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Symposium on China and Climate Change, Session Two: Energy Technology in China [Rush Transcript; Federal News Service]

Panelists: Wu Zongxin, Director of Academic Committee, Institute of Nuclear Energy Technology; Director, Energy Environment Economy Institute, Tsinghua University, and Edward S. Steinfeld, Associate Professor of Political Science, Massachusetts Institute of Technology; Director, MIT-China Program; Co-Director, China Energy Group, MIT Industrial Performance Center
Presider: Andrew Revkin, Science Reporter, New York Times
June 24, 2008
Council on Foreign Relations

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New York City, New York

ANDREW REVKIN:  Well, welcome back.  I'm Andy Revkin. I cover the environment and global risk basically for the New York Times, everything from earthquakes to tsunamis and then climate change, energy challenge, population development.  And so, it's a great pleasure for me to be here listening and taking notes this morning both on the earlier panel and now on this one.  I'll be taking my own notes.  You know, a reporter -- you can't get out of the habit.  And we're going to discuss now the technology questions underlying.  You heard a lot about policy this morning.  And in a world heading toward, somewhere around 2050, having essentially two more Chinas on board -- not literally but two more Chinas worth of people on the planet -- we all need more energy options than we have right now even if you set aside the climate challenge. 

Right now, by some estimates, the world is using -- you heard about gigawatts earlier -- well, we're using globally about 14 terawatts of energy, that's trillion watts.  That's 1,000 gigawatts for every terawatt.  And a gigawatt, there's two of them up the Hudson River, the Indian Point power plant is a couple of gigawatts just to give you a sense of scale -- giga, tera, billions and billions, sagans.  They used to call those units sagans because Carl Sagan was so good at that.  So we need a lot more energy than we have.  And there are countries that are using a lot less energy than the rich countries are or a per capita basis. 

On my blog recently -- I write this blog called Dot Earth -- I posed the question, "What if the world were equal - in emissions?" In other words, suppose that right now the United States average citizen emits about 20 tons of carbon dioxide per year.  The average person in India emits about 1.2 tons per year.  China is -- what is it now? Maybe five, six.

WU XONGXIN:  About two -- two tons -- (inaudible.)

REVKIN:  Yeah, so suppose we all come in around Europe.  Europe's about 10.  So let's say we all find that nice cozy middle and we head toward 9 billion people all emitting 10 tons each.  That's a lot of carbon dioxide.  That's 90 billion tons of carbon dioxide per year.  Right now the world is emitting about 28 (billion), 29 (billion), 30 billion tons a year.  So we can't get there from here with current energy choices.  We need probably triple the energy we currently get from fossil fuels. 

Now how does that play out?  And then what is the role of China both in terms of the innovation and in terms of what's happening on the ground now, which we'll talk about in a minute, too. 

I wanted to reflect briefly.  I was just in Washington yesterday with Jim Hansen, the NASA scientist whose name came up yesterday, because it was 20 years since he gave this quite gripping testimony about where we're headed on greenhouse heated world.  And I was writing about it at the time so I pulled out my old 20-year-old story.  It's a 6,000 word cover story in Discover Magazine from 1988, and I was re-reading it.  You actually -- if you go to Dot Earth you can read it too.  Discover Magazine gave us permission to post a link to it.  And there's this section toward the end looking ahead about China.  So this is 1988. 

How could the developed countries expect that China, for example, which has plans to double its coal production in the next 15 years in order to spur development, will be willing or even able to change course, willing or even able.  And as you've heard, right now, the imperative is development.  The imperative is growth and advancing and spreading, disbursing economic prosperity.  Twenty years ago, the forecast was already there, and now of course, here we are. 

I want to take you briefly to 2000, the year 2000.  I was at the Climate Treaty Talks then in The Hague and I ran into a guy from American Electric Power, Dale Heydlauff, who was their senior vice president for environment and sustainability and all that stuff.  And he told me this little story, and it was the single most depressing story I think I have heard in 20 years of climate reporting, which was he -- his company AEP at that time, besides being the largest emitter of greenhouse gasses in the industrialized world, they were building power plants in other countries at that time.  I don't think they do that business anymore.  But they had just helped China, and I don't remember which province, but they just helped build a power plant in China to basically 1950s efficiency standards.  This is around 1999.  And he knew that they could've built it to an efficiency standard probably 10 (percent), 15 (percent), 20 percent higher for X extra dollars.  And the whole idea of those conversations in The Hague was to find out a way to transfer just a little bit of wealth from the haves to the havings -- the ones who want to have -- so that we could facilitate having -- avoiding that kind of emissions. 

You know, in other words, once a coal fired power plant is built, you're talking about 50, even 60, 70 years worth of churning through 1 million tons of coal a year.  And if you could make it 10 (percent) or 20 percent more efficient, that's a lot of avoided carbon dioxide.  And the money wasn't there and the plant got built to the old efficiency standard.  And he was looking around this room, and I was looking around the room, you know, with all these delegates, hopefully mostly well-meaning people and thinking, "So how do you make that actually happen?  How do you actually make that little transfer happen which you heard about earlier?"  It still seems rather challenging. 

And one last thing, just on Sunday, the Bush -- President Bush pushed for this Asia-Pacific partnership on technology transfer and energy and climate and development.  And this meeting series that the president commissioned last year is coming close to its end this year as well. They just had their last meeting close in South Korea over the weekend and these are sort of the sherpa-level discussions because the Group of Eight meeting next month will be a very important point in this whole climate conversation about technology transfer and getting everybody on board. 

And we had a conference call and the big questions that were being discussed there all related to, "What is our long term global goal," which you heard about a minute ago too?  What do we want to have the world's emissions atmosphere look like in 2050? And we are very, very far from even having a number there yet.  The EU wants at least 50 percent cut by 2050.  The United States is sort of hovering around that number but how do you then -- and this is all voluntary.  This is not even something that'll be set in stone.  It's an aspirational -- it's set from the start as an aspirational goal.  And we're not even close to having agreement among the 12 or 13 biggest emitters of greenhouse gasses for that -- even that kind of number.  So there's a lot of work to be done. 

So let's now dive in toward China again.  And I want to introduce you to these fine panelists who have far more expertise and experience on this issue than I do.  I'm still mainly just sort of hovering around asking questions.  Next to me is Wu Xongxin, professor -- he's the director of the Academic Committee, the Institute of Nuclear Energy Technology, and director of the Energy Environment Economy Institute at Tsinghua University.  And anything that connects studying energy, the environment and the economy together is a very important initiative.  And next to him is Edward Steinfeld.  He's an associate profession of political science at MIT, in the MIT China program, and co-director of the China Energy Group, the MIT Industrial Performance Center.  And he spends a lot of time on the ground in China trying to understand trends there.

Now I want to remind you also about all those Blackberries and computers and little thingies. As they say on the airlines, anything that uses a battery please turn it off now.  And I'd like to start now.  We're going to have a quick sort of set of questions and answers here on the panel and then we'll move to audience questions. 

So I would really like to start from your own -- just to get your sense of -- what's happening now and what's China doing itself on the innovation frontier in some of the fields that are important it we want to limit greenhouse gas emissions?  And maybe we would start with you, professor.

WU:  Okay.  So -- (inaudible) -- to have the opportunity to have the exchange of views on technology, innovation in China for dealing with the climate change issues.  Because China is the -- (inaudible) -- country.  Also is during the earliest stage of globalization and the industrialization.  So we also are facing a big challenge for energy security.  And also the -- (inaudible) -- pollutant related to energy consumption.  But this I think is the -- has the common interest for international consideration for mitigating CO2 emission.  So China also considered for the technical development.  We also -- just mention to some people -- we also, China is developing some R&D programs to 2020.  So since the program maybe also is the -- (inaudible) -- for the (tenfold ?) development in China.  So because the China, the energy, they're facing some big challenges. Number one is energy security.  

And the second one also because China energy is -- coal is dominant and also coal is a very serious pollutant. And also we also consider it's the -- because China is for the oil is the shortage in supply in the -- (inaudible.)  Because we now is the sitting production for oil.  So we increase the imported dependent (resist ?) the problem. So for the science -- the R&D to work or core support in dealing with (assistance ?).  So way how is the soft energy security?  We should have the world energy supply to support the economic development.  And also one or two changes of the Department of Energy mix is dominated by coal.  NO wanted to solve how is the substitute the transportation fuel?  So mostly the older program R&D program is the dealing with this (package ?).  So, number one is we -- how is the increase of the energy supply, so we have to diversify out an energy source. Emphasize the development clean technology, especially like nuclear, hydro power and renewable energy.  And also we should improve our efficiency.  It's important.  So our target -- the government to set target for from 2005 to 2010 we wanted to reduction the energy intensity by 20 percentage, annual about 4 percentage.  So we also have some the technology support improved energy efficiency. 

We use the new technology replace the old one.  Also phase out the old technology.  Then also we also just mention that we also have some considering how substitute transportation fuel so we also developed some coal based liquefaction technology also consider the second generation of the biofuel technology.  Also cost, because China is the mostly is the coal is the dominant energy source.  We've also developed some clean coal technology, especially high efficiency coal power generation because now in recent years our country, each year, about -- each year about 100 gigawatts new power installation.  Most use super critical power generation and -- (inaudible) -- clean coal power generation.  So these things we also consider is the support of the energy development package.  And this also, I think is for interesting is content without the CO2 mitigation is the same goal, I think.  So if the biofuel  technology benefit all the National Society -- (inaudible) -- Development also, permit all the globally mitigation CO2 emissions.

REVKIN:  Yeah.  Thank you.  Thank you.  Maybe you could introduce us, Ed, to your focus there? 

EDWARD S. STEINFELD:  Sure.  You had asked, Andy, about talking about future technology trends in China. And as I sometimes joke with friends and students and colleagues, I have enough trouble predicting the past in China -- or explaining or predicting the present, let alone the future.  But that gets to the issue of, "Well, what really is happening on the ground today in China in terms of the technologies that are being employed and what's being built and how is it being employed?"  I was glad that professor Wu mentioned coal.  Coal is -- and coal fired power generation is sort of the orphan stepchild in many of these discussions about energy futures because coal is at least associated with bad environmental outcomes whether rightly or wrongly. 

The reality, however, is that coal accounts in China for the bulk of power generation -- about 80 percent of all electricity is generated through the combustion of coal; it's under 50 percent in the United States.  So we're in this game as well.  And coal, for the foreseeable future, I'd argue 10, 20, 30 years out will continue to be the basis for the power sector in China.  Coal combustion accounts for roughly 80 percent of all of China's CO2 emissions.  More than half of all coal consumed in China is consumed by the power sector, and again about 80 percent of China's electricity is fueled by coal.  So coal in many respects, whether we like it or not, is where a lot of the action is in innovation.  Of course, in nuclear and renewables but coal is a very big picture issue in China. 

I'll just say a quick anecdote.  Let's see, in 2005, my research team at MIT was sitting around a table.  We were beginning a study of the power sector in China and we all have spent a bunch of time in China -- some were Chinese, some Americans.  And, you know, we were sort of going around a table providing impressionistic views of what we thought the nature of the power sector in China was like.  And one guy at the table pretty much summed it up and he used language which I can't use now, but I'll tone it down.  He basically said, look, the story in China is -- of course it's coal fired power generation -- and China builds a lot of junk and burns a lot of junk and basically doesn't care.  That's the story. 

And, you know, that kind of resonated with a number of us.  Impressionistically we had been to a number of power plants that had museum-type technologies and we had certainly breathed the air in Chinese cities -- terrible in some cities.  On the other hand, a number of us visited very modern plants in China, and visited plants with very modern environmental cleanup technologies.  And we were left, I must say, sort of conflicted and puzzled because there was all of this impressionistic stuff out there and assumptions and statements but very little data to support those statements about what's really going on in China.  I like that statement about, you know, China builds junk and burns junk and doesn't care, not because I agree with it, but because I think those are the right leverage points for thinking about change.  You have to think about, well, what are the physical technologies that are going in.  As Andy said, these have a long time horizon once they're in place. 

Second, what are the fuels?  What kind of fuels are being burned and at what price are they being sourced?  How are they being burned? And third, what's the regulatory environment that may be shifting the price structure or putting other structures on the way technology in fuels are employed?  So we conducted a survey that we just finished of coal fired power generation in China.  We had 85 plants in the sample and we accounted for roughly 6 percent of all coal-fired power generation in China was in that sample.  And what did we find?  We found an incredibly confusing picture about what's happening on the ground today. 

So the first finding about technology -- it turns out that there's an incredible mix of technologies being built today in China.  It's not all junk.  In fact, some of it is state of the art.  As has been mentioned, there are a number of plants now using super critical, also highly efficient pulverized coal technologies on the combustion side.  Soon, there'll be some ultra super critical -- again, highly efficient on the pulverized coal side.  But even on the small side, so power plants that are thought of as operating below minimum scale economies -- even some of the small plants we saw picked up very advanced technologies, fluidized bed combustion, which may not be the most efficient technology but it's actually very efficient on the environmental clean-up side.  So the question that came to my mind is, "What's the leverage in the system that's pushing at least some plants, and a fairly substantial portion, to source and build expensive technologies on the combustion side?" 

Related to that, second, we found that most plants are sourcing coal now through both long and short-term spot contracts rather than through any kind of government allocation system or through any sort of subsidization program.  And the prices that plants are paying for coal were converging very rapidly to global levels.  So plants are paying a high price for their fuel, which partly explains why a number of plants want to put in more efficient technologies to burn that coal.  We found that a surprisingly large portion of these plants had installed some kind of environmental cleanup technologies, including flue gas desulfurization systems, very expensive to operate and expensive to purchase. 

And lastly, we found that -- so there's some good story here -- but lastly we found that he emission levels that plants themselves report, emissions levels for pollutants like sulfur, sulfur oxides -- we weren't looking at carbon, but sulfur -- the emissions levels were almost right across the sample, far in excess of Chinese rules, let alone global standards.  So that's very interesting.  What that says is there's some points of leverage in the system today for getting state of the art, roughly, technologies in place, which will have a long time horizon.  There are some price levers, clearly, which are incenting producers of energy to use those technologies.  Price, of course, works against the operation of some environmental cleanup technologies because they are expensive to use.  And clearly, there's some kind of governance problem about enforcing some of the rules on the books.

But I'll just, you know, finish this point by saying it's by no means clear that China, for oddly speaking, is building junk.  It's by no means clear burning junk.  And lastly, it's not clear that nobody cares about this, but it's clear that those who do care about emissions have not been able to, through the economic levers that they have now, to influence the behavior of plants, at least in how they emit environmentally. 

REVKIN:  Well, at least for the conventional pollutants it sounds like.  But for CO2, efficiency equals less CO2, right?

STEINFELD:  Yeah, for all pollutants and certainly for CO2.  If you're a power plant and you're installing a more-efficient system of combustion, you will use less fuel and you will emit fewer pollutants per unit of energy traded.  Now, I don't want to sound Pollyanna-ish. It's not as if the technologies being employed are going to solve China's problems or our problems immediately. 

But I simply raise this to say that there do seem to be leverage points in this system for change.  I don't think we understand those leverage points very well.  I think there are many people in China on the governance side, on the academic side, on the operational side who are also trying to figure out these leverage points in a system that's very complicated and governed in a difficult fashion, evolving fashion.

Just the last thing I'll say is doing this work on the Chinese power sector has, of course, pushed me to more research on American power production.  And surprise, surprise, it turns out in the United States that when new power plants are built, they also reflect a range of different kinds of capacities.  So some very small plants that are built, not just big stuff, they represent a range of technologies that are employed, not just absolute state of the art. 

And on the emissions side, well, arguably, a more evolved regulatory system than what exists in China today.

REVKIN:  One thing I would hope you can both help me explore is the coal-to-liquids question.  Yesterday at his briefing for the House committee, Jim Hansen  laid out trajectories for emissions.  He basically concludes, as many people do, economists and scientists, that we're going to burn the oil.  Oil is expensive, valuable, it can be turned into lots of things.  It's a very useful thing.  But coal is where Dr. Hansen feels we really do need to change the trajectory sharply, of course, if we're going to get anywhere near climate stability in time to avoid centuries of change.

But both in the United States and, it sounds like, in China, the energy security question still trumps the energy climate question in terms of which challenge you deal with first.  Now that oil prices are high, you're hearing much  more about tar sands and shale and things that we left in the ground for a long time for economic reasons.  And if Jim Hansen -- and many scientists have concluded if we start turning coal into liquid fuels, then it becomes a limitless transition to much more emissions unless you capture the carbon dioxide coming from the energy-intensive process of turning a hard rock into a liquid and all that stuff.

So in China, I wanted to ask if there's a -- do you feel that the energy security imperative still dominates over the climate question for now?

WU:  (Inaudible.)

REVKIN:  Oh, if you have any reaction, go ahead, yeah.

WU:  Because China also has engaged the -- just the pictures in China -- (inaudible) -- because the -- (inaudible) -- range is a different technology and also because China is -- (inaudible) -- is very small sized power generation and also big, modern power generation.  So it's also China is the range of different technology and different efficiencies.  So is this the China real picture.  Some areas is very developed but some areas also undeveloped.  So it's the really China situation.

And also, China -- also the problem is not -- I don't listen close to the technology problem.  Maybe some regulation no -- existing problem also influences China.  The efficiency improvement also improved the pollution the control -- I think is the real picture for China.

And also, just mention for -- because, of course, the energy security is also in China's big challenge.  So -- but also, the same -- of course, we also wanted to change it because the transportation fuel is the big problem for China.  So we considered some solution.  With solution, of course, we wanted to explore more the resources, natural gas and also coal -- (inaudible) -- and -- (inaudible).  Otherwise, we also developed some technology for substitute for transportation fuels.

So this same solution with, number one, maybe coal liquefaction.  But also, you just mentioned that because liquefaction also maybe if from the whole -- the line of consideration from the world to where is not as efficient.  So now, for us, only on the demonstration project stage, we face the different technology.  We announced some demonstration project already in the commissioning of China, but now it is under the demonstration project. 

We should make technology improvements and also for the cost improvement and also consider therefore the whole cycle that the CO2 emission since we also consideration.  So now China, only in the demonstration stage, how is the future development?  Depends since the demonstration, the results.

Third, one of cost because China considers the biofuel technology by use the second generation use the agricultural residue for the feedstock.  China is -- also the problem is because of our land.  Per capita, the land for use, land per capita, China, the average only 40 percent where the world average 11 (percent).  So the land is very big chunk on (trends ?) for China.  Number one, we should -- the food supply is number one that we are talking.  So we not consider the use for the food for the animal is enough --

REVKIN:  You don't have the corn problem that we do.

(Cross talk.)

WU:  -- but we also develop the second-generation technology for use the agriculture (already ?) for this use.  For this only -- for all the R&D program consideration.  For it also it depends on what's the R&D results and the cost once we see the results.

REVKIN:  And you're a political scientist at the root? 

STEINFELD:  I am.

REVKIN:  What's your sense of this whole issue, climate security versus energy security?  I mean, in a real-world sense, is China going to pay attention to climate security on a time scale that's meaningful without help?

STEINFELD:  Let me, as an academic, answer your question with a question.  (Laughs.)  When I hear -- and the question about coal to liquids is excellent because it forces me, in some ways, to ask, well, what kind of a China do I want to see in the future?  What kind of a United States do I want to see in the future?  Do I want to see a United States heavily dependent on Mideastern sources of fossil fuels?  Well, probably not.  And so that then pushes me back toward maybe coal to liquids or other similar solutions which, as has been pointed out, could potentially be very, very dirty environmentally.  Or do I want to see the United States on the cutting edge or China on the cutting edge of environmental security and good environmental solutions?  Well, that may push me more toward fuels like natural gas which, unfortunately, neither the United States nor China has in great enough quantity to meet their respective needs.  Which pushes us back into the energy security issue.

So from the 10,000-foot or 100,000-foot level, looking at these, we have these kind of difficult-to-reconcile strategic choices.  But you know, there's another reality operating.  It's operating in the United States, and it's operating in China, and that's a reality about energy innovation that's going on and I think will continue to go on if energy crisis remain high or get higher.

And that reality is sort of the globalization story.  You have not an explosion of players, many of them are commercial players, some from the financial industry but many from manufacturing industry, research arms of universities.  But a variety of players now are in the energy-innovation research game.  Many of them are in China or have pieces of their operations in China.  And many of them, of course, are in the United States or other advanced industrial countries.

It is, in some says, exhilarating to see this kind of very disaggregated innovation happening.  As Professor Wu mentioned, there's some very exciting things happening in China with bigger projects like high-temperature reactors.  But there are also some very exciting things happening potentially with plug-in hybrids and other type of transportation technologies which seem to be coming not through big government programs.  They may involve the government, but really seem to be bubbling up from the commercial sector.

And so when I said I'm going to answer your question with a question, the question I have is this:  I don't know how to answer it.  I'd like to know whether fundamentally we feel that energy innovation in the future, whether it happens in China or the United States or both places together, whether it's fundamentally about sort of a space-programlike, big push, top-down, big-investment government programs.  Is that what energy innovation is going to look like, whether it's in coal to liquids or carbon capture and sequestration or anything else?  Or is it more the kind of information technology model?  Lots of companies out there, some cooperating with universities, many having their own in-house research operations, many doing joint research with other companies researching across a broad portfolio of areas and innovating in the margin but fundamentally changing the way we live our lives through a bunch of incremental technology changes which somehow add up to a revolutionary world.

And I guess my hunch -- of course, I'm a political scientist, not a management specialist or a physical scientist -- but my hunch is we're not in the Apollo-program mode right now, and we'll likely not be in the future on energy innovation and energy research.  That we're much more in the IT-dispersed-disaggregated mode than we probably even realize today.

REVKIN:  So you're not making a judgment about whether we need to be in one or the other.

STEINFELD:  No.  And I'm not making a judgment or saying that the government should be spending -- personally, of course, I feel that substantial investments are necessary.  But rather that we may not find, over the long run, the clearest returns or we may not be able to pinpoint today the big, massive programs that are going to lead to change.  Or to put it somewhat differently and, I think, more optimistically, if we can't get massive funding today, and we should, but if we can't get massive funding, say, for carbon capture and sequestration, major demonstration effort, that doesn't mean the game is lost on addressing climate change.

It not more means that than it would be honest to say that in China today there's no adaptation of modern technologies.  There is a lot going on at the micro level, the grassroots level that needs to be organized better.  Undoubtedly, it would benefit from more funding.  But I think we need to better understand today what's happening in order to project into the future where many of these resources should ultimately go and who the key players are going to be in pushing change.

REVKIN:  Professor Wu, do you get a sense that there's an incentive out there in China.  There are plenty of entrepreneurs in China, innovators, engineers.  Is there anything the government is doing or can do to spur innovation on the ground, to spur that kind of activity? 

I just want to mention one thing that McCain yesterday on the campaign trail, he says he wants to offer a prize, $300 million, I think, for the breakthrough battery technology.  And he's not the first person to get into that mode.  Two years ago, I did a long article on energy research.  And some economists actually say that kind of incentive, what Gates did with vaccines, how many hundreds of years ago was done to find out how to measure longitude on a ship in Europe -- there's a book about longitude -- they had a big prize, and that was the way that they got.  It was a tinkerer who made watches who came up with that.

So is there anything going on in China that's trying to spur people to come up with new energy ideas?

WU:  China is -- (inaudible) -- innovation is maybe government pay a lot of attention, pay a lot money for the R&D work.  But China, I think, is the maybe -- I think is the place for innovation is the -- maybe government will pay a lot more attention -- a lot of money for the R&D work.  But China is the big challenge foe that because for innovation, for policy reconsideration, it's the enterprises should pay more important look in the innovation.  Then easily from the R&D go to deployment.  But now China is the problem, most R&D work activities is concentrated in the research institute at the university, not the enterprise, not play so important role in the R&D work. 

So is there some barrier from the R&D to the achievement become the industry application?  This, I think, is the China big challenge, not solution because this --

REVKIN:  In the United States, that can be a challenge.

WU:  -- yeah.  Maybe U.S. is much better because for our country, maybe for -- my personal -- you know, work in the nuclear area.  In the U.S. maybe GE company, Westin Company is mainly the force for a push to nuclear power technology development.  And it's easier from the R&D become the industry application.

But China, for nuclear technology development, most in the institute and also for -- maybe some university.  So there is the vendor from the enterprises.  So because China is the industry, maybe easier for the earliest development stage, not the sole R&D that deposits it in the -- (inaudible).  So is the -- (inaudible) -- on the time for -- (inaudible) -- for these enterprises I think is the number-one problem.

Secondly, is probably is the each -- the new technology in the stage where it's more scarce, it's always cost much higher.  So government should give some incentive -- the policy to promote the new technology development and become the largest scale and the cost with reduction then the government pays some attention.  This maybe some --  China the -- lacks the institutional incentives to promote technology deployment.

REVKIN:  I have one more question and then it'll be up to everyone in the room here for the last half hour or so.  And this gets back to that question of capturing carbon dioxide from burning coal.  It's the one thing that seems to be on everyone's list if you go down RDC, if you go to Peabody Energy, the world's biggest coal company, if you go to the Bush administration position, if you look at what the IPCC focused on in a special report a couple of years ago, capturing CO2, the main greenhouse gas accumulating in the atmosphere, from burning coal is an imperative, partially because of those trajectories.  We're going to to burn a lot more coal for decades to come. 

The problem, though, comes in scale.  And MIT actually did this pretty important report on this a couple of years ago with some other people there saying that if the world wants to prove it's serious about this, we need to have 10 or 15 demonstration projects equal to the one that was just canceled by the U.S. in play now, so that by 2020 or so, we actually know even if this technology can work at the gigaton scale.  Because again, remember those numbers a few minutes ago.  We're currently emitting 30 billion, 29 billion tons of CO2 annually.  And so anything that's meaningful has to capture billions of tons and put it away for perpetuity basically of this gas each year.  And right now, we're trying to do 1 million ton a year demonstration.  That's the scale what's happening around the world.

Is there any -- I think I've heard about China doing some partnerships to actually start building some larger CO2-capturing plants.  Is that right?

WU:  Sure.  And China also has some -- (inaudible) -- in China that domestically we have some IPCC project, so I just -- because we consider it capture and storage carbon should base on the coal gasification and uses the coal gasification and it's very easily low cost to capture CO2.  But we have some projects of IPCC demonstration product we will launch.  And also China -- also participation in U.S. international cooperation, the FutureGen project China also participates.

But for the carbon capture and the storage, also the two problem.  One is for the cost efficiency because capture should have some more high-energy intensity technology.  China now is deficient energy security.  How much energy supply the future is problem.  If we use the carbon capture and storage, we should further increase the energy supply.  So is this also -- for China is the (phase-in ?) problem.

Second also are the cost.  And the third one is China now because now is the most power generation is the burning technology, not the base -- the coal gasification.  We have to use the flue gas to capture technology.  So it's very high-energy-intensity technology.  So is this also the problem with how is the -- (inaudible) -- is now present.  Most is the burning coal.  Coal power-generation technology is the transition to go to the future, the base of the coal gasification technology also some technology problem.

So I think it is maybe we can -- in China also we want to do some R&D work and also for the demonstration project.  But for how is the -- use this technology maybe, I think, maybe should take a long time.  But also storage, just that we should make (junk ?) because -- (inaudible).  Maybe storage some the CO2.  We have -- (inaudible) -- in the -- for storage of the CO2, also a problem.

REVKIN:  Yeah, yeah, storage is a problem.

So now, I assume there are questions out there.  And you probably remember the ground rules.  Please state your name and affiliation, if you have one, and keep the question tight so we can have as many as possible.  There's one here.  And then over there in a second.

So right here in the middle -- here.

QUESTIONER:  Hi.  I'm Debbie Seligsohn from the World Resources Institute.

The NDRC already has policies requiring new coal-fired power plants in China be either super critical or ultra super critical.  So when you're talking about the best of current technologies, China has clear policies and programs.  My question is, what's needed to get to the next level of technology?  And specifically, what does China need from the U.S. 

Let me ask you to address that in two ways.  The first is the way that was discussed in the last panel, which is, what's needed in China-U.S. cooperation?  And it's important to talk about this IGCC question and both the agreement that was there in the late '90s that disappeared and FutureGen which has run into problems.  What's needed to get long-term, ongoing cooperation?

Second question, though, is a lot of people have a lot of suggestions for China for its domestic policy.  What suggestions do you have for U.S. domestic policy that will transform the market and help get us all to the next level?

And that's for both of you. 

WU:  (Chuckles.)  Because I -- for -- my personally is that the -- (inaudible) -- involve in the clean-coal technology, but I know is because, of course, we -- power generation use the -- (inaudible) -- coal and also we have now to realize the localization.  But also FutureGen project, we also wanted to have some cooperation with the U.S.  So I don't -- in additional, I am not the source of new suggestion for it.

STEINFELD:  I have to say briefly, thanks, Andy, for mentioning that the MIT "Future of Coal" study that came out in February of 2007, February of last year, is available online if anybody's interested.  But sort of the punch line of that report was that many people, like political scientists such as myself, throw around terms like carbon capture and sequestration as if this is a completely tested, understood set of technologies and it's just a question of whether we want to employ them, whether in China or in the United States.

And the point of -- well, one of the points of that report was to say the individual pieces of carbon capture and sequestration, the capture of carbon, may be fairly well understood, though even there, there's some room for debate.  And the sequestration of carbon may be fairly well understood, although, again, there's some debate.

But actually integrating this as a system and capturing carbon at the power plant and then finding some way to sequester it -- where, nobody's exactly sure -- and coordinating all this is not a trivial issue.  It's not trivial technologically.  It's not trivial institutionally about what the rules are going to be, and it's not trivial economically about what the pricing is going to be.

And so one of the points of our report is we need some demonstration projects to start understanding these economic and institutional and technological systems integration issues.  And unfortunately, the United States, as was mentioned, is not currently leading the way on these demonstration projects.  It's hard to believe that capture and sequestration will be a reality unless there's some forward motion on actually testing some of these systems.

The second point of Debbie's question about what can be done in the United States -- price doesn't solve everything.  As I said earlier, rising coal prices in China have led to the adoption, I think it's fair to say, of more efficient combustion technology in power plants, but they lead many plants not to use their cleanup technology.  So price doesn't solve everything, but price is often an important precondition for change and innovation.

If the United States moved forward and attempted to put a price on carbon, even a relatively low price, I would argue that that would have some potentially very interesting effects on American innovators in the energy area, much as gasoline prices today seem to be having that effect.  And I think if that happened politically, we'd see a bit of a change where more American constituencies would have a producer perspective, a commercial perspective of what can we win.  How can we build wealth based on this pricing, rather than how are we getting punished as consumers with this new pricing scheme?

REVKIN:  Next -- (inaudible).

QUESTIONER:  Elizabeth Bramwell, Bramwell Capital.

I wonder if you could comment on who sets the design standards for power plants and for automobiles in terms of use of scrubbers or mandated use of scrubbers or emission controls on cars?  And it seems to me -- I mean, I assume that the government has a great deal to do with that.  And there's a lot of technology in the western world that's already in place that significantly does reduce emissions.  And, you know, before we go to whole new technologies, which are going to take several years, what are you doing to use the existing technologies on your existing facilities?

And it seems to me to be kind of short term rather than long term in terms of the effect on the population, on water, and perhaps even on tourism to China.

WU:  I think it's now is because globally, we -- there's a lot of international trade; so mostly with technology by the international trade way to move to China, like the -- (inaudible) -- the technology, because most use the -- (inaudible) -- technology, because also like we -- nuclear power station.

We now think face a signed cooperation agreement with U.S. -- Westinghouse.  We also technical transport for AP-1000 -- the new technology for China.  So now we also -- (inaudible) -- the most important way by the international trade is the way to integrate the new technology.  Also -- government also has some incentive for the (push ?) that promoted the news that -- existing technologies.

But my personal consideration in China is the technology is very important (way ?), but China now is -- more important is how is the new way towards industrialization and urbanization is big challenge for China, because China each year, about 30 million people immigrate from the rural to the urban.  So it is also -- it's big challenge for China.  How is the new society, new economy, the pattern is big influence for the China energy consumption.

So if -- when the lifestyle.  What lifestyle?  What's the urbanization?  The urban -- what's the size, the form, more suitable for people living condition improvement, and also less energy consumption; and also for economy, the regional configuration also important.  If China is larger territory country.  Each large territory country always -- the traffic service demand is much higher.  So like U.S., about 40 percent of (farming use ?) for transportation, because -- (inaudible) -- China, U.S. is the larger territory country.  So China is the same situation.

So I think it's for the considered future -- for the domestic consideration for the -- (inaudible) -- development, also from the international climate change issue address.  So it's not only technology problem.  Also the problem is how is the -- or the new way for urbanization industrialization.  And this also should be -- has some innovation.  This, I think, is more important for China.

REVKIN:  (Inaudible) -- planning --

WU:  Planning -- yeah.

REVKIN:  Are there a lot of partnerships now with institutions outside of China?

WU:  I think so.  It's maybe (laughs) -- also some -- like some city planning, also have some international cooperation.  And also have some -- (inaudible) -- the foreign company involved in it, yeah.

REVKIN:  A question over there, and then here.

QUESTIONER:  My name is Greg Jackson.  I'm pastor of Mount Olive Baptist Church in Hackensack, New Jersey.

A few months ago I was in South Africa in a little town called Witbank, which is a coal miners' town, and they had several power plants all over, so you see emissions all over the place.  But also in the surrounding communities there were so many informal townships with thousands and thousands of people burning coal every single night.

We talk about manufacturing emissions and all that kind of stuff.  But what about -- have any studies been done on the relationship of poverty and coal?  And I imagine not only in South Africa; I imagine in China and other places where there are large poverty communities that have to heat by coal.  What relationship does that have in the overall environment?

REVKIN:  Either one of you would --

STEINFELD:  I can answer very briefly.  It's a very important question.  There have been a series of studies done in recent years that have looked at rural energy consumption, and particularly rural coal consumption or rural consumption of other biomass -- straw, whatever else -- mostly for cooking in households and for heating.

It's a very important issue, first, because of health, so the indoor burning of coal and straw, their biomass, has terrible ramifications for respiratory problems.  Second, of course, when fuel is burned this way in households, it's often burned in a very dirty fashion, for understandable reasons.  It's very hard to monitor and regulate.

So I think what the studies suggest, not entirely surprisingly, is that with increasing incomes in the countryside and some government incentives, there's been a pretty substantial decline in the household use of coal and biomass for heating and cooking.  And there have been positive health effects.  Whether that will continue in the future is hard to say because of some of the persistent poverty issues in China and the growing disparities between urban and rural citizens.

So one quick solution to both the poverty issue and the health issues associated with indoor burning of fuels is to keep facilitating urbanization of Chinese citizens.  Of course, that leads to a series of other social challenges.

Just to return very briefly to Professor Wu's point, you know, a lot of this is, of course, about government regulation and whether the government in China can coordinate its bureaucracy.  But I think Professor Wu's point about social issues and sort of Chinese identity issues, those are extremely important.

People in China are self-consciously, I think, asking themselves, "What does modernity mean?  What do we want to be as a country and what do we want to be as citizens?  Do we want to be just rich, even if that means dirty air and dirty water?  Well, maybe the answer is no right now.  Or do we want to be richer but also cleaner and, you know, living an existence that does look something more like the existence in advanced industrial economies, regardless of the level of wealth?"

And I think that discussion is happening in a quite overt way in China, in all different segments of society -- in the state, but also in NGOs, in civil society, in academia.  It happens in the U.S., incidentally, but just in, I think, a much more subdued way.

I know in my neighborhood -- I live in Lexington, Massachusetts -- 10 years ago, had you put your laundry outside to dry, you would have been viewed as, dare I say, sort of low-class.  Today if you do it -- I notice all over the neighborhood people are doing it -- you're making an environmental statement.  You're being green.  And I say that not as a trivial -- it is a trivial example, of course, in Lexington, Massachusetts, but when those kinds of questions are being asked on a very broad scale across Chinese society, when the leverage for changing lifestyles is so great in a developing economy, who knows where things may ultimately end up?  But I guarantee you they will look very different tomorrow from what they look like today.

REVKIN:  Right here, and then --

QUESTIONER:  John Douglas -- (inaudible) -- the Foreign Policy Association.

This is both a comment and a question.  Earlier mention was made of the Apollo program.  And for some years it has been a concern to me -- it has been obvious to me that China is going to be burning coal for a long time to come, and it's obvious to me that, since coal is very plentiful in America, we are too.  So it's both an American problem and a Chinese problem.

But why have we not or hasn't -- is it (conscience-building ?)?  Why have we not gone in more or less of a Manhattan Project mode to try to find the technological answer to coal?  I mean, we (both did ?) the demonstration problems, which I was all excited a couple of years ago about the one that was -- (inaudible) -- from China.  And here in this country, the demonstration project has failed.

But isn't the problem even deeper than that?  It's finding new technological and scientific answers to the problem of coal and making its use without emitting CO2 more economical.  That may be the project that, it seems to me, the world could call for something like a Manhattan Project type of endeavor.

REVKIN:  Do you have theories on that?

STEINFELD:  I don't have particular theories.  But I'll just again emphasize, I don't know that the answer is a Manhattan Project.  It may be.  I guess I'm equally troubled, though.  That seems much lower in scale, smaller in scale.  The Manhattan Projects have been ignored in the U.S., for the most part ignored.

And I think part of the story -- it's not just government failure.  I think societally Americans, including myself, have a very poor sense of where our energy comes from and what actually we're burning and how we're burning it and what actually we're doing.  And so when -- because we have a poor sense and because, in a relatively non-dense population setting, we don't feel the environmental impact of our own consumption patterns as directly as Chinese do, and Chinese lower per capita consumption levels, because we don't feel that directly when issues like putting a price on emissions of carbon, when those come up, the immediate response politically is negative.

And over time, as awareness grows of global warming issues and awareness grows of some of the costs of inaction, I'm hoping that we will see a change.  It may require something less than a Manhattan Project. It may require a regulatory change that will facilitate a bunch of entrepreneurial work in companies.  But I, too, think there's got to be some kind of awareness change that's going to promote either of these directions, the entrepreneurial or the Manhattan Project/Apollo program track.

REVKIN:  Professor Wu, do you have any thoughts on that, or we can pass?

I have lots of thoughts on that, but just go to my blog if you want to see them.

Over here.

QUESTIONER:  Thanks.  It's Jim Staffi (sp) with Bloomberg News.

I just want to get back to carbon capture for a second.  And Ed, I guess you're kind of a skeptic, or maybe I'm reading between the lines of the whole idea of pulling this off in time to basically make the kind of difference that needs to be made.  And I'm just wondering if there is a technological argument that you can get from A to B without developing this technology that most people say won't be ready for 15 or 20 years anyway.

Is there a way to do it with the resources we have through renewables, energy efficiency, other kinds of initiatives?  Is there a technological answer that sort of gets you around the need to sort of extend the life of coal into a carbon-constrained world?

STEINFELD:  Just very quickly, let me emphasize, I'm not a skeptic about carbon capture, so forgive me if I misstated my position.  I simply wanted to say that as one of the members -- there are 12 faculty members who did this future coal study, and so there were chemical engineers, nuclear engineers, physicists and chemists and a political scientist sitting around the table.

And what I learned from the discussion among the engineers and scientists was not that one should be skeptical about the technology, but rather one shouldn't simply assume that this is all existing, proven technology as a system and that it really has to be demonstrated -- not to demonstrate it's not feasible, but it has to be demonstrated to figure out how to integrate and how to regulate this kind of system.

The other thing I learned sitting around that table for the few years that required to do that study was that coal will be a central source of energy for many years to come and that to solve problems of global warming, or at least to buy some kind of insurance policy if global warming really proves to be as serious a problem as we think it is, one needs to focus both on a series of technologies for combusting coal cleanly -- coal is not going to disappear -- but second, one needs to take every opportunity one can to pursue other kinds of fuels and other kinds of technologies; that is to say, there is no single technological fix.  There's no social engineering quick fix to this problem.

Rather, we're going to need a variety of different solutions entering from a variety of different avenues.  It's just that coal is going to be one of those avenues, and capture and sequestration is going to be arguably one of those indispensable technological systems.

REVKIN:  There was -- right there.  We seem to be picking on men.  Are there any women out there with a question?  Raise your hand higher if you do.

QUESTIONER:  Hi.  Dan Rosen, Rhodium Group.

Is it critical that China pay for the technology that needs to be transferred to it, not just to remedy the trade imbalance, that China is a critical macro problem that is threatening the government and the economy of the country, but because without the notion of paying for it, you're never going to move innovation out of the top-down institutes Dr. Wu described to the private sector, where there's enough of a profit motive there to incentivize a broader effort to innovate and enjoy the capital gains and returns that come from innovation.

So is it critical that China pay for the technology that needs to be transferred, or should it all just be subsidized and handed over?

REVKIN:  He's saying should China pay for the technology that comes from outside, or should it be provided?  In other words, who pays for that incremental change in energy practice in China that emits carbon dioxide emissions?

QUESTIONER:  (Off mike) -- institutions protecting intellectual property will never really be developed, because that's not part of the system.

REVKIN:  That's a very macroeconomic question.

You can pass.  (Laughter.)

WU:  (Inaudible.)

REVKIN:  Let me try a take at it.  Everyone I've talked to over the years from developing countries insists that it's the responsibility of the countries who added the burden of greenhouse gases that's accumulated in the atmosphere already that they pay for the transitional costs to limit emissions, whatever would happen in a developing country with a much lower per capita responsibility for what's already happened in the atmosphere, let alone from what's coming, that it's an obligation of the outside world, the developed world, the rich world, to help.

It's just not going to happen.  Economically, the impetus is not going to be there, however that plays out on that level of economics you're talking about.  That's just a very firm stance that I've heard over and over and over again.

STEINFELD:  Maybe Professor Wu could mention the high-temperature reactor program, because here there's a potential for China to be the producer of innovative technology, selling it to the rest of the world; interesting way.

WU:  Yeah.  Because my personal involvement in high-temperature gas -- (inaudible) -- reactor.  So this may be -- (inaudible) -- we have to give that a lot of investment for R&D.  So we have to finish the chemical test reactor, a successful operation.  So government -- (inaudible) -- for 2020 or some program for support of the development demonstration project.  It's the modular design.

So since the project is also not only for institute, but also we have some utility, and the owner also investment.  But the -- for R&D work is the -- R&D function is brought by the government.  For the project itself is by the investment for -- (inaudible).  So we go out to 2013, we wanted to complete this project.  But after demonstration, we wanted modular constructing the new one.

So in (this ?) case, we also have some -- (inaudible) -- wide international cooperation, especially with the West -- the German company, because the original technology developed is the western country.  The western country -- because in this year is for the nuclear power is shut out.  So they also -- if -- not use technology is -- (inaudible).  So they also very interesting cooperation with us.  So we very closely cooperation with the German company and also international the enterprises cooperation for make other innovation for this area.

REVKIN:  Ed, did you have any thoughts on the economics of that?  That may come up again later; I have a feeling.  That's a point we can all discuss in a break or something.  I'm interested to learn more.

Oh, yes.

QUESTIONER:  Marcia Aronoff from Environmental Defense Fund.

One of the other forms of carbon capture is through sequestration.  And China has been experimenting with programs that directly tie to poverty alleviation in rural areas by creating aggregation of efforts by farmers to either manage rice growing in ways that capture or reduce methane, planting trees that are involved in avoided decertification, avoided deforestation; a variety of rural efforts.

And I'm just interested in your comments about the problems of planning for expanded urbanization and whether or not there is an awareness, broader awareness in the government, of opportunities for poverty alleviation tied to a carbon market that might provide income for poor residents of rural areas to avoid some of the rush to urbanization.

STEINFELD:  I --

REVKIN:  Haven't worked on that?  :  No.  (Chuckles.)  Overall, my sense, again, is just the limitations on land.  To have that kind of agricultural sequestration be -- somehow avoid any perceptible chunk of the carbon emissions from coal is a challenge.

I wanted to say something related to your question earlier, which was about, you know, why aren't we doing this?  And I will weigh in a little bit.  You could go to the blog to learn more.  But again, climate, as we were saying a minute ago, we have $130-a-barrel oil now.  It's having impacts.  It's actually starting to change consumer behavior.  People are driving less, according to the government.

But climate still remains a someday issue.  For most people in the world, it's not here and now.  It's about our children.  It's not even so much in America about our children as it is about someone's yet unborn kid on a coastline in Bangladesh.

And until the world wraps its head around the idea that setting us on a trajectory toward having centuries of shifting climate patterns with no new normal climate and centuries of changing coastlines -- no new normal coastline -- can you imagine a world -- actually, it would be centuries, probably a millennium or more, with no convention of what your coast is.

Until we somehow integrate that thought and make it a priority such that -- and if you go back through some stuff I've written in the last few years, you'll see we've disinvested in energy research for decades under Republican and Democratic administrations.  And there's only one country, Japan, that has had a sustained level of R&D on energy over time that wasn't just a blip during the oil crisis of the '70s.

And unless and until the rest of the world gets engaged in the idea, that we actually someday have to have a post-fossil world with a lot more people than the world has now, all seeking a quality of life, until the world is engaged on that in a way far more meaningful than anything that you've seen happen in the last five, 10 years, we're not going to get there from here.

And I would love it if each of you might summarize your thinking on, again, the order of our priorities; each one has distinct responsibility, priorities and capacities in this climate question.  And China, I think, for sure, for the time being, is in a world where other things are the dominant concern.  And the United States is rich enough to start thinking maybe more quickly about some of this.  I don't know if you share that line of thinking; if you could just summarize your ideas.  Do you have any final thoughts on how to get there from here?

WU:  (Laughs.)  I also have seen -- (inaudible) -- China (to serve ?) for substantial development, also one to two search the low-carbon economy.  So it's also benefited China, and also benefited the global climate change.  So this, I think, is for China the (search ?) -- the way towards the future.

STEINFELD:  I share your very serious concern about the climate issues.  And I guess, on the one hand, I'm a bit pessimistic about the degree to which Americans or Chinese really have gotten their collective minds around this problem and the magnitude of this problem.  I'm not sure either of our countries really has put this at the top of the priority list or even on the priority list in a meaningful way.  That's the pessimistic side.

On the optimistic side, though, actually, in China, at least, I think we are seeing very rapid technological transformation.  We're seeing regulation trying to catch up, not always very effectively, but trying to catch up.  But we're also seeing very rapid social transformation and very rapid transformation of societal attitudes.

And, interestingly enough, to me those changes end up having kind of a positive bottom-line effect for a number of commercial players, some of which are in China and many of which are outside of China.  So in ways that surprise me today, in ways I wouldn't have predicted several years ago, we're seeing the purchase of some very expensive, very high-end technologies, purchased from outsiders, whether it's nuclear technologies or other energy-related technologies, by insiders in China, sometimes through government financing, but often through commercial financing.

And what this says to me is, again, not that markets always work, but that the markets, at least in some respects, are working in China and overlapping with patterns of globalization where you have many different companies involved in various kinds of partnerships and coordination for innovation that leads for kind of an extremely rapid cycle of change.

Now, of course, we all know with IT, but I think we're starting to see similar kinds of outcomes in energy.  And although I'm not so optimistic about the political side in either the U.S. or China about priorities, I'm actually more optimistic about the social and the technological side.  So maybe the right pressures will come from the bottom or from the side, and the top will follow accordingly.

REVKIN:  Great.  A note of optimism is always a good place to stop.  So thank you both, Professor Wu and Professor Steinfeld.  And thank you all for listening.  (Applause.)

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