VZCZCXRO0264
RR RUEHCN RUEHGH
DE RUEHGH #0383/01 2550528
ZNR UUUUU ZZH ZDK
R 110528Z SEP 08 REF UR RUEHHK 4632 2600552
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 7136
INFO RUEHBJ/AMEMBASSY BEIJING 2094
RUEHSH/AMCONSUL SHENYANG 1375
RUEHGZ/AMCONSUL GUANGZHOU 1352
RUEHCN/AMCONSUL CHENGDU 1381
RUEHIN/AIT TAIPEI 1188
RUEHHK/AMCONSUL HONG KONG 1533
RUEHKO/AMEMBASSY TOKYO 0358
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC
RUEHGH/AMCONSUL SHANGHAI 7720

UNCLAS SECTION 01 OF 02 SHANGHAI 000383 
 
SIPDIS 
 
STATE FOR EAP/CM 
DOC FOR ITA - DAS KASOFF, MONTOULIEU, MELCHER, KARNAK 
NSC FOR LOI 
EMBASSY PASS FCS 
 
E.O. 12958: N/A 
TAGS: ENRG ECON EIND PGOV BEXP CH
SUBJECT: SHANGHAI VICE MAYOR AI BAOJUN DISCUSSES SHANGHAI'S ENERGY 
CONSERVATION PRIORITIES WITH DOC ASSISTANT SECRETARY BOHIGIAN 
 
(U) Sensitive but unclassified.  Not for dissemination outside 
USG channels.  Not for Internet distribution. 
 
¶1.  (SBU) Summary: During a September 5 meeting with Department 
of Commerce Assistant Secretary David Bohigian, Shanghai Vice 
Mayor Ai Baojun explained the Shanghai Government's efforts to 
build its alternative/renewable energy capacity, particularly 
focusing on wind energy and alternative energy for vehicles. 
Through various policy incentives such as tax rebates, 
subsidies, and new pricing models for power companies, the 
government hopes to encourage R&D and investment in renewables 
while implementing mandatory emissions standards as a 
disincentive for the continued use of traditional energy.  The 
Shanghai Government fully supports partnerships between local 
companies and world-leading companies in the energy sector.  End 
summary. 
 
¶2.  (U) During their recent visit to Shanghai, Department of 
Commerce Assistant Secretary David Bohigian and a delegation of 
eleven U.S. firms developing energy conservation technology met 
on September 5 with Shanghai Vice Mayor Ai Baojun.  Participants 
on the Chinese side included Guan Heping, Vice Chairperson of 
the Shanghai Foreign Trade and Economic Commission, Gao Yun, 
Deputy Director of the Shanghai Economic Commission, and Shi 
Yaotian, Deputy Director of Shanghai Development & Reform 
Commission. 
 
Shanghai's Priorities 
---------------------- 
¶3.  (SBU) Vice Mayor Ai, who oversees Shanghai's energy 
conservation efforts, outlined the Shanghai Government's plans 
to boost energy conservation and reduce emissions by promoting 
clean energy technology.  Shanghai is currently focused on four 
areas of alternative/renewable energy development: wind, solar, 
biomass, and alternative energies for transportation.  Shanghai 
currently has 200 Megawatts of wind energy capacity and plans to 
eventually expand this to 1040 Megawatts (Note: Ai did not 
mention a definitive timeframe, but just stated this is a "long 
term goal".  End note).   According to Ai, Shanghai is "richly 
endowed" with wind energy, especially in its three outlying 
islands, and harnessing this energy will continue to be a 
priority for the city. 
 
¶4.  (SBU) Regarding solar energy, Ai thinks that the technology 
is promising but poses many "structural and cost constraints", 
making it difficult to incorporate into the design and 
construction of office buildings.  The city is currently 
experimenting with biomass renewable energy, such as the pilot 
project to recycle solid waste at the Shanghai Laogang 
Industrial Park.  However, he cited prohibitive costs as a 
constraint on further development and utilization of this 
technology. 
 
¶5.  (SBU) Switching vehicles from traditional to alternative 
energy will be another priority for Shanghai, according to Ai. 
He envisions a large fleet of electric and hydrogen-powered cars 
and buses replacing traditional petrol vehicles in Shanghai by 
2010, the start of the Shanghai World Expo.  He noted how 
Shanghai is at the forefront of this technology in China, having 
provided 500 alternative energy vehicles for use at the Beijing 
Olympics.  (Comment: Shanghai officials predict 60 million 
Chinese visitors and 10 million foreign visitors for the 
six-month Shanghai World Expo in 2010.  Any Chinese or foreign 
companies that can showcase new and innovative products and 
technologies will presumably gain large exposure to potential 
customers.  End comment). 
 
Government Incentives 
---------------------- 
¶6.  (SBU) Ai emphasized that the Shanghai Government will 
promote the use of alternative/renewable energy through various 
incentives, including tax rebates for companies importing new 
clean energy technology, subsidies for "innovative" power 
generating companies, and new pricing models to ensure lower 
costs and higher profits for power generating companies that use 
renewable energy.  Power grids will purchase electricity 
generated from renewable energy at "full price" from power 
companies, and the costs will be shared by "various end users". 
 
SHANGHAI 00000383  002 OF 002 
 
 
In addition, the government will set up foundations to encourage 
public investment in renewable energy technology. 
 
Traditional Energy Policy 
------------------------- 
¶7.  (SBU) Shanghai wants to restructure its industrial mix, 
phasing out power-hungry manufacturing plants and focusing more 
on the services sector, according to Ai.  The government will 
encourage "efficient and economical use" of traditional energy 
by power plants and industry while implementing mandatory 
emission standards, which Ai hopes will serve as a disincentive 
for the continued use of traditional energy resources.  Reducing 
emissions of sulphur dioxide and nitrogen dioxide will remain a 
"top priority" for the Shanghai Government.  (Note: Ai joked 
that he had the "foresight" to import desulphurization 
technology from the United States several years before it became 
mandatory when he was an executive at Baoshan Iron and Steel 
Corporation, China's largest steel manufacturer.  End note). 
 
Working with International Partners 
------------------------------------ 
¶8.  (SBU) Ai emphasized the need to work with world-leading 
companies in the energy conservation sector in order for 
Shanghai to meet its energy goals.  He promised the Shanghai 
Government's full support for the development and 
commercialization of new energy technology and welcomed the U.S. 
companies in the delegation to build their presence in the 
Shanghai market through partnerships with local companies. 
 
Comment 
------- 
¶9.  (SBU) Coming from a business background, Ai brings business 
acumen to his current role as Vice Mayor.  He is obviously 
knowledgeable about this subject, speaking without notes and 
going into detail on technical issues, though he deferred to the 
other Chinese participants on questions related to their 
particular areas of expertise.  He also appeared to be genuinely 
interested in the questions posed by the U.S. companies, taking 
down notes, asking follow-up questions, and even offering to 
introduce local business partners.  Although he spoke in 
Chinese, he appeared able to understand some English, and also 
used a few words at points in the meeting. 
CAMP