Creating Subnational Climate Institutions in China

Note

Links to the full text of both the English and Chinese-language versions of the paper are at the top of this page.

With the support of the Harvard Global Institute, the Belfer Center for Science and International Affairs’ Environment and Natural Resources Program, and Tsinghua University’s Institute of Energy, Environment, and Economy

Michael Davidson prepared this paper as part of a larger project that the Harvard Project on Climate Agreements is conducting, with support of the Harvard Global Institute, on subnational climate-change policy in China and India. The Harvard Project conducted a research workshop on this topic in July 2019, in collaboration with Tsinghua University’s Institute of Energy, Environment, and Economy — and will conduct a parallel workshop in New Delhi in mid-2020.

While writing this paper, Professor Davidson was a postdoctoral research fellow with the Environment and Natural Resources Program (ENRP), in Harvard Kennedy School’s Belfer Center for Science and International Affairs. The Harvard Project is grateful to ENRP and the Belfer Center for their support of Professor Davidson.

Finally, the Harvard Project and Professor Davidson wish to thank Huang Xiaodan, doctoral candidate at Tsinghua University in energy and environmental policy and management, for her skill and attention in translating the paper.

Executive Summary

China’s party-state consists of multiple nested hierarchies of bureaucrats and officials accountable to a common leadership, yet it also gives substantial autonomy to lower levels of government in pursuing various objectives. By some fiscal measures, China is the most decentralized country in the world. As such, China’s particular flavor of “quasi-federal” control, as well as its integration of party and state, will heavily influence and constrain options for controlling greenhouse gas (GHG) emissions in the economy. This paper describes the evolution of decentralization over the reform period that began in China in 1978, different theories of institutional change in China, and how the empirical and theoretical literatures help us understand the development of institutions for governing GHG-emitting activities.

Climate policy merits this extended look at the subnational Chinese state for several reasons. First, large institutional transformations are required to align the incentives of government bureaucracies with the new goal of reducing GHGs across a wide range of established government functions. Second, the local political economy embedded in government institutions ensures that this task is significantly more complicated than prescribing a single set of ideal institutions (e.g., based on international best practices). There will likely be extended periods of geographic variation in policies and institutions. Third, effective policy prescriptions will thus require creative use of centralization where local interests diverge substantially from national objectives, but must also align with and exploit local government authorities to advance rapid reforms in other areas.

In terms of institutional functions, China’s central agencies have a great deal of power over economic planning, tax policy, some pricing, and standard-setting. Meanwhile, local governments control much permitting, other aspects of pricing, portions of production, and land policy. Since 2007, these functions have increasingly reflected climate change concerns, though the priority given to reducing GHG emissions is by no means uniform across central and local government institutions. Additionally, there remain crucial gaps in the overall institutional framework that would elevate the importance of climate change. Central enforcement of policy implementation generally increases when policies align with other, arguably more salient, policy goals, such as reducing air pollution.

Personnel decisions crucially determine many aspects of implementation: local officials are directed and constrained by superiors via cadre-leadership selection and promotion, administrative mandates, and budgets. Strong relationships—and consonance of interests—between provincial and central authorities and institutions may facilitate policy implementation by provinces. However, such strong ties may also reduce local officials’ flexibility in adapting policies to local conditions—and hence reduce policy effectiveness. On the other hand, if the implementation process primarily reflects local interests, state objectives may not be achieved.

These findings have implications for the design and implementation of the national carbon market set to start around 2020. The newly-created Ministry of Ecology and Environment is the locus for climate change policy, but its authority within China’s complex institutional framework is still being developed, at both central and local levels. One important component of fully implementing a national carbon market will be to harmonize existing province- and city-level pilot GHG trading programs with the goal of generating efficient prices and eliminating cross-provincial trading barriers. However, this will be complicated by differing local policy designs and industry structures. More fundamentally, the interests of the provinces and municipalities with considerable (though not exclusive) authority over their pilot programs must be aligned with the central priority of advancing the national GHG trading system. Another challenge is the absence of a well-functioning market for electricity—the first sector targeted under the national carbon market. Designers of the national carbon market are therefore developing second-best “rate-based” approaches and “indirect emissions” permit systems. Ultimately, the success of the national carbon market will depend on electricity market reforms, which are being pursued in parallel and have an uncertain end-date.

摘要 (Executive Summary)

中国的党政体系由多级行政体系组成，虽然下级政府对共同的领导负责，但在实现不同目标方面具有实质自治权。对于部分财政措施，中国是世界上权力最分散的国家。因此，中国特殊的“准联邦主义”权力制度，以及党和国家的统一，将在经济上极大地影响和制约温室气体排放（GHG）的控制权。本文介绍了自1978年“改革开放”以来中国地方分权制度的演变进程、中国制度变迁的不同理论，阐述相关经验和文献将如何帮助我们理解温室气体排放活动管理制度的发展。 气候政策值得我们从以下几个方面对中国的地方政府进行深入研究。首先，需要进行大规模的制度转型，使政府行政机构的激励措施与减少温室气体排放的新目标相一致。其次，植根于政府机构的地方政治经济，使得这一任务比建立一套单一的理想机构（例如，基于国际最佳实践）要复杂得多。在政策和制度方面，可能会出现较长时间的地域差异。第三，在地方利益与国家目标存在重大分歧的情况下，有效的政策处方将因此需要创造性地使用中央集权，同时还必须与地方政府当局保持一致，并利用他们推动其他领域的快速改革。 就机构职能而言，中国的中央机构在经济规划、税收政策、部分定价和标准制定方面拥有很大的权力。与此同时，地方政府控制着许多准许权、其他方面的定价权、部分的生产权和土地政策。自2007年以来，这些职能日益反映出政府对气候变化的担忧，尽管中央和地方政府机构对减少温室气体排放的重视程度并不一致。此外，相较于提升气候变化重要性的整体制度框架，目前的制度框架仍存在关键的差距。当政策与其他（可以说是更突出的）政策目标（如减少空气污染）相一致时，中央政策执行力度通常会加大。 人事决策对执行的许多方面至关重要：通过干部选拔和晋升、行政命令和预算，地方官员受到上级的指导和约束。省与中央政府和机构之间的牢固关系和利益协调可能有助于各省执行政策。然而，这种紧密的联系也可能降低地方官员根据当地情况调整政策的灵活性，从而降低政策的有效性。另一方面，如果执行过程主要反映地方利益，则可能无法实现国家目标。 这些研究结果影响着将于2020年左右启动的国家碳市场的设计和实施。新成立的生态环境部是气候变化政策的主管部门，但其在中央和地方层面的权威性在中国复杂的制度框架下仍处于发展之中。全面实施全国碳市场的一个重要组成部分将是以产生有效价格和消除跨省贸易壁垒为目标，协调现有的省和市级温室气体贸易试点项目。然而，不同的地方政策设计和行业结构将使情况复杂化。更重要的是，对试点项目拥有相当大(但非排他的)权力的省市的利益必须与推进全国温室气体交易体系的中心优先事项保持一致。另一个挑战是缺乏一个运行良好的电力市场——这是全国碳市场的首要目标部门。因此，国家碳市场的设计者们正在开发第二好的“基于税率”的方法和“间接排放”许可制度。最终，国家碳市场的成功将取决于电力市场的改革，这些改革正在以未知终期的方式平行进行。

Michael Davidson
School of Global Policy & Strategy
University of California, San Diego