VZCZCXRO2127
PP RUEHAST RUEHCN RUEHDH RUEHGH RUEHHM RUEHLN RUEHMA RUEHPB RUEHPOD
RUEHSL RUEHTM RUEHTRO RUEHVC
DE RUEHBJ #2073/01 2020629
ZNR UUUUU ZZH
P 210629Z JUL 09
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 5308
RHMFIUU/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
INFO RUEHOO/CHINA POSTS COLLECTIVE PRIORITY
RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RUEAEPA/HQ EPA WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

UNCLAS SECTION 01 OF 03 BEIJING 002073 
 
STATE FOR SECC/STERN, EAP/CAMPBELL AND NORRIS, OES/MIOTKE, OES/EGC, 
EAP/CM, EEB/ESC 
 
STATE PASS USTR FOR LINSCOTT AND STRATFORD 
COMMERCE FOR KASOFF AND MELCHER 
ENERGY FOR SANDALOW AND YASHIDA 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958:  N/A 
TAGS: ENRG KGHG ECON SENV PGOV CH
SUBJECT:  Energy Secretary Chu and Commerce Secretary Locke Discuss 
Energy and Climate Change with NDRC Chairman Zhang Ping and NEA 
Director Zhang Guobao 
 
(U) This cable is Sensitive but Unclassified (SBU) and for official 
use only.  Not for transmission outside USG channels. 
 
¶1. (SBU) Summary:  In a meeting with National Development and Reform 
Commission (NDRC) Chairman Zhang Ping on July 14, Energy Secretary 
Steven Chu and Commerce Secretary Gary Locke discussed how the 
United States and China can work together on energy and climate 
change.  Chu pointed out that through the newly-proposed joint 
research centers, the United States and China will be able to 
develop new technologies to address these challenges.  Zhang 
suggested that the U.S.-China cooperation will send an important 
signal to the international community and that the technology 
breakthroughs they achieve together will spur economic development, 
but stressed that because China is a developing country, the United 
States should take the lead.  Both sides agreed that getting 
policies right, such as energy pricing, will be essential to making 
progress.  Locke urged Zhang to re-examine Chinese energy efficiency 
policies that discriminate against foreign-invested companies, a 
concern that Zhang dismissed as having already been addressed.  In a 
dinner hosted by the National Energy Administration (NEA) Director 
Zhang Guobao following the Zhang Ping meeting, Zhang Guobao raised 
questions on oil shale and carbon capture and storage (CCS).  Zhang 
indicated that he has no interest in CCS because he does not believe 
it is worthwhile or cost effective.  He argued that tree-planting is 
a better approach.  Chu explained that CO2 is indeed possible and 
that a number of CCS experimental projects are currently away to 
establish its feasibility and cost-effectiveness.  End summary. 
 
------------------------------------- 
Meeting with NDRC Chairman Zhang Ping 
------------------------------------- 
 
Addressing Energy and Climate Change Long Term Process 
--------------------------------------------- --------- 
 
¶2.  (SBU) Zhang Ping opened the meeting by congratulating Secretary 
Chu and Secretary Locke for being the first ethnic Chinese to occupy 
their current positions in the U.S. Government.  He joked that they 
were probably better known in China than either he or National 
Energy Administration Director Zhang Guobao (who is also a Vice 
Chairman of NDRC).  Zhang observed that the current financial crisis 
will be dealt with relatively quickly, but that energy and climate 
change issues will likely take decades to resolve.  Chu agreed with 
Zhang, pointing out that the United States and China are the two 
most important countries in deciding the world's economic and energy 
future.  Together, the two countries emit 42 percent of the world's 
carbon.  He argued that unless the United States and China 
successfully address these issues, other issues will not matter.  In 
the short term, he said, the United States will be focused on 
increasing energy efficiency, but for the long term it will need to 
develop new energy technologies.  For that reason, he sees the 
proposed joint research centers as an important opportunity to 
develop these technologies.  He noted that he has discovered that 
much of learning is in the doing -- like a cook or gardener -- and 
he hopes that the United States and China can learn to "cook" and 
"garden" together as they learn more about how to deal with these 
issues. 
 
¶3.  (SBU) Zhang state that by working together, the United States 
and China will send an important positive signal to the 
international community.  He noted that the two countries have 
already been doing a lot together, including the Oil and Gas Forum, 
the Energy Policy Dialogue, the U.S.-China Ten Year Framework on 
Energy and Environmental Cooperation and other such arrangements. 
However, Zhang said he would look to the United States, as a 
developed country, to take the lead on technology development.  The 
expected breakthroughs on technology will help establish a 
foundation for further economic development.  Zhang pointed out that 
because of China's large, urbanizing population, it will need a lot 
of new buildings and infrastructure and the resulting energy 
consumption will be huge. 
 
Energy Policies Important 
------------------------- 
 
¶4.  (SBU) Developing better policies is a critical priority, Chu 
 
BEIJING 00002073  002 OF 003 
 
 
noted.  For example, both the United States and China need to 
rationalize energy pricing.  Some U.S. states have energy pricing 
that amounts to a de facto subsidy.  There is also a great need to 
develop incentives to improve the energy efficiency of buildings so 
that more efficient buildings can pay for themselves in 10-20 years. 
 Regarding energy pricing, Zhang cited the recent decision to raise 
the prices of petroleum products in China as a "painful" experience 
because of the criticism NDRC received within China for taking this 
action.  He pointed out that China has expended a great deal of 
effort in recent years to develop more renewable energy and conserve 
energy.  In wind energy alone, China has expanded installed capacity 
from six GWs to 12 GWs.  China has also become number one in the 
world in the production of solar panels.  Chairman Zhang Ping 
reported that NEA's Zhang Guobao is concerned about the potential 
for overbuilding in certain areas like wind energy that will not 
have the supporting infrastructure.  Nevertheless, Zhang Ping 
offered assurances that the energy efficiency goals of the 11th and 
12th Five-Year Plans will be met.  In this regard, he expressed 
satisfaction with the progress in China's nuclear power program, 
since the construction of the first AP1000 unit has already begun. 
Agreeing with Zhang on the urgency to take action, 
 
¶5.  (SBU) Chu said it was because of his concerns about climate 
change that he abandoned a comfortable position as a professor to 
become the director of the Lawrence Berkeley National Laboratory. 
White House Cabinet Secretary Chris Lu added that President Obama 
had said that one of the most important challenges of this 
generation is climate change, which is why he made such an effort to 
win passage of the (Waxman-Markey) climate change bill.  Moreover, 
it was only possible to pass the bill because of assurances that 
other countries like China will also be taking action. 
 
¶6.  (SBU) Locke praised China for the progress it has made over the 
past 30 years since the establishment of U.S.-China relations.  He 
noted that when he visited China in January, former President Carter 
and former Secretary of State Kissinger both highlighted the 
U.S.-China relationship as the world's most important bilateral 
relationship.  And now, he added, the United States and China have a 
great opportunity to work together on energy and climate change. 
While the western countries may be largely responsible for the 
accumulation of greenhouse gases in the atmosphere, China must now 
embrace its own responsibility to save the planet, he said.  China 
has made great contributions to the world such as printing, the 
compass and paper, but it would be a shame if China could not work 
together with the United States to address climate change. 
Referring to a Chinese policy that encourages companies to buy 
domestically-produced energy-efficient products, he urged NDRC to 
re-examine this policy because of its bias against foreign-invested 
joint ventures that produce in China. 
 
China Still a Developing Country 
-------------------------------- 
 
¶7.  (SBU) In reacting to Locke's comments, Zhang Ping maintained 
that although China has made many important contributions to 
mankind, it has still lagged behind the western countries and 
remains a developing country.  While China has many tall buildings 
and cars, its productivity is still very low.  Zhang said China does 
not wish to follow the western development model of developing first 
and cleaning up later, but hopes to adopt an approach that preserves 
natural resources.  He argued that western countries have the 
greater responsibility and that China will take on responsibilities 
consistent with its own capacity.  In addressing climate change, 
Zhang affirmed that China is willing to work with the United States. 
 Regarding the policy that Locke mentioned, Zhang suggested that 
Locke's concerns had already been dealt with and that foreign joint 
ventures now enjoy national treatment.  Only Chinese Government 
procurement would have any restrictions. 
 
------------------------------------- 
Dinner with NEA Director Zhang Guobao 
------------------------------------- 
 
¶8.  (SBU) At a follow-on dinner, National Energy Director Zhang 
Guobao reminded Secretary Locke that they had met before during a 
visit to Washington State when Locke was still the governor. 
 
BEIJING 00002073  003 OF 003 
 
 
Turning to Secretary Chu, Zhang referred to Chu's background as a 
famous professor and said he had nine questions he hoped Chu would 
answer during the course of the dinner.  Zhang noted that he had 
enjoyed a long term relationship with the U.S. Department of Energy 
and had been friends with former Energy Secretary Bodman.  Chu 
commented that he had earlier been involved with several projects 
with China, including a neutrino experiment and a particle 
accelerator project.  In terms of research, he pointed out that DOE 
is the biggest funder of physical science in the world and has 
supported more Nobel Prize winners that any funding agency in the 
world. 
 
Oil Shale and CCS 
----------------- 
 
¶9.  (SBU) One of Zhang's questions was about how the United States 
had been able to exploit its ample reserves of shale gas, noting 
that China also has substantial reserves.  Chu responded that the 
United States had been successful in releasing more gas through 
cracking the rocks.  Zhang suggested that perhaps the two countries 
would work on a joint development program focused on shale gas. 
Locke commented that he was sure there were many U.S. companies that 
would be happy to cooperate with China in this area.  Chu proposed 
that the two countries concentrate joint research efforts on carbon 
capture and sequestion (CCS), especially with regard to coal 
gasification and post-combustion.  Because both the United States 
and China have large coal reserves, there is a great challenge in 
using it cleanly.  He noted that the United States currently has 6-7 
on-going experimental CCS projects.  He suggested that coal, 
ideally, should be used for the production of chemicals and only 
used as fuel at times of peak energy demand. 
 
Questions about CCS 
------------------- 
 
¶10.  (SBU) Regarding CCS research, Zhang cited the GreenGen project, 
in which a United States company (Peabody Coal) is cooperating with 
the Chinese Huaneng company, as an example of how the United States 
and China are already cooperating on a zero-emissions experimental 
initiative.  However, he admitted, he personally has no interest in 
CCS.  He contended that because of the high costs and the small 
amount of CO2 that would be captured (one percent), he did not think 
CCS was worth the cost.  Instead, he argued, it would be more 
worthwhile to plant trees in the desert. 
 
¶11. (SBU) When Chu challenged Zhang's assumptions regarding CCS, 
Zhang explained that since a single mole of carbon (12 grams), when 
burned, produces 22.4 liters of CO2, it is simply impossible to 
store all of the CO2 from coal-fired power plants underground.  Chu 
pointed out that the CO2 does not remain in gaseous form when it is 
sequestered.  For example, when stored in saline deposits, the CO2 
dissolves.  A single bore hole can accommodate up to 100 tons of 
CO2.  He further noted that China already has several IGCC 
(integrated gasification combined cycle) projects in progress and 
that General Electric is introducing new IGCC technology in China 
that can use low-quality coal. 
 
¶12.  (U) In concluding the dinner, Zhang said he had only gotten 
through four of his nine questions, but looked forward to discussing 
the remaining questions in a future meeting. 
 
¶13.  (U) Secretaries Chu and Locke did not have an opportunity to 
review this report before departing Beijing. 
 
GOLDBERG