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Cablegate: Climate Change: Uk Efforts in Southwest China to Encourage A

VZCZCXRO1235
PP RUEHGH RUEHVC
DE RUEHCN #0264/01 3220902
ZNR UUUUU ZZH
P 180902Z NOV 09
FM AMCONSUL CHENGDU
TO RUEHC/SECSTATE WASHDC PRIORITY 3530
INFO RUEHC/USAID WASHDC
RUEAEPA/EPA WASHINGTON DC
RUEHOO/CHINA POSTS COLLECTIVE
RUEHCN/AMCONSUL CHENGDU 4234

UNCLAS SECTION 01 OF 03 CHENGDU 000264

SENSITIVE
SIPDIS

DEPT FOR EAP/CM

E.O. 12958: N/A
TAGS: ECON EAID EFIN PREL PGOV PINR SENV KGHG
SUBJECT: CLIMATE CHANGE: UK EFFORTS IN SOUTHWEST CHINA TO ENCOURAGE A
LOW-CARBON ECONOMY

REF: A) CHENGDU 166; B) CHENGDU 163

CHENGDU 00000264 001.2 OF 003


1. (U) This message contains sensitive but unclassified
information. Not for distribution on the Internet.

2. (SBU) Summary. Chongqing leads SW China in moving towards a
low-carbon economy, with Guizhou lagging furthest behind, a UK
official told Consul General. Chongqing owes its lead to the
"internationalist" perspective of Party Secretary Bo Xilai. Bo
has encouraged foreign companies (e.g. Ford) to produce lower
carbon products (e.g. green cars) to compete with those from
China's coastal provinces. Chongqing's "Energy Saving
Committee" has been giving out grants primarily to larger
state-owned enterprises, with smaller private firms largely left
out. The UK has several climate change projects in SW China,
including: one to promote "Low Carbon Zones" modeled on the
"Special Economic Zones (SEZs)" of the 1980s; a "green credit
policy" for lending to the steel and iron sector; and a pilot
project to encourage cities to incorporate low-carbon goals in
their municipal planning. Chongqing passed but Sichuan flunked
the National Development and Reform Commission's (NDRC) recent
report card on achievement of 2008 goals on reducing energy and
pollution relative to GDP. End Summary.

Convincing SW China "To Take Climate Change Seriously"

--------------------------------------------- --------

3. (SBU) The UK Consulate General in Chongqing has three
staffers with a modest budget but a major goal: encouraging
Chinese officialdom in southwest China "to take climate change
seriously," UK Climate Change and Energy Consul Bryn James told
Consul General recently. The success of the four administrative
regions within his consular district (Chongqing Autonomous
Municipality, and Sichuan, Yunnan, and Guizhou Provinces) in
reducing CO2 emissions is "varied," with Chongqing the most
advanced, and Guizhou the least (refs A and B). Guizhou has 50
billion tons of easily recoverable coal, which may be why the
mayor of Guiyang (Guizhou's capital) recently declined to talk
about climate change. This being said, James added, Guizhou
officials have shown interest in carbon capture and storage.

4. (U) [Note: The NDRC, in its report card on energy savings and
emission reductions per unit of GDP released on October 29, gave
Sichuan Province a failing grade for have reached less than 50
percent of its target. The other provinces in SW China got
mediocre grades of between 50 - 60 percent of their target
achieved. These provincial goals for the last year of the 11th
Five-Year Plan (2006-11) were pursuant to the national goal of
reducing energy consumption relative to GDP by 20 percent over
five years, and reducing pollution emissions relative to GDP by
10 percent. Details at tinyurl.com/2008-prc-energy-intensity.
End Note.]

Chongqing, Under Bo Xilai, is Leader on Low-Carbon Efforts

--------------------------------------------- -------------

5. (SBU) Chongqing's lead in reducing carbon emissions is
largely due to its Party Secretary, Bo Xilai, who James
described "as an internationalist, not a traditionalist." Bo
Xilai has told the UK Consulate General that, even though
Chongqing is like "a developing province within a developing
country," it has achieved CO2 emissions well below China's
national average. Chongqing officials claim to be meeting the
11th Five-Year Plan's objective to increase energy efficiency by
20 percent. Two ways the municipality is doing this is by
boosting the efficiency of its existing heavy industry, and
shifting to higher-tech, lower-polluting industries. Chongqing
Iron and Steel, for example, is building a new main plant, to be
operational within six months, which will be at least 20 percent
more energy efficient and give off less CO2 than the aging plant
that it will replace.


CHENGDU 00000264 002.2 OF 003


6. (SBU) Bo Xilai is also encouraging foreign-invested companies
based in Chongqing to introduce innovative, low-carbon products
that would also give his municipality a competitive edge
vis-`-vis China's coastal provinces, James said. For example,
Bo recently convened his once-per-year summit with foreign CEOs,
including Alan Mulally of Ford, which has a huge joint venture
in Chongqing (ref A). Bo urged Mulally to produce green cars
locally.

7. (U) Parts of Bo Xilai's "Five Chongqings" initiative (ref A)
are consistent with climate change goals: "Green Chongqing
(reforestation, air pollution)," "Smooth Chongqing (public
transport)," and "Livable Chongqing (building energy
efficiency)," James noted. In terms of building energy
efficiency, Chongqing is one of the four autonomous
municipalities in China (along with Beijing, Tianjin, and
Shanghai) that were given tougher goals under the 11th Five-Year
Plan to boost energy savings in new buildings (65 percent
improvement, versus 50 percent for the rest of China). Towards
this and other energy savings goals, the Chongqing
municipality's "Energy Saving Committee" gives out grants,
primarily to the largest energy consumers, James explained.
Because of this, the beneficiaries of this assistance tend to be
state-owned enterprises (SOEs), not privately owned small and
medium-sized enterprises (SMEs), he said.

Three UK Projects: "Low Carbon Zones," "Green Credit Policy,"
and Aid to Municipalities in Low-Carbon Planning

--------------------------------------------- ----------------

8. (U) James explained that the UK is now sponsoring 30 climate
change projects in China, and shared the details of three with
direct linkages to southwest China:

A) Moving Chongqing toward a Low-carbon Economy (Sept 2009 - Oct
2010; 382,000 Pounds Sterling). The project summary states that
"Low Carbon Zones (LCZs)," modeled on the Special Economic Zones
established in the 1980s, could be the key to decisively
shifting China toward a low-carbon economy. If China
established zones LCZs that "go beyond business-as-usual in
promotion low carbon production and consumption, then the
European Union would offer extra investment, aid, joint R&D, and
other sweeteners." The project would also work closely with
another pilot project in Jilin, James explained, where UK and
Chinese academics are working on a "road map" to a low carbon
economy that is to be discussed by the NDRC in Beijing sometime
in November. The researchers examined three ambitious scenarios
for Jilin, the most ambitious of which had CO2 peaking there in
2020, in part through the use of carbon recapture.

B) "Green Credit Policy" in Sichuan's Steel and Iron Sector
(April 2009 - March 2011; 243,000 Pounds Sterling). The project
will assist the China Banking Regulatory Commission (Sichuan
Branch), the People's Bank of China (Sichuan Branch), and the
Sichuan Provincial Environmental Protection Bureau to jointly
issue environmental guidelines for local financial institutions
when they lend to the steel and iron sector. Chongqing,
Guizhou, and Yunnan will issue similar guidelines.

C) Moving to a Low-carbon Economy Under Different Economic
Circumstances (April 2009 - September 2011; 310,000 Pounds
Sterling). The project seeks to have four demonstration cities,
including one large and one small city (Guiyang and Zunyi
respectively) in Guizhou Province in underdeveloped, western
China, and one large and one small city (Jinan and Dongying) in
Shangdong Province in richer, coastal China, integrate
low-carbon action plans into their municipal development plans.
(Note: James briefly mentioned that a town in Sichuan devastated
by the May 2008 earthquake, Guangyuan, would be a similar pilot
city under another UK-sponsored project whose partner was
China's Academy of Social Sciences.)


CHENGDU 00000264 003.2 OF 003


9. (SBU) James added that, while the Sichuan "Green Credit"
project was off to a good start, the Chongqing Low-Carbon
Economy project had become "mired" in differences between the UK
consulting firm hired to implement it (ERM), and the Chongqing
Academic of Social Sciences. In all 30 UK-funded projects, he
explained, the PRC Government has insisted that at least 50
percent of the aid money be given to a Chinese organization that
must also be the project lead. Chongqing officials in this
project have been jealous of the high salaries paid to the UK
consultants, whose relations with their Chinese partners have
also been hurt by a lack of language fluency in Chinese.

Ambiguity over Definition of "Low-Carbon Economy

--------------------------------------------- ---

10. (SBU) Speaking more broadly, James recalled that his SW
Chinese interlocutors like the phrase "low-carbon economy," but
have no clear definition of what this means. When they do try
to define it, it is usually in terms of an early focus on energy
efficiency, with carbon emissions peaking at some point in the
future. The UK Consulate in Chongqing recently sponsored a
Chinese delegation to the UK, which came back supporting
inclusion of language in the 12th Five-Year Plan promoting a
low-carbon economy. (James also recalled that Chinese President
Hu Jintao recently discussed notable cuts in China's carbon
intensity by 2020 as part of the PRC's position at the
forthcoming December climate change talks in Copenhagen. James
also stressed that provinces need a measuring system to assess
carbon intensity that is "MRV" (measurable, reportable, and
verifiable) - "something that Beijing has opposed so far in
international negotiations.")
BOUGHNER

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