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Politics of Renewable Energy in China

Chen Gang

In this book, Chen Gang examines the real-world effectiveness of China's approach to the promotion of green technologies and practices, and discusses the political landscape in which it is situated.
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Chapter 1: Introduction

Chen Gang

Environmental pollution is a global issue that most fast-growing economies have to face, relating to many factors such as economic structure, technological level, political systems, governance capacity, institutional building, as well as public awareness and social participation. China’s economic miracles over the past three decades have imposed enormous pressures on the country’s already worsened environment and scant resources, with the mounting ecological problems, such as emissions of greenhouse gases, urban smog, water pollution and shortages, soil contamination, desertification, and loss of biodiversity, having caught the intensive attention of the Chinese government, and the domestic public and international community. As the world’s largest carbon polluter, generating about 29 percent of global carbon dioxide emissions (PBL Netherlands Environmental Assessment Agency 2016, p.5), China has been playing a paradoxical role in global climate political economy for years, by stubbornly refusing to accept any mandatory emission-cutting obligations, yet ironically becoming the world’s leading developer of renewable energies and carbon trading business. Through enhancing its capacity for environmental governance, the Chinese authorities have taken concrete steps in curbing pollution, with environmental conservation and low-carbon tasks being given the highest platform in the political agenda of the ruling Communist Party of China (CPC).

Nevertheless, a society’s ability to identify and resolve environmental problems is not merely based on the knowledge and resources embedded in its bureaucracy and legal framework (Weidner 2002, pp.1340–68). Until now, China’s ecological protection and low-carbon effort has been mainly a state-led process, which has been severely restrained by the existing implementation deficit in environmental governance and the inability of the administration to monitor and reduce pollution in this vast nation. The presence of social actors who can act as advocates for the environment and the integration of these non-governmental forces in processes of planning and policy-making can substantially enhance the opportunities for ongoing environmental transition (Jänicke 1996, pp.71–85). The rising civic activism in an era of social media and fragmentized policy-making has been constantly confronting the party-state’s non-participatory approach managed through a top-down apparatus. The political interactions among central and local bureaucracies, interest groups, and societal forces have constrained the country’s ambition in developing renewable energy.

The former US vice president Al Gore said in his 1993 bestselling book, Earth in the Balance, that ‘as the dramatic environmental problems in Eastern Europe show, freedom is a necessary condition for an effective stewardship of the environment’ (Gore 1993, p.179), highlighting the nexus between democratic political institutions and the creation and implementation of environmental regulations. Yet in a new context of the global climate change crisis, some scholars have noticed that authoritarian regimes on some occasions might make better environmental managers vis-à-vis wealthy democracies’ generally lackluster responses to global environmental challenges, with the concept of authoritarian environmentalism (Josephson 2004; Purdy 2010, pp.1122–209; Gilley 2012, pp.287–307) being developed to explain the phenomenon.

Authoritarian environmentalism has been generally interpreted in two dimensions (Beeson 2010, pp.276–94): the first is a decrease in individual liberty that prevents individuals from engaging in unsustainable behavior and compels them to obey more sustainable policies; the second is a policy process that is dominated by a relatively autonomous central state, affording little or no role for social actors or their representatives. East Asian authoritarianism has been hailed by Shearman and Smith as a model for authoritarian environmentalism that stresses limits on individual freedoms as well as a policy process in the exclusive hands of an autonomous state. Some of the remarkable achievements made by China in curbing environmental degradation and pollution have proved that authoritarian environmentalism can be efficient and effective in fighting pollution in many ways (Shearman and Smith 2007; Chen 2009; Gilley 2012, pp. 287–307).

In recent years, the emergence of China as the world’s largest producer of renewable energies, including wind and solar photovoltaic power, has been hailed by some observers as a model for authoritarian environmentalism, a policy process dominated by a strong central state that prevents businesses and localities from engaging in unsustainable behavior and compels them to obey more sustainable policies. Scholars amazed at China’s renewable miracles started to challenge climate mitigation strategies prevailing in many industrialized countries that are profoundly dependent on democratic political environments and governance modes that explicitly require the strengthening of local public participation (Few et al. 2007; Devine-Wright 2012; Mathews and Tan 2015; Chen 2016). Mathews and Tan (2015, p.1) praised China’s renewable energy revolution as being ‘the world’s first case of a country breaking free of carbon lock-in by building its own renewable energy industries – building energy security through manufacturing.’ Chen (2016, p.8) attributed China’s renewable leap forward to the government’s ‘hybrid strategies for environmental protection measures that combine a cluster of developmental state features in an attempt to partially incorporate a modified, state-led strategy based on ecological modernization.’ China’s centralized way of developing renewable energy and related industries also questions existing consensus in international documents such as the Brundtland Report (World Commission on Environment and Development 1987) and the Organisation for Economic Co-operation and Development (OECD) (2002) report that emphasized decentralized and democratic mechanisms as a necessary environmental governance condition for desired policy outcomes.

Research claims that centralization occupies an important place in the governance template used to diffuse renewable energy in China (Chen 2016, p.9). As a non-liberal state with a centralized and top-down development model, China’s leap forward in renewable energy application seems to contradict existing orthodox governance patterns in which sustainable development targets can only be achieved in a decentralized, participatory, and bottom-up environment. China’s surprising progress in the low-carbon industry has been deemed as a case in point to support authoritarian environmentalism, which has been accusing democracy and the free market of promoting consumerism and individualism that exacerbate the unsustainability issue (Ophuls 1977; Methmann 2010). Most of the above literatures point to the same argument – the authoritarian Chinese regime is gifted in developing renewable alternatives because it is more capable of overcoming resistances from domestic interest groups, especially those in conventional energy sectors, than are most democracies. Besides, the party-state is well-known for drafting strategic development plans with five-year or even longer-term policy targets, which many believe helps solve the market failure in the clean energy sector where ecological benefit or cost is often not fully priced in.

Even in the authoritarian party-state, however, the Chinese regime has never been monolithic, with numerous interest groups co-existing and vying for greater influences on the extensive and fragmented bureaucracy at various levels. Modern energy politics must be understood in terms of the relative influence of numerous groups contending for protection or promotion by the government (Chubb 1983, p.18). Evidently, China’s energy policy-making does not fit in the rational decision-making model where parochial interests often give way to overall national interest. The concept of ‘fragmented authoritarianism’ (Lieberthal and Oksenberg 1988; Lieberthal 1992) used to describe China’s decision-making in its early stage of reform is becoming more convincing for viewing today’s energy policy formation and implementation in China. An authoritarian centralist state in theory, China has witnessed the emergence of de facto federalism and pluralism in practice in the past four decades of reform and opening up. In the new policy context of growing pluralization, decentralization, and fragmentation, fast-growing economic stakes have led to a subsequent increase in the number and types of pressure groups involved in energy policy-making. This is likely to expand substantially to include more ministries at the national level, big business entities, media, and non-governmental organizations (NGOs), among other entities and individuals.

The theoretical puzzle concerning interest groups and bureaucracy is not how to approach these organizational forms independently, but how to understand the relationship between them (Chubb 1983, p.10). The outcome of China’s renewable energy development is largely being shaped by the dynamic interactions among various interest groups, central–local relationships and the central government’s energy policy priorities – these have been identified as the three determinants that will decide China’s renewable energy future. Like many other countries, China’s energy policy-making is fueled by the country’s overall economic growth targets. The central government’s renewable energy policy prioritizes the dual goals of meeting China’s insatiable energy demand and delivering its low-carbon commitment in the context of climate change and industrial pollution. Though ambitious, the country’s renewable targets are often unrealistic and are not supported by other energy interest groups or local governments. This has led to huge waste and inefficiency of renewable energy projects, with consequences of exorbitant overcapacity and curtailment rates in local wind and solar projects. The void of effective civic supervision and lobby activities impedes the enforcement of China’s low-carbon energy ambition and other environmental initiatives, as political and business elites, who benefit from patronage and income from natural resource rents and favorable policies, often have little incentive to engage with citizens and to build effective public authority over energy and environmental issues.

China has an electrification rate of close to 99 percent (Urmee et al. 2009), with two-thirds of the total supply coming from carbon fuels, mostly coal. Retired Chinese Premier Li Peng, in his three-volume Diaries of Power Industry (Li 2005) and the Diaries of Three Gorges Dams (Li 2003), provides rare revelations about detailed operations and conflicts within China’s fragmented power industry bureaucracy. As an expert on China’s hydropower industry himself, Li witnessed the merger of the Ministry of Power Industry and the Ministry of Water Resources in 1982 (Li 2005, p.398) to solve divergences between coal-fired power sections and hydropower departments, and the establishment of the State Council Three Gorges Project Construction Committee in 1992 (Li 2003, p.159) to coordinate inter-agency issues concerning the construction of the world’s largest hydropower project. Li’s first-hand description of administrative affairs within China’s electricity bureaucracy implicitly revealed that inside Chinese energy politics, under its unified and authoritarian façade, was the intensified power struggle and lobbying activities conducted by different stakeholders within the state apparatus. As a top leader in the CPC, Li chose to focus on consensus rather than divergences in the compiling of his diaries, but he failed to give convincing explanations as to why the State Council decided to abolish the leading panel on the preparation work of the Three Gorges Project in 1986 (Li 2003, p.91), or why the then CPC general secretary Hu Yaobang was determined to push forward the merger of the Ministry of Power Industry and Ministry of Water Resources in 1982 (Li 2005, p.399).

These unanswered questions may still link to today’s Chinese energy and environmental politics, which remain authoritarian and centralized on the surface, but in reality are becoming much more fragmentized and decentralized in the context of further marketization and growing pluralism. This book focuses on ongoing interactions among various interest groups and stakeholders in China’s low-carbon energy development, with special emphasis on their connections with policy-makers and their vested interests in state-dominated sectors. Given the profound impact on a broad set of interest groups in the party-state, the energy policies are often the outcomes of bureaucratic politics and inter-agency competitions within the regime rather than reasoned debates. Besides their long-existing political connections with top leadership, the fast-expanding profitability and assets of energy vested interests in the past have dramatically reinforced the economic and political clout of these groups within the bureaucracy. Energy companies, either state-owned or private, were already influential interest groups in the command economy era and this has only increased due to the vast amounts of wealth generated since then.

The Chinese central government’s top-down effort to promote low-carbon power generation has encountered severe challenges in many provinces where local renewable power projects are facing high curtailment rates, and subnational governments and grid dispatchers in favor of vested coal interests are blocking renewable power generation and transmission. With an emphasis on China’s renewable energy policy, and related enforcement issues and local politics concerning wind and solar power generation, this book examines to what extent China’s centralized and top-down approach has been effective in coercing local actors to reach policy targets in an increasingly decentralized yet still non-democratic political context. Without marketization in the energy industry or the participation of local environmental activism, the central government does not have the capacity to overcome such local resistances. This book reviews the problems and progress in the politics of China’s renewable energy development. It analyzes the factors in China’s governance and political process that restrain its capacity to develop low-carbon alternatives. Focusing on the different institutional imperatives the authoritarian rulers needed to address in different stages, the book aims to make unique contributions to new institutionalist studies of authoritarianism that help to explain China’s institutional capacity and weaknesses in promoting renewables and fighting climate change.

Although a couple of books on similar topics (Zhang 2011; Mathews and Tan 2015; Chen 2016) have been published in recent years, the local politics of China’s renewable energy, which has been attracting growing public and scholarly interest in the new context of climate change and social media, is severely understudied. As the world’s largest renewable energy producer, China has been promoting wind and solar power generation in a top-down manner that reinforced government dominance and interference in the domestic energy market and reshaped both vertical and horizontal relationships among various stakeholders in China’s energy realm. Most existing studies have failed to capture the latest institutional and norm changes related to China’s leap forward in developing renewable energy that reinforced central government’s dominance in the fragmented local energy markets and reshaped central–local and state–society relationships in energy development. Instead of the generalized approaches adopted by most researchers that emphasize bureaucratic apparatus and policy incentives, this book focuses more on specific institutional reforms and underlining political and socioeconomic implications in this realm, with detailed description and analysis of the complicated interactions among China’s central and local governments, energy companies, civic forces and other interest groups.

As China’s politics and society are becoming more pluralistic and fragmented, the book is designed to help the reader better understand the dynamic relationships among various local interest groups and civic forces in promoting different kinds of energies. Although some research has touched on the emerging civic voices of the social media era, few studies have discussed the interaction among different energy stakeholders within and outside the state apparatus, which cover a wide range of institutional players, such as the central government, local governments at various levels, traditional energy producers, renewable energy producers, grid companies, environmentalist groups, official media and social media. This book draws on vivid case studies and in-depth analysis to reveal the complexity of China’s formal and informal politics related to local renewable energy development, in which all these interest groups and social organizations interact with one another in a new institutional environment.

Authoritarian environmentalists tend to use China’s great leap forward in wind and solar power generation as plausible evidence to challenge the pluralistic and participatory rules widely recognized in the environmental governance of most liberal democracies, which emphasize that a democratic, decentralized and bottom-up governance model provides the only possible pragmatic approach for dealing with modern environmental crises. Having seen a distinct tendency in recent years towards a centralized, top-down attitude to local governance of the renewable energy industry, some believe that such policy implementation that relies on the unusual ability of related coercive mechanisms to control verticality is the key to China achieving remarkable renewable targets.

China’s better-than-expected capability in developing low-carbon energies has been seen as the outcome of its hybrid strategies that combine the developmental state and ecological modernization approaches, with local compliance being greatly enhanced through emerging formal, corporatist institutions. Authoritarian environmental research on the principal–agent relationship between central and local governments tends to believe in the omnipotent role of central government as the principal in guiding alternative energy choices within the broader governance networks, challenging the de facto federalism theory that always questions the ability of the authoritarian center as the principal to monitor or control local agents’ behavior.

Given the recent predicament encountered by renewable energy projects in many Chinese provinces, the theory of authoritarian environmentalism is becoming less convincing when applied to the understanding of China’s renewable energy reality. This monograph, through the analysis of such local impediments from certain interest groups, self-contradicting policy priorities, and relevant enforcement issues concerning wind and solar power generation, examines the extent to which China’s centralized and top-down approach has been effective in coercing local actors to reach policy targets in an increasingly decentralized but still non-democratic political context. In reality, the central government’s top-down effort to promote low-carbon power generation has been increasingly facing severe resistances in many provinces where local renewable power projects are witnessing high curtailment rates, and subnational governments and grid dispatchers in favor of vested coal interests are blocking renewable power generation and transmission. Without participation of local environmental activism, the central government does not have the capacity to overcome such local resistances.

Chapter 2 takes a close look at China’s mercantile strategy to boost renewable sectors. Considering the exorbitant costs and risks involved in developing low-carbon energy, China’s emergence as the world’s largest player in renewable energy generation and equipment production has been closely related to the government’s robust policy support and heavy subsidies under the Chinese model of state capitalism. Since the global financial crisis of 2008, when China’s export-oriented manufacturing was hit hard by sluggish external demand, the government has regarded renewable energy equipment sectors as emerging industries of strategic importance that need strong policy support. Such a mercantile strategy subsequently led to serious overcapacity and trade disputes, forcing the government to stimulate domestic demand through subsidizing local power generation projects to absorb redundant manufacture capacity.

Chapter 3 focuses on China’s centralized and top-down approach of developing renewable energy, which has been tagged as a model for authoritarian environmentalism, a policy process dominated by a strong central state that prevents businesses and localities from engaging in unsustainable behavior and compels them to follow more sustainable policies. In each stage of its renewable sector development, the change in Chinese central leadership’s policy priority has always been triggered by both international and domestic pressures. The statutory and enforcement flaws reflected in the Renewable Energy Law resulted from improvised policy priority change from top leadership, unpreparedness of central and local enforcement apparatus and resistances from within the bureaucracy and various interest groups. Many of the central government’s supportive policies in the beginning proved to be unrealistic and unattainable, only starting to take effect when market conditions started to become more mature and interest groups became more cooperative. This chapter examines the innate weaknesses of such a centralized and top-down approach in fostering renewable energy development.

Chapter 4 analyzes local geographic and industrial barriers that have been challenging the implementation of national renewable energy policies. China’s wind and solar resources are concentrated in the vast but sparsely populated northwestern and northern areas, exacerbating the imbalanced distribution of energy resources that constantly afflicts the economically vibrant eastern (coastal) area with energy shortage. The overconcentration of conventional coal, hydroelectricity, and emerging wind and solar resources in the western part of Chinese territory has imposed enormous pressure on the country’s transmission networks. Despite central government’s effort to promote renewable energy, such intentions have resulted in huge waste and overcapacity in the northwest and northern provinces. This chapter discusses why high curtailment rates and overcapacity are inevitable in remote areas.

Chapter 5 discusses policy priorities advocated by different interest groups, and how such interaction would affect the implementation of China’s renewable policy. China’s weakness in enforcing national energy policies is subject to the level of coordination within three kinds of relationships, namely the relationship between central government agencies, the relationship between central and local governments, and the relationship between government agencies and state-owned enterprises (SOEs). This chapter discusses policy priorities advocated by different interest groups, and how such interaction affects the implementation of China’s renewable policy.

Chapter 6 continues the discussion on different interest groups in the low-carbon energy sector. Mitigation imperatives coupled with energy shortage have pushed China to encourage aggressive construction of new hydropower and nuclear plants, in addition to its impressive input into such established renewable energies as wind and solar power. Facing fierce competition among different low-carbon alternatives, the Chinese government has been adjusting subsidy amount, on-grid tariffs, and other financial incentives from time to time in supporting various non-fossil fuels. Compared with other democracies, the authoritarian one-party regime in China faces much less resistance from civil society when pushing forward those hydropower and nuclear mammoths that may pose potentially serious threats to the local ecology.

Chapter 7 discusses energy policy priorities in China’s Five-Year Plans (FYPs). The core of all energy-related policies of Chinese top planners includes maximizing/diversifying energy supply and controlling/conserving energy demand. Scrutiny of changes in policy priorities in China’s energy FYPs contributes to the understanding of how the central authorities have adjusted energy policy targets in response to new industrial and market conditions as well as concerns from different interest groups. The scrutiny of FYPs reveals that the prioritization of sufficiency over efficiency, a vestige from China’s pre-reform communist ideology of planning economy, and a consequence of the slow process of energy marketization and privatization, is still deeply rooted in China’s energy apparatus, and will continue to dominate policy-making for a long time.

Chapter 8 examines how China’s energy policy priorities have restrained the authoritarian state from tapping the full potential of its low-carbon resources. China’s renewable energy strategy is a natural extension of the country’s preferred ‘no-regret’ strategy that emphasizes mitigation actions providing fringe benefits such as economic growth and employment to the country, regardless of whether the threat of climate change is real. On the surface, China’s coal-dominant energy structure puts it in an awkward dichotomy between energy supply and environmental protection, but in reality, the authoritarian state’s obsession with high economic growth, powered by relentless domestic energy production, is the rooted cause for the economic model featuring inefficient energy utilization and high-polluting emissions. Such a development-centric ideology of government and lack of environmental activism at the civic level would prevent China from making full use of the renewable energy facilities installed across the country.

The final chapter summarizes the discussion on interaction among China’s renewable energy policy priorities, relevant interest groups and the central–local relationship. Focusing on the political and institutional factors leading to China’s redundant renewable power capacity, the book argues that China’s state capitalism has an innate tendency to focus on the ‘supply side’ instead of ‘demand side’, which differs from a market-driven economy and results in enormous industrial capacity subsidized by the state yet detached from real market demand. To fundamentally solve the huge waste problem associated with excessive investment and overcapacity, China has to transform its power sector from a top-down and state-driven system to a new version driven by domestic demand and with less intervention from governmental apparatus at various levels.

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