Energy Futures and Urban Air Pollution: Challenges for China and the United States (2008)

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Summary The United States and China are the number one and two energy con­sumers in the world. China is the largest emitter of sulfur dioxide (SO2) worldwide, and the two countries lead the world in carbon dioxide (CO2) emissions. Energy con- sumption on a grand scale and the concomitant air pollution it can cause have myriad effects, from local to global, and there are a number of underlying issues which have a profound impact on their interplay. Both countries possess massive coal reserves and intend to continue utilizing these resources, which have been a major source of pollution. In spite of energy security concerns, the United States is still the world’s largest consumer of petroleum, though China’s skyrocketing demand has made it the second largest consumer and a major source of demand growth. This is, of course, being driven by rapid urbanization and, in particular, by the rise of personal vehicle use. The United States has made great strides in improving air quality since the early part of the 20th century, by reducing domestic and transportation coal use and by refining combustion conditions in large centralized facilities. Further improvements were achieved during the last half of the 20th century by better understanding the relationships between emissions and air quality, developing and applying pollution controls, increasing energy efficiency, and instituting a man- agement framework to monitor airsheds and to enforce regulations. U.S. ambient levels of SO2, nitrogen dioxide (NO2), carbon monoxide (CO), and lead (Pb) have largely been reduced to levels that comply with air quality standards. However, ozone (O3), suspended particulate matter (PM), mercury (Hg), and a large list of Hazardous Air Pollutants are still at levels of concern. O3 and a large portion of PM are not directly emitted, but form in the atmosphere from other emissions, including SO2, oxides of nitrogen (NOx), volatile organic compounds (VOCs),  

 ENERGY FUTURES AND URBAN AIR POLLUTION and ammonia (NH3). The relationships between direct emissions and ambient concentrations are not linear and involve large transport distances, thereby com- plicating air quality management. China has focused on directly emitted PM and SO2 emissions and concentra- tions, with less regulatory attention being given to secondary pollutants such as O3 or the sulfate, nitrate, and ammonium components of PM. China has made great progress over the last 25 to 30 years in reducing emissions per unit of fuel use or production. However, rapid growth in all energy sectors means more fuel use and product, which counteracts reductions for individual units. Shut- tering obsolete facilities, which are often the most offensive polluters, has been an effective strategy, as well as adopting modern engine designs and requiring cleaner fuels (e.g., low sulfur coal). While necessary measures, these represent the “low-hanging fruit,” and greater reductions for a larger number of emitters and economic sectors will be needed to attain healthful air quality. The responsibility for developing and instituting many air quality and energy strategies rests with local and regional governments. The importance of national policies and actions should not be overlooked, but the most appropriate solutions in China will require local knowledge, willpower, and implementation. To examine the challenges faced today by China and the United States in terms of energy use and urban air pollution, the U.S. National Academies, in cooperation with the Chinese Academy of Engineering and the Chinese Academy of Sciences, developed this comparative study. In addition to informing national policies in both countries, the study is intended to assist Chinese cities in assess- ing their challenges, which include meeting increased energy demands, managing the growth in motor vehicle use, and improving air quality, all while maintaining high rates of economic growth. This report is geared towards policy and towards decision makers involved in urban energy and air quality issues. It identifies les- sons learned from the case studies of four cities (Pittsburgh and Los Angeles in the United States, Huainan and Dalian in China), addresses key technological and institutional challenges and opportunities, and highlights areas for continued cooperation between the United States and China. Owing to the small number of case studies, the committee decided against making many recommendations specifically tailored to the case study cities, or to cities in general, based solely on the experience of the four case studies. Instead, the case studies provide insight into how energy use and air quality are managed at a local level, and how our cities might learn from one another’s experience. This study does not examine in detail the related and increasingly significant issue of global climate change. It does acknowledge that this will be a central issue in future discussions of energy and air pollution, and an area where continued cooperation between the U.S. and Chinese Academies will be critical. The study committee, composed of leading experts on energy and air quality from both countries, began its work in 2005. 

Executive summary  ENERGY RESOURCES, CONSUMPTION AND PROJECTIONS In both countries, fossil fuels continue to dominate energy production. Renewable energy offers the potential to decrease this dependence, but, except for hydropower and wood, has not yet been heavily exploited in either country.  Due in large part to its abundance in both countries, coal has played an important role in electricity production and industrial processes, and its combustion has been a major source of air pollution. Coal has been and will continue to be primarily used for power production in the United States and China, but it can also be used to create gaseous and liquid fuels, as well as other feed stocks, and may play a larger role, depending on prices, as an alternative to natural gas and petroleum. Therefore, a primary challenge for both countries is to seek ways to utilize their coal resources in an environmentally acceptable manner. Petroleum accounts for nearly 40 percent of the U.S. primary energy consumption, mostly for liquid fuels in the transportation sector. China’s energy consumption is still dominated by industry (70 percent) and is supplied by coal (69 percent), but petroleum demand has increased rapidly in recent years in tandem with the burgeoning transportation sector (Figure S-1). Neither country has sufficient domestic petroleum reserves to satisfy cur- rent demand; in a business as usual scenario, both countries will be increasingly dependent upon imports. Natural gas has played an important role in the United States, primarily due to environmental concerns; but limited supplies and higher prices have led to renewed interest in coal-fired power plant development. In China, natural gas is not used widely, though China does possess large reserves of natural gas and of coalbed methane (CBM) and is taking steps to develop these energy sources. For both countries, future natural gas consumption will likely rely on advances in liquefied natural gas technologies and trade. Finally, nuclear power, which is the second largest source of electricity in the United States, has been receiving renewed interest, owing to higher energy prices and concerns over CO2 emissions. However, it is still unclear whether or not this sector will expand in the United States, and it still constitutes a small portion of total power production in China. Energy forecasting has proved challenging in both countries, owing to limited data and inaccurate projections of available resources and consumption. Energy consumption and projection data are also used as the basis for creating emission inventories used in air quality management. Energy security is a primary concern for both countries, and projected increases in fuel imports (notably petroleum) are a primary driver for the United States and China to pursue energy efficiency improvements and fuel substitution strategies. Energy prices have an important impact on decisions regarding fuel consumption. Rising natural gas prices in the United States have led to renewed interest in coal-fired capacity; and, in China, There are notable exceptions, including western states in the United States which have reduced their fossil fuel dependence relative to the rest of the country. 

 ENERGY FUTURES AND URBAN AIR POLLUTION United States China Petroleum 39.7% Petroleum Coal 21.0% 22.8% Coal 68.9% Natural gas 2.9% Renewables & Nuclear Natural gas Renewables & 14.0% 23.5% Nuclear 7.2% FIGURE S-1  Primary commercial energy consumption by fuel type, 2005. NOTE: China’s nuclear power production represents less than 1 percent of total c ­ onsumption. Left and right ES-1 the rising cost of delivered coal, due to escalating costs of transportation by train, has led some coastal cities to import cheaper coal from other countries. Rising fossil energy prices will also affect the development and use of alternative energy resources, such as biofuels. In terms of energy consumption, industrial uses continue to dominate in China, although buildings (residential and commercial) and transportation will increase their share in the coming years. Buildings are a large consumer of energy in the United States, in terms of electricity consumption for lighting and appli- ances and energy for heating and cooling (40 percent of total energy consumed). Transportation is also an important energy consumer in the United States (nearly 30 percent), almost exclusively in petroleum-based fuels. China’s transportation sector currently consumes 8 percent of total energy, but this proportion is certain to increase along with the increase in personal vehicle use, air travel, and goods shipment (Figure S-2 and Figure S-3). As such, fuel quality will be an important issue, in addition to its availability. In many parts of China, fuel quality remains poor, especially diesel fuel, and consequently transportation fuels have a dispro- portionate impact on air quality. AIR POLLUTION TRENDS AND EFFECTS The United States and China both regulate air pollution because of its effects on human health, visibility, and the environment. Both countries have adopted air quality standards for individual pollutants, although China’s air pollution index contains five separate classes, allowing for “compliance” at levels less stringent 

Executive summary  Transportation 28% System losses 46% Residential Electricity 21% 21% Industry Natural Gas 32% 24% Other Commercial 9% 18% FIGURE S-2  United States Energy consumption by sector, 2006. Transportation 7.5% Agriculture ES-2 3.6% Industry Residential 70.8% 10.5% Commercial 6.2% Construction 1.5% FIGURE S-3  China Energy consumption by sector, 2005. than international standards. In the United States, National Ambient Air Quality Standards (NAAQS) have been established for O3, CO, SO2, NO2, Pb, PM2.5 (< 2.5 µm aerodynamic diameter), and PM10 (<10 µm aerodynamic ­diameter), based on their adverse health effects. Indoor air pollution, largely associated with the use ES-3 of coal for heating and cooking in China and with smoking, building materials, wood burning, and natural gas cooking in both countries—is an important health concern that is not regulated. Respiratory and cardiovascular sickness and death rates are significantly higher in polluted compared to non-­polluted areas in both 

 ENERGY FUTURES AND URBAN AIR POLLUTION countries. It is estimated that nearly 50 percent of respiratory ailments are related to excessive air pollution and that, by 2020, China may be devoting 13 percent of its projected GDP to healthcare costs associated with coal burning. Like the United States, China is ultimately bearing some of the external costs of air pollu- tion through healthcare costs. In the United States, acid deposition and visibility impairment are being reduced, but it will still take decades and larger emission reductions to attain desired levels. Plant life is more sensitive than humans are to O3 and this has important implications for forest ecosystems and agricultural crop production. China is currently studying the agricultural impacts of O 3 exposure; by some projections, O3 could cause 20-30 percent crop losses for soybeans and winter wheat by 2020. Largely as a result of air pollution regulation, the United States has witnessed substantial reductions in emissions and ambient concentrations of PM10, CO, SO2, NOx, and Pb. However, PM2.5 and O3 exceed healthful levels in many parts of the United States and China. These require both local and regional emission reduc- tions of directly emitted PM2.5, SO2, NOx, and VOCs, which lead to secondary ozone formation. In addition to controlling industrial sources (including power plants), the United States has instituted pollution controls for mobile sources and specifications for motor vehicle fuels. This has led to marked decreases in Pb emissions (China is currently experiencing similar decreases) and CO l ­ evels. China’s emissions are predominantly industrial; SO2 emissions have been increasing, although soot and dust (the other two currently regulated emissions) have remained slightly more stable since the mid-1990s. Although some Chinese cities measure and report O3 and other pollutants, local governments are only required to report on CO, NO2, SO2, and PM10. Of these, PM10 has most often been associated with unhealthy air quality. However, regional and local studies in urbanized regions have observed excessive O3 and PM2.5. PM2.5 constitutes a large part of PM10 (50-70 percent) and therefore is an important urban and regional air p ­ ollutant, which is currently unregulated in China. An important lesson learned is that air pollution damage imposes major eco- nomic costs, through premature mortality, increased sickness and lost productiv- ity, as well as decreased crop yields and ecosystem impacts. Cost-benefit analyses in the United States show that emission reduction programs have provided much greater benefits than their costs, by a ratio of up to 40 to 1, according to some estimates. INSTITUTIONAL AND REGULATORY FRAMEWORKS The United States has strong federal leadership and enforcement (U.S. Envi- ronmental Protection Agency [EPA]) for NAAQS attainment. This resulted from the realization that air pollution crossed political boundaries, and that some states and localities were not sufficiently controlling their emissions. There is a partnership between federal, state, and local agencies that addresses different 

Executive summary  types of emissions, with partial federal financing available to state and local pol- lution control agencies. Federal highway funds can be withheld from areas that do not make good faith efforts to attain pollution standards. In China, the central authority (State Environmental Protection Agency, SEPA) plays a minor role in air quality management in cities, with most activities carried out by local Environ- mental Protection Bureaus (EPBs). Cities and provinces have little motivation to reduce emissions that might affect neighboring regions. Pollution reduction laws have been ineffective in the absence of enforcement, emissions monitoring, and ambient air monitoring. Thus, monitoring and enforcement are key challenges for China. The central government recognizes the importance of air quality and has enacted a series of regulations aimed at reducing pollutant emissions. However, the local EPBs charged with the responsibility for enforcement often lack the necessary funding, technical capacity for monitoring, and/or the will to perform appropriately. Moreover, local and provincial leaders are evaluated primarily on economic performance that does not consider the costs of pollution, often leading to short-sighted decisions favoring economics over pollution control. As a result, air quality management has been inconsistent. Emission controls are often less costly to implement than first envisioned. Control costs are also not purely costs, as they create opportunities (e.g., manu- facturing and sales of pollution control and energy efficient equipment) that result in economic growth. Appropriate programs can lead to economically efficient approaches for improving the environment, thereby further reducing costs. In particular, both countries are experiencing a trend towards market-based approaches to air quality management (in contrast to the earlier command and control approach). The U.S. successful SO2 “cap and trade” program is being adopted elsewhere, including in China. Other tools, such as emission taxes and fees, can also be utilized to achieve air quality goals, but these likewise require judicious monitoring and enforcement. China has made important strides in closing down inefficient and heavily polluting industries, and SEPA has recently become influential in reviewing environmental impact assessments and even in halting major construction projects. Still, challenges remain in terms of managing remaining infrastructure and in planning for future growth. Aside from the EPA and SEPA, other agencies in both countries play roles in air quality management. Energy policies also impact air quality. In the United States, the Department of Energy (DOE) plays a dominant role in setting policy, as well as in conducting key research; but in China energy responsibilities are more diffuse. Both countries might benefit from increased coordination between energy and air quality research and policy making. While much data and informa- tion about emissions, ambient concentrations, and energy use are publicly avail- able in the United States (many of them over the Internet), such data are often sequestered in China. The EPA has converted older data management methods to modern web-based systems. The U.S. Energy Information Administration has a similar compilation of energy data. Public and scientific scrutiny of these data has 

 ENERGY FUTURES AND URBAN AIR POLLUTION led to improved quality and utility over time. Many of these modern concepts can be applied in China. Although China has made progress in reporting air ­quality indices to the public, the data needed for successful energy and air quality man- agement are still difficult to obtain and analyze. Non-governmental organizations (NGOs) have also played important roles in setting air quality and energy priori- ties in the United States; environmental NGOs are on the rise in China, but their active involvement is predicated on access to information. KEY INTERVENTIONS Energy Efficiency Improved energy efficiency provides benefits for air quality and energy security, while reducing costs. Energy efficiency can provide gains similar to, or greater than those provided by specific pollution controls and can reduce the need for new power generators. Cost-effective technology is currently available to greatly improve energy efficiency across all energy use sectors. Overall, energy intensity (a measure of energy consumption divided by GDP) has been declining in the United States over the past 20 years; China’s intensity also declined from 1985 to 2000, but, since 2000, it has been increasing. However, this broad measure does not always accurately reflect changes in energy efficiency. The U.S. economy has experienced a reduction in energy-intensive industries, as part of a transition to a more service-based economy, and in many cases these energy-intensive indus- tries have relocated in China. Still, both countries have made important sectoral improvements, which could be implemented more broadly. Energy efficiency has been an underutilized resource in both the United States and China. China can make substantial and immediate gains through improvements in supply-side energy efficiency. Its power generation and industrial sectors have lagged behind international standards for energy efficiency, although there is increasing interest in utilizing more efficient coal technologies (ultra-supercritical pulverized coal combustion or integrated gasification combined cycle (IGCC) coal combustion). China has made strong efforts to integrate energy systems, such as in combined heat and power (CHP) and in combined cooling, heat, and power (CCHP) plants, both of which efficiently capture waste heat from power genera- tion and utilize it to provide heating and cooling for residential and commercial buildings. CHP plants represent roughly 12 percent of total installed electrical capacity in China, and there are plans to double this share by 2020. Efficiency in the transportation sector is another area in which both the United States and China can improve. In the United States, fuel economy standards imposed in the 1970s led to rapid improvements in vehicle fuel efficiency, but owing to the popularity of less stringently regulated light duty trucks coupled with low fuel prices, overall fleet fuel efficiency has declined since the early 1990s. China has developed fuel economy standards which surpass those of the United 

Executive summary  States, though it is not yet clear how effectively these are being or will be enforced. Hybrids, which combine electric batteries with conventional fuel tanks, are avail- able in both countries and offer substantial fuel savings. However, higher initial costs and battery replacement costs make these vehicles prohibitively expensive for some consumers. One additional means of improving efficiency in the urban transportation sector is by decreasing congestion and increasing the use of more efficient modes (e.g., public transportation). Combustion and Pollution Control Technologies It is less costly to plan for and implement pollution controls up front than to install them later. Due to a lack of knowledge of pollution effects and controls, the United States did not act early enough to provide for emission controls on station- ary and mobile sources. Thus, retrofitting is an important but expensive part of the U.S. strategy to meet current air quality goals. Fortunately, in the U.S. experience, pollution control costs have declined and equipment costs are now anywhere from one-half to one-tenth the cost of older systems, and are more effective at pollutant removal. China is mandating SO2 scrubbers on new power plants, and this is an important first step. But monitoring and enforcement will be needed to ensure that controls are properly installed, maintained, and continually operated. Future solutions to air quality goals may necessitate additional retrofits in China, such as adding scrubbers to existing plants and reducing NOx emissions with low-NOx burners, or through selective catalytic reduction systems. Coal-fired boilers have long lifespans (> 50 years) and decisions made at the time of construction persist for many decades; this is particularly important, given the rate at which China is currently constructing new coal-fired power sets. Lack of available technical expertise, supply bottlenecks, financing, short-sighted economic decisions, and/or political opposition may continue to limit the up-front implementation of the best available control technology; but leaving room for it in the future will make it easier to install when the necessary resources are available. Future pollution controls for stationary sources in the United States will focus on further reducing SO2 and NOx emissions from older facilities, reducing Hg emissions from coal-fired power stations, and decreasing the introduction of CO2 into the atmosphere. Mercury capture is, in some cases, a co-benefit of other installed pollution controls, but ongoing research is focused on improving tech- nologies specifically designed for mercury control (e.g., activated carbon). Carbon capture and sequestration, though not currently mandated, are being studied and could be regulated in the United States in the future. It is for this reason that IGCC technology is of great interest, as it permits the most efficient capture of CO 2 and other pollutants from coal gas, before it is used to drive a turbine. China has been a world leader in developing coal gasification technologies, though it is currently used almost exclusively for chemical production. One notable project involving both countries is FutureGen, a DOE-led venture which seeks to utilize IGCC with 

10 ENERGY FUTURES AND URBAN AIR POLLUTION carbon capture and sequestration, to produce electricity, hydrogen from coal, and to realize co-benefits such as the use of the captured CO2 as a medium to drive enhanced oil recovery. Renewable Energy Renewable energy sources, including solar, wind, geothermal, waste-to- energy, and biofuels, constitute important, but not large, fractions of energy port­folios in both countries. But the current rate of growth in renewables is insufficient to meet the projected needs for fossil fuel energy. Hydropower and wood to produce electricity are the dominant renewable resources currently being utilized, and are projected to remain so—although other technologies, notably wind turbines, have been improving and their use is rapidly expanding. Several applications, such as solar water heating and wind turbines to generate electric- ity, are economical in the long term, but can require larger up-front investments and backup power versus more conventional sources. Therefore, energy prices influence the market penetration of renewable technologies. Government man- dates also play a role, as both countries (including state and local governments) have set targets for renewable energy consumption. For the time being, except for hydroelectric, renewable electricity generation sources mostly fulfill niche applications, but they are showing promise as distributed or off-grid energy sup- plies, as they are cleaner and can be more cost-effective than extending existing power lines. China has been expanding its capacity of small hydropower units, in order to electrify remote areas. China has also made great strides in developing its domestic capacity to produce wind turbines, and it is already the world leader in production and use of solar water heaters. Renewable technologies will also be critical to the eventual pursuit of a hydrogen economy. Hydrogen can currently be produced economically from natural gas for industrial purposes, but large- scale production will almost certainly rely on renewable energy for production, if hydrogen is to be considered a clean alternative energy carrier. It is unclear whether some biofuels, including ethanol from non-cellulosic sources, provide more renewable energy than they consume in non-renewable energy for their production. Biodiesel production has been increasing, but it still constitutes a minor fraction of total biofuel production. In the United States, e ­ thanol is predominantly derived from corn, while in China its sources are slightly more diversified, but still grain-based. In both cases, this production is viewed as competitive with food markets and, ultimately, the future of ethanol as a viable petroleum alternative will depend on advances in cellulose-based production technologies and their successful commercialization. However, ethanol has been effectively used as an additive for reformulated gasoline (RFG) for a number of years, in order to reduce certain harmful emissions; experiences in U.S. metro- politan areas have shown that use of ethanol in RFG can help reduce total CO emissions, as well as toxics such as benzene. 

Executive summary 11 LESSONS FROM CITIES In the United States, many cities, including Pittsburgh and Los Angeles, have successfully implemented policies and technologies to reduce various emissions and to improve air quality. Local pollution prevention measures showed benefits as early as the 1940s in Pittsburgh, when smoke controls in place likely saved the city from a severe air pollution episode that caused loss of life in nearby Donora. Civil society played an important role in Pittsburgh’s approach to air quality management. Early activist groups raised awareness of air pollution issues and paved the way for an open stakeholder process which allowed NGOs, such as the Group Against Smog and Pollution, to take part in policy formulation. Pittsburgh has diversified its economy since its industrial prime. As local pol- lution sources have been cleaned up or closed down, the city has focused more on regional pollution issues such as O3 and PM2.5. Indeed, as many U.S. cities remediated local air pollution problems, it became apparent that some issues required regional solutions, as current pollution levels derive from a variety of energy uses and sectors on local and regional scales. All of these sectors must participate in solutions to pollution. As demonstrated in Los Angeles, emission controls can be applied to many small and medium-size sources that collectively have a large effect on pollution levels. Federal intervention often leads to local regulations to solve what are ultimately regional challenges. Air pollution does not obey boundaries, and while many Chinese cities are pointing out the impact that regional pollution has on local conditions, to date there have been few examples of regional cooperation. In the United States, the Los Angeles situation is more common, where regional and statewide organizations such as the South Coast Air Quality Management District and the California Air Resources Board both play critical and complementary roles in air quality management. Both U.S. and Chinese cities have benefited from research, development, and technology transfer efforts in their universities, research institutes, and pro- fessional associations. These efforts also provide local expertise for states and provinces and train professionals needed for regulatory, industrial, and educational enterprises. Pittsburgh and Los Angeles both continue to rely on their local uni- versities and research institutes to address emerging challenges in energy and air pollution. An ongoing challenge for many U.S. cities is that U.S. transportation and economic development policies have created the need to drive long distances, resulting in high personal vehicle use and automobile emissions. A similar pattern is now occurring in many Chinese cities, and their response has been to build more roads to alleviate congestion. The rapid growth of traffic in Dalian and in similar Chinese cities will repeat the air quality and energy consumption mistakes of Los Angeles and other U.S. cities, if not better managed. Chinese cities can benefit from their greater densities (relative to most U.S. cities) and take steps to limit the need for personal vehicle use, as the cities continue to grow. Some U.S. cities are attempting to undo the effects of their sprawling development, but these efforts are slow and costly. 

12 ENERGY FUTURES AND URBAN AIR POLLUTION Huainan and Dalian can also set examples for other Chinese and U.S. ­cities. Both cities benefited from efforts to relocate key industries away from urban c ­ enters and from closing down inefficient, highly polluting industries. However, the net impacts of industrial relocation are not yet fully understood; moving pol- luting industries away from densely populated city centers has lowered the risk and exposure for numerous city dwellers, but the relocated industries may transfer the risk to rural or suburban residents; moreover, depending upon the location of the industries, the air quality impacts may not be fully reflected by data generated at urban air quality monitoring stations. Huainan has improved its air quality, though future plans to develop the city into a regional base for energy and chemi- cal production will necessitate further strengthening of the air quality management system. As a coal-rich city, Huainan has benefited from local research and devel- opment, which has allowed it to begin harnessing coalbed methane and to utilize coal gasification technologies. These may be usefully applied to the energy needs of numerous other cities. Dalian has enjoyed a reputation as one of the cleanest cities in China, and it has often established environmental quality standards which exceed national standards. Other Chinese cities could benefit from adopting and pursuing similar aggressive standards. KEY RECOMMENDATIONS To meet the challenges of increasing energy consumption while achieving air quality goals, the U.S. and Chinese governments (national and local) should consider the committee’s specific recommendations in 15 areas. Some of the key recommendations are presented below. A discussion of all of the committee’s recommendations and study findings may be found in Chapter 12. 1. Learn from experience. China should learn from the successes and fail- ures of the United States and other developed countries in reducing the influence of energy use on air quality. Mistakes already made in the United States and elsewhere should be identified (as this report has attempted to do) and avoided in China (Recommendation 1-a). Continued dialogue and information exchange among U.S. and Chinese scientists and policy makers should be promoted through professional organizations, government support programs, and the National Acad- emies in both countries, to promote joint development of energy and pollution control strategies (Recommendation 1-b). 2. ���������������������������������������������������������������������� Recognize and respond to external costs of energy production and use. Both countries need to improve permitting policies and economic mechanisms that reflect the external costs of pollution that are being paid by others (e.g., through adverse health effects and degraded quality of life). These might include high enough taxes on emissions to make the addition of controls economically 

Executive summary 13 attractive, and rebates or subsidies to encourage use of higher efficiency and renewable technologies (Recommendation 2-a). 3. ������������������������������������������������������������� Both the Establish and implement standards that protect human health. United States and China should adopt minimum standards based on healthful air quality, which may require revising currently accepted standards. Local govern- ments should be able to enact more stringent local standards, but there should not be a sliding scale based on the level of economic development (Recommendation 3-a). PM2.5 control should be emphasized over, but not at the expense of, PM10 and O3 reductions (Recommendation 3-f). 4. ������������������������������������������� There has to be participation Address pollution sources comprehensively. in emissions reductions by all sectors, not just by the major industries. Enforce- ment and monitoring, as well as incentives, are needed to assure that emission reductions are implemented and maintained (Recommendation 4-e). Governments must improve policy incentives to adopt specific control technologies. Policies requiring the implementation of pollution controls are a positive first step, but these policies must be developed in tandem with appropriate incentives to over- come financial or other barriers (Recommendation 4-g). 5. ����������������������������������������� quality planning and enforce� Strengthen SEPA’s role in overseeing air ����������������������������� ment. The Chinese government needs to expand SEPA’s staff and influence over local air quality surveillance, management, and enforcement. Better coordination is needed between national and provincial authorities (Recommendation 5-a). As in the United States, China needs formal emission reduction plans specific to cities and regions that are independently evaluated and enforced at the national level. These plans should specify the activities that will bring areas into compliance with standards and that will keep areas already in compliance from becoming more polluted (Recommendation 5-b). 6. ��������������������������������������������������������� The United States Realize the potential of energy efficiency improvements. and China should consider evaluating the best energy efficiency standards for all energy sectors that have been formulated by each country, by their states/prov- inces, or by other countries. Efficiency standards, like air quality standards, will need to be properly enforced in order to be effective (Recommendation 6-a). 7. ����������������������������������������������������������������������� Promote efficient transportation systems and sustainable urban design. Transit-oriented design and smart growth policies should be implemented to develop new urban areas or to redevelop existing areas, particularly in rapidly developing cities with high projected growth. Bus rapid transit (BRT) should be considered in a number of U.S. and Chinese cities, as it represents a low-cost (relative to subways and light-rail) transit system easily adapted to existing infra- 

14 ENERGY FUTURES AND URBAN AIR POLLUTION structure, with proven success in other parts of the world (Recommendation 7-a). Traffic management systems, such as the system in place in Dalian, should be implemented in other Chinese cities, in order to manage the rapidly expanding vehicle fleets and to limit congestion (Recommendation 7-c). 8. ������������������������������������������������������������������������ Accelerate improvements in fuel economy and reductions in mobile source emissions. The United States should examine the present Corporate Average Fuel Economy (CAFE) standards or alternative incentives to improving fuel economy, to develop standards tailored to the U.S. market and vehicle stock (Recommendation 8-a). China should enforce their fuel economy standards and consider other, possibly more effective alternatives as well (Recommendation 8-b). China should continue to increase its vehicle emission standards and to enforce those standards; China should also improve the quality of its refined fuels (Recommendation 8-d). 9. ���������������������������������������� Building codes in both countries Improve energy efficiency in buildings. should be updated to require energy-saving technologies (e.g., CCHP; Recom- mendation 9-a). Subsidies, incentives, and low cost financing should be enhanced in both countries to encourage up-front investments in energy efficient technolo- gies that will be paid back in future cost savings (Recommendation 9-b). Both countries should allow or encourage utilities to decouple profits from energy sales. This is occurring to some degree in the United States, but needs to be accelerated, and must be implemented in China (Recommendation 9-c). 10. ������������������������������������������������������������ Incentives Promote cleaner technologies for heat and power generation. are needed in the United States and China to implement cleaner coal conversion technologies (e.g., IGCC), more efficient generation methods, and productive use of waste heat (Recommendation 10-a). Coal washing and sieving rules should be implemented and enforced in all sectors of the coal industry in China, to reduce SO2 and to increase combustion efficiency (Recommendation 10-b). Following the example of cities such as Huainan, coal-rich areas should implement systems to recover and make effective use of CBM and coke oven gas (Recommendation 10-d). 11. ��������������������������������������� Better evaluation tools need to Plan in advance for pollution control. be promulgated, specific to the United States and China, which assist project d ­ esigners in evaluating the costs and benefits of different energy conservation/­ pollution control alternatives (Recommendation 11-a). Projects need to be planned with the expectation that pollution controls and retrofits may be required, or deemed economical, in the future, even if benefits do not exceed costs by today’s standards (Recommendation 11-b). 

Executive summary 15 12. ������������������������������������������������������������ Both Accelerate development and use of renewable energy sources. countries should continue to encourage the development, production, and use of renewable energy wherever possible, through various policy instruments (e.g., renewable portfolio standards, tax rebates, preferential purchasing) (Recommen- dation 12-a). 13. ������������������������������������������� quality management efforts. Expand public participation in Chinese air ���������������������������� SEPA needs to convince public officials that the advantages of disseminating energy use, emissions, and air quality data outweigh the disadvantages. Such transparency will result in better data quality, by providing feedback on deficien- cies to data generators (Recommendation 13-a). SEPA and provincial agencies in China should continue to increase their efforts in outreach and education to engage the public in helping address air pollution problems, and to encourage public participation in environmental impact studies and decisions affecting the environment (Recommendation 13-d). Local governments in China should encourage more volunteer groups focused on improving the environment (Recom- mendation 13-f). 14. ����������������������������������������������������������������������� Improve capacity to address current and future issues through research and education. Both countries need to strengthen research and development in clean energy, energy efficiency, and air quality research. There is also a need for improved research across disciplines, in order to better understand the linkages between energy and air quality (Recommendation 14-a). Chinese cities need to develop local and regional technical training centers and professional education centers, in order to build the capacity to operate and maintain pollution controls and advanced technologies (Recommendation 14-e). 15. ������������������������������������� quality issues, including efforts to Expand cooperation on energy and air ������������������������������������� reduce greenhouse gas emissions. Given the existing interest in climate change, it is imperative that the United States and China begin substantial cooperation on issues to reduce greenhouse gas emissions. In addition to energy efficiency, there is great potential for collaborative research on improving CO2 capture and sequestration technologies (Recommendation 15-a). China will benefit from fur- ther cooperation on developing regional air quality management. Future activities should complement the ongoing work between Guangdong and Hong Kong, and efforts to develop SEPA’s regional offices. Research universities and governments should also increase collaboration on measuring and monitoring PM2.5 and O3, as well as air quality forecasting (Recommendation 15-c).