China’s Long Road to a Low-Carbon Economy: An Institutional Analysis

China’s Long Road to a Low-Carbon Economy: An Institutional Analysis

Senior Fellow Philip Andrews-Speed's recent paper published as part of the Transatlantic Academy Paper Series looks at the progress that China is making, or not, toward reducing carbon emissions. China is the world’s largest emitter of greenhouse gases from energy use and so the future of the world’s climate depends to a significant extent on the willingness and ability of the country to make the transition to a low-carbon or at least a lower-carbon economy. Many analyses have highlighted the technical and economic opportunities for achieving such a transition, but few have explored systematically those features of China’s society, polity, and economy, which may determine the transition path. This paper applies institutional theories to analyze the governance of energy in China in order to identify sources of adaptability and of resistance to change.

The long and continuous history of Chinese civilization has played a significant role in shaping certain attributes of government, governance, and society that can be observed today, despite the recent overlay of communism. Strong sources of institutional resilience lie within the government itself and the way it operates, and these are complemented by the behavior of powerful actors, notably the state-owned energy companies. Conversely, the government has shown the ability and the willingness to constantly adapt the institutions which govern the energy sector in response to pressing domestic needs and often by taking into account ideas introduced from outside China.

China’s path to a low-carbon economy under the prevailing institutions of governance will probably be characterized by 1) the construction of infrastructure to produce and deliver (relatively) low-carbon energy, matched by ongoing growth of high-carbon energy sources such as coal and oil; and 2) ever-increasing difficulties for the central government as it seeks to change the behaviors of local governments, industries, and households across the country.

Radical institutional change across the polity, economy, and society in China will be required in order to accelerate the transition to a low-carbon economy, but it is difficult to identify such profound institutional changes taking place. If China’s transition to a low- or lower-carbon future continues to be highly constrained by the institutional forces described herein, the outlook for global warming is grim, especially if other countries follow a similar path. A logical consequence is that the international community should expend much greater effort on adaptation than we have seen to date.