Governance Analysis of Chinas Energy and Emission Target Implementation

1
Governance Analysis of Chinas Energy and
Emission Target Implementation

• Hu Tao
• Mao Xianqiang
• Oslo, August 31, 2007

2
Background

• To discuss on implementation issue after Chinas
  energy and emission targets introduction this
  April
• To systematically answer questions raised by our
  Norwegian friends on political system reform
• To introduce our team work on environmental
  governance new study by political science and
  institutional economics rather than environmental
  economic and policy study methodology

3
Outline

• Review of Targets
• Current Implementation scheme
• Key Obstacles of implementation
• Key facilitator of implementation
• Proposed solutions
• Conclusion

4
Review of Targets

• 11th FY plan (2006-2010) initiated by Communist
  Party, proposed by State Council and approved by
  National Peoples Congress
• 20 energy and GHGs intensity reduction
• 10 of SOx reduction
• 1.8 forest coverage of total territory increasing

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Review of Targets

• From sectoral target escalation up to national
  target
• Integrated into NCCP as part of the long
  strategic climate change action plan
• The only plan from Non-Annex I country so far

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Review of Targets

• My personnel comment
• I dont double the political will of China but
  governing capability and capacity

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Current Implementation Scheme

• Horizontal
• National plan being implemented separately by
  NDRC for energy target and SEPA for SO2 target
  and forest by SFA
• Coordinated by Newly established Leading Group of
  Energy Saving and Emission Reduction Office of
  State Council
• State Owned Enterprise Groups being targeted with
  its own implementation tasks, such as PetroChina,
  SinoPac, China Resources, State Grid

8
Current Implementation Scheme

• Vertical
• Each province (and provincial level regions and
  municipalities) being distributed tasks of
  energy consumption quotas and emission allowances
  by NDRC and SEPA on behalf of Central government
• Similarly, each municipality (and prefecture)
  being distributed tasks by local DRCs and EPBs
• Similarly, each district (and county) being
  distributed tasks by local DRCs and EPBs at
  municipal level
• Isomorphic structure of China

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Governance Analysis Framework
??????? Identification and distribution of the
responsibilities among departments and
ministries, Central and local governments
???????policy and regulation and policies made
well and right target on the problems
??????? Policy and regulation implemented
?????? Implementation supervision mechanism
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Key Obstacles of implementation

• Lack of coherence among sectors
• Co-benefits Vs Co-costs
• Path dependency technology
• US case
• Lack of accountable mechanisms between central
  and locals
• Unclear responsibilities between Central and
  locals
• Not differentiate the high stack and low stack
  SO2
• No good carrots, no effective sticks, no
  sufficient supervision
• Almost no motivations to do emission reduction
  based on Local government stakeholder analysis
• US case
• Lack of judiciary intervention
• No effective legal enforcement of liability and
  criminality of governments

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Key Obstacles of implementation

• Lack of effective transparent monitoring
• Multi-layer monitoring system
• China environmental motioning center
• Provincial environmental motioning centers
• Municipal environmental motioning centers
• county/district environmental motioning centers
• Technical coordination but institutionalized
  uniformed system
• Lack of implementation flexibilities and
  efficiencies
• Inefficient allocation with different abate costs
  in different regions
• Leakage effect described by DRC
• Tensions among regions

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Key Obstacles of implementation

• Lack (or not) of public participation
• Yes, defense of citizens rights
• No, also defense of own interests
• Democracy doesnt always result in good
  environmental protection
• How does the implementation plan function???
• How do the other plans work???

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Key Facilitator of implementation

• Party system
• vertical party system to evaluate local officials
  performances (thats why they are eager to have
  green GDP)
• Effective and functional
• Energy and emission targets as key indicators to
  be evaluated for varies level local officials
  performance
• A successful management sector
• Food self-sufficiency agriculture policy
• Wall streets finding

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Key Facilitator of implementation

• Further debate in political reform community
• Role of governments is to provide public goods
  and services rather than private goods and
  services
• Neither GDP nor green GPD are needed for local
  governments performance evaluation
• Energy and environmental targets should be the
  responsibilities of governments

15
Future research work

• Quantitative evaluation of energy and emission
  policy implementation
• Institutional economic analysis
• Institutional costs and effectiveness estimation
• Comparison study between China and US, (maybe
  Norway and other countries)

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Proposed solutions

• Long term
• improving environmental governance system
• Air pollution control governance
• Energy saving governance
• Water governance
• Biodiversity governance

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Proposed solutions

• Short term
• Pricing/taxation
• Fuel tax
• Energy tax
• Sulfur fee/tax
• Tax special on coal
• Significances
• To reflect the full external costs of energy and
  environment
• to let everybody feel market signal to change
  behaves
• to avoid weak governing capability and capacity
  constrains
• The best governance is no governance by Taoism
  Laozi

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Proposed solutions

• Short term
• However, economic concerns
• CPI increasing due to energy related products
• Inflation rate higher
• Interest rate higher
• Exchange rate higher pressure
• And then stock market irrational and real estate
  market bubbles

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Proposed solutions

• Short term
• Even more social concerns
• Affordability of poor
• Complains by consumers
• Social stability is highest priority of Central
  Government
• Subsidy solution
• Gradual Pricing/taxation
• Subsidies for the poor

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Proposed solutions

• Japans experiences
• Economy structure change and efficiency
  improvement
• Oil crisis in 1972
• Japanese Yen appreciation in 1980s
• Artificial energy crisis by taxation
• US lessons
• Cheap energy price system result in high energy
  consumption pattern

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Conclusion

• China is able to effectively and efficiently
  achieve the energy and emission targets by
  pricing and will follow the path of Japan
• Environmental governance system would be improved
  along with other sectors reform
• Regional office of SEPA learning from US
  experiences
• State Council leading group of energy and
  emission

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Tusen Takk!