1. The China Council for International Cooperation on Environment and Development （"the Council" or CCICED）was established in 1992 by the State Council of the Government of China （GOC）to support cooperation between China and the international community in the fields of environment and development.

　　2. The Council is a high-level advisory body that puts forth policy recommendations for the Chinese Government’s consideration on the integration of environment and development. It has so far held five annual meetings in each of the First, Second and Third Phase in the past 15 years. The 2007 Annual General Meeting was the first one in the Fourth Phase of the Council, which will go through 2007-2011.

　　3. The Council supports the development of an integrated, coherent approach to environment and development and encourages close cooperation between China and other countries.

　　The Council is a non-profit body with strong government involvement and support. At present the Council is composed of 25 Chinese Members and 22 International Members, all chosen for their experience and their expertise.

　　4. The Council is chaired by Mr. Zeng Peiyan, the Vice-Premier of China’s State Council. The Members of the Council attended the 2007 Annual General Meeting （AGM）at the invitation of the Chinese Government.

　　5. The host institution of the Council is the State Environmental Protection Administration（SEPA）. SEPA has been made responsible for inter-ministerial coordination and for supporting the activities of the Council. It has established a Secretariat（SERI）to maintain and develop international and domestic contacts. The Secretariat also ensures follow-up within China to the recommendations made by the Council, and deals with the routine work of the Council when not in session. The Secretariat is assisted by the Secretariat International Support Office（SISO）. The CCICED Secretariat International Support Office is located at Simon Fraser University in Burnaby, Canada, and is funded by the Canadian International Development Agency（CIDA）.

　　6.This Summary Record of the 2007 AGM of the Council was prepared for SISO by Ms Lucie McNeill on the basis of detailed notes recorded during the AGM. The Summary Record represents SISO’s interpretation of the discussions and not necessarily the views of all participants. To facilitate frank and direct exchanges it has been agreed that the Summary Record of the Meeting should present an overview of the discussions without attribution to individual speakers.

ITEM 1. ADOPTION OF THE AGENDA AND AMENDED TERMS OF REFERENCE AND RULES OF PROCEDURE

　　7. Vice-Chair Zhou Shengxian, the Minister of SEPA, declared the 2007 AGM of the CCICED in session. He introduced Council Chair and Vice Premier of the State Council of China, Mr Zeng Peiyan. He also introduced CCICED Fourth Phase Vice Chairs Mr Xie Zhenhua, Klaus Töpfer and Børge Brende. He welcomed guests, Council members and observers to the meeting. He regretted the absence of Executive Vice-Chair and President of CIDA, Mr Robert Greenhill.

　　8. The agenda was presented; Vice-Chair Zhou stated the theme of the meeting was Innovation Strategy for an Environment-Friendly Society. The agenda was adopted as circulated.

　　9. Mr. Zhou highlighted the need for Council to adopt amended Terms of Reference （TOR）and Rules of Procedure so the CCICED can fulfil the mandate of its Fourth Phase. He indicated the changes were based on work done during the end of the Third Phase, and included input from members and other stakeholders. The amended TOR and Rules of Procedure were approved as circulated.

　　10. Vice-Chair Zhou Shengxian asked Council Chair and Vice-Premier Zeng Peiyan to address the Council. Chair Zeng then invited the following participants to address the AGM:

　　1）Vice-Chair Xie Zhenhua, Vice-Chair of the National Development and Reform Commission （NDRC）;

　　2）Vice-Chair Klaus Töpfer, former Executive Director of the United Nations Environment Programme （UNEP）;

　　3）Vice-Chair Børge Brende, Member of Norway’s Parliament and former Minister of the Environment.

　　11. During the course of his opening remarks, Vice-Premier Zeng made the following statements:

　　1）During the first three quarters of 2007, China has maintained a high rate of growth in Gross Domestic Product （GDP）, but has now managed to start reducing its consumption of energy, when calculating per unit of GDP; this is now down 3%. Sulphur dioxide （SO₂）and Chemical Oxygen Demand （COD）emissions, per unit of GDP, are also starting to come down – respectively by 1.81% and 0.28%. This indicates that China has started to turn the corner on emissions control.

　　2）Globalization is proceeding apace, with increasing flows of capital, goods, technologies and people. This represents good development opportunities for China, but it also presents a threat to sustainable use of resources, as fluctuating prices for copper, oil and other resources have shown. Climate change, holes in the ozone layer and assaults on biodiversity and ecosystems will have significant impacts on people and their quality of life. We need to join hands in working towards a better future.

　　3）China’s annual GDP growth rate over the past five years has been over 10%; it reached 11.5% during the first three quarters of this year. A sober-minded assessment reveals that sustainable development is threatened by excess liquidity, rising trade surplus, excessive investment and increased commodity prices. With low productivity and incomes, China must continue to modernize. The coming years will bring challenges in terms of insistent demand for rising incomes and standards of living on one hand, and environmental protection and wise resource use on the other. China’s growth is also promoting world economic prosperity by taking on much of the heavy and chemical industries, and by producing high quality goods at low prices. But China is also bearing the environmental costs of this production.

　　4）China has taken action to protect its environment in the context of its broader strategies of promoting a moderately well-off society （xiaokang）, and of pursuing socialist modernization. China is continuing to restructure industry, to strengthen environmental governance, to use financial and fiscal levers to protect the environment, and to clamp down on energy and resource intensive projects. It has invested heavily in sewage treatment facilities, coal desulphurization equipment, and has restored grasslands and replanted forests.

　　5）The 17^th Congress of the Communist Party of China （CPC）held in October 2007 stated unequivocally that China must have optimal economic development – one that is at the same time sound and rapid; it must be energy efficient and it must not harm the environment. Ecological civilization has been decreed to be a key component of xiaokang. Innovation is to be emphasized, in thinking, technologies, institutions and production.

　　6）As globalization continues to accelerate, it becomes increasingly important to reduce the imbalance between environment and development. International cooperation is essential and China is doing its part to mitigate climate change. The GOC has a national plan to tackle the issue and Premier Wen Jiabao is heading the leading group responsible for this plan. The developed countries（DCs）need to help developing countries in the areas of technical transfer and capacity building. China’s development is intimately tied to global development; protecting China’s environment contributes to saving the global environment. The CCICED is an excellent platform for this kind of international cooperation.

　　12. During the 2007 AGM Opening Ceremony, Council Vice Chairs Xie Zhenhua, Klaus Töpfer and Børge Brende highlighted the following issues:

　　1）Important targets for emissions reduction were set out in the 11^th Five Year Plan （FYP）; these were important in terms of climate change globally, and in helping to establish an ecological civilization in China. The State Council held an important conference on energy this past year; Premier Wen and Vice Premier Zeng are heading the leading group on climate change. An integrated plan for the reduction of emission comprising ten key measures was approved. An improved monitoring and evaluation system for the environment is in place and environment indicators are now included in the performance assessment of local officials. Industrial restructuring, the promotion of energy efficiency in industry and in construction, and the promotion of alternative energies are among the measures included in the plan.

　　2）Such a meeting is key for agenda setting and laying out the goals of the current five-year program. It is timely that this AGM should follow the 17^th CPC Congress where key phrases included xiaokang, harmonious society and Conservation culture. It is in all our interests to promote energy and resource efficient environment-friendly industry, patterns of growth and modes of consumption.

　　3）This year the Council will hear a very important report on chemicals, which offers new avenues for industry, and on innovation for an environment-friendly society. China’s great success in reducing poverty is largely responsible for the global achievement of the Millennium Development Goals（MDGs）. China’s contributions on the environment could have a similar impact.

　　4）An important decision was made at the 17^th CPC Congress to mainstream environment in all aspects of governmental decision-making. But it is essential to have sustained economic growth. In this new Phase of the CCICED, new members are eager to tackle emergent issues for China, particularly energy and climate change. The proposed Task Force （TF）on the low carbon economy represents a good fit with this work focus. It is hoped China can be as successful in decoupling economic growth from the growth of emissions as it has been in its fight against poverty.

　　13. Vice-chair Zhou Shengxian introduced the keynote speaker of the 2007 CCICED AGM, Dr R. K. Pachauri, CCICED member and Director General of the Energy and Resources Institute of India. Dr Pachauri is also Chair of the Inter-governmental Panel on Climate Change （IPCC）and Nobel Peace Prize laureate of 2007. In his remarks, Dr Pachauri put forward the following key points.

　　14. The Nobel Peace Prize awarded to the IPCC recognizes the hard work of international scientists and governments that support its work, notably Chinese experts. The IPCC assessment report was approved in Valencia, Spain, earlier in November. It presents unequivocal evidence of climate change. Global average temperatures are increasing, the sea level is rising and there is a marked decrease in northern hemisphere snow cover. The impacts of these changes are already seen and will worsen, namely extreme weather events such as flooding, droughts and heat waves. Different scenarios have been studied, from the most optimistic temperature rise of 1.8 degrees Celsius, to the catastrophic 4 degree Celsius rise by the end of this century. Emissions have to start decreasing by 2015 if we want to stabilize our climate; still, this would imply sea level rises of up to 1.4 meters.

　　15. The poorest regions of the world will bear the brunt of the climate change effects. Poverty, low access to funds, ecosystem degradation, political conflicts and governments’ failure to take action all add to the vulnerability of the poor to climate change. Coastal settlements in the great deltas of Asia are particularly at risk.

　　16. Biodiversity is threatened. It is estimated that 20% to 30% of all species are at risk of extinction if there is a 1.5 to 2.5 degree Celsius rise in temperature. The most vulnerable ecosystems are the coral reefs, the marine molluscs, the tundra and the boreal forest systems.

　　17. Impacts have also been seen in China, more particularly in the increased frequency of heat waves, increased intensity of cyclones and a seven-fold increase in floods since the 1950s. There has been a 22% to 33% increase in rainfall in northwest China, while an additional 6.7 million hectares of land are in areas severely affected by droughts. Agricultural productivity is at risk, due to high temperatures, droughts, floods and soil degradation. A 2-degree increase in temperatures could reduce rice yields by 12% in China. The melting glaciers of the Tibetan Plateau and other ranges will affect the water supplies for one billion people.

　　18. China is facing a difficult challenge. Primary energy demand is to double by 2030, with oil imports rising by 50% to 80% and with coal remaining the main fuel. Renewable sources of energy will contribute up to 15% of the total by 2020 and to 30% by 2050. China overtook the US as the world’s largest emitter of carbon dioxide （CO₂）in 2007. These projections would indicate there will be further climate change and unsustainable development. China will need to minimise GHG emissions while achieving economic growth. Rapid economic growth can help China adapt to climate change.

　　19. Mitigation is not an expensive proposition. To limit global warming to 2.4 degrees Celsius, it would cost less than 3% of GDP. This means postponing the level of economic achievement we might have reached in 2030 by only one year; we only need a yearly reduction of 0.12% GDP to prevent very serious impacts. With access to important new technologies, the costs could be even less. An important area of intervention is transportation, as is construction of new buildings. China needs incentives to develop new technologies; this could be the imposition of an effective carbon price.

　　20. It is hoped that the Bali negotiations will take us in this direction. Energy investments need a long planning horizon. National policies need to be linked and coordinated with policies supporting mitigation, poverty reduction and employment creation. LDCs will need to adopt a new development path; changes are needed in the areas of economic structure, technologies, geographic distribution of activities, consumption patterns, urban design, transport infrastructure, demography, institutional arrangements and trade patterns. China could seize the global moral high ground if it took the right path.

　　21. With Vice-Chair Klaus Töpfer presiding, Council International Chief Advisor Arthur Hanson presented to Council the 2007 Issues Paper on Innovation Strategy for an Environment-friendly Society. During his talk Mr Hanson made the following points.

　　22. The Issues Paper is intended to highlight the key points that are to be discussed during the AGM. China at the 17^th Congress of the CPC resolved to adopt a transformative approach to environment and development. This will not happen without innovation in the areas of technology, policy and institutions. China needs to take significant steps in the right direction during this 11^th FYP. Nobody disputes the need for China’s economy to grow – but the current model is unsustainable; China is building an environmental deficit as it is building a current accounts surplus.

　　23. It has been stated that China has turned the corner on GHG emissions – but these are based on intensity measures, defined in terms of per unit of GDP. The ultimate goal, and the real challenge to innovation, is to see a decrease in absolute emissions discharged.

　　24. During this AGM, Council will consider China’s ecological footprint. Ecological innovation is different from other types of innovation in that the environment is a public good where benefits are ill defined, hence true market value is hard to capture. The government, rather than the private sector, has an important role to play in supporting science and technology development in this area. Venture capital is also needed for environmental innovation. China can be a model for LDCs in terms of creating economic wealth and opportunity in a more sustainable manner.

　　25. Vice Chair Klaus Töpfer introduced keynote speaker Professor Ye Ruqiu, Counsellor of the State Council of China. Professor Ye presented to Council members the Special Policy Study（SPS）on the Strategic Transformation of Environment and Development in China: Global Experience and China’s Solutions. In the course of his presentation, Professor Ye made the following points.

　　26. China is on the road to fundamental changes in the area of environment and development – a strategic transformation that is now at the centre of the national agenda. The evidence can be seen in the signals originating from the leadership of the GOC, namely policy pronouncements related to government adopting a “scientific approach to development”, commitments to “build a harmonious Socialist society”, as well as the more recent “Three Transitions in Managing Environmental Protection and Economic Development” and others. This was further confirmed by the 17^th CPC Congress, where the costs of environmental damage were discussed and the themes of environmental protection and building an ecological civilization were repeatedly stressed.

　　27. In looking at other countries’ experience, the study found that the path most often taken is that of economic development first and clean-up later, following environmental accidents, media attention and public pressure; this usually culminates in a population with high awareness and leads to improved environmental governance.

　　28. There are several implications for China. The process of integrating environment into the mainstream of economic and social decision-making can take many forms. Improvements in living standards, education levels and public information are having an impact on people’s priorities and perceptions. China, as an export-led economy, is also facing increasingly stringent requirements from its customers. The country is still under an economic growth imperative, with its economy having expanded by a factor of 58 since the reform program of 1978; 60% of the growth has been generated by the industrial sector. Industrial growth is closely related to China’s present environmental problems, since rapid expansion leads to enormous emissions of pollutants. China is still pursuing an extensive, inefficient growth pattern. A recognition of the resulting problems only started some twenty years ago and has been increasing as frequent environmental accidents have heightened public concern.

　　29. China could seize the opportunities of globalization. China is increasingly integrated in the world economy. Increasing trade flows are bringing about a more efficient allocation of resources. China imports waste paper for the manufacture of recycled paper and other goods; this has resulted in reduced pressure on forests, for instance. Negative effects are China’s rising environmental trade deficit due to low （subsidized）prices for water, power and other inputs. This in turn provides a perverse incentive for wasteful consumption of cheap Chinese goods in other countries. Estimates indicate that up to 23% of China’s GHG emissions are due to the embodied energy in export goods.

　　30. The impact of Foreign Direct Investment （FDI）on China’s environment and development has negative as well as positive aspects. Positive contributions are the transfer of technologies and management methods, improved labour flows, improved environmental management and increased investments in research and development （R&D）. Negative aspects include a rising trade surplus and a skewed balance of payment, the gradual marginalization of domestic companies and an exacerbation of geographic inequities within China.

　　31. China is now also an investor in other countries, and is now the 13^th largest contributor to Overseas Direct Investment （ODI）. China brings skilled labour and capital to the countries in which it invests; but it also in some cases generates environmental damage and pollution.

　　32. The SPS recommends to the GOC to accelerate improvements to the environmental protection system, taking full advantage of the latest technologies, management approaches and legal frameworks. As the strategic transformation accelerates, China should rely increasingly on market-based mechanisms such as pollution taxes. Public awareness and participation need to be encouraged in order to allow people to contribute to the strategic transformation. China should push for eco-innovations in all sectors, relying increasingly on endogenous technologies and approaches. China should also strengthen management of foreign companies operating on its soil, and of Chinese companies operating abroad; enterprises should be encouraged to become more socially responsible. China needs to strengthen its participation in bilateral and multilateral environmental cooperation efforts.

　　33. Vice-Chair Klaus Töpfer introduced James Leape, the Director General of the World Wide Fund for Nature（WWF）. Mr Leape is a Council Member and discussed the initial work of the TF on China’s Ecological Footprint.

　　34. China was interested in having a study conducted through the aegis of the CCICED on its ecological footprint. WWF initiated this work in cooperation with the Chinese Academy of Sciences（CAS）; a full report is expected in June 2008. When discussing innovation, it is easy to think of science and technology – but innovation can also be seen in the concepts now pioneered by China, such as conservation culture and ecological civilization. It will be necessary to re-imagine sustainable cities, and the meaning of prosperity in times of constraints. Urgent action is now needed because of the dangers brought about by climate change. Decisions made today could lock us into unsustainable patterns of production and consumption that will be hard to reverse. The groundwork needs to be laid for a conservation culture. The concept of “ecological footprint” is useful to engage the public and decision-makers; it is a powerful tool to discuss big picture issues in intuitive terms.

　　35. The ecological footprint measure captures the area of planet required to absorb waste, house people and produce what they need. It is reduced to the common denominator of global hectares. It shows how impacts add up; and it compares how different countries fare in terms of their impact on the planet. Half of the global footprint is due to energy consumption and the production of CO₂. WWF figures show that humans have overshot the capacity of the planet to support us by 25%; the world is in ecological deficit. The responsibility for this state of affairs is not evenly distributed. The United States（US）has only 5% of the global population, but takes up 20% of the total human footprint. The European Union （EU）is 2^nd, and China is 3^rd.

　　36. In calculating China’s footprint, the TF aims to not only capture domestic realities, but also China’s impacts abroad. A first draft of the report has been circulated and will be further developed for presentation to Council. Preliminary data analysis shows that China’s ecological footprint per capita has more than doubled over the past 40 years, and exceeds China’s bio-capacity by a factor of 2. On a per capita basis, China is behind many other countries in terms of average footprint, but this is growing fast. The study will further examine the inflows and outflows of bio-capacity – that is, how much timber, fish and other resources China is importing in order to produce what it does, and to what extent these goods are in turn exported. Preliminary data show that there is a net inflow of bio-capacity from the US to China.

　　37. The study will also link bio-capacity issues and human development; the United Nations Development Programme （UNDP）’s Human Development Index （HDI）is used for this purpose. Initial work indicates that as countries move up on the HDI scale, their ecological footprint also increases. Strategies need to be developed in order to allow for a rising HDI while reducing the ecological footprint, perhaps through the development of a conservation culture.

　　38. Vice-Chair Klaus Töpfer invited Members to discuss the presentations made during the first session of the AGM. In the course of their interventions, Members made the following key points.

　　39. Regarding the Council’s future workplan and given the importance of globalization and China’s role in that context, it would be worthwhile to ensure that the Council’s work meshes with planned international meetings and negotiations. This would allow for timely contributions by the CCICED.

　　40. The draft recommendations circulated do not fully reflect the ideas contained in the Issues Paper, the SPS reports and the initial work of the TF on China’s Ecological Footprint. It is hoped this can be remedied.

　　41. Vice-Chair Zhou Shengxian presided over the session, calling on Mr Feng Zhijun, the Vice Chair of the Environmental Protection and Resources Conservation Committee of the National People’s Congress （NPC）of China to address the Council on the preliminary work of the TF on Innovation and Environment-Friendly Society. During the course of his presentation, Mr Feng highlighted the following issues.

　　42. The report deals with the challenges of China realizing xiaokang while at the same time becoming a conservation society. Three areas need to be targeted: the industrial structure of the economy needs to be modified, the development model needs to be changed and the consumption model needs to be improved. Scientific and harmonious development depends essentially on innovation. Without innovation, China’s resources will not be able to sustain economic growth, China’s environment will not be sustainable, China’s capacity to develop will be hampered and therefore social stability and security will not be maintained.

　　43. This presentation highlights five areas: innovations in terms of mindset, theory, technology, culture and nature. Traditionally, the human mindset was that nature was a force to be fought – that humanity struggled against nature. In rethinking this mindset and considering the types of resources in classical economics, human, financial and physical, the depletion of natural resources forces us to estimate anew the value of our natural capital, including the ecosystems of the planet.

　　44. Theoretical innovation is also needed. Classical economic theory considered development strictly in terms of economic growth, without factoring in social or other dimensions. The UNDP’s HDI is one way to consider the social dimensions of development, but more theoretical work is needed to ensure other factors besides GDP growth are taken into account.

　　45. Technical innovation comprises innovations that are imported, domestically produced, or produced in a combined or integrated way. Only when China also innovates technically on its own can it really “stand on its feet”. But it must also take full advantage of innovations generated abroad.

　　46. Institutional innovation is necessary to ensure full implementation of measures to support an environment-friendly society. This includes changes in the kind of indicators used to assess the performance of organizations and individuals; GDP cannot be the only yardstick. There are 11 key industries in China that are singled out in the report, where effective emissions reduction and good environmental management could generate substantive pollution reduction for China. Managing these key industries effectively would indeed represent institutional innovation for the GOC.

　　47. Cultural innovation takes for its starting point that culture is central to the health of a nation; cultural vitality is part of economic development and progress. Chinese culture traditionally has held as ideal the harmony between humanity and nature. This underpins the current thinking about ecosystems, and greater progress can be made along this line.

　　48. Vice-Chair Zhou Shengxian introduced Professor David Strangway, the Co-Chair of the Task Force. Dr Strangway discussed the following key ideas during his presentation.

　　49. It is often thought that innovation is limited to the field of science and technology, but it is much broader. China is committed to, and has made remarkable achievements in, the area of science and technology. Fostering innovation also requires nurturing research communities; innovation is not a top-down process, but rather a bottom-up process drawing on individuals, groups, institutions in both the private and the public sector. People must be empowered to innovate and be creative; and entrepreneurs must be empowered to shoulder some of the risks. Governments can set up incentives in order to ensure quality work and reduce the barriers that innovators and entrepreneurs face.

　　50. China now has the opportunity to lead the world in environmental stewardship through innovation. The priority areas identified are: hydrocarbons emissions reduction, and the sequestration of emissions; air quality; automobiles and transportation; green buildings; water quality; solid waste management and the circular economy; environment and health.

　　51. Funding and sets of incentives must be in place to foster innovation. This needs to be led, at least in part, by government. Government can set up smart enforcement systems and standards. The focus should be on total emissions reduction, not simply on reaching intensity targets; this is because when GDP doubles or quadruples, reaching intensity targets still means increasing total emissions. The system must support action by local authorities. Smart procurement can also be a powerful tool. Finally, entrepreneurs and inventors must have incentives to innovate; allowing them to retain some of the intellectual property revenue is key.

　　52. The TF has begun its work and will have a full report for Council at the next AGM.

　　53. Vice-Chair Zhou Shengxian commended to Members the SPS report entitled Major Issues and Policy Framework for Environmentally Sound and Strategic Management of Chemicals in China. Professor Hu Jianxin of Beijing University, the Chinese Co-Chair of the SPSgroup, addressed Council members and made the following comments.

　　54. Since World War II, there has been a dramatic increase in the production and use of chemicals around the world – reaching 100,000 compounds today. Every year, new substances are invented and introduced. They are attracting attention because of their environmental and health hazards; some compounds bio-accumulate as they move up the food chain, while others spread around the world on air or water currents. Some 350 chemicals are now detected in the human body; chemicals represent 80% of all factors contributing to cancer deaths according to the World Health Organization （WHO）. Since 1992 at the Rio de Janeiro conference, countries have supported the Environmentally-Sound Management of Chemicals （ESMC）. Several international agreements cover the production, trade and movement of chemicals; in 2006, the international community adopted strategic approaches and detailed action plans for the ESMC.

　　55. In China, the production and usage of chemicals is rising year by year, with 45,000 in use today. Since 1990, this increase of 30% per year has outstripped GDP growth; some 100 new substances are registered officially every year. However, chemical technologies and production processes in China are still relatively primitive, with weak environmental safeguards or processes to control waste and prevent accidents. Some chemicals have been banned elsewhere in the world but are still used in China, such as Dichloro-diphenyl-trichloroethane （DDT）and chlordane. Information is lacking on these chemicals in terms of production, storage, transportation and use.

　　56. Chemical pollution is getting more dire in China, with DDT, Poly-chlorinated-biphenyls （PCBs）and other toxic chemicals such as endochrine disrupting chemicals （EDCs）and persistent organic pollutants （POPs）now found in groundwater, soils, sediments and the human body, including breast milk. Perfluoro-octane sulfonate （PFOS）has been detected in the drinking water of Beijing and Shanghai. As the economy speeds ahead, there are increasing numbers of accidents involving hazardous chemicals – such as the spill in 2005 in the Songhua River.

　　57. In China, ESMC is traditional and focuses mostly on occupational health and safety, on flammable and explosive chemicals and those that have acute toxicity. Chemicals with potential or long time-lag effects are generally not covered. Most measures are limited to end-of-pipe controls; this differs from international best practice which is based on risk assessment and management. China has yet to take this step, since it has little capacity for risk assessment, management and monitoring. It has yet to foster cross-ministry coordination where needed. Basic legislation and administration of ESMC is still weak. The general public has not been involved in surveillance and oversight.

　　58. The SPS recommends that a national strategy for ESMC be determined for China. It should be compatible with existing international structures and instruments. This is in line with the guiding principles laid out during the 17^th congress of the CPC. Cleaner production should be one of the basic approaches of China’s ESMC, moving beyond end-of-pipe interventions.

　　59. The national ESMC strategy should encompass the following elements: comprehensive laws and administrative regulations need to be put in place, based on existing statues, risk management and with clearly identified standards, testing and regulatory mechanisms for new chemicals; institutions responsible for this work need to be established; capacity among personnel and institutions needs to be built, and in particular in the area of risk assessment; the environmental governance for chemicals needs to be established, including avenues for public participation. Any risk management action plan for the management of chemicals needs to be specific and include clear milestones. A system of notification for new chemicals needs to be set up; standards should be defined in order to determine the toxic chemicals that need to be examined as a matter of priority. In addition, an early warning system for toxic spills needs to be devised.

　　60. Co-Chair Zhou Shengxian introduced the Director General of the Swedish Environmental Protection Agency and Council Member, Mr Lar-Erik Liljelund. In his remarks to Council, Mr Liljelund outlined Sweden’s approaches on innovation and environmental protection. He highlighted the following points.

　　61. Environmental policy is the cornerstone of Sweden’s platform for supporting innovation. The institutional framework supporting innovation is not only centred on the public sector but also encompasses private institutions and research organizations. A key element is that the scope of research goes beyond science and technology to encompass the social sciences, which provide the basis for implementation. Another cornerstone is the legislative framework, which includes intellectual property rights protection.

　　62. The three steps to innovation are to use the best available techniques, to adapt existing techniques to a different context, and to develop new techniques. Sweden has embraced innovation because of its focus on the environment, because of the threat posed by acid rain in northern regions, and because of the serious pollution of the Baltic Sea, shared with other countries. For the past seven years, the Swedish parliament has set environmental objectives for the public and private sectors. Legislation has been in place to control and manage chemicals since the 1980s. Sweden uses economic instruments in order to provide incentives for the private sector to behave in a more environment-friendly way. These instruments include pricing mechanisms, taxes and financial incentives. However, it is advised to avoid instruments that are too rigid and block innovation because they favour a given technology. Green procurement has also been used by the government; given its importance as a buyer, government can become a standard setter. Sweden has found that large companies are now becoming increasingly proactive – government standards become the minimum that is often surpassed.

　　63. Innovation in Sweden is done cooperatively between the research institutions, the public and the private sector. Universities are the research centres, while the private sector provides the entrepreneurship needed, and the public sector provides the enabling environment and some of the funding. Sweden has found that the three elements need to be on an equal footing, and that there should be no confusion on the ownership of new technologies in terms of intellectual property rights.

　　64. The future challenge will be to decouple economic growth from the growth of emissions and other environmental costs. There must be a growing focus on the sustainable use of resources and on quality of life. Lessons must be learned from the past when dealing with emerging issues such as nanotechnologies. A greater challenge for innovation will be in the areas of sustainable production and consumption. The emission of GHGs is more problematic than traditional pollutants because it is a horizontal issue, cutting across most human activity. A holistic systems approach will be required; a one-sided focus on mitigation could cause problems, for example, the reliance on bio-fuels.

　　65. Co-Chair Zhou Shengxian opened the floor for discussion by Council Members. The following issues were raised.

　　66. Two issues must be considered in dealing with sustainable development: optimal use of resources and the mitigation of natural disasters and climate change. Historically, climate change has been triggered by natural disasters such as volcanic eruptions, earthquakes and so on. It would be useful for the Council to pursue this area of study. Understanding the triggers of such disasters and how the chains of events occur could help in finding ways to mitigate problems.

　　67. The role of the private sector needs to be further stressed. The business sector is the first one to use technologies; it is important to understand what are the incentives and barriers to adoption of these innovations in China. In the TOR for the Council’s Fourth Phase, Private Sector Forums have been added as a mechanism to broaden the CCICED’s impacts. It would be useful to organize such a Forum on the adoption of technology and innovation. Much has been said on the need to use best available technologies, but business needs the right enabling environment to do so. This includes pricing, standards, building codes, procurement rules and in some cases subsidies to make technologies more affordable.

　　68. On the issue of climate change, there is an international market for emissions trading and the Clean Development Mechanism （CDM）. China is already taking an active part in this; 20% of the carbon rights have been issued to China. But this could be enhanced if, at Bali, a more business-like concept of CDM was developed. A sectoral system might be more effective; if the leading companies in each sector were to sign on, they could have a major impact. This topic could also be the focus of one of the Council’s future private sector forums.

　　69. The TF on Innovation’s preliminary report reveals that often the bottleneck is with political and institutional structures, as well as with cultural mindsets and structures. Perhaps the Council should consider broadening its work from a China focus to a more global focus when it comes to the identified bottlenecks. We need to shift from a narrow nationalistic focus to a fair global system of conflict resolution around distribution disputes over access to resources. This will require political and institutional innovation on a larger scale than what has been achieved so far. We need to move beyond the business-as-usual approach in the areas of international cooperation and international relations, and move towards fair global governance. We also need consensus around cultural norms when it comes to basic values such as fairness in order to resolve distributional conflicts.

　　70. More analysis is necessary in order to achieve some of the objectives set by the 17^th CPC Congress around the establishment of an environment-friendly society. This will especially be the case for the implementation of concepts such as sustainable consumption, innovation in production and the harmonization of economic and social targets. For instance, when considering how to optimize transportation in terms of energy conservation, it is necessary to think in economically innovative ways; just designing more energy efficient vehicles will only lead to higher emissions given the present rate of increase of vehicles on the road. Similar challenges exist for the conservation of older buildings, retrofitting them to be more energy efficient; buildings in China have a short lifespan at present. Planning needs to take into account the economic externalities of the environment. There are now incentives rewarding growth; how do we change this to integrate environmental criteria as well? The early work on the Green GDP was promising and could be pursued.

　　71. National statistics are not capturing some of the environmental innovation taking place in China. In some areas, thanks to various departments, research institutions, local governments and the regional CDM office, existing technologies are adapted to local conditions to reduce GHGs – in one case, stone mulch is used on the Loess Plateau to grow watermelons in near-drought conditions. Adaptation is here a key component of innovation. A great deal of this work is happening at the local level in China and should be better reflected in national accounts.

　　72. Innovation has been the engine of economic growth and development throughout human history. Innovation requires certain enabling factors, but there are no guarantees that even under the best of circumstances inventions will be created. As the Innovations TF continues its work, it could focus on concrete case studies in an international and Chinese context. Attention should be paid to the barriers to innovation and to strategic partnerships. Environmental Defence in the US has partnered with Federal Express to do research on a low emissions vehicle for courier deliveries; it has also partnered with the US administration to study emissions trading systems. It has drawn lessons from businesses who share the savings achieved through innovation with employees – a powerful incentive. Case studies in a Chinese context could illustrate how the creative energies of China’s people could be better harnessed.

　　73. There has been work on the payment for ecosystem services in the past; there has also been work on assessing the values of specific ecosystem services, although this has been less successful. But there has been little success so far in creating a mechanism to ensure the benefits of ecosystem conservation accrue to the custodians of the ecosystem services. This area would benefit from innovative work in China. In addition, with the emergence of new and larger cities in China, there is scope for work on sustainable cities – allowing for improved planning around transport and other issues. China is fast becoming one of the largest consuming nations in the world; sustainable consumption models will be key to wiser resource use. Greater public awareness, the use of eco-labelling and other interventions could be key but additional work is needed in this area.

　　74. China’s people and its leaders are increasingly paying attention to sustainable development. But more is needed, especially in the area of local governments. Decision-makers at those levels do not have high awareness or understanding. Planning is key; but even if China has broad experience with the planned economy of the past, the capacity for sound, scientific planning is still lacking. Many of the plans developed for various sectors or at various administrative levels contradict each other. Innovation, capacity building and additional analysis are needed in this area. Moreover, problems have occurred in the past due to unruly real estate development; improved governance around regional and urban planning is necessary.

　　75. The Chemicals SPS puts forward timely proposals in the management of chemicals. Many dangerous chemicals are spread through non-point pollution, and are therefore harder to control. But the study would benefit from compartmentalizing its recommendations in the areas of chemical production, usage and transportation. For instance, standards should be strict when it comes to licensing and regulating new chemicals. Similarly, transportation of chemicals needs more focused consideration. A staggering 20% of chemicals are shipped along the Yangtze River; yet rules are lacking for the transport of hazardous chemicals. In the use of chemicals, a paradigm shift is required; the non-harmful use of chemicals should be promoted – hence the application of fertilizers and pesticides should be reduced.

　　76. It would be useful to link what the EU does in terms of risk assessment systems, and what the SPS on Chemicals proposes. In addition, were EU standards to be adopted by the GOC in its procurement practices, but not necessarily putting these standards into law, this could have a large impact on innovation. The Netherlands’ experience underlines the necessity to have good cooperation between government, the private sector and universities to support innovation as a bottom-up and a top-down process. Recent work on energy saw cooperation between six ministries, facilitated by a special directorate; innovation is hastened by intersectoral approaches. Government needs to change the way it does business in order to support innovation effectively.

　　77. Innovation is difficult because commercial outcomes are dependent on future government policies. It is therefore important for government to consider capital support programs during the early stages of development or adoption of a new technology or process. Australia has set up cooperative research centres that get government funding but that are a blend of private sector’s, research institutions’ and universities’ contributions.

　　78. Environmental innovation depends on the ability of bankers to support the work of innovators and entrepreneurs; it is also incumbent upon innovators to make a business case to their bankers. There is a lack of capacity for this kind of work in both sectors, and new curricula are needed in universities to prepare professionals for this new kind of innovative process. We need to put a head on environmentalists, and a heart into bankers.

　　79. China needs a system to implement its new policies of scientific approach to development, people-centred development and harmonious society. The legal framework has evolved since 1978 when the reform and opening program was put in place. China has borrowed much from other countries to set up its environmental laws and regulations. But implementation remains problematic and more innovation is needed in this area.

　　80. China’s consumption levels are not high but they are not conducive to energy conservation. Traditionally, it has been virtuous to conserve energy and resources in China. This should be encouraged again.

　　81. With Vice-Chair Klaus Töpfer presiding, the Council reviewed the draft CCICED Policy Recommendations to the Chinese Government. The Draft was produced by the Council Chief Advisor （CA）team, led by Professors Shen Guofang and Arthur Hanson. During his introduction, Chief Advisor Shen Guofang underscored the following points.

　　82. The Draft Recommendations are based on the recommendations put forward in the various 2007 AGM reports, papers and presentations. They centre around the theme of Innovation Strategy for an Environment-friendly Society. They also take into account the important pronouncements made during the 17^th Congress of the CPC. The main issues tackled are the policies and mechanisms needed to ensure emissions targets contained in the 11^th FYP can be achieved; the control of secondary pollution from chemicals; the strategic transformation facing China; environment and development in China in the context of increasing globalization; and the establishment of a national eco-innovation system.

　　83. The first draft was produced in Chinese and revised by the International CA. There are still outstanding differences between the English and Chinese versions that will need to be resolved. For instance, more work is needed on the wording related to the 11^th FYP emissions targets. Moreover, we need to look beyond the 11^th FYP to 2020; hence we need to address the 12^th and 13^th FYPs.

　　84. Vice-Chair Klaus Töpfer opened the floor to CCICED Members for their input on the document. The drafting team, led by Vice-Chair Töpfer would then present a revised document to Council on the final day of the AGM for Members’ approval.

　　85. During the course of the discussion, Members emphasized the following issues.

　　86. Among the five themes outlined in the draft, the area of institutional and structural issues in environmental management remains problematic. It would be important to ensure there is continuity with previous CCICED recommendations submitted to the GOC; in this area, the recommendation to enhance SEPA’s status to a full ministry was put forward by the TF on Environmental Governance and was discussed with China’s Premier Wen Jiabao in 2006. There is also a recommendation to improve the technical capacity of local governments to better perform on the environmental front; but the capacity building required is also institutional. In addition, there is a need to reform the penalty structure for non-compliance in China. This should be added to the present recommendation.

　　87. It is important to recognize there is environmental globalization occurring at present. In the EU and the US, proposals are being discussed around the imposition of tariffs on the goods from countries with lower environmental standards. This represents a risk for China, which is not reflected in the draft paper. In addition, it would be productive to spell out clearly the expectations the Council has of the business sector in relevant passages of the paper.

　　88. A recommendation should focus on the main sources of pollution in China and the volume of the major pollutants. Most of the situation is due to outdated production processes, plants and equipment, as well as inadequate management. Therefore a holistic approach is needed in proposing recommendations; points dealing with this general issue should be consolidated. The recommendations should clearly state that the GOC should aim for a reduction of the total volume of emissions and pollution.

　　89. The 17^th CPC Congress has determined that the environment will now be mainstreamed throughout government. A prerequisite for the implementation of this directive is to make sure there is a voice for the environment at the cabinet table. As long as SEPA is not a full ministry, this voice cannot be heard. Yet other ministries’ decisions can have large impacts on the environment – for instance in the area of subsidies or taxation. China will go through an important reorganization of the State Council and ministries this spring; such a recommendation from the CCICED would be timely indeed. In addition, since the evaluation system of local officials is also undergoing revisions, it might be useful to recommend ways to integrate sustainable growth in the evaluation criteria.

　　90. The recommendations should highlight continuity by starting the paper with a passage linking this year’s recommendations with those of past years. What is presently the third section of the paper, regarding strategic transformation, should be at the beginning of the paper, logically moving from the general to the specific.

　　91. The imperative to manage chemicals is the price we must pay for development; we have allowed the legacies of the creation of chemical compounds to go on for too long. China should draw from the wealth of foreign experience in the areas of science, legislation, regulation and corporate responsibility. Mechanisms also exist in the multilateral agreements reached on the management of chemicals. Acting on this promptly is essential for China’s trade sector and its economy. The Council has dealt with economic globalization in the past; it is important to cast this issue in terms of opportunities, not just challenges. Changing the structure of manufacturing and trade would allow for a transition from “Processed in China” to “Made in China”. Long-term competitiveness could be gained by China were it to take part in the global governance system for a fair marketplace.

　　92. The second section of the paper should encompass health concerns in its heading. It is also suggested that the relevant recommendation include a reference to the Organization for Economic Co-operation and Development （OECD）good laboratory practices system, which China could adopt.

　　93. The importance of international cooperation in solving global environmental issues is at present buried in the text and should be highlighted. China has played a critical role in the Montreal Protocol on Ozone Depleting Substances （ODS）; it could play a similarly key role in Bali on climate change.

　　94. While China’s environmental investment decisions are made at the national level, implementation happens at the provincial level. It would be useful to recommend that SEPA have the mandate to make grants to provincial governments, which would be conditional on their implementation of environmental rules and achieving key targets.

　　95. Given the importance of China achieving its 11^th FYP emissions targets, and the challenges existing before these targets can be reached, it may be necessary for China to ramp up current efforts. This should be reflected in the recommendations.

　　96. The theme of innovation strategy needs to be further emphasized in the introduction. Moreover, it would be useful to single out the importance of rule of law in the third recommendation.

　　97. Vice-Chair Børge Brende presided over the Council’s session on Energy Saving and Emission Reduction in China, and Global Climate Change. He introduced SEPA Minister Zhou Shengxian, Executive Co-Chair of the CCICED, who addressed Council members on China’s achievements in the area of emissions control and the 11^th Five Year Plan targets. During the course of his presentation, Minister Zhou emphasized the following points.

　　98. The reduction of GHG emissions is at the top of the GOC’s agenda. A leading group has been formed, presided by Premier Wen Jiabao, and an important conference was held on this issue and was televised nationally. This shows the GOC’s commitment to mobilize all resources to achieve the targets set in the 11^th FYP. Already, key emissions per unit of GDP are starting to decrease. This demonstrates an important shift and shows that a developing country can reduce emissions while still pursuing economic growth.

　　99. Decisive actions have been taken to mothball inefficient thermal power plants while putting more energy efficient plants on stream. The GOC has promoted the use of desulphurized coal, with some 40% of coal-fired power plants now operating desulphurization facilities. The situation with respect to waste treatment has also improved, with some 60% of sewage now treated before release. Similarly, plants that have outdated facilities, such as cement factories, steel mills, pulp and paper mills and others, have been shut down. These efforts have not been fairly reflected in international media reports.

　　100. The lessons learned from the toxic spill in the Songhua River have been summarized and a new policy for the recovery of rivers and lakes has been proposed. The guiding directive will be to allow these water systems to rest and recover naturally. Water is the source of life and at the root of most great civilizations. China is cognizant of great civilizations now silenced because their river systems failed. Aside from putting less pressure on river and lake systems to allow for natural regeneration, China will also take positive measures to ease development pressures on these systems, and to protect the ecosystems. China will continue to use its water resources, but it will cut emissions at source and limits will be strictly enforced. This will require revisions of several laws and regulations. Sewage treatment for urban areas will be improved and a more rational use of water will be enforced. This will require the joint efforts of all stakeholders.

　　101. China hopes to play an important role in the fight to control climate change. China’s President Hu Jintao and Premier Wen Jiabao’s views on the matter can be summarized in three key points. First, all countries should continue to negotiate on a sincere and honest basis; all countries share a common responsibility for climate change, but developed countries need to face up to their historic contribution to the problem and adopt stricter emissions targets. Only in unity can we achieve a reduction of GHGs. Secondly, a change in the modalities of production will be needed to slow down climate change; the idea is not to stop development, but to change the development paradigm. China and other countries still need to grow in order to reduce poverty. Thirdly, there is a need for improved access to advanced technologies and information for LDCs, and DCs hold the key to this technology transfer.

　　102. Vice-Chair Børge Brende introduced Council Member and Executive Director of UNEP Mr Achim Steiner. In his address to Council, Mr Steiner emphasized the following issues.

　　103. A key area of innovation is innovative thinking; the 17^th Congress of the CPC shows there has been a paradigm shift in the way China sees environment and sustainability as part of growth and development. Over the last fifty years, we have lived equating environment with a clean-up operation, and we have seen environmental protection as a tax on development. As we now draw near to several tipping points in terms of what the planet can sustain, drawing down our natural capital, many countries are now entering a transition phase where environment becomes central to sustainable human progress and well being. China is in the midst of rethinking environmental sustainability in the context of economic development in order to generate a transformative economy that can produce sustainably the comforts of life for people. China is at the forefront of the work on the environment as a driver for development.

　　104. Climate change is a sobering scenario, with the planet on the threshold of unimaginable consequences. But this dangerous time is one of opportunity as well. Climate change and its dangers can stimulate a push for much greater efficiency, product and job creation innovation, and the transformation of various processes. This is already underway. China is facing many threats – desertification, pollution of lakes and rivers, acid rain and so on – but there are few countries that can react and take action as quickly as China.

　　105. New industries and jobs are being created through these opportunities. China already dominates much of the solar cell and solar power industry. In the context of the Montreal Protocol, China could soon, through technical innovation, dominate the air conditioner market with its energy efficient products.

　　106. In terms of natural capital, the news is grim. The UNEP report published this year on the ecosystems of the planet shows that over the past 20 years, the situation is worsening in all cases. Each is a case study of what could have been done differently with transformative thinking. Ecosystem goods and services are key to limiting climate change; the resilience of ecosystems and their ability to adapt will be crucial. It is hoped the Council will continue to adopt a holistic approach and not reduce the discourse to issues of technology and mitigation.

　　107. There are important positive signals. Council is demonstrating a greater pragmatism and a willingness to recognize that if 1.3 billion people can live in a more sustainable manner, this is positive for the whole world. It will be important to ensure full international cooperation, and the Bali meetings will be difficult because more than 190 countries taking part have conflicting interests and perspectives. Member states must ensure the United Nations （UN）system is supported so it can continue to play a pivotal role. The world needs a framework and an action plan by 2009. China can play an important role in ensuring the UN continues to be the forum for international action on climate change.

　　108. Co-Chair Børge Brende introduced Ms Wang Jirong, Vice-Chair of the China Environmental Protection Foundation and Co-Chair of the TF on Policy Mechanisms towards the Successful Achievement of the 11^th FYP Environmental Targets. During the course of her presentation, Ms Wang made the following points.

　　109. The first part of the TF report provides an analysis of the problems posed by emissions reduction in China. Targets have been set and have been broken down for each province for key pollutants such as SO₂ and COD. The targets were based on an assumed 10% growth in GDP. But reducing emissions has political and economic, as well as technical implications. Economic theory shows clearly that it is difficult to decouple GDP growth from environmental damage due in part to increased energy consumption. Pollution reduction is a political issue because China is now one of the top emitters of COD, POPs and other major pollutants, thereby attracting world attention.

　　110. While recent figures indicate that China may be able to control incremental emissions, current reduction schemes are not sufficient to reaching the emissions targets set in the 11^th FYP. The current coal desulphurization capacity is still too low, and coal consumption continues to rise; moreover, some desulphurization facilities have been poorly engineered, have low technical standards, and cannot be operated. For COD, the total sewage treatment plants’ capacity in China is not being maintained and a significant proportion of total sewage is still untreated. Government agencies are having difficulty implementing existing laws and regulations. Investment in pollution control processes and equipment is inadequate. There is a quality gap between the design of treatment plants and their implementation. Setting aside funds used for afforestation, only 0.5% of GDP is at present invested in the environment.

　　111. The TF recommends that the GOC prioritize the indicators used in assessing the performance of officials; GDP growth should clearly be less important than pollution reduction. Audits of lower levels of government and agencies should be conducted on issues such as resources and energy conservation, and pollution control. Economic policies need to be more effectively coordinated with environmental policies. There are not enough incentives for enterprises to abide by environmental standards. Pollution control needs to be conducted on the basis of total emissions. There has to be special attention paid to export-oriented enterprises, and stringent efforts need to be made to stop the importation of toxic materials for recycling. Finally, the GOC could emulate the US measures to support green buildings through tax incentives.

　　112. Many countries have achieved significant progress on emissions control by the adoption of new technologies and cleaner production techniques, by the use of low sulphur coal and desulphurization, and by effective administrative, financial and regulatory means. Most countries spent roughly 5% of GDP on the environment – 10 times more than China’s investment. In some cases, funds have been set up to assist with infrastructure investment in pollution control. Other economic instruments such as tax incentives and subsidies have been used to generate desired change in industry. By the time the 12^th FYP is formulated, China needs to study these examples in a timely manner and adopt those it deems most appropriate. Priorities for action during the 12^th FYP include industrial boilers, the power-generation sector, and pollution control in rivers and lakes.

　　113. With Co-Chair Børge Brende presiding, Member Sir Gordon Conway, Chief Scientific Advisor of the UK Department for International Development （DFID）and Professor He Jiankun, Vice-President of Qinghua University addressed Council on preliminary work on a proposed TF on the Low Carbon Economy. During the course of their remarks, they underlined the following issues.

　　114. The evidence is undeniable: carbon emissions from human activity are at unprecedented levels and are changing our climate. Analysis done by the China Academy of Agricultural Sciences shows minimum temperatures rising rapidly in northern China while precipitation is going down in the south and centre of China, and increasing in the west. A greater frequency and severity of extreme weather events such as droughts and floods is occurring. The planet is now reaching dangerous points-of-no-return – such as the melting of the Greenland icecap. There is therefore an urgent need to reach a global agreement on the price of carbon emissions, and we need to develop low carbon technologies.

　　115. This represents an opportunity to shift into a new competitive era. In the EU, an emissions trading scheme is now setting the price of carbon emissions. Political leaders are committing to ambitious targets, such as the UK’s pledge to cut 80% of its emissions by 2050. This will drive innovation towards 0-emissions houses, and programs such as the ban on plastic shopping bags.

　　116. Transportation contributes to 40% of emissions in the UK, but only to 4% of emissions in China. Conversely, agriculture is a larger contributor to emissions in China. All sources of emissions must be tackled in order to control total emissions. China is committed to increasing renewable energy sources, while decreasing coal-generated power to 50% of its total energy production. But China will still be increasing its capacity of thermal power plants and will be burning increasing amounts of coal. This highlights the importance of carbon abatement technologies; higher efficiency of thermal power generation is key. The UK is keenly interested in international cooperation with China on the issue of a low carbon economy and recommends a new TF be formed.

　　117. There is still much room for improvement in carbon intensity in China, although significant progress has already been made. Since 1980, per unit of GDP carbon emissions have decreased by 66%. This drive for greater efficiency and for a reduction in emissions will spur new technologies and other innovations. Clean coal technologies and carbon sequestration could reduce the impacts of coal power generation. Global action on climate change is taking us down the low-carbon road. Additional international cooperation is needed in order to allow LDCs access to technologies, using the CDM. Further developments of the study and recommendations could be submitted to Council in coming years.

　　118. Vice-Chair Børge Brende presided over the discussion on the issues raised during the Session. During Members’ interventions, the following issues emerged.

　　119. The work of a TF on the Low Carbon Economy would be a valuable addition to the work of the CCICED. One of the issues to touch upon would be the so-called “no-regrets options” – actions that China should take now and that can yield immediate benefits. It would be important to also identify the foundation for the longer term development of a low carbon economy; there is a clear link here to the Innovations TF.

　　120. The TF on the 11^th FYP Emissions Targets has highlighted an important policy contradiction in pointing out conflicting mandates of various ministries when it comes to SO₂ controls. It would be important to highlight the contradictions that can be resolved in order to move more consistently towards stated goals.

　　121. As China pushes for common but differentiated responsibilities in the control of GHG emissions, the price of carbon and hence energy in the developed world will increase more rapidly than business-as-usual assumptions. Even as China tries to move away from energy intensity, its relative energy price will fall compared to the global economy, unless it takes action to address energy pricing. This highlights the importance of reforming China’s energy pricing policy, for exports and perhaps for domestic consumption as well. It might be useful to look at global agreements governing energy-intensive, footloose industries such as the aluminium sector.

　　122. The Council should look into the implementation of a low carbon economy in China over the next five years. Recommendations to the State Council could encompass the issue of effective emissions and energy-intensity indicators and targets. In addition, greater discussion is needed on the acceptable levels of temperature increases due to climate change. Developed countries can perhaps cope with a rise of 2 degrees Celsius in terms of emissions control, but this could prove a difficult challenge for poorer countries that still need to develop in order to feed people. Some countries may be willing to face the problems associated with higher temperature increases in order to make progress.

　　123. The two degrees Celsius mentioned is an average global value. In fact, the temperature fluctuations will be more pronounced in certain areas of the globe, such as the arctic. Many of the northern latitudes will be more affected than southern latitudes, which is important to China.

　　124. Emissions control needs to be considered in the agricultural sector. Grain security is still an important priority for China. Energy consumption and production in rural areas should be considered in future by the Council. Agriculture in China is still extensive, with high levels of waste and non-point pollution from pesticides and fertilizers; much improvement could be made while at the same time improving rural livelihoods. Rural areas have significant potential for power generation through bio-fuels and waste.

　　125. The morning’s presentations share three points in common. On the national level in China and in the OECD, as well as globally, there is a great deal of urgency for a post-Kyoto regime by 2009, in order to reach the peak of CO₂ emissions by 2015. In this context the emissions targets in the 11^th FYP reflect this urgency for China. Secondly, there is no room for incremental improvement; there is a need for radical action and the proposed TF on the Low Carbon Economy is very timely. Third, in order to take this route, a system of effective global incentives will be needed in order to avoid inaction. Work on the global carbon market and what this could mean for China is very relevant. A different kind of cooperation is needed in order to support the development of a low carbon economy; priorities should be set and elements of action plans put in place for this work globally. This could be part of the TF’s workplan.

　　126. Wastewater is the main source of COD; and much of this is urban wastewater. This poses a threat to the health of rivers and lakes, and also threatens the quality of potable water. Many areas in China are short of water, due not only to quantity, but also to low quality water that cannot be purified for use as tap water. There are 660 cities in China with sewage treatment plants, but one third of cities do not treat their sewage at all, while others have low efficiency sewage plants. In older systems, storm sewers are not segregated from the waste pipes. Massive investments are needed to bring all urban sewage under effective management. Sludge from wastewater plants can no longer be disposed of on land, as in the past. This issue still needs to be resolved. Many of the more modern treatment plants are not used at full capacity due to various administrative and policy reasons. Moreover, some 30,000 smaller towns and townships have no sewage treatment and there is a need for innovative approaches to treatment of waste water in those areas.

　　127. Sweden is prepared to support the work of a TF on the Low Carbon Economy. Its TOR need to be elaborated carefully in order to avoid duplication with other efforts in this field.

　　128. The work of the private sector in the fight against climate change needs to be mentioned. Large food producers started sustainable food initiatives and have generated data and strategies; multinationals have teamed up with universities in order to look into this. The TF should review carefully the work done in this area in order to avoid duplication.

　　129. Co-Chair Klaus Töpfer presided over the final discussion and approval of the CCICED Recommendations to the Government of China. The revised draft was presented to Council by International CA Arthur Hanson, who highlighted the following points for Members.

　　130. The revision work was done using the English version, with the contribution of several Members. A Chinese version was then produced. The initial order of the main points raised has been retained. In general, more focused statements have been produced. One of the changes has been to include the Chinese term “ecological civilization”, which has been introduced during the 17^th CPC Congress; it is judged useful to be consistent with current Chinese thinking in this area.

　　131. Co-Chair Klaus Töpfer invited Members to comment on the revised draft. The following points were made during this discussion.

　　132. More time should have been allotted to discussion during the AGM. It is a waste of the talents assembled not to maximize their contribution.

　　133. Greater integration of the business sector, in particular China’s, in the work of the Council is needed. Implementation of any technical innovations, pollution control policies and other measures is often left to the business sector. Global sector approaches involving Chinese companies are essential, and the GOC’s support is needed to foster this discussion. Perhaps a TF on the role of business in the environmental area in China would be useful in future.

　　134. The discussion on the need to develop a low carbon economy is not reflected in the present version of the recommendations. The spirit and tone of the Council’s discussions should be better reflected in the document. Similarly, the section on China’s ecological footprint needs to mention that China is at present over-stripping the capacity of its land to support its population.

　　135. The next AGM should be organized differently. Each TF or SPS report needs to be discussed by members after it is presented.

　　136. The revised recommendations were approved by members for submission to the State Council of China.

　　137. Vice-Chair Børge Brende presided over the final session of the 2007 AGM. He introduced CCICED Secretary General Mr Zhu Guangyao who presented Council with the 2007 Work Report and the 2008 Workplan. During his presentation, Secretary General Zhu made the following points.

　　138. Council activities in 2007 focused on the transition between Phase Three and Phase Four. The Secretariat produced its report to the GOC and worked with a variety of partners and donors. The composition of the Council was changed to better suit the requirements of Phase Four. The commissioned TFs and SPSs proceeded with their work smoothly. A report distributed to Council outlines the details of these activities.

　　139. As demonstrated by the comments of Premier Wen Jiabao in meeting with Council Members during this AGM, the GOC attaches great importance to the Council. During this Phase, the Secretariat is to perform at higher standards; the CA group has a more important role, providing a solid foundation for activities over the coming five years.

　　140. The new TOR and Rules of Procedures have been adopted during this AGM. The work of the CCICED will be based on China’s actual needs and will reflect the strategic direction laid out during the 17^th Congress of the CPC. In addition, the Council will pay increasing attention to China’s role in the world and the impacts of globalization on China itself. Issues of priority will be energy and climate change. In order to more effectively propagate Council findings and recommendations, roundtables will be held with various stakeholders.

　　141. The main activities of the CCICED in 2008 are as follows. One SPS and two TFs will complete their work and report to Council. Five more TFs studying various aspects of energy and environment will commence their work in 2008 and 2009. Further proposals have been made on the low carbon economy, on rural energy and development, and on adaptation to climate change. The theme for the 2008 AGM will be Innovative Mechanisms for Harmonious Development; it will take place in Beijing from November 12^th to 14^th. Following the 2007 AGM, during the first half of 2008, a Roundtable will be organized in order to disseminate policy recommendations and study findings; members are welcome to attend and will be given a three months’ notice of the event. In addition, Council recommendations will be distributed to local governments, media organizations and other agencies.

　　142. Co-Chair Børge Brende invited members to comment on the Secretary General’s report. During the discussion, the following issues were raised.

　　143. The TF on Environmental Governance of Phase Three had encouraged participation from local and provincial governments; they made a valuable contribution. It is recognized that there are gaps between central government policies and local implementation. Perhaps roundtables could be organized regionally in order to ensure greater penetration of Council recommendations throughout China. Regional roundtables could be tailored to fit the area’s chief concerns and priorities.

　　144. The new TOR of the Council makes mention of private sector forums. Over the coming year, such a forum should be organized in order to assess the role the Chinese private sector could play in the Council. The World Business Council （WBC）would be interested in working with the Secretariat to organize such an event. Another element of the new TOR is the provision for special observer status for business people. More information is needed on the eligibility of potential observers, but this initiative should be encouraged.

　　145. China is building an enormous amount of new commercial, residential and industrial construction. Despite existing building codes, the quality of the construction and energy efficiency are low. The WBC has a project in China focusing on energy efficiency in buildings. Major gains could be made if new buildings going up now were more efficient. This could also be the focus of a future TF.

　　146. There is a cascade of activities with TFs in the coming years focusing on energy-related issues. Energy efficiency, including in buildings and in transportation, will be considered, as will market-based instruments, the sustainable use of coal, the low carbon economy and others. The TFs need to be set up expeditiously so work can commence. Council members will be solicited for input on their TORs. Because energy and environment issues are complex, it will be important to coordinate the work of various TFs and SPSs in order to maximize their effectiveness.

　　147. In the past, the Council worked on bio-diversity issues. This AGM has seen mention of ecological civilization, of ecological deficit, of ecosystem services, of eco-restoration – allowing rivers and lakes to rest so they can regenerate. There is a need for additional work in the area of natural capital in times of transformation during this Fourth Phase. Additional ideas from Members would be valued.

　　148. Attention should be drawn to the link between ecosystems and adaptation to climate change. The focus is often put on mitigation and on improving technologies and efficiency to reduce GHG emissions, but the resilience of ecosystems to the degradation brought by climate change is an important area of study. There is an international community of professionals working on this, and there are good Chinese institutes interested in this work. The Council could provide an ideal platform for this work.

　　149. There should also be some attention paid on the ways the AGMs are run, who can be invited, whether or not some of the work could be done in smaller working groups that would then report to the plenary of the AGM.

　　150. It is important for the Council not to repeat earlier work. There was a report on Ecosystem Services in past years and this could be the basis for future work. This new TF could be timed to coincide with the next Conference of the Parties of the Convention on Biodiversity in Bonn.

　　151. Rural issues are important in China and the TF should not limit itself to energy considerations. Similarly, urban areas should be the focus of work on energy, especially given the 2010 World Expo in Shanghai which has as theme “Better Cities, Better Life”. Council’s work in this area could be linked to this World Expo. Chinese entry points should be sought for the work of the Council and for its pilot projects.

　　152. A workshop could be held around the notion of a 2 degree Celsius climate change. A roundtable or working group looking into the current international agenda and China’s role in this regard could also be productive.

　　153. Caution should be exercised when using the ecological footprint measure. Although it is a useful teaching and publicity device, the common denominator of the footprint is hectares of bio-capacity. However, water is not taken into consideration. Australia would seem to have a surplus of bio-capacity, but this is not the case due to water scarcity. Many indicators are needed in order to produce a reliable picture.

　　154. Attention should be paid to the length of the reports submitted to members. Executive summaries should be provided.

　　155. It would be useful to have an analysis of the past recommendations of Council that were not adopted by the GOC.

　　156. Co-Chair Børge Brende introduced the CCICED’s Executive Co-Chair and SEPA Minister Mr Zhou Shengxian, who pronounced the closing speech of the 2007 AGM. During his remarks, Mr Zhou underlined the following points.

　　157. The AGM has been a lively one, with thought-provoking presentations and stimulating exchanges amongst Members. The objectives of the AGM have been achieved. Premier Wen Jiabao, in meeting with Council, highlighted the various areas where innovation is needed, namely science, institutions, laws and mindset. Premier Wen announced that China had turned the corner on emissions, that they are starting to decrease when measured per unit of GDP. China is paying attention to climate change and the need to build a low carbon economy as it prepares for the Bali conference.

　　158. The Premier emphasized the Council is a good platform for international cooperation. If the Council helps 1.3 billion people improve the environment, it is also helping one fifth of the world population. Members were also briefed by Vice-Premier Zeng Peiyan on China’s efforts and on the global perspective on emissions control. The speech from Dr Pachauri of the IPCC on climate change was important. Five sessions were held to discuss various SPS and TF report and to work on recommendations to the Chinese government.

　　159. Since the 17^th CPC Congress, environment is to be mainstreamed in China’s development. More efforts are needed in future and the Council’s recommendations towards strengthening China’s innovation system are timely. International cooperation will be key in this area.

　　160. Council recommendations are an important document. By the next Bureau meeting, the Secretariat will provide feedback on the reception given to these recommendations by agencies of the GOC. It will also look into the reasons why some of them are not implemented.

　　161. The Council in its Fourth Phase has an entirely new look. It is maintaining its vitality in order to fulfil its important role. The composition of Council is representative of important sectors and geographic areas. The members are specialists of outstanding repute and experience. The core of the Council’s work in the coming years will be on energy, which has the most serious repercussions on the environment and on climate change. More work can be done to improve the workings of Council in order to allow members to express their views and perhaps work in smaller groups.

　　162. Chinese leaders are more willing than ever to listen to the Council. The recommendations are widely used in supporting more sustainable development in China. An important responsibility is the dissemination of the Council’s work and recommendations. Members are invited to pay close attention to issues of importance to China, and to support the increased flow of technologies and training of personnel between China and their countries. Because the contribution of the Council is practical and timely, it is bound to play an ever greater role in China’s development.

　　163. Co-Chair Børge Brende pronounced the 2007 AGM closed.

　　164. Premier Wen Jiabao met with international CCICED Members at the Zhongnanhai Compound on November 29^th 2007, the second day of the AGM. The Premier welcomed his guests and engaged Co-Chairs Klaus Töpfer and Børge Brende in discussion. The following notes were made during the course of this meeting.

　　165. Premier Wen Jiabao （WJB）: Welcome to our friends of the CCICED. This is the 16^th year of the Council – its continued existence demonstrates the resolve of the Government of China （GOC）to build an economy that is environmentally friendly and that conserves resources. This is indeed the strategic direction of our development program. Your theme this year of Innovation Strategy for an Environment-friendly Society is closely related to this. I have met with you now ten times; some of the faces on Council have changed and the themes are different each year, but what does not change is your enthusiasm and your commitment to helping China.

　　166. We know we must, as a nation, be open to the world and inclusive and receptive to good advice; only then can we build the prosperity to which we aspire. The CCICED is an excellent platform for exchanging views and learning from each other. I am keenly interested in your ideas and your recommendations on innovation in the context of building a resource-saving and environmentally-friendly society.

　　167. Vice Chair Klaus Töpfer （KT）: International members of the Council are grateful you are devoting some of your precious time to meet with us. We are aware that this is a critical time in China’s history. We are meeting with you a few weeks following the 17^th Congress of the Chinese Communist Party. We have studied some of its key documents and we note you have embarked on an important transition. This is the first meeting of the Council’s Fourth Phase; two thirds of our members are new. A first meeting is important for agenda setting and for members to get better acquainted. But we are doing solid work on this theme of innovation. We have determined that this phase will see us undertake some policy demonstration projects, such as piloting a low carbon economy in a small to medium size city in China. We have based our deliberations on work done by the Secretariat of the Council, and the Chinese and International Chief Advisors.

　　168. We remember well our discussion last year when we talked about your concept of Three Transformations. We know such an endeavour will require the participation of China’s entire population. Our members have rich experience to share from their own countries. It is critical that awareness of this concept keep building and that people be brought on board. I am a professor at Tongji University in Shanghai and I teach your Three Transformations to my students, who are keenly interested in this. Transformation requires innovation – innovation in the areas of technology, politics and institutions. We would like to emphasize that in order to ensure equal importance is paid to environment and development, there is a need for a full ministry to advocate for the environment within cabinet. As a former environment minister, I know that it is critical to have a seat at the table. We feel it is important to put in place a solid architecture supporting effective environmental governance at the national, regional and local levels. It is also critical to strengthen the capacity of the institutions that are charged with making these improvements.

　　169. We wish to congratulate you on the outstanding success China is achieving on the economic front, with GDP growth of over 11% this year. But in line with the 2^nd of your Three Transformations, it is important that environmental dimensions be considered now, not after economic development has taken place. We see with pleasure the plans you have to invest in greater energy efficiency and in measures to combat climate change. There is no doubt that a “crash program” is needed in the current Five Year Plan so China can show the world that it can reach its emissions targets.

　　170. In addition, the Council feels it is imperative to deal with chemical pollution problems. There is a need for stronger administrative and legal measures to curb pollution. This is a global challenge, and it is one where trade implications could be serious for China. Finally, in this globalized world, China is one of the economic pace setters. The need for energy and resources will only grow as China continues to develop. In this context, it becomes ever more critical to develop green markets, protect the environment, and ensure wise use of our natural capital. China can take the lead in being more environmentally friendly and in conserving its resources. It is our hope that we can provide you with solid recommendations in thanking you for your continued support.

　　171. （WJB）: You have conveyed just now the main points of your meeting; let me highlight some of them. You have mentioned three key areas of innovation – technical, institutional and legislative. But I believe there is a fourth and most important aspect: innovative thinking. Secondly, indeed China’s economic growth is very rapid, but it must be sustainable. We must consider the capacity of the environment and our natural resources and energy capital. Resource use must be sustainable. Thirdly, I note that in our discussion of the Three Transformations, in innovating to develop an environment-friendly society, we need the underpinning of a solid institutional framework. Only then can we achieve our objectives.

　　172. Fourthly, in discussing the low carbon economy and its application in cities, as well as in the discussion of environmental indicators, I want to highlight two issues with which we are grappling. Already Beijing has 3 million vehicles on its streets; the environment cannot bear further growth in this area. We must develop more options for public transit and light rail transport. Similarly, we cannot continue to rely on fossil fuels for our growing energy needs due to the pollution generated, so we must focus our efforts on clean technologies and renewable energy sources. Finally, let me underline that China’s development is at the crossroads. Environmental protection and sustainable development are our top priorities. This message must be received by our whole population; we must all understand that developing first and putting off dealing with the environment will lead to disaster for our posterity and for the whole globe. The old road of development first and cleaning up second is simply not feasible.

　　173. Vice Chair Børge Brende（BB）: The Chinese government has taken concrete actions over the past year in both environmental and energy areas. I have studied China’s program to combat climate change and it is very good. Without energy, there can be no development, but without decoupling economic growth and the growth of emissions, China will run into greater problems with deforestation, desertification, climate change and other negative effects. China’s position is a realistic one; there must be a transition between the use of fossil fuels and that of renewables – and carbon capture and storage can be such a transition. But when we report to you, Mr Premier, on a roadmap to a low carbon economy, where can the Council provide added value? This is an important aspect of the tasks facing us in this Fourth Phase.

　　174. WJB: In meeting with you, I have answered a longer exam paper this year compared to years past and it seems my performance has improved! In forming our leading group on climate change, in issuing our national program to combat climate change, in formulating a set of indicators of progress, in stipulating a reduction in emissions and in setting up mechanisms for evaluation and supervision, we have done practical work. We can provide you with all relevant documents should you be interested. Already, we are achieving results. The past trend of rising energy consumption per unit of GDP has been reversed – in fact it has dropped by 2.8%. Sulphur dioxide has similarly dropped by 1.2% and Chemical Oxygen Demand （COD）by 0.28%. We have turned the corner in our efforts in curbing emissions.

　　175. Our officials are changing their thinking. In the past, they were obsessed by GDP growth. Then when we had SARS, they all became familiar with the letters CDC – the acronym for Centres for Disease Control. Now they are becoming familiar with COD. To be honest, they are still vague on what a low carbon economy really means. And yet this is of vital concern for the whole world and it will be discussed in Bali. China faces some difficult challenges. On one hand our population is increasing so we need to have our economy grow; that implies the demand for energy will continue to increase. The question is how we can provide more energy while cutting down greenhouse gas emissions.

　　176. Our second challenge is that economic growth must be coupled with energy efficiency and resource conservation. These efficiencies apply to all sectors – industry, agriculture and people’s way of life. To effect such broad changes requires comprehensive policy measures. The third problem we have is that we need to adjust and shift our old energy structure. China has many areas where wind, solar, geo-thermal and nuclear energy sources can be harnessed. The fourth issue is how we can combine lower energy consumption and carbon capture. This implies massive reforestation efforts. I am a geologist and I know about our Loess Plateau – China has the world’s largest area under loess, a geological feature that was created in the quaternary period when there was very scarce vegetation. We also face more specific challenges, such as the conservation of energy in buildings and how to prevent each family in China from owning a car. I have enumerated five key areas. How do you rate my understanding?

　　177. BB: You have a staggering grasp of the problems and that is very promising for China!

　　178. Council Member Achim Steiner （AS）: You have mentioned the need to innovate in our ways of thinking. What strikes us is the speed with which China has moved from a point where the environment is seen as a tax on development, to the point where it is an investment in future development. China has gotten there much faster than other countries. There is talk among Chinese leaders now of building an ecological civilization and a sustainable economy. This shows the environment can be seen as underpinning development, dissolving the tension between economic growth and environmental sustainability. We have arrived at a new paradigm.

　　179. WJB: I fully agree with you. We are now raising the environment to a much higher level. I want to be known as an environmentally friendly premier, and my cabinet to be environmentally friendly. I want my country to have a sound environment, with blue skies and white clouds. Of course, we must face many problems yet. I can only go part of the way; future generations will have to continue the work.

　　180. AS: You make reference to other countries; we must help each other. As executive director of UNEP and a member of the CCICED, I know that globalization can both help and hinder. China can emerge as a partner in global environmental governance. The problems we face will need the efforts of all and in Bali it will be critical for leadership to emerge, especially from China. The Secretary General will need your support in forging an equitable way forward in solving climate change. I convey the message that he will want to discuss these issues with you prior to the Bali meeting.

　　181. WJB: In Bali, you will notice that the Chinese delegation will demonstrate a positive, constructive and realistic approach. If we help China’s 1.3 billion population, we are helping one fifth of the globe’s people. That will be our contribution to the world. I would like to review some statistics that have cropped up. It has been mentioned that 600 billion RMB yuan would be needed to treat sewage and solid waste. But the amount is much larger if we take into account the need to also clean up our lakes and rivers systems. We are committed to increase the ratio of GDP spent on environmental investments.

　　182. KT: We are impressed that you have turned the corner on emissions in spite of the very rapid growth. We are confident that things will improve if this trend continues.

　　183. WJB: I hope that when we meet again next year, I will have even better results to report.

　　184. KT: My colleagues and I hope we can become ambassadors of China’s work and way of thinking in this area.

　　185. WJB: Each year, our meetings demonstrate your friendship and your confidence in our environmental endeavours in China.

　　186. KT: We also congratulate you on rising economic prosperity and the role China has played in ensuring the Millennium Development Goals are reached by making such progress in fighting poverty. We wish you all success in your fight for the environment.

　　187. WJB: Poverty has been reduced in China in a historically unprecedented manner. We are recognized throughout the world for our success in this area. I would be delighted if we can get recognition for our work on behalf of the environment. Thank you for your visit and for your help to China.