O B J E C T I V E S• To provide advice for the China Council for International

Co-operation on Environment and Development (CCICED)to use in their policy recommendations to the ChineseGovernment regarding China’s acquisition of cleaner coaltechnologies from international sources.

• To highlight strategies which have allowed exportingcompanies to successfully work in China whilst transferringtechnology, helping to inform future DTI activities in thisarea.

• To help UK-based suppliers of equipment and expertise tounderstand the Chinese market for cleaner coaltechnologies, and communicate their views on technologytransfer issues to Chinese policy makers.

• To learn lessons from cases of successful technologytransfer by UK companies, foreign Governments andinternational organisations.

S U M M A R YCoal is central to the Chinese economy, accounting for 75% ofannual energy use in recent years. With rapid economic growth,the need to limit the environmental impacts of coal use hasbecome more pressing (see Figure 1). In the search for loweremissions and improvements in economic efficiency, cleaner coaltechnologies potentially have a important role to play.

This study was initiated at the request of the Working Group onTrade and Environment of the China Council for InternationalCo-operation on Environment and Development (CCICED).It examined the transfer of cleaner coal technologies frominternational sources to China from the internationalperspective, and focused on the experience of UK companiesand Government bodies in a number of industrialised countries.It complements a parallel study, carried out by Chineseresearchers, that examines the same issues but from theperspective of Government and companies within China.

This study examined in detail the issues faced by foreign firmsin transferring cleaner coal knowledge and skills to China.Since the main focus is on UK firms, the technologies chosenfor the study reflect both the specialisms of UK industry andthe supposition that the most important technologies areincremental rather than new and radical. Examples include theuse of coal gasification for industrial processes, coal washingand briquetting and the retrofitting of controls at existingboiler facilities.

The study’s conclusions and recommendations are based on anextensive series of interviews with representatives from industryand Government, both within the UK and several other OECD(Organisation for Economic Co-Operation and Development)countries. The study concludes that, despite numerous barriersand reservations, UK companies are engaged in a wide rangeof technology transfer activities that focus on China. Theseactivities are dominated by larger firms that have the financialresources necessary for the development of long-termpartnerships with their Chinese counterparts.

The study’s recommendations to both the Chinese Governmentand the DTI focus on strategies for successful and sustainabletechnology transfer in the future. Four key issues emergedduring the course of the study:

• State-led technology transfer programmes should not betoo prescriptive; by allowing companies to help shapepotential projects, the specific requirements of thosecompanies can be incorporated into the design of projects.

• Governments have an important role in funding site-specific projects carried out by firms and other institutions.

• Dissemination of results from successful technologytransfer programmes is often inadequate. Projects need tobe monitored more closely so that lessons can be learned.

• Processes of technology transfer should be comprehensiveand long-term if they are to succeed. They should includewider knowledge transfer, not just new hardware.

• There is no single ‘best’ mechanism for technology transferto China. However, it is important to allow the building oftrust between foreign and Chinese firms.

C O S TThe total cost of this project was £82,500 with the DTIcontributing £72,500, the Shell Foundation contributing£5,000 and PowerGen plc contributing £5,000.

D U R A T I O N12 months - October 1999 to October 2000 inclusive.

Further information on the Cleaner Coal Technology Programme, and copies of publications, can be obtained from:

Roshan Kamall, Location 1124, Department of Trade and Industry,1 Victoria Street, London SW1H 0ET

Tel: +44 (0) 207 215 6261Fax: +44 (0) 207 215 2674

E-mail: roshan.kamal@hend.dti.gov.ukWeb: www.dti.gov.uk/cct/

N O V E M B E R 2 0 0 0

P ro je c tSummary

274

CLEA

NER C

OAL T

ECHN

OLOG

Y PRO

GRAM

METHE TRANSFER OF CLEANER COALTECHNOLOGIES TO CHINA: A UK PERSPECTIVE

Figure 1. Industrial Pollution in Jiayuguan, Gansu Province

(courtesy of SPRU)

2297 PS274 3/7/01 10:14 am Page 2

C O N T R A C T O RThe Energy ProgrammeSPRU - Science and Technology Policy ResearchUniversity of SussexFalmerEast Sussex BN1 9RF

Contact: Dr Jim WatsonTel: +44 (0)1273 686 758Fax: +44 (0)1273 685 865E-mail: w.j.watson@sussex.ac.uk

C O L L A B O R A T O R SGuanghua School of ManagementPeking UniversityBeijing 100871People’s Republic of China

Contact: Dr Liu XueTel: +86 10 6275 6238Fax: +86 10 6275 1463E-mail: xueliu@gsm.pku.ude.cn

Working Group on Trade and EnvironmentChina Council for International Co-operation on Environment andDevelopment (CCICED)International SecretariatInternational Institute for Sustainable Development161 Portage Avenue East, 6th FloorWinnipeg, ManitobaCanada R3B 0Y4

Contact: Wanhua YangTel: +1 204 958 7719Fax: +1 204 958 7710E-mail: whyang@iisd.ca

B A C K G R O U N DOne of the Chinese Government’s most pressing problems stems from itsdesire for rapid industrialisation whilst protecting the natural environment andsafeguarding public health. As part of the strategy to tackle theenvironmental effects of China’s development path, the CCICED wasestablished in 1992 with core funding from the Canadian Government. Themain task of the China Council is to provide advice to the ChineseGovernment on China’s environmental policies. The Council consists of about50 members, half of whom are Chinese and the rest international. Sir CrispinTickell and Brian Anderson, head of Shell China, are the two UK members ofthe Council. The Council meets once a year and is chaired by a Chinese VicePremier. Its advice and recommendations are made to the ChineseGovernment, which has, in large measure, implemented the recommendations.

The China Council operates through nine Working Groups, whichcommission research and background studies to inform the Council’sannual recommendations. The Working Group on Trade and Environmentdecided in May 1998 that one of the issues it intended to analyse was thetransfer of cleaner coal technologies from international companies andGovernments to China. The Working Group subsequently initiated twoparallel studies to analyse the transfer of cleaner coal technologies toChina: a study from China’s perspective; and this study summarised in thispublication, which has investigated international perspectives.

I N T R O D U C T I O N Coal’s dominant position in China’s energy mix is set to continue for theforeseeable future. Cleaner coal technologies can potentially help Chinato offset some of the environmental side-effects of coal use as economicgrowth continues.

Figure 2. Chinese coal use by sector (1997)

International efforts to transfer these technologies to China must takeaccount of China’s needs. At present, around 90% of the technologytransfer effort focuses on the power sector. However, this sector onlyaccounts for just over one third of China’s coal demand (see Figure 2).Very large quantities of coal are used for many other end-uses includingcoking, industry and households. The scope for emissions reductionoutside the power sector is therefore extremely large.

C L E A N E R C O A L T E C H N O L O G I E SA N D T H E I R R E L E V A N C E T OC H I N AThe definition of cleaner coal technologies is not a simple one. As a generalrule, coal-use technologies are regarded as ‘clean’ if they offer an improvementover those currently in use. Therefore, the precise definition of cleaner coaltechnology depends on the context in which it is used. Technologies that areclean in China may not be regarded as clean in other countries.

One example is the use of washing/preparation processes to improve thequality of coal before it is utilised, something that is not often carried outin China. Cleaner coal technologies in a Chinese context also encompassnon-hardware measures, such as better maintenance and managementregimes, that can improve overall thermal and economic efficiencies ofcoal-fired facilities. One way to categorise cleaner coal options for Chinais to group them under three broad headings:

• Commercial technologies in which Chinese firms have a significantcapability (eg some coal preparation and washing technologies andcleaner types of boiler).

• Commercial technologies that can be transferred to China in the nearfuture (more efficient industrial equipment such as boilers and coalgasifiers, and abatement equipment such as flue gas desulphurisationunits).

• Technologies that are still being developed and demonstrated (such asadvanced gasification and boiler technologies for more efficientelectric power generation).

This study has concentrated heavily on technologies in the second of thesecategories because the benefits to China are potentially more immediateand because these are areas of specialism on the part of UK suppliers ofcleaner coal technologies. To date, most of the international efforts totransfer these technologies to China have tended to concentrate on large-scale power sector investments, and have neglected activities that wouldresult in incremental improvements in Chinese industry and households.Equally, many of these efforts have focused on the transfer of newhardware equipment and have omitted the transfer of broadertechnological knowledge. Without this knowledge, it is difficult forChinese firms to operate and maintain new hardware effectively, and tomake incremental improvements to it.

2297 PS274 3/7/01 10:14 am Page 3

T H E C H I N E S E P O L I C Y C O N T E X TDuring the past 20 years, the Chinese Government has developed a rangeof environmental, trade and investment policies that can potentially helpto create the demand for more sustainable technologies.

China’s complex array of environmental regulations are particularlyimportant. These include a well-established pollution fee system thatpenalises industrial sites that exceed emissions limits, separate limits onemissions from new coal-fired power stations, programmes to close smallpolluting factories, tougher sulphur dioxide emissions limits in specifiedacid rain and sulphur ‘control zones’, and a recent regulation to limitoverall national emissions of specified airborne and solid pollutants. Whilstthere are many deficiencies in these regulations, particularly in theirimplementation, there is a general move towards tougher standards andenforcement. There is evidence that this action is starting to reverse thetrend of rising emissions (see Figure 3). According to official statistics,emissions of many air pollutants in China have fallen significantly duringthe past two years.

Figure 3. China’ s national emissions of sulphur dioxide and particulates (1985-1999).

Trade and investment policies are also influential in attracting foreigninvestment and facilitating technological collaboration. A range ofChinese policies govern technology transfer from foreign firms throughmechanisms such as licences and joint ventures. There is significantdebate within China about the relative merits of the various mechanismsand the ability of Chinese firms and research institutions to acquire andassimilate foreign technology.

V I E W S F R O M U K I N D U S T R YChina is potentially the largest market for UK companies exporting andtransferring cleaner coal technologies. The attitudes of companies rangefrom an enthusiastic approach to technology transfer to a more cautiousapproach. Whilst mixed feelings are common, there is an identifiablecontrast between those companies that are more relaxed about technologytransfer to Chinese firms and companies that are more circumspect. In asurvey of UK companies, five major types of barrier to technology transferwere suggested:

• Environmental policy. This was the most frequently mentionedproblem, both because standards are set low, and because they arepoorly and inconsistently enforced. (Figure 4 shows the persistentenvironmental pollution in Beijing.)

• Institutional capabilities. This arises from the lack of commercial andorganisational skills within the Chinese national innovation system,and difficulties in finding initial contact points.

• Intellectual property. Unease often reflects perceptions of other firms'experiences, and though there are real problems, the overall situationappears to be improving.

• Trade and investment. Concerns exist about Chinese restrictions onthe ownership and control of joint ventures by foreign investors andthe complex approval process.

• Finance and economics. These are usually a reflection of weakenvironmental policy failing to internalise environmental costs or ofpoor economic incentives to Chinese managers to implement 'win-win'projects (ie those with both economic and environmental benefits).

Figure 4. The sun hidden by the smog in Beijing during the winter heating season.

(courtesy of SPRU)

A C T I V I T I E S B Y O T H E RC O U N T R I E SIn formulating future UK and Chinese policies, lessons can be learned fromthe technology transfer programmes of other industrialised countries suchas the USA and Japan:

• Japan has the largest Government programme to transfer cleaner coaltechnologies to China, much of which is implemented through theGreen Aid Plan. This includes a number of large cleaner coaltechnology demonstration projects that focus on the installation ofenergy saving and cleaner coal equipment and broader technicalassistance. The uptake of the demonstrated technologies has beenlimited to date, partly because of the high cost of equipment and alsobecause Chinese manufacturing companies were under-involved in thetransfer process.

• The USA has made some effort to disseminate the results of itsmassive Clean Coal Technology Program in China. However, the USDepartment of Energy has had limited funds to do this, partly becauseof US-China political difficulties. In practice the US EnvironmentalProtection Agency has made greater efforts, mostly in more modestactivities such as technology co-operation through expert assistance,academic collaboration and environmental monitoring.

• The European Union has pursued relatively small-scale and diffuseapproaches to cleaner coal technologies in China, initially based onthe activities of the Directorate-General for Transport and Energy (DGTREN), but more recently (and on a larger scale) as a sub-set of widerenvironmental co-operation programmes. Budgetary limitations meanthat demonstration activities are largely absent, though the smaller-scale management and training activities look promising.

2297 PS274 3/7/01 10:15 am Page 4

C O N C L U S I O N SThe experiences of technology transfer by companies and Governments inthe UK and other OECD countries suggest the following main conclusions:

• Despite numerous barriers and reservations, several UK companies areengaged in both hardware and wider knowledge transfer to Chinesefirms.

• A surprising number of UK companies that supply cleaner coaltechnologies and services are not doing any business in China. Mostof these are small and medium-sized firms that do not have theresources to develop a base in China.

• Whilst the most prominent international efforts to fund cleaner coaltechnology transfer to China are being pursued by countries withlarge R&D programmes, the efforts to effect this transfer aresometimes surprisingly small.

In general, cleaner coal technology transfer activities by UK firms to Chinahave been relatively limited and have shown advantages and disadvantagesfor both sides. To go further, other mechanisms and practices will beneeded. Examples are:

• Avoidance of State-led programmes that are too prescriptive. The mostsuccessful programmes bring Chinese enterprises and design institutesinto close but mutually negotiated collaboration with foreign firms.

• The need to capitalise on successful environmental improvementprogrammes in China, many using incremental cleaner coaltechnologies. Dissemination is often over-emphasised; monitoring isrelatively neglected.

• Processes of technology transfer need to be both comprehensive andlong-term if they are to succeed. Chinese institutions need to be fullyinvolved from the start.

• Many mechanisms have been successfully used to transfer technology toChina. The choice of mechanism varies on a case by case basis, thoughit is important to allow the building of trust between the two sides.

There are several activities recommended for the DTI to aid this process,which reinforce the current DTI Programme efforts to facilitate the transferof cleaner coal technologies to China:

• Acting as a focus for a new round of site-specific technical assistanceprojects in China, which involve both Chinese and UK suppliers ofhardware and expertise.

• Encouraging its Chinese counterparts to involve institutions andcompanies from all parts of the Chinese innovation system in futurecollaborative initiatives.

• Helping to establish national gateway organisations in China to helpsmall and medium-sized UK and Chinese firms to form collaborativerelationships.

• Pressing the case for clean coal technology projects to be includedwithin the Clean Development Mechanism (CDM) at internationalforums and bilateral discussions.

• Facilitating links between UK environmental monitoring equipmentmanufacturers and Chinese firms, which may lead to the setting up ofjoint design and manufacturing facilities in China.

DTI/Pub URN 00/1430

2297 PS274 3/7/01 10:14 am Page 1