Subnational Climate Change Policy in China

Publication: Subnational Climate Change Policy in China - Subnational Implementation Pathways for China´s National Pricing System: Challenges and Opportunities

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Authors: many

CNARC member: Fridtjof Nansen Institute (FNI)

Introduction: Climate change is a global commons problem and therefore necessitates cooperation at the highest jurisdictional level – that is, international cooperation among national governments – if it is to be adequately addressed. Both national governments and subnational governments can significantly advance efforts to mitigate climate change. Provinces and municipalities around the world have indeed undertaken initiatives – sometimes working together across national boundaries – to reduce greenhouse-gas emissions. This includes jurisdictions in the largest-emitting countries – China, the United States, and India – as well as in the European Union.

This volume examines subnational climate-change policy in China – including how Chinese provinces and municipalities work with the central government to implement policy. The volume focuses to a considerable degree on carbon-pricing policy in China, including how China’s subnational (pilot) emissions-trading systems can inform the emerging national carbon-pricing system.
The briefs in this volume draw on presentations and discussion at a research workshop organized by the Harvard Project on Climate Agreements in Beijing on July 18 – 19, 2019. The workshop was hosted and co-sponsored by Tsinghua University’s Institute of Energy, Environment, and Economy, directed by Professor Zhang Xiliang. Workshop participants included 24 researchers and practitioners from China, Australia, Canada, India, Norway, the United Kingdom, and the United States. Chinese participants were based in Guangdong Province, Hubei Province, and Shanghai, as well as Beijing. The agenda and participant list for the workshop are included at the end of the volume.

This volume – and the July 2019 workshop – are part of a larger initiative of the Harvard Project on Climate Agreements examining and comparing subnational climate-change policy in China, India, the United States, and Canada. The Harvard Project is conducting a similar workshop in New Delhi in the summer of 2020 and will release a volume of briefs on subnational climate-change policy in India in early 2021.

This volume begins with an overview and framing, first in a brief by Zhang Xiliang and Zhou Li that details policies adopted by Chinese provinces and municipalities to address climate change. Ye Qi and Xiaofan Zhao then describe what they see as the most important drivers of climate-change policy in China, providing context for the volume.

Next, institutional perspectives are provided in four briefs by experts on center-provincial institutional dynamics in China, with applications to climate-change policy. Michael Davidson explores China’s “quasi-federalist” system, and discusses how this system might be leveraged to develop effective institutions for addressing climate change.1 Gørild Heggelund focuses on China’s national emissions-trading system (ETS), concluding that, among other things, “Capacity building at the subnational level is…needed to strengthen understanding of how emissions trading works.”

Tan Xianchun provides a concise yet detailed analysis of China’s administrative systems and procedures for addressing climate change – both carbon pricing and other approaches to reducing emissions, including the results of modeling that estimates the potential impact of a range of “[l]ow-carbon measures and policies” in Chongqing municipality and Guangdong Province.2

Providing the final institutional perspective, Christine Wong discusses how the implementation and enforcement of environmental policy in China have evolved over the last decade. She finds that although the central government places greater emphasis on environmental policy than in the past and has provided considerable financial support for implementation and enforcement, renewed financial constraints in a period of low economic growth may prompt subnational officials to favor carbon pricing over more traditional top-down policy approaches.

The next section of the volume focuses on emissions trading systems in China, both at the national and sub-national levels, because China’s central government and many observers see carbon pricing as China’s primary policy tool for addressing climate change.

First, three contributors examine lessons for national policy design from experience with the pilot ETSs. Shaozhou Qi assesses the performance of the seven3 pilot ETSs. Tian Qi provides insights based on his study of Hubei’s pilot ETS, focusing on allowance allocation, as well as the closely-related topics of auction design and market-stability measures. Zeng Xuelan examines a range of GHG emissions-reduction policies in Guangdong Province, noting that Guangdong’s pilot ETS has been its “main mechanism for reducing provincial emissions.”

Zeng also notes the possibility of the central government terminating Guangdong’s ETS after lessons have been incorporated into the national carbon-pricing system. The fate of the pilot ETSs more broadly is the subject of Valerie Karplus’s brief. She discusses three scenarios: “(1) coexistence, that is, maintaining separate subnational trading systems alongside the national system; (2) partial integration, which would mean allowing credits from one system to be used in other systems; and (3) full integration, which would involve subsuming the seven subnational pilots under a single national ETS.” Karplus discusses the tradeoffs among these options and then suggests an approach to strengthening the pilot ETSs that is somewhat independent of the path chosen. (to read more please go to the download link)