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### Viewing cable 07BEIJING265, SED SESSION FIVE: ENERGY, ENVIRONMENT AND

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
07BEIJING265 | 2007-01-11 13:22 | 2011-08-23 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Beijing

`

    VZCZCXRO5591
    OO RUEHCN RUEHGH RUEHVC
    DE RUEHBJ #0265/01 0111322
    ZNY EEEEE ZZH
    O 111322Z JAN 07
    FM AMEMBASSY BEIJING
    TO RUEHC/SECSTATE WASHDC IMMEDIATE 3736
    RUEATRS/DEPT OF TREASURY WASHINGTON DC IMMEDIATE
    RUCPDOC/USDOC WASHDC IMMEDIATE
    RUEHC/DEPT OF LABOR WASHDC IMMEDIATE
    RHMFISS/DEPT OF ENERGY WASHINGTON DC IMMEDIATE
    RUEAUSA/DEPT OF HHS WASHINGTON DC IMMEDIATE
    RUEAEPA/HQ EPA WASHDC IMMEDIATE
    RHEHNSC/NSC WASHDC IMMEDIATE
    INFO RUEHOO/CHINA POSTS COLLECTIVE

` `

    UNCLAS E F T O SECTION 01 OF 04 BEIJING 000265

    SIPDIS

    SENSITIVE
    SIPDIS

    STATE ALSO FOR OES/WATSON AND DEROSA-JOYNT
    STATE PASS CEQ CONNAUGHTON
    STATE PASS CEA FOR BLOCK, SLAUGHTER
    STATE PASS USTR FOR STRATFORD, ALTBACH, WINTERS, CELICO
    STATE PASS FEDERAL RESERVE BOARD FOR JOHNSON/SCHINDLER; SAN
    FRANCISCO FRB FOR CURRAN/LUNG; NEW YORK FRM FOR DAGES
    NSC FOR RHUNTER/JSCHRIER/KTONG
    TREASURY FOR OASIA/INA DOHNER/HAARSAGER/BAKER/CUSHMAN
    TREASURY FOR TAIYA SMITH
    DOE FOR INTERNATIONAL/PUMPHREY AND GEBERT
    EPA FOR INTERNATIONAL/AYRES, FIDLER, MCASKILL
    HHS FOR STEIGER, ELVANDER AND BHAT
    LABOR FOR ILAB

    E.O. 12958: N/A
    TAGS: ECON EFIN ETRD PREL CVIS SENV ENRG CH
    SUBJECT: SED SESSION FIVE:  ENERGY, ENVIRONMENT AND
    SUSTAINABLE DEVELOPMENT

    REF: A. BEIJING 259
         ¶B. BEIJING 262
         ¶C. BEIJING 263
         ¶D. BEIJING 264

    ¶1. (SBU) Summary:  In the December 15 Strategic Economic
    Dialogue (SED) session on energy, environment, and
    sustainable development, National Development and Reform
    Commission Chairman Ma Kai, Department of Energy Secretary
    Samuel Bodman, State Environmental Protection Administration
    Minister Zhou Shengxian and Environmental Protection Agency
    Administrator Stephen Johnson all emphasized the need for
    increased cooperation on energy and environmental issues.
    Minister of Finance Jin Renqing stressed that the United
    States has leading energy efficient/environmentally friendly
    technologies and that China wants to buy them.  Minister Jin
    promised that the Ministry of Finance would use government
    policy to encourage Chinese companies to use more energy
    efficient environmentally friendly technologies.  End
    Summary.

    NDRC Chairman Ma Kai: China No Energy Threat
    --------------------

    ¶2.  (SBU) National Development and Reform Commission Chairman
    (NDRC) Ma Kai's presentation to open session five of the
    Strategic Economic Dialogue (SED) countered the argument that
    China is a threat to world energy security.  Chairman Ma
    stated that China successfully solved its energy needs, with
    about 92 percent being sourced domestically compared to 70
    percent for OECD countries and 62 percent for the United
    States.  Chairman Ma stated that China is confident about its
    ability to meet future energy demand because of its great
    resource development potential.

    ¶3.  (SBU) Chairman Ma also sees huge potential for energy
    savings: first, by moving away from energy intensive
    industries; second, by taking advantage of new technologies
    such as efficient coal-fired boilers; and third, by
    conserving energy, including through pricing of resources.

    ¶4.  (SBU) Chairman Ma stated that China faces a serious
    environmental challenge because of its reliance on coal.
    China will first address this problem by reducing energy
    consumption.  Second, China will use improved technology such
    as Integrated Gasification Combined Cycle (IGCC) coal-fired
    power plants, desulfurize existing plants, and use other
    clean coal technologies.  Chairman Ma stated that China will
    readjust its energy mix to reduce the amount of coal and
    increase clean energy such as natural gas, nuclear and
    hydroelectric.  He predicted that China's ratio of renewable
    energy will increase from the current 7 percent to 16 percent
    by 2020.

    ¶5.  (SBU) Chairman Ma stated that China and other developing
    countries must chose a more energy efficient path of
    industrialization but that growth of developing countries
    must not be restricted.  He said that developed countries
    should bear more responsibility for sustainable development
    through increased investment in energy efficiency and
    technology transfer since the developed countries consumed
    most of the world's energy and resources.  He made proposals
    for future cooperation in the following areas: the Energy
    Policy Dialogue; energy conservation and energy efficiency;
    renewable and alternative energy; clean energy technology;
    oil reserve technology and management; and multilateral
    cooperation, including joint investment in third world
    countries.

    BEIJING 00000265  002 OF 004

    USDOE Bodman: Energy Projections and Energy Security
    ---------------------

    ¶6.  (SBU) Department of Energy (DOE) Secretary Samuel Bodman
    stated he does not believe that China and the United States
    should be competitors for energy resources, but rather
    cooperate, such as in the Asia Pacific Partnership (APP) and
    the Carbon Sequestration Forum.  He stated that the United
    States has improved energy efficiency and is ready to share
    our experiences, including appliance standards, research on
    biofuels and possibly the Global Nuclear Energy Partnership
    (GNEP).  Secretary Bodman stated that the most important area
    for cooperation is on clean coal and that he is pleased with
    China'sparticipation in Futuregen, a zero emission
    coal-fired power plant.  He also stated that a large
    investment in new technologies needs to start today and that
    a better investment climate in China will help.  Secretary
    Bodman urged China to welcome foreign companies in its energy
    markets.  He hopes China will focus on securing access to
    energy resources and not ownership of resources as the first
    is a more flexible and reliable strategy.

    SEPA Minister Zhou
    ------------------

    ¶7.  (SBU) State Environmental Protection Administration
    (SEPA) Minister Zhou Shengxian said that the State Council
    now attaches equal importance to economic growth and
    environmental protection with less reliance on administrative
    measures.  He stated that SEPA's major tasks include
    pollution prevention and control; ensuring safe drinking
    water and ecological conservation.  Minister Zhou referred to
    the 11th Five-Year Plan goals of energy intensity reduction
    of 20 percent by 2010 and 10 percent reduction in overall
    pollutants.  He emphasized the importance of international
    environmental cooperation, especially with the United States.

    EPA Administrator Johnson
    -------------------------

    ¶8.  (SBU) United States Environmental Protection Agency (EPA)
    Administrator Stephen Johnson outlined the benefits of EPA's
    Acid Rain Program.  He said that the program used economic
    incentives to encourage investments in new technologies.
    Another success story is in the transportation sector, where
    by requiring better quality fuels and encouraging cleaner
    engine technologies, the United States saved USD 175 billion
    in health benefits.  He outlined how Methane to Market (M2M)
    Partnerships in the United States have reduced methane by 10
    percent from 1990 levels and he commended China, as a
    founding member of the partnership, on hosting the 2007 M2M
    Expo.  Johnson also outlined the United States' Energy Star
    program, an energy efficient appliance labeling system.
    Johnson welcomed increased cooperation with China on clean
    coal and Futuregen.

    MOST Minister XU
    ----------------

    ¶9.  (SBU) Ministry of Science and Technology (MOST) Minister
    Xu Guanhua stated that as labor and land costs increase,
    China is losing its comparative advantage and must improve
    its innovation.  He said that research and development
    spending in China is too low.  Minister Xu stated that a top
    priority for China is conservation of energy and water
    resources and environmental protection.  Therefore MOST
    strongly supports the development of clean energy and energy
    efficient technologies.  Minister Xu proposed the following:

    BEIJING 00000265  003 OF 004

    strengthen cooperation with the United States; establish a
    joint funding mechanism for energy research and development
    including both demonstration and commercial projects; joint
    formulation of preferential energy conservation policies and
    incentives; and increase cooperation in fighting communicable
    diseases.

    Suggestions and Questions
    -------------------------

    ¶10.  (SBU) Secretary of Commerce Carlos Gutierrez suggested
    increasing cooperation on managing fisheries and prevention
    of overfishing and that this topic could be included in the
    next SED.  Minister Zhou responded that China was already
    participating in some multilateral cooperation on this issue
    through the United Nations.

    ¶11. (SBU) Department of State Assistant Secretary Daniel
    Sullivan recommended that, if China wants to strengthen oil
    reserve technology and management, it should increase
    cooperation with the International Energy Agency which works
    on coordinating strategic stocks.

    ¶12. (SBU) NDRC Vice Chairman Zhang Xiaoqiang discussed
    reforms to separate power plant operations from power grid
    operations to increase competition.  He said that China will
    upgrade grids in rural areas.  Vice Chairman Zhang stated
    that China will continue energy reforms so that prices
    reflect cost.

    ¶13. (SBU) Matthew Slaughter, Member of the Council of
    Economic Advisors, underscored that energy markets and price
    signals foster sustainable economic growth and minimize the
    impacts of energy shortages.  Treasury Secretary Henry
    Paulson asked how China requires coal-fired power plants to
    use clean technology.  NDRC Chairman Ma Kai replied that
    China has established 970 coal cleaning sites and is also
    pursuing IGCC technology.

    Ministry of Finance Picks Up the Check
    -------------------

    ¶14. (SBU) Minister of Finance Jin Renqing stated that the
    United States has leading energy efficient and
    environmentally friendly technologies and that China wants to
    buy them.  Minister Jin promised that the Ministry of Finance
    would implement policies to encourage Chinese companies to
    use more energy efficient and environmentally friendly
    technologies.

    Participants
    -------------

    ¶15. (U) United States:

    --Henry Paulson, Secretary of Treasury
    --Clark T. Randt, Jr., United States Ambassador to China
    --Michael Leavitt, Secretary of Health and Human Services
    --Samuel Bodman, Secretary of Energy
    --Carlos Gutierrez, Secretary of Commerce
    --Elaine Chao, Secretary of Labor
    --Susan Schwab, United States Trade Representative
    --Stephen Johnson, Administrator of the Environmental
      Protection Agency
    --Benjamin Bernanke, Chairman of the Federal Reserve
    --James Lambright, Chairman and President of Ex-Im Bank
    --Daniel Sullivan, Assistant Secretary, Department of State
    --Andrew Steinberg, Assistant Secretary, Department of
    Transportation

    BEIJING 00000265  004 OF 004

    --Matthew Slaughter, Member of Council of Economic Advisors

    ¶15. (U) Chinese Delegation:

    --Wu Yi, Vice Premier
    --Jin Renqing, Minister of Finance
    --Ma Kai, Chairman of National Development and Reform
      Commission
    --Xu Guanhua, Minister of Science and Technology
    --Tian Chengping, Minister of Labor and Social Security
    --Liu Zhijun, Minister of Railways
    --Li Shenglin, Minister of Communications
    --Wang Xudong, Minister of Information and Industry
    --Bo Xilai, Minister of Commerce
    --Gao Qiang, Minster of Health
    --Zhou Xiaochuan, Governor of People's Bank of China
    --Li Changjiang, Administrator of General Administration of
      Quality Supervision, Inspection, and Quarantine
    --Zhou Shengxian, Administrator of State Environmental
      Protection Administration
    --Zhou Wenxhong, Chinese Ambassador to the United States
    --Xu Shaoshi, Deputy Secretary-General, State Council
    --Yang Jiechi, Senior Vice Minister, Ministry of Foreign
    Affairs
    --Zhang Xiaoqiang, Vice Chairman, National Development and
    Reform Commission
    --Li Yong, Vice Minister, Ministry of Finance
    --Yi Xiaozhun, Vice Minister, Ministry of Commerce
    --Hu Xiaolian, Vice Governor, People's Bank of China
    --Li Ruogu, Chairman of China Export-Import Bank
    SEDNEY

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