Effects of Energy Conservation Exceed Most People’s Expectations

—Exclusive Interview with Barbara Finamore, President of the China-U.S. Energy Efficiency Alliance (Part I)

Jiansheng Ma, Yao Xu
China Electric Power News
July 10, 2014

“American electricity companies have already benefited from energy efficiency

China Electric Power News: As we all know, China has become the largest energy-consuming country in the world. This has caused many environment problems. In your opinion, how should China balance the relationship between economy, energy, and the environment issues?

Barbara Finamore: Yes. I think it is very important to find a way to reduce energy demand and cut reliance on coal while maintaining a strong economic growth. This is also a worldwide goal. In the United States, particularly California, they have found a solution. For instance, in the past forty years, California’ energy policy has laws and regulations   held energy demand even while keeping economic growth. Hence, I believe that this goal is achievable.

CEPN: How can we accomplish this?

Barbara interview pic 8.4.14

Barbara Finamore being interviewed by Jiansheng Ma & Yao Xu of China Electric Power News

BF: I am happy to share our experience in this area. One major measure California employed is energy efficiency. This measure is much more effective than most people expected. California’s way is interesting—

They consider energy efficiency as an energy resource. Compared to other resources, it is cheaper, cleaner, more convenient to use, and has no negative effect on the environment. Instead, it brings more environmental and economic benefits.

For instance, we consider electric conservation as an additional energy resource. Every dollar invested in energy efficiency brings potentials to save money, and it is so much cheaper than other energy resources (even coal). People are therefore willing to invest in this area. In practice, many state governments require power plants to invest for energy efficiency. This is a very exciting move.

But this is only the first step of the energy efficiency program. The electricity company needs to make money too. If we follow the old scheme, the more an electricity company invests in helping its clients save electricity and cut energy expenditure, the less money it would be able to make. Because of this, California (other states followed its lead) introduced decoupling, which enables the electricity company to ensure a certain amount of profit by saving electricity for their clients. This is different from power plants’ regular profit source; it innovatively created a new profit model for them.

You might think the electricity companies are not interested, but actually it’s the opposite. This is because no matter how much electricity an electricity company is able to sell within a certain period of time, whether it is profitable or not, under this energy conservation profit model, a reasonable and stable return is guaranteed. In early 1990s, some power plants in California went bankrupt because the electricity and diminished profits. After that, they started to appreciate the benefits of this more stable profit system—When energy crises hit, while big profits would not be achieved through this system, it prevents losses. We believe that this model is suitable for public utilities, such as power plants.

 “The enforcement of environmental laws is vitally important”

CEPN: Can you give us some advice on tackling environmental pollution in China, especially smog?

BF: Currently, environmental and natural resource degradation cost China an annual 9% of GDP, a huge amount, while air pollution in China contributes to around 1.2 million premature deaths a year. It would be much cheaper to prevent environmental degradation than to clean up after it. The U.S., particularly California, has shown that it’s possible to reduce smog and grow GDP at the same time. The U.S. established the Clean Air Act (CAA) in 1970 to regulate harmful pollutants, while states like California set up their own Air Resources Board to administer the CAA in its own state.

Los Angeles’ severe smog in the 1970s acted as a catalyst for California to act and protect public health. California’s laws and regulations to clean up the environment and its energy efficiency programs for utilities, buildings, and appliances drove innovation, created jobs, lowered electricity bills and provided higher quality of life. Because of these efficiency policies, California avoided the need for dirtier, more expensive energy. Meanwhile, California created 1.5 million jobs between 1972 and 2006 from its efficiency policies, and spends half as much GPD on electricity than the rest of the U.S. In terms of environmental issues, China, like the U.S. in the 1970s, is at a turning point, because it can no longer ignore its pollution problems.

CEPN: You are an expert on environmental law and energy policy. The American environmental law is stricter than the Chinese one in both standards and enforcement. How strict is it in the States? Can you give us some examples?

BF: Yes. The first example is that American power plant regulators now have regulations on four major pollutants. This measure is great because it allows power plants to take the most cost-effective way to meet the requirements. The power plants are not dealing with one single pollutant at a time. In order to save cost, power plants can install the best equipment at the very beginning to control all these pollutants.

The second example is training. For instance, according to America’s latest carbon emission standards, states can create their own programs to educate power plants on how to meet environmental requirements. “Meeting requirements” has multiple meanings. One of them is that power plants should increase energy efficiency. In this way, power plants reduce their costs, instead of merely focusing on emission results (the outcomes of which are usually not desirable).

The last example is enforcement. And it is the most important one. China has issued new regulations to tackle environmental problems, such as setting limit on PM2.5. However, the U.S. has a more comprehensive enforcement system. States have first responsibility in enforcing environmental regulations. If their execution is not effective or strong enough, the central government can take over these programs. And then the Environmental Protection Agency (EPA) can enforce the regulations.

If these agencies cannot execute effectively, American citizens could sue the power plants, or even sue the government on the ground that it has failed to comply with the law. However, the citizen or organization needs to submit an intent-to-sue letter sixty days before the litigation, declaring the intention to sue. And within these sixty days, the state government or federal government could intervene if it chooses to. In that case, the citizen would not be able to pursue further suit, but this action at least reminds the government of the severity of the problem. In fact, the enforcement policy in China’s latest environmental law is fairly similar to the American approach. This was achieved after a long period of discussions, and is much more robust and comprehensive than the old environmental law passed in 1989.

“Include carbon emission in the environmental protection framework”

CEPN: What do you think are the key elements of China’s energy revolution? Comparing with other countries, what are the differences?

BF: I think the key is to reduce the reliance on coal because China generates 80% of its electricity from coal, contributing to nearly half of China’s PM2.5. In provinces like Hebei, coal produces 80% of the SO2. It is also the chief contributor to China’s greenhouse gas emission. Hence, reducing coal consumption will bring benefits to the environment, climate, and various areas of the economy. One excellent way of reducing coal consumption is to change China’s economic structure—reduce the size of manufacturing industry, and expand the services sector. Limiting coal consumption will help China achieve industrial transformation.

In fact, the U.S. has the world’s largest coal reserve, and it has increasingly stringent rules to regulate environmental problems caused by coal (there is pressure from environment, health, and climate). The U.S. first focused on regular pollutants. On June 3rd, EPA just released a carbon emission regulation, for the first time in history, setting limits to the emission of carbon dioxide as a pollutant. As early as in the 1970s, Natural Resources Defense Council (NRDC) helped write the Clean Air Act. Recently, we filed a suit against EPA and the aim is to include CO2 in environmental regulation.

Comparing with other countries, China is following a similar development pattern set by Britain, America, and Japan, which is grow first and clean up later. Its environmental problems also have historical parallels: most Chinese cities are no more polluted than Japan’s were in 1960. But China is still growing on a massive scale. While America and Europe are cutting their carbon emissions by 60 million tons a year combined, China is increasing its own by over 500 million tons. China’s economy and population are both huge and resource-hungry; therefore its impact on climate is unique.

In the U.S. when in 1969 the Cuyahoga River in Ohio caught fire, the EPA was founded and passed the clean air and water acts. Beijing’s recent smog and other pollution events could be China’s turning point. While China is spending a lot of time and money to clean up, it is also trying to grow more. Around 250 million rural residents will move to urban centers in the next decade, leading to even more demand for energy, construction, food, and material goods. So China must develop and implement smart growth policies.

NRDC is working with the government and researchers to see how to cap coal feasibly by ramping up alternative energy sources (energy efficiency, renewable energy, nuclear power, natural gas, and hydroelectricity).  China is projected to reach its peak coal use in 2035, and NRDC is working to help China achieve negative growth in coal consumption by 2025.

How Much Do You Know About Air Pollution in China? Take the CRT Challenge

A traffic policeman signals to drivers during a smoggy day in Harbin, Heilongjiang province. Reuters

A traffic policeman signals to drivers during a smoggy day in Harbin, Heilongjiang province. Reuters

Test your knowledge on China’s air quality. China Real Time is putting readers to the test. You might be surprised what you find out.

Click here to access the quiz. 

Join Our EE Business Development Mission to China!

us china handshakeDecember 7-13, 2014

Join a small, select group of companies in the energy efficiency sector on a business development mission to China!

The week-long mission will begin in Beijing and visit Tianjin, Qingdao and Changzhou. These cities were chosen because they have specific needs for support in the energy efficiency sector, have the strong support of local officials, and have the ability to set up one-on-one meetings geared to the interests of participating companies. Contact us for more itinerary details. 

Who should participate?  

The mission is geared to any small- and medium-sized company that has proven technology and/or expertise in the energy efficiency sector, including equipment, software and service providers. We are focusing on companies that have sufficient experience, staff and funding to be able to make a commitment to working in China. For purposes of this mission, energy efficiency includes residential and commercial building efficiency/green buildings (new buildings and retrofits) as well as industrial efficiency.

How much does it cost?

Total cost per participant is $7500 for all expenses in China. 

  • This includes all meetings, receptions, translation, domestic travel, accommodations, and meals.
  • This does not include roundtrip airfare between the U.S. and China, visas, and company-specific needs (such as brochures and interpretation for one-on-one meetings).

Contact information:

Email: trademission@chinauseealliance.org

(415) 951-8975

Click here for the mission website

Support the Alliance by shopping at AmazonSmile!

amazonsmileWhen you shop @AmazonSmile, Amazon will make a donation to the China-U.S. Energy Efficiency Alliance. There is no cost to using AmazonSmile  – it is the same process and cost as using Amazon.

Signing up is easy:
Go to http://smile.amazon.com/ch/25-1909187 to register with your existing account. Please note that we are listed under our official name, China-U.S. Energy Efficiency Alliance.

How does AmazonSmile work?
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What is the AmazonSmile Foundation?
The AmazonSmile Foundation is a 501(c)(3) private foundation created by Amazon to administer the AmazonSmile program. All donation amounts generated by the AmazonSmile program are remitted to the AmazonSmile Foundation. In turn, the AmazonSmile Foundation donates those amounts to the charitable organizations selected by our customers. Amazon pays all expenses of the AmazonSmile Foundation; they are not deducted from the donation amounts generated by purchases on AmazonSmile.

Again, the Alliance’s AmazonSmile link: http://smile.amazon.com/ch/25-1909187

Thank you! We appreciate you supporting our efforts in combating global climate change by promoting energy efficiency as the preferred energy resource in China.

Roundtable on California-China cooperation on climate change

On June 5, Chair Robert Weisenmiller of the California Energy Commission and Secretary Matthew Rodriquez of the California Environmental Protection Agency discussed the unprecedented cooperation between California and China to combat climate change, promote clean and efficient energy, and support low carbon development. Hosted by Bingham McCutchen in San Francisco, the sold-out audience included representatives from the clean technology and energy industries, local governments, academia, and civil society.

In a panel discussion moderated by Annie Notthoff of the Natural Resources Defense Council, Secretary Rodriquez and Chair Weisenmiller started by noting what an enormous challenge and opportunity it is for California and China to cooperate on improving air quality for both sides of the Pacific Ocean.  This effort is supported by a memorandum of understanding (MOU) signed by the two governments in September 2013, as well as a number of other MOUs and agreements between California and the central or provincial governments in China.

Three speakers

From left: Annie Notthoff, NRDC (moderator), Chair Robert Weisenmiller, CEC, and Secretary Matthew Rodriquez, Cal/EPA. Photo: Fran Schulberg

Several areas of cooperation were highlighted, especially pertaining to energy efficiency, low carbon development, and other sustainable development efforts. Chair Weisenmiller mentioned how some of California’s regulatory structure can be adapted to China’s structure to assist them in making the transition from coal. He noted that China is now looking at a cap on coal by 2017. He stressed that this is the right time to collaborate with both decision makers at the central and provincial levels in China because, as he declared, “Climate is one of the defining challenges of our time.”

Secretary Rodriquez highlighted how cooperation on climate change and energy between California and China is a tremendous benefit to both economies by providing numerous opportunities for Californa and Chinese businesses to work together, especially within the energy efficiency and cleantech sectors. The market potential in China is staggering. He also noted that the newly opened California-China Office of Trade and Investment in Shanghai (part of the Bay Area Council and the Governor’s Office of Business and Economic Development (GO-Biz)) will help bolster additional business opportunities on both sides of the Pacific.

Secretary Rodriquez underscored that there have been concrete actions and follow-up since the signing of these agreements to ensure that they become more than just “paper MOUs”. Such follow-up has included at least three delegations from California’s Air Resource Board that have traveled to China to discuss air quality issues including PM2.5, as well as trips to California by officials from China’s Ministry of Environmental Protection. During these visits, Secretary Rodriquez has been amazed by the number of Chinese officials who have mentioned that despite California’s previous air pollution issues, the state learned how to improve its air quality while concurrently growing the economy—something that China wishes to do.  Secretary Rodriquez emphasized that when you see a willing partner who is interested in tackling these problems together, you can’t back away.

Barbara Finamore, President of the China-U.S. Energy Efficiency Alliance, recently commented on the cooperation between California and China. “It is exciting to see the initiatives between California and China to cooperate on targeting and reducing the sources of harmful air pollutants. The MOUs signed between both parties in the past two years have created a solid working foundation for state agencies, businesses, civil society, and academia to collaborate on trade and investment initiatives while simultaneously addressing air pollution and climate change.” Finamore is optimistic that there will be great opportunities for private sector and non-governmental organizations to be involved in some of the MOU implementation plans.