Cablegate: Us-China Energy Policy Dialogue: Room For

DE RUEHBJ #2845/01 2860925
P 130925Z OCT 09




E.O. 12958: N/A
SUBJECT: US-China Energy Policy Dialogue: Room for


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


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.


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