WA China Watch Digest Special!

Interview: Dennis Bracy on U.S., China ratifying Paris Agreement, and other stories from Hangzhou G20 Summit

Dennis Bracy signing an agreement with China Southern Grid, April, 2016By Wen Liu   Sept. 19, 2016

Earlier this month, the 11th G20 Summit took place in Hangzhou, China, with the theme, “Innovative, Invigorated, Interconnected and Inclusive,” and a communiqué on global economic recovery. The bigger story out of Hangzhou, however, was the ratifying by the U.S. and China of the Paris Agreement on climate change adopted by 195 countries last December. One person who knows anything about the agreement is Dennis Bracy, Chief Executive Officer of the US-China Clean Energy Forum based here in Seattle. While we were at it, Mr. Bracy also shared his views on what the media called a “snub” at President Obama at the Hangzhou airport. With his many years dealing with China beginning in the 1980s, Mr. Bracy also has his own understanding of the changing attitude on the part of China in their dealings with the United States.

WCWD: Just before the G20 Summit in Hangzhou, President Obama and President Xi Jinping announced that the U.S. and China ratified the Paris Agreement on climate change. What does it mean? On the China side, Xinhua News said that the National People’s Congress had ratified the agreement. On the U.S. side, doesn’t the ratification need the U.S. Senate vote or approval?

Dennis Bracy: It means that as the heads of state of our two countries, they were among the very first to sign on. That has a dramatic and positive impact on moving the other countries to sign the agreement. Of the 195 countries, it takes 55 to make it official. The symbolic importance can’t be overstated. I was in Paris in December, everyone was there, in a sense, waiting to see what the two big guys would do. China and the U.S. together account for 40% of greenhouse emissions. If U.S. and China had not stepped up and agreed to in 2014 to a very aggressive path, Paris couldn’t have happened. The strategy the White House and the State Department signed on, I think it is the right strategy, was to keep this as an agreement rather than a treaty. A treaty of course requires 2/3rds approval by the U.S. Senate. There is no secret that getting things out of the U.S. Senate and U.S. House these days is very difficult. And the Earth can’t wait. The amount of the CO2 and greenhouse gas is continuing to accumulate and they break down over hundreds of years. So every day we wait literally is a problem. The agreement recognized the reality. Each country in the world, small or large, wants to be the master of its own future. In the beginning we started with a very top-down approach, that’s one of the reasons the Copenhagen was not a success. We took a bottom-up approach and said each country would set its own limits, and we were going to try through persuasion, aid, education and other incentives, to get every country to stretch, including with the “Big Two” leading the way with very ambitious agenda. That’s a sounder approach, because it takes action and commitment from each country to realize a goal much more important than a piece of paper.

WCWD: You were very excited last year when China announced that it would commit to peak its CO2 emissions, or cut carbon emissions by 60-65% per unit of GDP, by 2030, compared with 2005 levels, and to increase non-fossil energy to 20% of its energy consumption also by 2030. How is China doing so far on those commitments? What about the U.S. in comparison?

Dennis Bracy: I think both countries are taking very bold steps in the right direction. China for a long time did not want to set an absolute limit. They wanted to insist upon a metric of percentage of emissions as compared to gross domestic product, GDP. While that is a valid measure, it wasn’t really going to put a lid on the total amount. Now they accepted that. That’s a big step. How they doing? I think very, very well. First, let’s talk about their challenge though. China is modern and prosperous as it is; much of China today still has 500 million people in a developing country situation. And as you know, 20 million people every year migrate from rural China to cities. So China, just by 2030, will add essentially the population of the United States to its cities. That means they have to build infrastructure, trains, subways, hospitals, schools, roads and all the things of modern life, while China to cut carbon. So they have a very big challenge.

U.S.-China Clean Energy Research CenterSecondly, in the U.S., we have a deep reserve of oil, gas and coal in even measures. In China, 94% of their fossil reserves are coal. People ask why does China do stuff with coal? That’s what they have. While they are faced with those enormous challenges, rural migration, a lack of diverse supply, they are leading the world in terms of investment, by a factor of two, in renewables. They are the world’s leader right now, today, in hydro. In the past two years, it cut coal use by 2-3% while still growing the economy nearly 7%. Cut carbon by 2% last year. I don’t know that is sustainable cut, because they take out the worst plants first, the least efficient cement plants, the least efficient coal power plants, the least efficient steel plants. Those are the ones that go first. That actually resulted in 2% cut. Actually, their coal plants, they are the world leaders in the technology to make plants more efficient, more efficient than most plants in the world, certainly ours.

We worked with them closely. We have very, very active cooperation programs to develop sensible, cost-effective solutions to capture or reutilize that carbon. That’s through U.S.-China Clean Energy Research Center, CERC.

As for the U.S., we are reducing carbon emissions for sure. The main part of that comes from switching from coal-fired power plants, which not long ago, was 50% of our generation. Now it stands at 30%. It is regulatory, but a lot of it is also we have so much natural gas, and so cheap. It makes sense for companies to switch to gas. That has an immediate and dramatic positive effect. That coincides with the development of natural gas from fracking. There are a lot of other things going on and encouraging. Automobile fuel economy has increased dramatically. Automobiles account for about a third of our greenhouse gas emissions. So putting a dent in those emissions by increasing efficiency is a very big idea. So we are making progress. Obviously, China has the benefit of a centralized planning and decision-making process. Five-year plan in my view is a very strong tool that forces everyone at the provincial level, the local level, the ministry level to form their plan and be measured by the plan. We of course don’t have that kind of unified system. And in fact, we have sharp disagreements across the political spectrum. But we are making progress. We made I think very bold commitments with China in that 2030 time frame.

WCWD: Now back to G20 Summit. When Air Force One touched down in Hangzhou, there was no staircase or red carpet rolled out for President Obama. He had to come out from the emergency exit of the plane. There was also a heated exchange between an American official and a Chinese official at the same arrival, with the American saying, “This is our president and our plane,” and Chinese shouting back, “This is our country and our airport!” Do you think the absent staircase was a protocol mishap or a deliberate snub at President Obama? Have you experienced any arrogance on the part of the Chinese along with China’s growing power?

Dennis Bracy: There is no time for reflection today and everyone has instant judgment. I don’t know the answer to it. I have found without exception that the Chinese respect and try to do their best to give hospitable receptions under any circumstances. Now if Air Force One had landed and there were no ladder, I would say that’s a problem. Again, I tend not to focus on that. Of course you are going to have personal view point differences, with so many people involved. Tensions in those kind of situations are inevitable. Again, I dismiss that as not important in the big scheme of things. The job of the Chinese and the job of the American was to protect their boss and their own interests. It’s a two-day social media phenomenon. The real task is what we are doing with our agreements, certainly in climate and in clean energy.

Dennis Bracy signing with WANG Liangyou of China Southern Grid, April, 2016My observation would be, the principle change is not how Chinese feel about us, but how they feel about themselves. It’s no secret that before the Opium War, China was the greatest country in the world. China went into a period of self-isolation, and by their own accounts, a period of shame, where they lost their leadership role, and they feel they were taken advantage of by foreign powers. Now because of all the amazing things happening in China, there is a sharp rise in pride. And I detected that among my friends and in our discussions. That’s more the story. Chinese are more self-confident about who they are, what they can do in the world that translates into perhaps a different setting for negotiating and connecting relations.

WCWD: On the whole, from the 1980s when you got the China bug in an English corner in China, to the 1990s when you worked with Chinese partners in producing prime-time TV shows in Beijing, to the 2000s when you served as chairman of the Washington State China Relations Council, and to now heading the U.S.-China Clean Energy Forum, how have you changed in your understanding of U.S.-China relations, and are you more optimistic or less today, considering the new South China Sea tension?

Dennis Bracy: The relationships are more complicated than used to be ten years ago. You know the movie by Alec Baldwin and Meryl Streep called Its Complicated. That’s going to be our relationship from now on. It’s complicated. So is our relationship. On clean energy matters, we have very, very close relationship because our interests are very much aligned. On other areas, we have greater challenges. South China Sea, to me, stands out as a particularly challenging situation. In fact, we both have legitimate interests there and very different points of view. For U.S., part of it is global power balance; it’s also the freedom of shipping. So we will see. I hope we don’t get into a point-to-point confrontation. It is important, but there are many more important global issues that we do have obvious common interests we need to concentrate on.

China’s vision of itself has changed. Part of it is the pride we talked about. For years and years and years, we worked to develop a common plan, which we did, with the National Development and Reform Commission and other leaders from China and our leaders and our businesses. China at the beginning, in Hu Jintao era, talked about how they were the largest developing economy in the world, with speeches about, look, on greenhouse gases, you and the West screwed it up. Don’t tell us we can’t have cars or air conditioners and other aspects of modern life. That was always a fair point. Now they changed. There is a sharp and obvious change, even in our negotiations. Now I don’t hear the developing country talk so much as we are world leader. They stepped up to the world stage. So that, for another country, changes the relationship. They have moved from saying it’s not our problem to understanding it is our problem, and it is our solution that we must join together.

I am optimistic but recognize it is more complex than used to be. There is an inevitability that we are going to share any common interests and there are also going to be areas where we don’t have common interests. Here is something I think is very interesting that I observe. It used to be, whenever one issue went awry, Taiwan arms sales, for example, everything would shut down, essentially all workings between government officials on both sides, would just stop. And our companies would feel a very direct impact in their negotiations and their treatment. What I find now while there are still disagreements, everything else keeps going. That’s kind of like a marriage. To agree to disagree, and handle and manage the disagreements, not pretending they don’t exist. I see a tremendous maturing of the government-to-government dialog, the way people work together, much more mature and productive, if we have some important differences.

WCWD: You said that you are going to China again in October. How is US-China Clean Energy Forum doing? And what is your October trip about?

US-China Clean Energy ForumDennis Bracy: Right now, we have been very pleased to be part of a number of things, but most importantly, the official U.S. China Clean Energy Research Center. That center was established 2009. We were the inaugural founding members and really helped put it together. The Clean Energy Research Center started with three areas of focus, cleaner coal, electrical vehicles, and efficient buildings, since China is building 50% of all building space in the world. We are doing the research at the top universities of both countries, Tsinghua, Beida, Huazhong University of Science and Technology, many others. I have seen UW sort of rekindle its interests and it should. There is no community in America that gets China the way we do and has the depth of relationships that we deal.

I will tell you a story that hasn’t been widely told. When Mr. Wan Gang, Minister of Science and Technology, talks about this Clean Energy Research Center, and he was one of the founders, along with Zhang Guobao, former Energy Administrator, on the Chinese side, he calls it the most successful collaboration between the U.S. and China since normalization in 1979. Then he says, it’s built on a firm foundation of intellectual property protection. So that’s a big deal. That’s a big move of recognition.

The October trip is mostly related to the Clean Energy Research Center. Our group were handed a very hot potato early on. It’s been our job to negotiate intellectual property work in this official research center. We negotiated with the Chinese side the methodology and the agreement for sharing the intellectual property that comes out of this joint research. What we negotiated and continue to work with the Chinese counterparts is a framework. We are not trying to tell Dow or Johnson Controls or anyone else what to put in their contract. But it has to fit in our framework. That’s what we are negotiating.

We undertook a task, working with our partners at HUST, Huazhong University of Science and Technology in Wuhan, and we created a guide, Researchers’ Guide to IP and Technology Transfer, or 研究人员知识产权与技术转移指南, in both Chinese and English. But it is also meant for average people, not for lawyers. It explains the complexities of both countries’ laws side by side. For the first time ever, put in one book, how the two systems work. We are getting great response to that. So if you want to get a PDF of that, it’s on the CERC website.

China’s IP system is changing dramatically. The sophistication of the system is growing as well. In fact, the main users of the IP laws of China are Chinese companies dealing with Chinese companies. And that’s a good thing. It’s an ongoing process. We learn about their system. They are very open to learning about our experience. It’s a great and growing relationship.

(For more information on US-China Clean Energy Forum, go to WA China Nonprofits. For more information about Dennis Bracy, go to WA China Hands. For more information on major events in Washington state-China relations, go to WA China Chronicle.)