1. Making the Leap to Cleaner Technology Lingering Challenges in Technology Diffusion Examples from Chinese Industry Prof. Stephanie B. Ohshita University of San Francisco sbohshita@usfca.edu RAEL Seminar, UC Berkeley ~ March 2004

2. Stephanie B. Ohshita, USF Motivations: More than Climate Change A per capita climate accord “must drive a rapid process of technology “leapfrogging” in the South. Indeed, it must prevent the South from building a fossil fuel infrastructure that mimics the unsustainable path of the North, even as it drives decarbonization in the North. The key is that the South’s leapfrogging must be part of a genuine development process, and the North must pay for it. This can’t be just another false promise.” Athanasiou & Baer 2002

3. Stephanie B. Ohshita, USF Lingering Challenges / A Question... Inappropriate technology... High capital costs... Limited operational and maintenance know-how... Poor technical training... Missing regulatory incentives... Difficulty obtaining financing... Concerns over intellectual property and return on investment... How can the same old problems in energy technology transfer be overcome, to mitigate climate change and a host of other problems in the developing world?

4. Stephanie B. Ohshita, USF China Energy & Environment  China is the world’s 2nd largest coal consumer, energy consumer, and CO 2 emitter.  Coal accounts for 75% of China’s energy, 30% of which is directly consumed by industry.  Over 75% of China’s SO 2 pollution, acid rain, and CO 2 emissions come from coal combustion.  Acid rain affects more than 30% of the country.  500 major cities in China exceed safe air quality levels.  Nearly 30% of respiratory disease in China is attributed to air pollution.

5. Stephanie B. Ohshita, USF Chinese Energy Consumption Source: Based on LBNL 2001; EIA 2003a, 2003b. Author estimates were used to reconcile differences in data sets.

6. Stephanie B. Ohshita, USF Cleaner Coal Technology Preparation Processing Conversion Combustion Pollution Control Coal Washing (e.g. Jigs, Control Systems) Briquetting, Coal Water Mixture (CWM) Coking, Gasification, Liquefaction Circulating Fluidized Bed Boilers (CFB) Flue Gas Desulfurization (FGD), Ash Utilization COAL FLOW TECHNOLOGY

7. Stephanie B. Ohshita, USF China CCT Facts & Figures n Coal Washing u Costs 500~600 yuan/ton SO 2 u Roughly 30% of coal is washed. u Now required for mines >1.5% S. u Have simple domestic technology; need foreign control systems, water saving technology. n Flue Gas Desulfurization u Costs 1,400~1,600 yuan/ton SO 2 u Less than a dozen in all of China. u Now required for new power stations, not yet for industrial enterprises. u Not available domestically.

8. Stephanie B. Ohshita, USF 5 Int’l Programs on CCT for China 1)Japan’s Green Aid Plan, CCT Program 2)Global Environment Facility (GEF)-World Bank Industrial Boiler Project 3)US Dept. of Energy (DOE) CCT Promotion (IGCC) 4)UK Dept. for Int’l Development (DFID) Guizhou and Shanxi Energy Efficiency (GASEE) Programme 5)UK Dept. of Trade and Industry (Dti) CCT Promotion

9. Stephanie B. Ohshita, USF Japan’s Green Aid Plan, CCT Program n Approach: Demonstrate proven technology at existing enterprises (retrofit approach) with government grants; supplement with technical assistance n Technology: multiple, commercially proven n Players: nat’l and local agencies, Japanese private manufacturers, Chinese industrial enterprises n Theoretical Advantages: Lower risk of introducing proven technology; potentially wide diffusion by targeting existing enterprises. Foster long-term relationships through dialogue, cooperative studies, and training. n Actual Experience: Demonstrated technical feasibility of selected CCT, but no diffusion. To promote diffusion, conducting more economic analysis and working with Chinese government on specific policy actions.

10. Stephanie B. Ohshita, USF Technology Transfer NEDO Beijing NEDO Industry Associations Industrial Firms Policy Dialogue Japan-China Network for Cleaner Energy Technology Transfer MITI (Lead Agency) ChinaJapan Industry Bureaus Industrial Enterprises Local Government SDPC (Lead Agency)

11. Stephanie B. Ohshita, USF GEF-World Bank Industrial Boiler Project n Approach: Fund license acquisition from foreign firms for CCT manufacture in China; supplement with technical assistance. n Technology: industrial boilers n Players: int’l agencies, foreign tech manufacturers, Chinese manufacturers & industrial enterprises n Theoretical Advantages: Reduce costs through local manufacture; encourage diffusion by making technology available domestically; enhance local knowledge of cleaner and more advanced technology. n Actual Experience: Strong interest from Chinese enterprises, but prominent international firms unwilling to participate due to concerns over competitive advantage, patent protection, and guarantee risks.

12. Stephanie B. Ohshita, USF US DOE CCT Promotion (IGCC) n Approach: Study and demonstrate advanced technology (e.g., IGCC) at new facilities with government support n Technology: advanced CCT, Integrated Gasification Combined Cycle power generation n Players: nat’l agencies, US tech suppliers, Chinese power plants n Theoretical Advantages: Achieve greater pollution reduction and energy efficiency benefits by leapfrogging to advanced new technology; reduce new technology risks through government support. n Actual Experience: US government unwilling to fund demonstration for political and economic reasons; newness, complexity, and high cost of technology present barriers to demonstration and diffusion.

13. Stephanie B. Ohshita, USF UK DTI CCT Promotion n Approach: Promote CCT exports, support commercial activities n Technology: multiple, commercially proven n Players: UK tech suppliers, Chinese industrial enterprises, nat’l agencies n Theoretical Advantages: Reduce risk through government backing; commercially viable technology more likely to diffuse widely; promote diffusion without large cost of government- funded technology demonstration. n Actual Experience: A few large UK firms successful in CCT transfer; looking to foster long-term relationships among UK and Chinese SMEs, research institutes, and government agencies.

14. Stephanie B. Ohshita, USF UK DFID GASEE Programme n Approach: Make incremental improvements in existing equipment through technical assistance and use of mostly local technology. n Technology: existing, mostly local n Players: UK engineers, Chinese industrial enterprises, nat’l and local agencies in Guizhou and Shanxi n Theoretical Advantages: Achieve quick, low-cost improvements in energy efficiency and environmental quality through bottoms-up cooperation at existing enterprises. n Actual Experience: Positive achievements during first stage of program and Chinese interest in disseminating results, but funding limitations halted further progress.

15. Stephanie B. Ohshita, USF China Domestic Policies: Coal Washing n 1992 Trial Collection of (Higher) SO 2 Fees n 1994 CCT Plan n 1995 Air Pollution Control Law (Revised) n 1996 Total Emissions Control Policy n 1996 "15 Smalls" Policy n 1997 9 th Five Year Plan: Clean Coal Technologies n 1997 9 th Five Year Plan: Environmental Protection n 1997 China Trans-Century Green Project n 1998 Two Control Zones Policy: Acid Rain, SO 2 n 1998 Energy Conservation Law n 1998 Guidance on Foreign Investment (Revised) n 2000 Air Pollution Control Law (Revised)

16. Stephanie B. Ohshita, USF China Domestic Policies: The Story of Coal Pricing

17. Stephanie B. Ohshita, USF Chinese Washed Coal (Mt) by Mine Ownership Source: Data for 1997 from CCPUA and EPRI 2000.

18. Stephanie B. Ohshita, USF Chinese Coal Production by Ownership Type Source: Based on LBNL 2001: Table 2B.1; US Embassy Beijing 2001; Asia Pulse 2002. Note: Data for 1999-2002 are estimates, as the official Chinese statistics have been undergoing revision.

19. Stephanie B. Ohshita, USF Implications for Climate Change Mitigation in China n Coal still dominating, even as nat’l gas and renewables make inroads -- need CCT n Must align with economic reforms to promote cleaner energy technology diffusion n Sub-national networks are crucial for info and technology exchange, training, and financing n At the same time, int’l financing needed n Need supporting engineering/ manufacturing/ management/ maintenance infrastructure