energy consumption, et cetera, et cetera, et cetera. The question is really what changes would you need to make in how the political system operates to get those things actually done because it isn’t like these are new ideas.

They’ve been around for some time. The system has not proven capable of making those

kinds of changes versus investing more money in production capacity and renewables and so forth. But when it comes to the marketization side – the establishing caps, changing the economic structure, you know, the really fundamental approaches – arguably while the desire has been there, the reality has generally been in the opposite direction over the – say, the last decade.

[01:11:10] So what – you know, how realistic is this or what else needs to change in order to make it

realistic, maybe the better way to put it? Thank you. MR. TU: Thank you. Linwei, please respond to the coal washing question first. MR. MA: Very good. So for coal washing – I’m not so sure about the water usage in coal

washing, but the two things I know is that, first, actually the water recycling in coal mines could


supply some water resources. And I think the water recycling ratio could also – could still be increased in the future – (inaudible). That’s one thing. Another thing that I know that the dry coal washing technology is in development, but I’m not so sure what stage it is in. We can also use air to wash it. Thank you, yeah.

[01:12:06] MR. TU: OK, Jeff Mario (sp) raised a very good question. I personally believe the Chinese

government needs to change the mentality needed to respect the national circumstance in China before it regulate the energy sector. For example, I am not a big fan of the national cap on either energy consumption or coal production and consumption because this type of regulation is not compatible with China’s national circumstance where the government should aim to improve the – (inaudible) – system.

And having said that, there is a market regulation that can help China to better regulate its

energy sector. For example, carbon trade pilot may not be easily kicked off in China, however if the ministry of finance can adopt a carbon tax in this country, the story will be totally different. And also, the common and the differentiated responsibility may be applied in different part of the country.

A national cap on coal consumption is very difficult to be disaggregated at the provincial

level. If we go to those coastal provinces, they are much better developed. They are more willing to pay for environmental protection. In this type of region, we may – the Chinese government may consider to have regional cap on coal consumption. So that’s my answer to your question.

Liu Qiang and Fuqiang, do you have any response? MR. LIU: Just briefly, yes. I know earlier when we talked about these issues, there’re quite

broad issues and quite basic issues. Through my personal view, I think it’s – now it’s quite important is for the – especially for local governments. They have to change their idea about what kind of growth they need. We have to – yeah, like Karen (sp) mentioned – we have to respect the Chinese situation, Chinese characteristic, Chinese circumstance.

[01:14:39] But we also need to consider the – is the GDP the only thing we want in the future? Is

economy growth the only thing we want in the future? I think now is the time for the local governments and also – the central government already, I think, is – have good discussion and very seriously considerate on that. And also, I think it’s very important for local authority to consider what kind of, like, growth we need and how important we need to put, like, environmental impacts and also the carbon emission issues in that.

Another thing I think is – like I mentioned before – I think it’s quite good for us – quite

important for us to provide very good policy environments for market-driving actions. However, I don’t think that market can solve anything, you know, sometimes like standard I think it’s also quite important. It is basic benchmarking and then we can use more market-driving policies.


And so I think, regarding the market-driving policies, I think it’s also that – for the local governments, they need to consider what kind of scheme, design they need, especially some innovative scheme. I think we can learn many from the European country, from the United States, from many other developed countries. But we have to consider if this scheme – how to use this scheme very appropriately in China. That’s also very important. I cannot say – (inaudible) – but I think it’s in my opinion. Thank you.

MR. TU: This gentleman. Q: Thank you. My name is Dan Morrow. I teach about climate change policy at George

Washington University. Thank you so much for organizing this panel. As you well know, the future of the world in terms of climate change depends largely on what China decides to do about its coal resources.

[01:16:32] I wanted to ask about shale gas. Two of you mentioned it. And Mr. Fuqiang mentioned

that China is trying to learn to use its shale gas resources. And I think, Kevin, you said it was difficult. Could you talk a little bit about the effort to develop the shale gas resources as a substitute for coal and whether or not there is any international technical assistance that might help China in learning to develop its shale gas?

MR. TU: Fuqiang. MR. YANG: Theoretically, China is rich in shale gas reserve and resources. And this is why

Chinese government like to develop shale gas in China. Now, the question is, we have to say what is deregulation or what is – how many regulation in which area? And deregulation is full price. And in China, that natural gas price is quite low. So now they have a reform for the – for the price.

[01:17:41] So first is we have to give investor and company a very strong signal. If you’re involved in

the shale gas development, conventional or not conventional, you are profitable, you get money back. So that is quite important. And second is we have to understand is because China, if developed shale gas, the front cost and the first investment is very high because China is a mountain area, and the shale is very deep, is up to 1,000 meters deep, and the water issues and other issues. And so that is if we can deregulate price and that Chinese developer can cover all these costs. These costs is much higher than the American company did in U.S.

And to answer your question about cooperation with international, and I think that’s no

problem because every international company finds this is profitable. So they like to get in. And the question is how about a Chinese company? And now they go out to buy out some international company and try to get this kind of technology and can be used in the – in the U.S., Canada or even in China.

And so I think is – how we regulate is we have to ask the minister environment protection

and to regulate, you know, the environment issues. And so far, simply tell you, in China we don’t have even standards for the methane emissions, for the water, you know – (inaudible) – and waste


water and the chemical stuff of reacting – for acting. So I think it’s – so now we work very closely with BP. And first is develop these standards and regulations.

MR. TU: So the shale gas development here is rather marginal in terms of its profit. So it’s

very difficult to imagine the giant energy company, such as SinoPac, CMTC and – (inaudible) – can be very interested in this type of development. They may be good at building a petroleum-refining facility, maybe good at develop all the conventional oil access. But in terms of shale gas development, that’s not a story. That’s why shale gas boom in this country was kicked off by small- and medium-sized enterprise. I don’t think the national circumstance in China will be different.

[01:20:40]

Another issue is the environmental enforcement in China. That’s a bigger concern here because personally, I don’t believe setting standards and regulation are major – (inaudible) – in terms of environmental protection in China. The enforcement is. If the shale gas was drilled across our country at a scale, I don’t know whether it’s good or not.

Scott.

Q: Scott Smouse, U.S. Department of Energy, National Energy Technology Laboratory. I just wanted to add a little bit about the U.S.-China cooperation related to shale gas, or more broadly, unconventional gas.

There’s an ongoing dialogue for a number of years called the U.S.-China oil and gas industry forum, which is a public-private dialogue around oil and gas issues. Shale gas has become a central piece of that discussion, so it will continue, you know, to have that dialogue both around the opportunities for U.S. investment or U.S. companies to do business in China, along with all the regulatory – associated regulatory issues.

Also I’ll mention that I chair the APEC Expert Group on Clean Fossil Energy, and a U.S. company just completed a regional study for all developing Asian-Pacific countries on unconventional gas potential. That study covers – with shale gas being the big opportunity, but also covers cobalt, methane and tight gas formations. We are also planning now a workshop, a – excuse me, an unconventional gas experts workshop, a relatively small event, probably 50 to 75 people later this year, probably early – late summer or early fall. And I’ve been in dialogue with NEA about holding that event in Beijing, where the results of that report will be discussed on a regional basis and then propose how within APEC we can assist within the dialogue, particularly around the environmental issues, regulatory issues on unconventional gas production.

[01:22:57]

MR. TU: OK. Professor Zhang (ph).

MR. : First of all, I’d like to thank you, Kevin, and for the Carnegie – (inaudible) – and also very enjoy the talk for these panels. I have two small questions. One is the – (inaudible) – you talk about the overcapacity of coal production and the power generation. I don’t know what is the basis – on what basis you talk about this, because as we all know that there is overcapacity, for example, like wind power, because, you know, the transmission line power grid does not catch up with development speed of the wind power capacity installations. But the – (inaudible) – I


understand, I would see China still – (inaudible) – shortage of power capacity, power demand. That’s my first question.

Second question is, you know, those days in China very – (inaudible) – low carbon, low-carbon town, low-carbon whatevers. I don’t know. It – you work on this issue. Do you have any specific recommendation? What exactly means by low-carbon towns, or is – there is a Chinese government on the national level or there is some – (inaudible) – levels and by what indicator that this town will be considered low-carbon towns? Thanks.

[01:24:17]

MR. YANG (?): OK. Very good questions. And for the first question, the – (inaudible) – power generation – (inaudible) – decreasing – maybe increasing recently, but recently it’s decrease – at decreasing loadings factors of coal-fired power generation, referring to our data. One reason if that we build too power plant – too many power plants. And now recently because we have a big scale of wind power and solar power, and we must have some power-generation capacity to compensate for the – you know, the peaking of the energy supply of wind, you know, not stable, to compensate. And some coal power plants is doing that. That’s – (inaudible).

And also, we have observed actually in power generation, power industry in China – it’s very interesting that even power companies that know that it is not profitable for some projects or coal-fire power – they still decide to build it. That’s related to the market mechanism and institution. Because for coal power companies, the top priority for them is to stay in a market. And so the objective then is to be big – big first. So he can stay in the market in the future. I don’t think it’s very good, but that’s the reality.

So coal production capacity, I think actually we have so many – (inaudible) – do not think all of them will be competitiveness in the future. Some actually maybe cannot survive in the future – (inaudible) – decrease. And also can you see it globally, what are – I have – because I’ve visited Australia and Canada. So Australia – for example, Australia actually is – they have very ambitious plan to increase the coal export into China. And also I know Canada is – (inaudible) – to do that. Actually, you can observe that actually globally, there’s a lot of project plans for future coal exports and steel – and also steel, another story. So I think this is a challenge. So I don’t know if that – if I have give you good answer.

[01:27:04]

And for second question – (inaudible) – it is a – (inaudible) – concept, and what I would like to say that in China – (inaudible) – reduce the absolute CO2 emission in Yatan (ph), because most of – (inaudible) – still developing. So in near term, the main target to reduce the carbon intensity, for example, carbon emission productivity, but in long term, we must lock in a low-carbon society economy. (Inaudible) – doing some, you know – (inaudible) – like improve efficiency, reduce energy waste, to (now ?) change economic structure and consumption behavior. But it may reduce some energy in near term, but long term, if you do not change the economic structure, still rely on heavy industry, still, you know, waste a lot in consumption and not good for future, we will lock in high carbon. So – (inaudible) – in China actually in near term, you can reduce carbon intensity. But in long term, you can lock in a way of absolute, maybe (cost ?) many years, of absolute low-carbon emissions. That’s what I try to say about it.

MR. TU (?): Now an actual – (inaudible) – two questions. Mr. – (name inaudible).


Q: OK. I’m Jin Sun (ph) from embassy of China. And my question – and not to speakers, but to the professor from Jantang (ph) University, just now you mentioned about the cooperation about shale gas. (Inaudible) – just wanted to ask your suggestion about – from United States side, how could we do in the future of cooperation between our two countries – (inaudible) – shale gas. Thank you.

MR. TU (?): Then Jennifer (sp).

[01:29:08]

Q: I want to thank the panel. You guys kind of went that really good gold middle path, “zhōng yōng zhī dào,” in your recommendations. Don’t want to be too extreme to – (inaudible) – coal control. Question’s about who makes the decision for how much coal to import? Because you – one of you commented that China’s importing 6 percent. Is that coming from the top? Is it coming from the provinces? Where’s that decision made? Easy question. (Laughter.)

MR. : Thank you for your question. I’m actually teaching at George Washington, not at Georgetown. And I’m not an expert in shale gas. I recognize that this is an important question. The only suggestions that I would make is that, as I understand it, the development of shale gas is not only a technical problem, it’s a policy problem. And the design of a policy and regulatory framework that gives sufficient pricing incentives for the development of the resource is critically important. So I would hope that in terms of cooperation – the U.S. does have a very well-developed pricing and regulatory system for natural gas. And so there may be opportunities for collaboration about the development of that policy and regulatory framework. That would be my only suggestion.

[01:30:31] MR. TU: In terms of coal imports in China, I don’t believe there any government agency

currently can fully regulate this. But if we look at China’s national energy development plan, over time the central government – especially national energy administration – its attitude toward coal imports have become increasingly flexible. In the future, I believe it’s possible for the government to realize, when the Chinese coal consumption is peaked, what’s the structure of the coal value chain might be quite important.

If when the coal consumption, it peaks hopefully in 10 years, China meet all its national coal

consumption with domestic coal. Then the country had overbuilt in terms of its coal mining capacity and the coal transport capacity. So if a certain percentage of domestic coal consumption met with coal imports, then when the Chinese national coal consumption peaks, then the government is a much better position to regulate the coal value chain.

Do you have anything to add? [01:32:24] MR. LIU: Sorry. I just kind of want to come back to the low carbon town as Professor

Yang mentioned. Actually, we are now helping Chinese government to direct like some pilot, low carbon industry loan pilots, low carbon society, pilot low carbon city. From my point of view, I think low carbon town, we need to – this is quite, you know, different for different region. It’s for some regions if we consider low carbon town, we have to consider this absolutely a cap. It’s – we


cannot depend on intensity. From national level – (inaudible) – but from the town level and especially some, like, very small-scale level, we need to consider.

So I think it’s quite – now is very – it’s very hot topic, that’s what is low carbon in China?

It’s – many different people have different definition. Actually, but I think in the town level and maybe the small city level, I think it’s – we need to consider benchmarking. I think for the low carbon town, it’s have to be at least the ones at the national level with the same – better condition, with the same industrial sources condition. And we can also consider international – (inaudible) – for some low – for some town. So that is – I think I just want to add this.

MR. TU: So one more question, David. DAVID BURWELL: Thank you, Kevin. I know you’re overtime and I’m pulling rank here.

But I just wanted to ask a basic question. I don’t quite understand – that I haven’t heard yet, which is in the regulation and management of coal, I should think it at least be in part a function of how much of coal is – coal development and production is owned by the government versus the private sector.

The more – my intuitive thought is that, you know, to the extent that the coal business is

government owned, it’s going to be harder to regulate it by another agency because you’re regulating your own – you know, the public sector. So what is the split between government-owned coal and private-owned industry? And does that, in your judgment, have any effect on the ability to manage coal in China?

[01:34:41] MR. TU: One-third of China’s coal production are from the private mines. And I would

like to extend this question to – for some of you who we need to respond. MR. YANG: (Chuckles.) Always hard questions. (Laughter.) Yeah. I think in China is –

we are not a – one company is still 100 percent government owned so far. I would like to use the public owned because they have stock in the stock market – issue their stock. So – but, you know, if we use the government owned, I think it now is – (inaudible) – dominate. And for private on the coal mine, and generally speaking, is a small and medium one.

[01:35:37] Now, consolidation is a – is a – you know, the small coal mine now they use less and less

because they damage the environment and very small and have a safety for the workers. All of these issues. They have to close down all these buy-out by big company. So – but I’m now worried, you know, about this regulation because they are common baby, it’s hard to do it. But I will say, probably not because for this company – and they have a few obligations. One is they work as a private company and the profit is still their target they like to pursue it. And second, because this still is a public-owned company, they have to listen to the government regulation.

So in China, the situation is now quite different in U.S. So now question for me – at this

moment, I will say the question is not private or state or public owned, the question is in China, we have too many small coal mine that damage our environment – climate change or other. First, let’s


get these small coal mine closed down or buy-out, and then consolidate, come out to something like 100 – you know, couple hundred companies, and they still can compete with each other. And so first is the close or buy-out small coal mine and the second is a compete – competition between these public-owned companies.

[01:37:23] MR. TU: So the status quo in China is state-owned coal company actually are better

regulated, they are more environmentally responsible. Having said that, the feeling is the government hadn’t provided transparent and a fair playing field for the private coal enterprise in China. So in the future, how the government can consolidate the industry but meanwhile create a better atmosphere for the private sector to complete with state-owned company might be very important for Chinese central government.

Now I’d like to conclude this panel by inviting each moderator and the speaker to give a one

paragraph to the audience about this session or what will be the take-home message from you. We’ll start from Dr. Liu Qiang.

MR. LIU: Just one word? (Laughter.) MR. TU: One sentence. MR. LIU: One sentence? I hope United States and China, we can cooperate in this field in

the future because I’m coming from the negotiation process – (laughter) – so I hope. That’s my hope.

MR. YANG: Yeah, I may answer your question because you’re from the Climate Change

Center. And I will say, in the long term – (inaudible) – force is the climate change and to reduce demand for coal.

MR. MA: OK, through this discussion I found there are still a lot of issues deserve scientific

research, so I will continue to do that after return. (Chuckles.) MR. TU: So the coal issue in China is complicated because the national circumstance in

China is so different than the United States. I think, if U.S. and China can work together and some of the mistrust can be eliminated in the future, I believe the chance to better regulate the Chinese coal industry can be significantly improved.

Thank you very much. (Applause.) (END)

u.s.-china coal value chain exchange conference how to clean

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