ClimateWire

Joel Kirkland, E&E reporter

November 29, 2011

BEIJING -- When Energy Secretary Steven Chu visits China's capital, he spends days with his counterpart Wan Gang, China's minister of science and technology, as they shuttle from meeting to meeting and listen to each other's speeches.

Both top scientists in their countries, the men often appear more excited than anyone else in the room about the latest scientific discovery and technological advancement toward conquering the industrial emissions contributing to global warming.

Here this fall, Chu stood before international delegates at the Carbon Sequestration Leadership Forum and gave a speech heavy on equations and chemical symbols. Wan, who once taught advanced mathematics, locked onto Chu as if, in that moment, Wan were a student again.
Scooter in Chinas

How to cut greenhouse gases from China's exploding transportation system is one of three problem areas in which researchers from the United States and China are collaborating. Photo by Joel Kirkland.

The close relationship between Chu and Wan has helped hold together a series of slow-moving U.S.-China partnerships. In time, they are supposed to boost clean energy investment and springboard the two countries toward advanced emissions-cutting technology that factories, chemical plants and electric utilities can afford to deploy.

The goal is to cut carbon dioxide emissions from the three largest sources: coal-fired power plants in the United States and China, cars and trucks in the world's two largest markets, and the massive stock of buildings under construction in China's growing cities.

"Disruption of the climate system is a huge strategic threat," David Sandalow, the U.S. Energy Department's assistant secretary for policy and international affairs, said in an interview. "The United States and China are central to any solution to the climate challenge."

That's the basic rationale behind an Obama administration policy of increasing collaboration among U.S. and Chinese clean energy researchers, despite acrimony that runs deep in other policy areas and the two nations' annual dance around the idea of a global climate treaty. (U.N.-sponsored talks kicked off in Durban, South Africa, yesterday.)

Sandalow joined the Obama administration from the Brookings Institution after writing a white paper in 2008 with Kenneth Lieberthal, director of the John Thornton China Center at Brookings, which argued for an organized U.S.-China clean energy research and development program. The idea built on private-sector efforts by organizations with nondescript names like the San Francisco-based Energy Foundation, a grant-making organization with significant funding from Hewlett-Packard family foundations.

President Obama announced the creation of the U.S.-China Clean Energy Research Center (CERC) during his state visit to China in November 2009.
Developing a working relationship

Little progress has been made on bridging hard positions staked out by China and the United States with respect to global climate talks, David Hawkins, director of climate programs at the Natural Resources Defense Council, explained. But he referred to bilateral U.S.-China efforts as critical for "confidence building," and said they could clear a path for energy technology-related business deals that are important for cutting emissions.

"There is limited evidence of progress at the country-to-country level," Hawkins said. "But some of these projects at the company-to-company level really are providing valuable experience, the technical experience, and getting used to working together on issues of technology exchange."

U.S.-China CERC is a tiny program by U.S. budget standards, with about $150 million in total public and private funding split between the United States and China. Chu and his deputies say the program is meant to spawn new inventions and companies, and encourage collaboration where it could help propel technology ahead, but not demand huge amounts of public funding.

On a broader, strategic level, they hope U.S.-China partnerships ultimately bind the nations into collaborative business relationships rather than zero-sum competition.

Obama's complicated China policy tries to make incremental progress on everything from halting Chinese arms shipments to combating cyber attacks on American companies. The U.S.-China CERC program falls well under the radar of most in Congress, and proponents of the program say they would rather it stay that way, given the heated anti-China rhetoric that comes pouring out during congressional debates.

Increasingly, China is blamed for killing U.S. jobs because it maintains a policy of artificially devaluing its currency, thereby raising the price of U.S. export goods while keeping Chinese goods cheap. The theft of intellectual property is the other big concern of the U.S. companies looking to bring their products to China or team with Chinese companies. U.S. and Chinese officials signed a binding agreement in September to respect patents and negotiated licensing agreements established under the U.S.-China CERC umbrella.

The patent agreement puts in place two significant advances: provisions for international arbitration of business disputes, and language guaranteeing U.S. inventors the right to market products in China that resulted from joint research. That wasn't explicitly spelled out in previous government-to-government research partnerships.

University of Michigan researchers are leading a "clean vehicle" consortium that has the high hurdle of advancing battery technology while protecting significant patents. California's Lawrence Berkeley National Laboratory is leading the U.S. side on joint projects aiming to increase energy efficiency in buildings. Major companies such as the Big Three carmakers, Honeywell Corp., General Electric Co. and Dow Chemical Co. are signed on as entities providing private-sector support.

China will build as much square footage of building space in the next 20 years as exists in the United States today. "It's so enormous, it's hard to wrap your head around," Sandalow said. "If you're looking for an inflection point in terms of global energy use or greenhouse gas emissions, improving the efficiency of the Chinese building stock is about as powerful as any tool out there."

On Capitol Hill, Rep. Rick Larsen (D-Wash.) is the lead Democratic member of the House's U.S.-China Working Group, a 60-member bipartisan group meant to foster information-sharing about China.

"The joke in the U.S.-China Working Group is that we'll take panda huggers and dragon slayers, and even panda slayers," Larsen said. "Anybody can come participate."
Suspicions linger in U.S. Congress

State-owned enterprises account for about half of China's industrial gross domestic product, according to an Oct. 26 report of the U.S.-China Economic and Security Review Commission, a panel set up by Congress. The state controls sectors the government deems strategically important, and "national champions" are gobbling up private companies and consolidating sectors. The national champions are also building a bigger footprint in sectors where foreign companies also want to compete.

"The idea that China has established industries that are national champions, which then become an excuse to keep non-Chinese companies out of the economy, is an issue that ought to get a lot more attention on Capitol Hill, and it doesn't," Larsen said.

China's 12th five-year plan, the central government's economic plan through 2015, leans heavily on clean energy sectors to help it grow into an economy as rooted in innovation as it has been in bulk manufacturing.

Still, Larsen favors engagement with China, particularly in the area of science and technology. "We've always benefited in the end from pushing the envelope on research," he said.

Influential China hawks in Congress aren't biting. Congress has cut off some scientific cooperation on the grounds that China's aim is to acquire and reverse-engineer sensitive U.S. technology. House language in a 2011 spending bill prohibited NASA and the White House Office of Science and Technology Policy from participating in bilateral talks with China.

In early October, in the heat of a one-way congressional firefight with China over currency manipulation, Sen. Jim Webb (D-Va.) introduced an amendment to bar companies from transferring technology to a country that "by law, practice or policy" requires the transfer of technology or intellectual property as a condition of doing business there.

"Despite assurances from Chinese leadership earlier this year that this was no longer 'official' Chinese policy, China continues to be aggressive and overt in its pursuit of foreign intellectual property, as it seeks to develop its own, what it calls, 'indigenous innovation,'" Webb said on the Senate floor.

Webb made no mention of the U.S.-China CERC program but cited the business decisions of General Electric, Westinghouse Electric Co. and Ford Motor Co. Webb says it should be illegal to transfer technology resulting from U.S. government loan guarantees and taxpayer-funded research and development.

Ford is collaborating with Chinese companies to expand the market for electric cars in China, Webb pointed out, despite benefiting from billions of dollars in loans to help the auto industry build fuel-efficient cars and develop electric vehicle technology.

Nuclear power and aviation technology have benefited from government research funding. Westinghouse, Webb noted, citing a Financial Times report, had transferred 75,000 documents about advanced nuclear technology in exchange for a slice of China's nuclear expansion. GE recently transferred airline technology through a joint venture, according to reports.

"The transfer of publicly supported proprietary technologies by American firms to China -- and potentially other countries -- clearly and unequivocally places the competitive advantage of the American economy at risk," Webb argued.

Larsen acknowledged in an interview with ClimateWire that close U.S.-China collaboration on advanced coal technology, electric cars and building efficiency is inherently risky. "The challenge we're going to face is, do we go down this road on joint clean energy research and development, and then at the end of the day, are we shut out?"

But he rejected the idea that the dangers are so great that developing energy technology together is a losing proposition for American workers. "That misses the strategic imperative," Larsen said. "Both countries can benefit from joint development and joint investment into clean energy research. Both countries can take out of that pot of research and apply it to their own economies."

"The fact that people don't see that, or miss that because of their own concerns, is disconcerting because of the benefit to the U.S. economy," he said.
Coal, conversion and carbon capture

The International Energy Agency has said that China's demand for energy is expected to grow 75 percent through 2035. China is building more, but cleaner, coal-fired power plants to meet that demand. The United States is also expected to demand more energy, but is starting with a smaller base of coal-fired generation. Many of the older U.S. coal-fired units are expected to be driven out of the energy pool in the two decades.

Today, West Virginia University is leading a consortium of companies and research labs, including Lawrence Livermore National Laboratory, in joint projects tied to cleaning up coal-burning electricity generation. The idea is to bring down the cost of building either coal gasification plants or high-efficiency coal-burning plants or the cost of capturing emissions at a large scale.

China has said it needs to keep moving toward advanced coal-burning power stations, and the United States has the same need. "That helped," said Jerald Fletcher, a research professor at West Virginia University who is the U.S. director of CERC's advanced coal consortium. "But ultimately, if you can figure out how to divide up the spoils of war, if you can make a major breakthrough, everybody's going to benefit."

But there is a push and pull with regard to China's continued reliance on coal for so much of its power generation and for industrial development. Increasingly, coal is going into producing petroleum, for example, a process that the United States has steered away from because of the high costs of converting coal to oil and the significant carbon emissions footprint associated with coal-to-liquids technology.

Shenhua, China's largest coal producer, wants to convert a portion of its massive coal reserves into liquid diesel fuel. The Chinese government has flirted with this idea for the past several years, as millions of cars have taken over the roads and China imports more oil. China became a net oil importer in 1993 and now imports more than half of its petroleum.

Deborah Seligsohn, a top China adviser for the World Resources Institute, said energy security issues are rising quickly in China. Any U.S. support for projects aiming to convert coal to oil should be considered within the context of China's desire to use local coal instead of Middle Eastern oil in its transportation sector.

"In looking at transportation fuels, do you substitute another liquid fuel, or do you electrify your fleet? They've been looking seriously at both options," Seligsohn said.

With regard to coal-to-oil, "greenhouse gases are clearly a concern," she said, "and Shenhua needed to promise to experiment with carbon capture and sequestration to get approval on its direct liquefaction plant."

China and Shenhua guards the coal-to-liquids technology as if it's nuclear material. Few foreign journalists have been allowed into a sprawling plant outside the city of Ordos in China's Inner Mongolia. Only a small, select group of foreign dignitaries were allowed behind the plant's walls this September during a conference aimed at understanding a Chinese carbon capture and storage demonstration project at the Ordos site.