Authors: Jiansheng Ma, Yao Xu, China Electric Power News

"China's Demand Side Management and carbon trading have great potentials"

China Electric Power News: You are the president of the China-U.S. Energy Efficiency Alliance. What programs is the Alliance working on to promote energy efficiency and to conserve energy?

Barbara Finamore: The China-U.S. Energy Efficiency Alliance is a non-profit organization. It combats global climate change by promoting energy efficiency as the cleanest, cheapest energy source. Its purpose is to share expertise from America's private sector, public policy makers, and public utilities. California and some other states have achieved great successes in energy efficiency. In the last decade we have invited many partners to come to China and share their experiences. In the meantime, we encourage Chinese experts to go to the U.S. to exchange experiences.

About ten years ago, we supported China's first large-scale energy efficiency incentive mechanism in Jiangsu (California's sister province). We signed contract, shared California's experience, and for the first time introduced and established Demand Side Management (DSM) in power plants. DSM has since become the blueprint for Central Government's policy-making in this field. We are currently working with the Development Research Center of the State Council in implementing related policy programs. We are also collaborating with the State Grid Corporation of China and China Southern Power Grid Company to train their experts on how to implement these policies.

However, inherent challenges to the transformation still exist. Grid companies face a conflict of interest because when they promote DSM, they lose benefits (revenue and profit loss). We are working with state grid companies to explore the concept of decoupling, where revenues and electricity sales are decoupled.

Unconstrained coal use in coal power plants and other industry enterprises are major sources of climate and air pollution in China and the U.S., so tackling this pollution has to be a key priority in both countries. China's power sector accounts for a big part of its coal consumption, with heavy industries such as iron and steel, cement and coal chemicals also constituting a large proportion of its coal consumption and pollution.

CEPN: Cutting emission is closely related to smog. What advice do you have on China's smog problem?

BF: In September 2013, the Chinese government issued "Atmospheric Pollution Prevention Action Plan", requiring for the first time that China should "set a mid-long term limit for the country's total coal consumption, and employ objective-responsibility management." Natural Resources Defense Council (NRDC) has organized and worked with 17 influential organizations including government think tank, research institutes, and trade associations. In October 2013, we jointly launched the "China Coal Consumption Cap Plan and Policy Project", in order to provide policy advisory and operational guidance for the successful implementation of China's coal cap goals, roadmap, and action plan. We aim to help China reach coal consumption peak by 2020, and help it achieve its goals in resource conservation, environmental protection, climate change, and sustainable economic development. I believe that this is a powerful action in the "revolution in energy" President Xi Jinping has called for.

Although some provinces have issued coal consumption peak objectives according to their clean air plans, coal consumption might move from these provinces to other provinces. If that were the case, our coal peak objective would miss its original objectives.

In addition, the U.S. and China should strengthen cooperation on market mechanisms, such as cap-and-trade programs which can further incentivize clean energy investment. China has initiated carbon trading pilot programs in five cities and two provinces. It aims to become a precursor by establishing a national carbon trading program during the 13th Five Year Plan (2016-2020). In the U.S., the Regional Greenhouse Gas Initiative and California's cap-and-trade program both provide valuable experiences in terms of developing effective cap-and-trade programs.

These experiences include developing accurate and comprehensive emissions inventories, including through use of continuous emissions monitoring systems, which will be helpful for China in developing either carbon trading or carbon tax system. In the meantime, designing emission trading systems would help achieve the optimal emissions reductions, especially through re-investment of program revenues into efficiency and renewables programs.

"Improving energy efficiencymanagement ability is as important as using advanced facilities"

CEPN: Can you give us some advice on adjusting China's energy structure, and in particular, how to increase the share of clean and renewable energy?

BF: First, energy integration is a very important point. For now, what China's energy integration needs the most is planning. In California and other parts of the U.S., top-level energy decision-makers and the decision-makers  of corporations that decides on how much energy to consume measure and calculate the expected effectiveness of energy conservation and energy efficiency programs. According to that data, they make integrated planning in order to achieve the goal of "Negative Voltage". In many other countries, there is one specialized department for energy planning, and another separate department is in charge of energy conservation and energy efficiency. In order to truly achieve energy conservation, integrated planning is indispensable.

Second, China is a world leader in renewable energy. As far as I know, China is doing better than any other country in wind power and photovoltaics. But the key here is still energy integration. In order to achieve the integration of wind power, photovoltaics and other renewable energy sources, many things need to be planed ahead: how to achieve our current goals, and how to move ahead into the future. Here I would like to use electric cars as an example. China has made plans on the development of electric vehicles. We have seen many exciting ideas and work. They are also working with the U.S. and other countries. Electric vehicles could become a part of the energy integration system.

CEPN: Coal will remain the major energy source for a long time to come. In terms of best utilizing coal and enhancing its combustion efficiency, could you give us some advice based on the experience from the U.S. and other countries?

BF: Actually, China is already a world leader in coal combustion efficiency. This is because many coal power plants are newly built, with the latest technologies. The U.S. does not have new coal power plant, and the old ones are using outdated facilities. So I think in this area China could share its success story with other countries.

But in my opinion, while employing the latest, most advanced technology is important, we could still go further in reducing coal consumption by enhancing management ability and thus improving "operating efficiency."

Since China has already done much work in conserving energy and improving energy efficiency, many incentive programs have been put into practice, and a great number of equipment have been updated, especially the generic equipment used by multiple industrial sectors, for example, electric fans, pumps, etc. While continuing to invest in more efficient equipment will render a quick return, acquiring more advanced equipment means more financial commitment, and equipment renewal would waste a great amount of energy and other resources.

Equipment test and enhancement consumes a big amount of time, effort and cost. We have heard about the experience of this process from many Chinese factories.

Then is there a cheaper way to conserve energy? That is the cost effective approach we are promoting. We have a general energy-saving management system designed specifically for this purpose, named SEM. It is also the best practice in the world. Moreover, there is an energy management system ISO50000. However, its standards are vey complex, and China could consider first employing this system in small businesses. Of course, there are many other ways to conserve energy. China needs to try them so that it could be able to conserve energy on a more advanced level.

"Shipping emissions in Chinese port cities should be given adequate attention"

CEPN: What directions should the Sino-American environmental collaboration go?

BF: Being the two biggest emitters in the world, the U.S. and China are collaborating at both the national and sub-national levels on various climate action initiatives. Both countries recognize the negative impacts that climate change is already having, such as droughts, food insecurity, and sea level rise. A warmer climate is threatening China's already vulnerable food and water supplies, while rising sea levels will affect millions of people along its long coastline.

Apart from international climate agreement, there are many things that the two countries can collaborate on, such as cleaner fuels, sustainable communities, energy efficiency, renewable energy, cleaner power plants, port and regional air pollution control, and coal cap and trade programs.

In addition, collaborations on shale gas, nuclear development safeguards, and near term action on HFCs and black carbon are the directions to go for the present and the future.

CEPN: What areas are you focusing on recently?

BF: I am the Asia Director of NRDC and I am also leading the port project which aims to reduce port and shipping emission. In the fight against pollution, it would be best for China to look into all major emissions sources.

Studies from Chinese port cities, like Hong Kong, suggest that air emissions from ships in China can be significant, but right now emissions from shipping are essentially uncontrolled and efforts to reduce emissions from port equipment is only at the infant stage.

This is what we have examined in the newly-released white paper on Prevention and Control of Shipping and Port Air Emissions. Our study includes the impact of port and shipping emissions on the environment and public health, and international experiences from the International Maritime Organization as well as other nations in setting related policies and regulations. The white paper will serve as reference information for the Chinese government and key port cities in China.