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Cablegate: Shanghai Vice Mayor Ai Baojun Discusses Shanghai's Energy

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

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