VZCZCXRO8291
PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #2845/01 2860925
ZNR UUUUU ZZH
P 130925Z OCT 09
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 6390
RHEBAAA/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
INFO RUEHOO/CHINA POSTS COLLECTIVE PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

UNCLAS SECTION 01 OF 03 BEIJING 002845 
 
SIPDIS 
SENSITIVE 
 
USDOC FOR 4420 
STATE PASS USTR FOR STRATFORD 
 
E.O. 12958: N/A 
TAGS: ECON ENRG SENV CH
SUBJECT: US-China Energy Policy Dialogue: Room for 
Cooperation 
 
SENSITIVE BUT UNCLASSIFIED: NOT INTENDED FOR 
INTERNET DISTRIBUTION 
 
¶1. (SBU) Begin Summary:  The fourth U.S.-China 
Energy Policy Dialogue (EPD) held September 27 in 
Qingdao agreed on the importance of deepening 
cooperation on clean energy issues in order to 
address global climate change and to strengthen 
energy security, and noted this topic would likely 
be high on President Obama's agenda during his 
November visit to China.  The Chinese briefed on 
their energy policy, including more efficient coal 
plants.  Both sides exchanged views on a U.S.-China 
Clean Energy Research Center (CERC) MOU, possibly 
with a goal of having it ready to announce during 
the President's visit, although China's Ministry of 
Foreign Affairs (MFA) had reportedly instructed 
Chinese ministries not to prepare any formal 
signings for the visit.  China expressed skepticism 
about the viability of carbon capture and storage 
(CCS), preferring reforestation for carbon 
sequestration.  China did not provide details on how 
it would achieve President Hu's pledge to cut 
China's carbon emissions per unit of GDP by a 
"notable margin" as the issue was still under 
discussion.  The U.S. side encouraged China to 
provide transparent and timely energy data in order 
to reduce price volatility.  China raised problems 
related to U.S. nuclear power plant sales, including 
restrictions on information transfer and visa 
difficulties.  Both sides agreed to work on 
renewable energy cooperation, including standards. 
End Summary. 
 
Key Energy Policies 
------------------- 
 
¶2. (SBU) Administrator of the National Energy 
Administration (NEA) Zhang Guobao opened the 
September 27 Energy Policy Dialogue (EPD) with a 
call for honest, frank and actionable discussions. 
Department of Energy Assistant Secretary David 
Sandalow summarized energy generation and 
consumption in the United States and highlighted new 
energy policies implemented by the Obama 
Administration.  He projected the U.S. energy mix 
out to 2020 and recognized U.S. responsibilities for 
CO2 reductions.  Zhang provided a similar overview. 
He reported the percentage decrease in total energy 
production by coal but admitted the most efficient 
coal plants are only operating at 65 percent 
capacity, giving way to an accelerated program of 
shutting down less efficient plants. 
 
Clean Energy Research Center (CERC) 
---------------------------------- 
 
¶3. (SBU) Sandalow said DOE had commented on the CERC 
MOU prepared by China's Ministry of Science and 
Technology (MOST) and cleared it through the U.S. 
interagency process just before the EPD.  The main 
changes proposed by DOE were in the management 
structure and the inclusion of a detailed annex to 
address intellectual property rights.  He sought 
timely concurrence by MOST and NEA. 
 
¶4. (SBU) MOST's Ma Linying said MOST and NEA were 
finalizing comments on DOE's draft but agreed in 
principle on DOE's proposal: 1) a joint minister- 
level council represented by Secretary Chu on the 
U.S. side and MOSTQs Wan Gang and NEAQs Zhang Guobao 
on the Chinese side; 2) separate secretariats to 
implement work plans; and 3) focus on concrete 
demonstration projects and not on conferences or 
journal articles.  While China agreed with DOE on 
the need for a limited number of research areas, 
NEAQs Li Ye outlined additional areas of interest 
including nuclear energy, smart grid technology, 
high-capacity storage systems, bio-fuels, and ultra- 
high-voltage power transmission. 
 
¶5. (SBU) Sandalow stressed it would be important to 
start with a small number of research topics and 
proposed building energy efficiency; clean coal, 
 
BEIJING 00002845  002 OF 003 
 
 
including carbon capture and storage (CCS); and 
clean vehicles as initial areas for cooperation. 
Sandalow said it would be important to work with 
universities and industry to leverage CERC's initial 
USD 15 million funding. 
 
¶6. (SBU) Sandalow said he hoped the MOU would be 
ready for Secretary Chu and Minister Wan to initial 
in London in mid-October with an eye towards a 
formal signing during the President's visit in 
November.  Ma replied that China's MFA had 
instructed Chinese ministries not to prepare any 
formal signings during the November visit but they 
agreed to coordinate with MFA and DOE to determine 
the best way to include this as a clean energy 
deliverable for President Obama's visit.  Both 
agreed it would demonstrate to the world that China 
and the U.S. were ready to work together on clean 
energy and climate change. 
 
Clean Coal 
---------- 
 
¶7. (SBU) NEA Administrator Zhang Guobao expressed 
skepticism about the commercial viability of CCS 
saying the issue needed additional scientific 
analysis and research.  He claimed that capturing 
and storing CO2 would increase a power plant's 
energy use by 20-30 percent.  He also doubted that 
there were sufficient geologic formations to store 
significant amounts of carbon.  Zhang said China 
prefers reforestation over CCS as a more efficient 
way to capture carbon. 
 
¶8. (SBU) DOE Principal Deputy Assistant Secretary 
Victor Der said the United States has made detailed 
geologic studies of U.S. storage capacity and 
believes it has several hundred years of capture 
potential.  An example is the joint U.S.QCanada 
Weyburn project that takes CO2 from a U.S. synthetic 
fuels plant and ships it to Canada for enhanced oil 
recovery.  Both sides recognized that large scale 
commercial viability of CCS is a decade or more away 
but that research and development work is being 
pursued to both reduce the cost of CCS and to 
explore commercial uses for CO2. 
 
Reducing China's Carbon-Intensity 
--------------------------------- 
 
¶9. (SBU) When pressed by Sandalow for details on 
specific targets or timeframe to achieve President 
Hu's pledge to cut by a "notable margin" China's 
carbon emissions per unit of GDP, Zhang replied the 
details were intentionally not provided because they 
havenQt been established yet. He said Chinese 
experts were working carefully on the issue, both 
how to measure the reduction and in setting an 
appropriate target.  At the working level, Zhang 
said there is broad consensus that China needs to 
reduce its carbon intensity. 
 
Oil, Gas and Energy Security/SPRs 
--------------------------------- 
 
¶10. (SBU) Both sides highlighted the rising 
projections in unconventional gas production, 
technology advances and the need for free trade 
policies.  Der explained the U.S. policy, strategy 
and utilization of the U.S. Strategic Petroleum 
Reserve.  State Department Energy Division Chief 
Peter Secor encouraged China to provide transparent 
and timely energy data in order to reduce price 
volatility.  Zhang expressed frustration over large 
swings in oil prices which he blamed on financial 
speculators.  Sandalow suggested further engagement 
on this issue by technical experts. 
 
¶11. (SBU) Secor also encouraged China to coordinate 
internationally in the event of a supply emergency. 
This could be done through the IEA or other 
international fora.  Zhang suggested oil prices were 
affected by U.S. decisions to purchase SPR stocks, 
an assertion rejected by Sandalow. 
 
BEIJING 00002845  003 OF 003 
 
 
 
Nuclear 
------- 
 
¶12. (SBU) DOE China Office Executive Director Marty 
Schoenbauer reviewed U.S. policy and program changes 
under the Obama Administration and discussed U.S. 
China collaboration in both multi- and bilateral 
programs. He attached importance to China taking a 
more global leadership role in nuclear energy. 
NEA's Xu Yongsheng reaffirmed U.S.-China nuclear 
energy cooperation, but made a point that recent U.S. 
policy changes have taken the United States and 
China down different paths with regard to fuel 
reprocessing and application of fast reactors.  He 
repeated China's desire to have additional third 
party software provided as part of the Westinghouse 
technical transfer program and China's dismay over 
10CFR810 which restricts the transfer of 
commercially restricted or confidential atomic 
energy information.  Several Chinese officials 
expressed concerns over delays in issuing U.S. visas 
for technical staff and officials. On visas, 
Schoenbauer said the process had recently been 
streamlined and reviews were being completed in 10 
working days.  He said U.S. export controls for 
atomic energy are deliberately thorough and take 
some time to be completed.  He asked China to work 
to resolve AP1000 project issues with Westinghouse 
and government policy issue with the USG. 
 
¶13. (SBU) Sandalow said DOE Deputy Secretary Dan 
Poneman looked forward to attending the Global 
Nuclear Energy Partnership ministerial meeting which 
China will host on October 23. 
 
Energy Efficiency and Renewable Energy 
-------------------------------------- 
 
¶14. (SBU) DOE Office of Energy Efficiency and 
Renewable Energy Senior Executive Mark Ginsberg said 
the United States and China were working closely on 
improving building efficiency as well as renewable 
energy sources such as biofuels, wind, and solar. 
Sandalow suggested agreements on energy efficiency 
and solar power could be highlighted during the 
President's November visit.  Zhang replied it would 
be a positive step forward to reach agreement on 
technical standards for solar and other renewable 
energy sources. 
 
HUNTSMAN