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Symposium on China and Climate Change, Session One: Chinese Energy and Climate Strategy [Rush Transcript; Federal News Service]

Panelists: Zhou Dadi, Senior Associate, Carnegie Endowment Energy and Climate Program, Beijing; Director-General Emeritus, Energy Research Institute, National Development and Reform Commission, Trevor Houser, Director, Energy & Climate Practice, Rhodium Group; Visiting Fellow, Peterson Institute for International Economics, and Taiya Smith, Deputy Chief of Staff and Executive Secretary, U.S. Department of the Treasury
Presider: Elizabeth C. Economy, C.V. Starr Senior Fellow and Director for Asia Studies, Council on Foreign Relations
June 24, 2008
Council on Foreign Relations

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New York City, New York

RICHARD N. HAASS: Well, good morning. I'm Richard Haass. I'm President of the Council on Foreign Relations, and I want to extend a welcome to everyone here, particularly for those who have traveled several thousand miles from China. You are particularly welcome here at the Council today.

I think it's fair to say that no topic has risen more quickly on the U.S. policy agenda in recent years than has climate change. This is a subject with many dimensions, but I would point out two.

One is the domestic side, and the question is what we in the United States can and should do to reduce carbon emissions here. But there is also a foreign policy dimension, which is what the United States should do, what the United States can do to work with others to counter climate change and its effects around the world. And obviously in a global world what happens in places far off still affects the United States. There is ultimately only one global climate.

And here at the Council we are focusing on the international dimension, though again, the ability of the United States to be effective at home in this area will largely shape our ability to be persuasive abroad.

Here at the Council on Foreign Relations, we recently sponsored an independent task force report on climate change. And it looks at the U.S. policy options and recommends strategies to exercise international leadership on the issue. And the task force co-chairs, two former governors, Governor George Pataki of New York and Governor Tom Vilsack of Iowa, and the project director, Council senior fellow Michael Levi are here, and will discuss the report's findings and recommendations later this morning, and obviously copies of this report are available outside. I would say they're on sale, but they are free. There is such a thing as a free report.

The task force in today's symposium are but two of many things the Council is doing in this area on climate change and on energy. And what we've got is a large program in this area, which includes a full slate of research, publications, meetings, website coverage and so forth.

One of the many aspects of the debate about climate change and U.S. climate change policy is how to deal with the emerging countries, and above all, the larger emerging or developing countries. And none is more central to this debate than is China.

And obviously the environmental consequences of China's tremendous growth are profound, and they are becoming clear both to its own people and to the world. And given China's rising carbon emissions and the projection of more to come, its participation will be essential to any efforts to combat climate change around the world. But to say that is not to answer the basic question which is exactly how China can and should be integrated into multilateral arrangements to reduce emissions.

So today's -- the timing of today's program, the focus of today's program, could hardly be better. And we've got three sessions -- I'd say three smart sessions -- looking at three topics: the first is Chinese energy and climate strategy; the second is energy technology in China; and third session is the one that looks at prescription. It's the session that looks at policy options for the United States, and that will obviously dovetail closely with the findings of the just published task force report.

In closing, let me also thank the China-U.S. Exchange Foundation for arranging and supporting the participation of our international speakers and our guests. And they are here as part of a delegation from Tsinghua University led by Jang Sheelian (ph). And we are delighted to have all of them with us, and we hope this is very much part of a continuing dialogue between the Council on Foreign Relations and between yourselves and others in your country.

Without any further delay, let me -- I'm happy to turn things over to the extraordinarily capable hands of Elizabeth Economy, who is the C.V. Starr Senior Fellow and Director of Asia Studies here at the Council on Foreign Relations.

ELIZABETH C. ECONOMY: Thank you very much, Richard.

It is a pleasure to have the opportunity to have the opportunity to moderate this first session of the symposium on China and climate change.

Before we begin, please if you would turn off all your electronics -- Blackberries, and cell phones. And I know everybody asks you to do this, and inevitably there's one or two or three people who don't do it. But I am asking you in part because it will interfere with our sound system, but also of course because it interferes with our speakers' remarks. So if you would please turn them off now. And also just let me make a note that this symposium, the entire symposium, will be on the record, and broadcast throughout the United States, and globally, via cfr.org.

So with that let me just begin by reiterating a little bit of what Richard said in his opening remarks, and that is, that I think this symposium really marries two of the most significant phenomena of the 21st century -- the rise of China as a global economic powerhouse on the one hand, and the transformation of the earth's atmosphere and landscape as a result of global climate change. And both of these phenomena are of course exerting a profound impact on the way the rest of the world lives and does business.

This morning, we're going to focus on the intersection of these two phenomena. We're at a point today where China is and will continue to be for the foreseeable future one of the key, maybe top two or three players in the global effort to address climate change, in large part because it has become, as a result of its extraordinary economic growth and its reliance on fossil fuels, one of the leading contributors to the problem by some international estimates having surpassed the United States as the leading contributor of the greenhouse gas carbon dioxide in 2007.

At the same time I think the Chinese leadership has come to understand that the country will face a steep price if climate change continues unabated, whether we're talking about the more aggressive melting of the Tibetan glaciers, which will contribute to greater floods and then droughts, or a potential decline in key grain yields by 2050 of up to 37 (percent) to 40 percent, or of course the rise in seal level which threatens tens of millions of coastal Chinese, if not hundreds of millions.

But as we've seen I think with our own fraught debates on climate change here in the United States, arriving at a national policy on climate change in particular in a highly charged international context is no small matter. And the Chinese are grappling on the home front with how best to balance continuing and maintaining their economic growth with developing and implementing an effective climate change response. And at the same time they're deeply engaged in international negotiations that are focused on issues of historic responsibility or equity, sovereignty and state capacity.

So our goal this morning is a relatively straightforward one, albeit not a very simple one, and that is first just to understand the trends in China's energy use and what they will mean for the trajectory of the country's greenhouse gas emissions; then to look a bit at China's climate change strategy today, and assess some of its strengths and weaknesses; and finally, and perhaps most importantly, to think through how the United States and China can work together most effectively to transform the way that China, and I have to say, the United States do business.

To do this, it is my pleasure to introduce a truly stellar panel, really, I think some of the top experts both here and in China. To my immediate left is Trevor Houser. He is the director of the energy and climate practice of the Rhodium Group, and a visiting fellow at the Peterson Institute for International Economics. He is also the author or co-author of several path-breaking studies on China and energy issues and on climate change issues. He just had a book come out called Leveling the Carbon Playing Field this year, and he has another book coming out this year. He puts all Council fellows to shame, I have to say two books in one year, called China's Energy Evolution. And for my money he really is -- there's nobody better when it comes to providing a detailed and nuanced understanding of China's energy situation and some of the potential policy levers that we have available to employ to meet this challenge, at least here in the United States.

Because in China, we have Professor Zhou Dadi. He is currently a senior adviser and researcher at the National Development and Reform Commission's Energy Research Institute. And until 2006 he was also the director-general there.

He has recently joined the Carnegie Center in Beijing, where he'll be a research fellow also working on climate and energy issues. He has long been renowned as one of China's most eminent energy researchers and climate policy strategists. He has served as the lead or co-author of several of the IPCC assessments. And in 2007 he was awarded the U.S. EPA's climate protection award.

I also have to inject a personal note and say that whether he remembers or not, back in the early 1990s, when I was a struggling graduate student working on this issue of China and climate change, Professor Zhou was extremely helpful to me. He was one of the very few people working on this issue of modeling carbon emissions, looking ahead. We're talking 16, 15 years ago, but he really helped me to understand better China's energy situation at the time.

So it is indeed a great pleasure for me to have him back here.

And last but certainly not least we have Taiya Smith. And she is the executive secretary of the Treasury Department and coordinator for the U.S.-China strategic economic dialogue, which I think maybe we've all come to understand is not only the preeminent bilateral forum for discussing issues of trade and finance between China and the United States, but also issues of energy and the environment.

Taiya previously served as special assistant to Deputy Secretary of State Bob Zoellick, where she focused on Africa, Europe and global military affairs; and she was also the State Department's point person on Darfur during 2004 and 2005.

So the way that we are going to run this session is that I am just going to begin by asking a couple of questions of our panel, just to help set the stage for about 25 minutes or so, and then open the floor for your questions.

Let me start with you, Trevor, and just ask you to lay out some of the key trends that you see in China's energy sector today over the next maybe five to 10, 15 years, of energy makeup and some of the drivers, whether we're talking about urbanization or industry, transportation sector; and how you think these trends are going to affect Chinese greenhouse gas emissions.

TREVOR HOUSER: Sure. Thanks, Elizabeth. And let me start by saying any of my research stands on the shoulders of giants, and no one among them is more giant than Professor Zhou, who's really been doing the path breaking work in this field for a long time. So it's an honor to be on the panel with him, and with Taiya Smith who actually has to put policy to all this analysis and does a fantastic job doing so.

I would start by saying that the energy future that we're looking at today for China is quite different than the energy future all of us were looking at back in 2000 -- 2001. Between 1978 and 2000, China did something which was largely unprecedented both for a developing country and -- or a developed country. Over a 20-25 year period, sustained economic growth of 9 percent while energy demand only grew at half that rate. That degree of efficiency meant that in 2000-2001 China was only 10 percent of global energy demand, rather than 30 percent of global energy demand which it would've been if that type of economic restructuring hadn't taken place.

Sitting in 2000-2001 and looking forward, most energy forecasters either in the U.S. or in Paris at the International Energy Agency or in Beijing thought that China would be able to continue that level of energy efficiency improvement for years to come, and made forecasts based upon that.

And instead what we saw in 2001 and 2002 was a change in the nature of economic growth and its relationship to energy demand in China, so much so that today, in 2007, the IEA's forecast for Chinese energy demand is 79 percent higher than what it was just five years ago. So that's two Indias of today, or an India of 2030, that's our rounding error when we think about Chinese energy demand.

So it begs the question, what happened in those five years. Why is our forecast today so different than it was before? And more importantly is that forecast we have today any more hardwired than the forecast that we had five years ago?

The change -- what happened in those five years, wasn't that the economy grew faster than expected, though it did a little bit. It was a change in the nature of economic growth. China went from focusing primarily on light manufacturing, starting in 2002 there was a surge in energy intensive heavy industry, in iron and steel and in cement.

China today is about 35 percent of global steel production; 50 percent of global cement production; 50 percent of global glass production. That's primarily for Chinese consumption as the country urbanizes. Since the late '90s China has moved about 160 million Chinese citizens from rural areas to urban areas, or they've been in rural areas that have suddenly become urban areas, and that, of course, takes a lot of steel and cement and glass.

But China has also become a major global supplier of those goods. Four years ago China was the world's largest steel importer. Imports exceeded exports by about 450 percent. Only five years later, and China is now the world's largest steel exporter. Exports exceed imports by about 450 percent.

That turnaround in the trade balance for metals has created a significant amount of energy demand in China. It's also accounted for about half the growth in China's global trade surplus, right. So the reason that China has a global trade surplus today isn't so much because it started exporting more toys than televisions, but that it stopped importing a lot of the energy-intensive goods that it did before.

So today industry is the energy challenge China faces. That's different than the U.S. Here we have a consumer problem. All the energy we use is in automobiles, buildings like this; that accounts for about two-thirds of our energy demand, is things tied to consumers.

In China about two-thirds of energy demand is tied to producers, and specifically to five industries: to iron and steel, cement, chemicals. The iron and steel industry alone consumes 18 percent of China's energy demand, right. Compare that to all the households in the country combined, which account for about 10 percent. The chemical sector uses more energy than private transportation, and the commercial sector -- the aluminum sector uses more energy than the commercial sector. So it's a very different type of challenge than what we faced today.

Looking forward, all of that cement and steel is laying a foundation for what we might call a consumption-led Chinese energy challenge down the road. When all of those Chinese consumers start buying automobiles and air conditioners, then that's the energy challenge China will face. That's the energy challenge 30 years down the road.

What I would say is that for China, the choice versus -- environmental protection versus economic growth is not a trade-off like it is in many places; that in fact many of the economic policies that have given rise to this level of energy demand today are not delivering the benefits that you might hope for.

Those five industries that I mentioned previously -- iron and cement, steel, chemicals, aluminum -- account for about 40 (percent), 45 percent of the country's energy demand and CO2 emissions, yet they only employ 14 million people out of a country of 1.3 billion. If you're China and you need to create 20 million new jobs each year, then iron and steel and cement is not the way you do it. You need services and labor-intensive manufacturing.

And the central government, and I think Professor Zhou will talk about this, is well aware of this, and it's instituted a number of policies to try to rebalance economic growth in a much less energy intensive direction.

In the near term, I think that's where we're going to see the greatest reduction in Chinese energy demand in CO2 emissions is on the demand side because on the supply side it's a little bit more challenging. As many of you know, 80 percent of China's energy comes from coal, the balance coming from hydropower and petroleum and a little bit of natural gas.

If we're thinking about between now and 2020 the ability to significantly shift away from coal is fairly limited. There's aggressive development of renewables in China, of wind power, of hydropower. Last year, China added about 4 gigawatts of wind power, which is an incredible amount, making it the second-or third-largest wind power market in the world. By 2020 China might have 50 or 60 gigawatts of wind power. It might have another 60 gigawatts of nuclear power. But that combined in 2020 will only account for about 6 (percent), 7 percent of China's electricity needs. Hydropower will make up a significant amount, but ultimately we are looking at coal in the medium term.

Looking beyond 2020, there's the possibility for a significant technological transformation in China, in part because of the rate of growth. When you're building 100 gigawatts of power each year, that type of scale and scope gives you the opportunity to do things that you can't do in the U.S., where to introduce new technologies we'd have to decommission old technologies.  In China fast growth creates opportunities for fast deployment of clean energy technology. Must of that technology is actually being developed in China today.

So in the short term it's conservation, and over the medium and long term it's supply side.

ECONOMY: Okay, thanks, that was a terrific overview.

Let me just ask, you mentioned that the Chinese leadership is putting into place some policies to try to improve energy efficiency, reduce energy intensity. Could you just talk a little bit about those policies, and how effective you feel they've been to date. What do you think are some of the challenges perhaps in actually getting those pushed forward?

HOUSER: Sure. So the official government target, and it was created by the gentleman to my left, is to improve energy intensive economic growth 20 percent by 2010, off a 2005 baseline. That's not heroic compared to China's historic trends. It's fairly heroic compared to the past five years, what has happened. It means turning around this spike in energy intensity that we've seen in the past five years.

To get there there's a number of things the government's going. First there's the 1,000-industry program, which the government has taken those nationwide targets, broken them down, and given them to the 1,000 most energy-intensive firms -- those same iron and steel, cement firms that I talked about a minute ago. Managers are being given new awareness of energy clocks, and freedom and how to go about managing those energy costs down.

On the supply side, there's a renewable portfolio standard and a feed in tariff for wind that has led to this aggressive growth in windpower. That was a policy driven event that's been -- that's been fairly successful.

If China does reach this 20 percent reduction, and the goal is after that another 20 percent over the five years after that, to give you a sense of scale, that would reduce as much CO2 as the Lieberman-Warner bill if we passed that. It's a similar order of magnitude of reduction of CO2 off of the baseline.

The efficiency measures that China is doing today I think will only get us about halfway there. To get the other halfway, China needs to rebalance the nature of economic growth and stop producing as much steel and produce more services and light industry.

And there are some policies there that have been a little slower to arrive, but are starting to yield fruit. One is a change in the trade policy for energy intensive goods. Contrary to what many folks in Washington, D.C. think, it's not Beijing's intention to become the world's largest steel producer and flood global steel markets. The pollution tied to that steel production causes $100 billion worth of economic loss each year in the country and isn't creating a lot of jobs.

Last year, in September, there was a change in the export VAT policy, so basically a disincentive to export steel and other energy-intensive goods. And in fact since then we've seen China's steel trade balance turn the corner and started to head towards a net import position. Those measures, macroeconomic policies take longer to take effect, but are going to be more promising over the long term.

ECONOMY: Great. Professor Zhou, first let me ask whether you have anything you would like to add to Trevor's discussion of the energy situation in China, some of the measures that China is taking.

ZHOU DADI: Personally, I really agree with what he has just commented. It's quite correct. And I think, you know, if I say what's the current achievement for the energy efficiency improvement, I would like to add that in 2006 we have 1.33 percentage of the efficiency improvements.

And last year the efficiency improvement rate becomes 3.66 percentage. It's already very high, you know. Average for the world in the last 30 years is -- the efficiency improvement rate per year is only about 1.1. So this year we will achieve more than 5 percent as a target. So if we can really do it, I think we will achieve the 20 percent efficiency improvement target by 2010.

And another important issue is we speed up the development now for renewables.  For example, last year China added about 3.5 gigawatts of wind power, and this year the wind power achieved about 10 gigawatts total, and by 2010, it will achieve about 20 gigawatts. So China will become very soon the biggest wind power producer country.

And we will really change our target by 2020. At this time, the new target for 2020 could be changing to like 50 gigawatts, even more. And nuclear power will be -- speed up also. Our original target for 2020 is we'll build about 40 gigawatts of nuclear. But from recent trends we can find that the 2020 target could more than 60 gigawatts, combined with that under construction, we will have at least more than 100 gigawatts of nuclear power around 2025 or even more in 2030. So nuclear could be become very important alternative.

At the same time we are developing the natural gas. Natural gas development rates, recent year, is about 20 percent per year. So we'll do a lot of work on that. And combined with the clean coal technology, for example, recently China became the biggest country to use the ultra-super critical technology in the world for the power generation. So in this way we will try our best to improve the efficiency, and to improve the clean coal technology, and the low carbon alternatives.

ECONOMY: You mentioned in your remarks the increasing role of renewables, as did Trevor, increasing role of renewables, improvement in energy efficiency, reductions in energy intensity. And I think China has gotten a lot of credit from the international community for making -- taking these steps.

In addition I saw recently that the Central Bank had announced the potential for China to -- or it's going to explore in any case a cap-and-trade system that might include some greenhouse gases down the line. At the same time China has resisted setting any sort of firm targets for limiting greenhouse gas emissions, and has been fairly tough in terms of advocating a restrictive international verification and monitoring system.

I'm wondering if you could lay out for us what you see as sort of the three or four key elements of China's climate strategy, and what you think it might take to get China over the bar in terms of setting targets and timetables -- harder sort of targets and timetables for emissions?

ZHOU: Tactically, it's very difficult to set up the targets at this time. You know, it's -- if you compare with per capita emissions, China is still very low. And we are still lower than the average of the -- the global average, per capita emissions. And, for example, the energy consumption in China is only about 1.4 tons of oil equivalence at this time per capita, and that in the United States is about more than seven tons of oil equivalence.  In this case, if you ask China to reduce the emission right now, I don't think it's doable.

So -- and technically it's very difficult to make some kinds of forecasts, when and what time points China can achieve the peak. And although we are working on that to try to find where and when China could have the peak times, but along with the development of -- into the industrialization and urbanization we still need maybe 20 years for some kinds of cyclical growth, including the energy consumption.

And on the other hand, it really depends on the achievements of the world. For example if really the developed countries can really take the lead and decrease its per capita -- emissions per capita, and the consumption significantly, then I think China will share the innovation of technology and the new type of consumption, and we can change our, you know, so-called development target.

Because as before, we take like the United States, like the other developed countries, as our targets to have cars per family, have a bigger house for each of the people including the people in the rural areas. And right now we already understand it's very difficult if we really copy the style of the production and consumption in the future, because we are facing more serious resources and environmental challenges, including climate change.

But we need a model.  So China is trying to create such a new model of development. But, you know, at this time no one can really guarantee that. So it really depends.

So I think China's policy and strategy on climate change is to try and do our best and find what we can do our best -- (inaudible) -- but not do something just to promise just some kinds of targets but we don't know how to do it. So this is China's very critical policymaking process.

And on the other hand we'll follow the so-called principle of the common -- (inaudible) -- responsibilities, and we'll work with the UN countries and work with all the big stakeholders, including the United States, to develop the multilateral and bilateral cooperation to encourage the technology transfer, and while of course China will welcome any financial and other help to speed up the Chinese change from the, you know, the old type of development into a new -- (inaudible) -- of sustainable development model.

Thank you.

ECONOMY: Thanks. So I think what I hear you saying is that there's sometimes in the United States and in Washington -- not Taiya and her group there at the SED, but there are sometimes this belief that if the United States would simply sign on to targets and timetables, if we would step forward and do the right thing, that China would somehow follow that. But I think what I hear you saying is that that's not the case.

ZHOU: You know, at this time China still is a big country, let's say it's a big developing country. In the recent published World Bank development report in 2006, the per capita GDP of China is only a little bit more than $2,000. And even by the so-called purchase power parity, China has only a little bit more than $7,000 per capita. And compared with the United States, yes, you have about $45,000. And all the developed countries have more than $20,000.

So in this case if you say China should take the same responsibility to set up a target by 2020, for example, as one of the developed countries, that's very, you know, difficult to be accepted by China.

So we'll try to get some periodic target like our efficiency improvements, our -- some kinds of -- for example, actions on the mitigation or adaptation, but we cannot really set up a so-called total cut, as in the Kyoto Protocol for the developed countries -- (inaudible).

So it's a very important principle. I think President Hu Jintao mentioned the last time, two times about that, so the different -- (inaudible). And the comment has been we will do our best. Given -- (inaudible) -- at those times, you have the two kinds of developed country take the lead and a developing country will follow.

So I think at this stage that China will take the following stage. And, of course, along with development, China maybe becomes more and more close or near as a developed country. And I think along with the approach, China will take more and more responsibility. Finally, maybe China becomes one of so-called Annex 1 country. (Chuckles.) There, we'll do that -- (inaudible) -- but not now.

Thank you.

ECONOMY: Okay. Thanks.

Taiya, the administration's Strategic Economic Dialogue just concluded and just from the publications that came out from it it seems that major outcome in terms of the kinds of issues that we're discussing here today is the sort of establishment of some joint task forces that are going to focus on issues like electricity, air, water, transportation and conservation of forests and wetland ecosystems.

If you would flesh these things out a little bit for us and help us understand in more concrete terms what seems to be going on in U.S.-China cooperation on these issues that are related to climate change, even though this is not directly tied into climate change negotiations.

TAIYA SMITH: Well, the last SED was just ended last week. We had some very vigorous conversations about climate change, energy security and environmental sustainability.

These followed on conversations that we'd had in December where, at that time, we said well, this is such a large strategic issue that's really affecting both of our countries, we need to do something about it. And the decision at that time by the leadership on both sides was to establish 10 years of cooperation.

So when we had these conversations about climate change I think Professor Zhou has really illuminated many of the aspects that China will represent. And the U.S. response to that tends to be okay, but there's a whole lot you could be doing right now, in terms of putting new technology in place, that you're not.

And there's a lot of policy changes that could happen which would have a significant impact, and that we can work together because, in the end, the U.S. and China are facing many of the same problems.

And as Trevor suggested, actually China has an easier time in some cases because China right now is developing its capacity, building a lot of new buildings, developing a lot of new capacity for energy production too, whereas the U.S., we have to retrofit everything that's already out there.

But when you put it together, both of our countries are looking at the same fundamental issues that revolve around energy security, dealing right now with the price of oil, finding ways to ensure that we can have continued economic growth that's both environmentally sustainable and also produces the benefits that we need to for the people of our countries.

So what we look at is how can we take advantage of those shared interests; what can we do together to really help both of our countries step forward and find this new model of living that Professor Zhou was talking about?

That was one of the interesting things coming out of the SED was the Chinese government has really come to the conclusion that the current model of energy intensive growth is not one that's going to be able to allow their country to develop at the pace and speed that they want to. And that when you look down the road, there just literally aren't the resources in the world for everybody to be at that level of energy-intensive usage in your daily life.

And so together we had a great discussion about how can we find a new model, what can we do together to reach that.

Now, part of the SED is that you can have very big, strategic discussions, but our job is to figure out how to actually make a change on the ground, and what are the concrete steps that we can take to really help improve the situation.

So we've launched this 10-year cooperation in energy environment. The framework itself was signed by Vice Premier Zhang Dejiang and Secretary Paulson on Thursday. I'm sorry, it was on Wednesday. Shortly after that, China announced that it'll be raising fuel prices, sort of as part of the discussions that we'd been having.

The framework is focusing initially on five specific goals, so it's clean, efficient, secure electricity; clean air; clean water -- both of those are big topics in both of our countries, but water certainly has taken a prominence in China recently; transportation. So we're looking for clean, efficient transportation, again, a topic that's been very big in both of our countries, certainly with China increasing its vehicle fleet on a daily basis, and it will soon overtake the size of the U.S. fleet.

And then the last one is on the conservation of forests and wetlands, and that goes to some of the broader issues. Again, you can't talk about wetlands and not talk about water and sort of where all the water comes from and sort of natural ecosystems (clean ?) in the process. But it also is a way that we can help raise the awareness in both of our countries.

So as we look at these five areas, there's a few key components that we've agreed to. One is that for each one, we're looking at it not just in the development of new technology, but policy. What policies can we be looking at in both countries, recognizing the policies are different for both countries, but there's a learning process that we have that will really change our usage and help create the right incentives for consumers, both industrial as well as civilian, to make better choices as we go forward.

And another part of that is education. Certainly both of our countries, the populations need to be educated; our industries need to be educated about the best way to move forward. At the same time, we're lucky in that in many cases our industries are educating the government as well. And we see this as a two-way road in cases.

We're also looking at capacity building. I think one of the starkest examples is when you look at the size of EPA that has some 75,000 employees and then you look at the new ministry of environmental protection in China that I believe has about 450 employees. And it sort of shows you how difficult it is to enforce regulations and other policies when you don't actually have the staff that's able to do so.

And then the final component is the one that we all look to with a lot of hope, which is about how do we create new technology. Is it simply the deployment of current technology? Is it the commercialization of technologies that are already existing but we don't actually have on the shelf and we're not able to work with in a commercial setting? Or is it really the development of new technology?  

And so through this 10-year framework we're engaging all sectors of society, whether that be NGOs, the research universities. I know Xinhua is already involved in many discussions with U.S. private sector companies as well as governments.

It also includes the average person on the street, because part of -- we recognize for both countries that if you don't engage the imagination of people -- it's like going to the moon. When the U.S. decided to go the moon, we didn't know how to get there. But nine years later we were able to do it, and part of it was that you had the support of the population.

Well, certainly for the U.S. and for China, we're looking for ways that you can engage the population to help make these changes on a daily basis.

So it is a full effort all around. We've been amazed. Sort of the traditional view of working with China is that it's very difficult. On these issues, we've found that in many cases the Chinese government is ahead of where the U.S. government is in encouraging us to move forward.

An example of that is when we talk about buildings, we're working very hard on smart buildings, with a lot of collaboration between U.S. industry, U.S. government, and U.S. research institutions on finding smart buildings -- the ways that you're building will work like your car, that you can kind of go plus a diagnostic in and it'll tell you what's going on within all of the systems in the building. It takes advantage of elevators doing down and the energy produced there to help light your rooms.

Well, the Chinese side is now working on smart blocks, which -- obviously it's easier to work on a smart block when you are building the whole block. But that sort of viewpoint has really been interesting for a lot of our scientists and engineers too.

So we're looking at how do we take advantage of these different overlapping interests, which will help us get at the agenda of dealing with climate change, dealing with energy security, and ensuring the environmental sustainability.

ECONOMY: Great. One of the issues that you raised and I think has been central in the broader climate discussions is the issue of technology transfer. And I know that President Bush and Secretary Paulson have been actively engaged in trying to develop a clean energy fund, a clean technology fund.

Could you talk a little bit about how the administration sees technology transfer actually happening? (Chuckles.) And what the Chinese would like to see, what the U.S. government is prepared to do; where the things intersect and where -- maybe where there's some challenge.

SMITH: One of the first things that is always brought up -- it certainly has been a policy of the Chinese government that technology transfer needs to be a very important part of their whole energy and environment strategy.

And what we found is, first, there's a bit of a misunderstanding on both sides as to what we mean by that. Anytime you get two words to describe something, there's a whole lot underneath.

For the U.S. government, because -- our technology really is run through the private sector. So we can't look at just handing over technology, which is our assumption of what the Chinese government is looking for.

In many cases, when we actually get down into the discussion, it's not sort of giving technology; a lot of times the Chinese government is looking to find ways to be able to have access to certain technologies.

So, for example, if you're in a province where you're looking to have clean water, the only sort of clean water membranes that they're aware of are the really big U.S. companies that are coming in and telling them about their new clean water membranes that will help reduce the industrial waste. So one of the questions they've had is well, what else is out there? What else is available? So we've been looking at ways to make sure we can spread that information.

We're also aware from the U.S. side there's a concern about making sure there's appropriate compensation, but also IPR, and are the intellectual property rights of the companies that are creating this technology protected sufficiently?

I've been surprised at how many U.S. companies have told me they're already actively engaged in transferring technology, whether that be know-how of how to build a plant or it's the knowledge that they have in creating a new type of technology that they're actively engaged in working with the Chinese government on.

And in many cases, they are not concerned about IPR, if it's in a specific agreement they have with a Chinese university. But it's when you start to get this information out into the public sector and then they, our companies, later get the phone call saying your product didn't work and they discover they didn't make the product, even though it had their name on it, that's when our real tension begins to build.

So we've been working on a variety of ways to begin to address that, with the double goal of making sure the right technology gets to China in the right places, making sure that there's access to the information and technology that's available, and also being able to protect the U.S. companies, and that of course applies to companies around the world.

One thing that's come up is a lot of places in China don't have the resources to be able to buy the most cutting-edge, innovative technology. And that's a concern; it's a concern that's been discussed certainly in Bali and around the world as well.

We've been working to put together a clean technology fund. This is something that China had certainly been asking about for quite a few years. Right now that fund is focused on getting existing technology to the places that it needs to be, so China certainly qualifies as one of those parts of the world that definitely need it.

It's being run through the MDBs, so all the banks -- the World Bank is actually the one that's facilitating the process. The U.S. government, the U.K. and Japan have already contributed. Certainly we're looking to China to also be part of that process, and I think there's been some receptivity from the Chinese government to participate as well.

And the hope is that we can work together in a multilateral context to help reduce the cost. So it's not giving technology, again, but it's saying if the dirty technology costs this much, what is the differential between having the better technology that will help reduce the greenhouse gas emissions, and then finding some funding to help cover that difference.

ECONOMY: Great. Before I open the discussion, is there anything that any of you would like to add to what you've heard, that another panelist might have said? Any additional comments or thoughts?

HOUSER: I may maybe make one comment on the climate negotiation, since that's a forum that the SED doesn't participate in.

I mean, the challenge, when we look forward to Copenhagen in 2009 is that we need leadership from developed countries, and particularly the U.S. And after what happened in 1997, we need climate policy from the U.S. going into Copenhagen, or shortly after, for the U.S. to have any credibility as a negotiator.

One of the largest issues in getting U.S. climate policy passed, in addressing those two-thirds of emissions that come from consumers, is some sensitivity about the share of emissions that come from industry, particularly iron and steel and cement.

In particular, concern that putting costs on those industries is going to create a competitive disadvantage for U.S. firms vis-a-vis Chinese firms, in particular. That was a feature in the Lieberman-Warner debate. It's a feature in most U.S. climate policy.

Looking forward in how we can broker an agreement to get the U.S. to pass economy-wide caps on emissions, to demonstrate that leadership, there's a little bit of help that we can get from China in that process.

While it's unreasonable to ask China in the interim to accept economy-wide limits, and probably isn't even a good idea, if we had -- if our expectations about future Chinese emissions five years ago were 79 percent below where they are now, there's a real difficulty in setting a baseline for China, that we would cap and provide credits underneath. That in the interim, the targets are going to have to be of a policy-based approach.

But if China could formalize some of the policies that it already has in place, that are trying to discipline those industries that the U.S. is most concerned about, then that would create some political space to pass more aggressive climate policy in the U.S.

And while Chinese climate negotiators are certainly concerned about putting a cap on emissions that would subject Chinese citizens to a fifth of the carbon budget of the U.S. -- so the farmer in Guangdong who's struggled his whole life to buy an air conditioner can't turn it on, but someone in California can still drive a Hummer.

If we're talking about industries and industries that don't employ a lot of people, then there's probably more room to impose the same types of disciplines on those industries as we are in the U.S.

That gets us to 2020, 2025, when China's per capital GDP is at the level, per capita emissions is at the level of OECD countries and we can talk about more comprehensive caps.

ECONOMY: Thanks. Okay.

So let me now open it to all of you. And if you would please identify yourself, your name and if you have an institutional affiliation, and please keep your questions brief.

Yes, in the back?

QUESTIONER: Jim Dingman, INN World Report. I was wondering if the panel could discuss their reaction to the state of the studies on the level of damage to the climate; that is, that many of them are rather grim, that the damage is already irreversible. And that these trends that we're talking about, the policy debates, may not be enough.

And I was wondering what kind of best scenarios you see coming out of the next few years in dealing with this. Because we -- you talk about wetlands. Many argue that the destruction of the wetlands in the delta in the Mississippi is what caused the disaster, or enhanced the disaster in New Orleans.

So I'm just curious what you think will happen. What should be done immediately?

ECONOMY: Thank you.

Who'd like to take the question?

ZHOU: Well, China has translated the IPCC, the full assessment report, into Chinese. And because that book is very thick and writing a very scientific way, so a lot of common people and the political people cannot really understand. So we are trying to interpret that into a more readable style -- (chuckles) -- to give the message to the -- all the common people and the decisionmakers.

And we are trying to develop a Chinese version, not only to translate, interpret the findings from the IPCC report, but more specifically on what damage, what kinds of climate change happened in China, and what's the future scenarios. So we are doing that. I think it will help the Chinese people, the common people and the decisionmakers, to try to understand the urgent action that's necessary.

But of course from -- other point of view is the Chinese understand that adaptation is necessary. Although for the long term, mitigation could be very more important, but at the same time we have to prepare for what already happened -- what has to be -- happen to some extent of the climate change. So we'll do both mitigation and adaptation.

But of course it's very difficult at this stage to find which one is most critical change and their impacts on the specific biosphere or other resources. So while doing that, you could find somewhere we can really take action to impact that, we'll do that. But yes, we need a lot more scientific work, in my understanding.

Maybe -- is this some kind of answer for your question?

ECONOMY: Taiya, do you want to add anything to that?

SMITH: I can say that there's -- the urgency that you're expressing here is something that we certainly feel very strongly. Anytime you try to move governments, whether it be the U.S. government or the Chinese government, it's naturally a slow process.

I've been amazed at how quickly we've been able to move things. Some of our emphasis on forests and wetlands certainly was not understood within the U.S. government as to why we said this is really important to focus on now. But the idea being that we need to save and restore as much -- we can of these really critical areas to be able to help us deal with the future.

So this isn't a satisfactory answer, I understand, but I know that the urgency's there. We're trying to make sure that the things that are easy to do are done very quickly in both of our countries, as well as trying to look down the road four and five years from now as to what we might be considering urgent at that time.

And that's certainly why we look at this as a process which has to include all of the American people as well as the Chinese people to make sure that everybody's taking every little step that they can to help deal with the current situation.

ZHOU: For example, one of the actions that we are taking is from the 2005 to 2010, we'll increase our forestry coverage area by about 200,000 square kilometers, so that we will have about 50 million tons of carbon sink.

But on the other hand, it'll help China to solve the -- somewhere the land erosion, and a lot of benefits for the increase of the forestry. So this is something we are taking.

ECONOMY: Okay. Jim, back there?

QUESTIONER: Jim Seymour (sp), the Chinese University of Hong Kong.

Given that -- I guess my question is for Drs. Houser or Zhou or anyone who wishes. Given that nuclear power is going to be increasing, albeit small part of the nuclear -- of the power mix in China, I wonder if you could comment on the plans for handling nuclear waste. This is a problem in the United States that we've always said we would cross that bridge when we come to it, and now we're on that bridge and we don't have satisfactory answers.

So I wonder what the plan is for transporting nuclear waste safely to a safe place and hopefully in a way that would not have a negative impact on the non-Han parts of the country, to -- (Xinzhan ?), Inner Mongolia, and so forth.

ZHOU: Oh, this is a very technical question. And although my background is so-called nuclear physics, but I haven't worked on this subject for a long time. So I understand what's your concern.

China has already long time working on the nuclear -- start from the weapon, but now is working more on the peaceful use for the nuclear power. And we have already established a system -- from the basic material production, concentration and the waste treatment.

But, of course, that's before is not so much waste. So, it's easier to -- (inaudible) -- waste, but in the future when we scale up the nuclear power, we have to develop the whole system, from the material production to the waste treatments and storage. Now we have real research institutes working on that, and develops a different kinds of alternatives, and try to find the better sites for storage.

And I think that we'll follow -- first follow the IAEA's rules and we'll learn from all the countries what the lessons and what the experiences, and we'll try to develop such technology. And we already established a so-called "nuclear safety bureau," and take care of the standards, and a very strict monitoring and a checking system already be established. So, I think we'll have a good solution for that. Thank you.

ECONOMY: Okay.

Yes, over here.

QUESTIONER: Denis Simon, Levin Institute.

About two years ago the vice minister Shang Yong, from the Science and Technology Ministry, came here and talked about this new science and technology program -- the 15-year medium and long-term program. And I'm wondering what kind of coordination takes place between the NDRC and the Ministry of Science and Technology to ensure, in fact, that the big policies are actually being coordinated across the Chinese government ministries?

Those are always big challenges in the U.S. government, and obviously on the Chinese side. And I'm wondering if Professor Zhou, and maybe Taiya, can comment about, sort of, the flavor of this coordination as you see it in action, post-these SED meetings, because during the meetings it's a -- may be very serendipity, but after the meetings, you know, that's when the rubber hits the road, in terms of implementation. So maybe both of you could comment on that.

ECONOMY: (Laughs.)

SMITH: That's one of the greatest challenges, as you know, for both of our governments. What we're doing, through this 10-year framework, is we have a core group of agencies and ministries, which is about five from each side. From the Chinese side -- that includes most NDRC; MEP, their new ministry of environmental protection; SFA, the state forestry guys -- and it's led by NDRC. And NDRC has the responsibility to coordinate all of these ministries together and make sure that they have the same policy agenda and prioritization.

We have to do the same thing on our side. And I don't think it's all that much easier -- bringing together all of our groups, which includes DOE, Department of Transportation, EPA, State Department, and Treasury has the job to coordinate there. What we find often is that the representatives at the DGE vice minister level that participate in these meetings, will have differences of opinion, and we'll find on both sides, that we have to work those out so that we have a unified way forward.

The power, for us, really has been that we have the vice premier and the premier so interested in these topics that it brings together the Chinese government and the U.S. government -- under our leadership also, with the same interests, to have to have a prioritization of what's going to be most important. So we'll figure out what's most important on each side, and then we have to figure out how we make sure those interests intersect and overlap in a way that works for both countries.

I would say that most has been very energetic. We've got a lot of ideas, a lot of thoughts, and a push forward. And that's been very helpful to the process. I think also the Ministry of Urban Planning and Housing -- so, there's a new title, is another one of the ministries on the Chinese side that is very energetic and has lots of new ideas that help push it forward. And NDRC has the wonderful of challenge of trying to coordinate and bring them into one policy prioritization.

ZHOU: I think that it will be happening all the governments, including the Chinese government, that a different ministry will try to have more power to some extent. But, in China, you know, we have a state council, it's a -- it's a high-level coordinating committee -- commission.  It's always a problem if it needs to be compromised, or need to be integrated, then go -- come into the state council and the premier or vice premier will take up that, and to make the agreements and the consensus between the ministries.

And, of course, Ministry of Science and Technology, in general, is in charge of all the important -- the basic and applied technology, and the sciences R&D. But one year to go into application and into demonstration, and into real engineering projects then the NDRC will have to take care of that. So it's a combination from -- and in my understanding, the two ministries will take up the different stage of the -- of the technology and the science developments. And the demonstration and finally spreading that. So you can find things.

But, I think the -- in Chinese way is if you have questions, problems, the ministry will talk to each other and get consensus. And the final results is to move things more smoothly. So I think they are doable.

ECONOMY: Okay. Yeah, right there.

QUESTIONER: Liz Wishneg (sp), Montclair State and Columbia University.

It's very heartening to hear about all of these policy changes and a tech transfer plans, but where the challenge is is in implementation, as this panel well knows. And I wonder what's being done to make sure that these technologies are actually going to be used, that the provincial level will actually carry out these new efficiency standards. And, in particular, I wonder what happened to the "Green GDP" idea, which would connect performance to environmental behavior?

HOUSER: Let me maybe take the last -- the last bit first. Some very well-meaning Chinese planners figured out what the U.N. had figured out a long time ago, which is it's extremely difficult to do an accurate Green GDP accounting. It wasn't for a lack of trying. So there's other metrics that are starting to be worked into the criteria for provincial officials and their advancement of their non-economic growth criteria going forward, rather than just a Green GDP metric.

Certainly, enforcement at a provincial level is a challenge. But it's not -- it's not an insurmountable challenge. The top three priorities that Beijing has, at any time, certainly get done at the provincial level. The amount of economic restructuring that was necessary for WTO accession, for example, was very challenging at a provincial level. It required creating a lot of losers, as well as -- as well as winners, and there were a lot of vested interests that were routed.

As energy and environment raise on the policy agenda, into the ranks of those top three, then the policy that the central government puts forth will certainly be implemented. There's -- there's challenges in managing that relationship, but it still, it's still a government run very much from Beijing.

ZHOU: I think Green GDP, we do have a great team led by the Ministry of Environmental Protection working on that. And we try to collect the data to apply that for all the provinces for several years. And finally -- we found that, one it's very hopeful if it really gets the number. But the difficulty is there's a lot of indicators that, you know, it's very difficult to get the data, and is some kinds of, you know, artificial or based on the majority of the personal scientists.

So, in the -- finally, you find, conceptually, it's very, very useful, but practically, you know, it's (yearly ?) you get the number is very difficult. So you have -- (inaudible) -- for some years. But you cannot repeat that for every year. So, you got so big job so to do. So we are still developing that, and Ministry of Environmental Protection mentioned that we keep on working on that. But it's not majority, no.

But, on the other hand, you know, the Ministry of Environmental Protection declared their number for pollution (laughs), pollutants -- a concentrating of air, water quality, everything -- annually, for each of the provinces. It help to become one part of the important socioeconomic indicators besides of the GDP. So we do have some efforts to work on that.

ECONOMY: Let me just add one point to that because I think, in a way, it's -- it's an important question that ties into an earlier question about, sort of, the coordination and the politics. Because while it may be true (laughs) that what Beijing says, goes, and the top three priorities get implemented -- I'd be curious to know what those top three priorities are right now, it's also true that when you look at something like the Green GDP the challenge was not only in figuring out how to do it, but there was substantial resistance from the provinces to being evaluated in that regard. And the National Bureau of Statistics was not very forthcoming, they weren't that interested in doing it.

So, you had strong efforts at leadership from the Ministry -- well, it wasn't at time the Ministry of Environmental Protection, but you had a lot of interest and enthusiasm there but you didn't really have support from other key parts of the government to push it forward. So, I think while they're continuing with the effort, it is a very good example of how an excellent potential policy initiative can become stymied because of political, sort of, infighting, game playing, or just lack of support.

Okay. Okay, I promised you -- back here first. And then --

QUESTIONER: (Inaudible) -- Environmental Technologies Practice

We touched base a little bit on, sort of, the cost of being environmentally friendly. And one can argue that, in the U.S. predominantly, environmental friendliness is also -- is mostly done if it's an economically beneficial. That's when the policy gets implemented. And that environmentally-friendly technologies generally cost more than non-environmentally-friendly technologies -- be it scrubbers in your smokestacks and things of that nature.

I was wondering if Professor Zhou, or Trevor you, could comment on how China evaluates that cost versus benefit trade-off? Is it just looking at direct costs? Is it looking at long-term costs of cleaning up that pollution, so on and so forth? Thank you.

HOUSER: I think that there is -- there's a number, there's a number of metrics that are used, a number of considerations. The one that I mentioned about -- just what type of economic growth is going to deliver the employment gains and the welfare gains that you want. And in that realm, and, kind of, macroeconomic policy, it's -- there's a lot of complementarity between smart economic policy and economic policy that's going to reduce energy demand.

On the supply side, there is a number of policies that are taken just for local environmental reasons. So, a requirement to put in sulfur scrubbers; increasing those still inadequate penalty for, 'if you don't run your sulfur scrubbers' -- I mean, that incurs a cost, in a higher electricity cost it passes right on to consumers. But the sulfur dioxide pollution causes $200 billion a year worth of economic loss, and 750,000 premature fatalities. So, those types of public welfare -- these aren't climate change concerns, per se, but a lot of the policies that are implemented for local environmental reasons have a climate dividend.

I think that, at the end of the day, the major concern is that environmental protection is raising in the league tables possible risks to stability -- to government stability. We've had some of the largest environmental protests in humanitarian history taking place in China. And while it's easy to deal with, kind of, civil disobedience in the democracy realm, the air is something that you can't hide, right. Everybody knows that it's polluted.

And it's clearly the job of the central government to deal with the air. And so if the air continues to get worse, it becomes a threat to the legitimacy of the government. And I think that, above all else, at the end of the day, is the chief motivator.

ZHOU: Wand we have introduced all the moethodologies and the approaches developed in -- that developed the countries, but on the environmental protection. And in our university, we do have so-called "environmental economics" to be introduced for the students. And we calculate, or evaluate all the so-called alternatives. If you have the -- China people understand what's the cost for the environmental pollution. But that's not enough. So, (to some extent ?), we introduced mostly the total quantity to control, or the standards and the costs for the quality of the environment.

That means all the emitters who have to obey some kinds of standards or lose. If you exceed that standard, you'll be fined, or you'll be ordered to close your production. For example, for this five years we -- the target is to decrease 10 percent of the total emission of the -- of the sulfur dioxide and COD in the water, regardless of the increments of the production.

And the target has been allocated to the 30 provinces as a specific target for each of that, and each of the provinces allocate that decompose the target into cities and counties and into the -- in the process. So, they have to take specific actions to reduce the total emission of the -- (inaudible) -- pollutants.

For example, all the new constructed power plants of coal burning have to be equipped with a sulfur scrubber. And last year we already equipped about more than 20 -- 250 gigawatts of power plants with a sulfur scrubber already. And we will apply that to older power plants in the near future. Thank you.

ECONOMY: All right.

We have time for one more question, I'm afraid. And I had -- a man over here had his hand for awhile. And then we'll just offer each of our panelists a chance to make one final comment.

QUESTIONER: Thank you. It's Jim Estothia (sp), we Bloomberg News.

I wanted to get back to the question of urgency for a second. There's different forecasts and projections for when the, you know, climate damage from greenhouse gasses will, sort of, trigger the most catastrophic effects of climate change. It may be irreversible. The IPCC has a forecast that, sort of, reflects 450 million parts per million. That could be the tipping point. James Hansen, over at Goddard thinks -- I think, we may already be there, and that we shouldn't be building any new coal plants that don't sequester carbon.

I'm wondering if the decisionmakers and leaders in China have, sort of, internalized this idea that there may be a point in time when it's just irreversible and that we've gone too far. And if they have, what -- you know, how far off is that? Or what's the number they're looking at, or how do they quantify that?

ZHOU: We understand from the IPCC report that, for example, European Union raised the target to limit the temperature -- and raise -- limited to the two degrees, right. And in that case, the carbon emission -- dioxide emission have to be limited about 450 ppm, and that, totally, greenhouse gas emission will be limited with about 550, or something like that. I cannot recall the specific number, but it's like that.

In that case, the developed country has to be -- decrease their emissions by 2050 about 60 (percent) to 80 percent. And I think, for some country like the United States could be asked to decrease by 90 percent of your higher intensity. In that case, we understand that developing country has to be, you know -- decreased by the emissions, compared with current emission, by about -- I think it's 20 (percent) 30 percent, even.

So we look at that as one of the scenarios. And China is really based on this kind of scenario, is thinking about -- you have all the country take this kinds of target as a action plan, and what China should do. And we are thinking about when we will get to the peak of the emission, and when we have to -- when we have to go down our total emissions. But this is still under study.

Actually, I think it really depends, because we are -- for the whole world, I think all the people is like doing and learning and the doing process and we'll look at that. Thank you.

ECONOMY: Let me just offer you a quick opportunity -- anybody on the panel, if you want to make just a -- offer a final thought, or didn't have a chance to say something you'd like to get across?

SMITH: I think the one thing that -- what everybody will need to keep in mind is that in China the motion amongst the people is really significant. We've had groups of business entrepreneurs and others come to talk to us about their concerns about the environment in China -- and these are Chinese entrepreneurs, and the work that they're doing to try to make a difference and to change that.

We're starting to see a lot of pressure on the central government, as Trevor was suggesting, that people need to see change. They need to see the legitimacy of the central government enforced by its ability to deal with environmental challenges, and the awareness of what's happening, both in the -- there's a Carbon Club now at Beijing University which is looking at carbon trading; the work that we've all been doing with China through EPA and MEP on sulfur dioxide trading, and helping set up a national plan for that.

That's all got young people involved and really energized about what they can do to participate in the future. So, that seems to really be a big motivator for the central government. And certainly having people like Professor Zhou. who's been working on this for so many years, having the foundation to then step up and move forward.

It, of course, is never fast enough for us in the U.S. We work with Congress regularly and we know everything's got to be a bit faster. But, it's moving forward, and we're -- you know, when you're at the front line of watching it, you can see that movement. And hopefully that, together, the two countries will be able to deal with this as the largest contributors to greenhouse gasses.

HOUSER: Yeah, I guess I would just say that -- and towards your question, that if we need to reduce global emissions 50 percent by 2050, then that means that the U.S., and Europe and Japan need to reduce probably 80 percent by 2050, and the developing world maybe 25 or 30 percent, starting to -- peaking at 2020, 2025, and then coming down. That's possible without a significant amount of economic cost.

The challenge is the politics. And we're going to have to go beyond just meeting at the climate negotiating table and trying to hash it out in the 11th hour, to really understanding, what are the political blockages in each country from staging those types of commitments in a way that makes sense for both development goals and for climate goals?

The Chinese side needs to know more about what happens in the U.S. Congress and what it's going to take to get a climate bill passed. The U.S. side needs to understand better about what happens in the state council in China, and what real intentions are towards economic growth and climate change. Without that type of understanding, we're never going to be able to get to where we need to be.

ZHOU: I think my words will be very short answering to the cooperation between us, not only on economics and the politics, but also on the environment is very important. And I think the Chinese people, and our academic people, are willing to work together with the United States as partners and colleagues, and to encourage the future cooperation on all the fields. And I think if we are doing our best, we can change something in the near future. Thank you very much.

ECONOMY: Thanks.

I think I failed to keep us to 9:45, as I was told to do. So I apologize for that. But I do think that the panel has succeeded brilliantly in beginning to sketch out some of the key issues here. So, thank you. (Applause.)

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