Between Market and State: Dilemmas of Environmental Governance in China's Sulphur Dioxide Emission Trading System

Abstract

Emission trading, modern governance, and the transitional state in China An important feature of the modern state is a growing emphasis on market solutions for a wide variety of issues and sectors of politics. This has on the one hand called for decentralization, new forms of accountability, and transparency. On the other hand the Asian financial crisis triggered by footloose international investment capital, and the growing awareness that markets are not well suited to define and pursue collective interests, have provoked an almost opposite movement, calling for increased political intervention, and a stronger state with enhanced capacity for effective regulation (Painter and Pierre, 2005; Singh, 1998). China's emission trading programme is situated at the centre of this debate regarding the relative merits of the market and the state in modern governance. A case study of this development is useful for understanding China's changing mode of governance as a transitional state. Our objective is to analyze and to assess to what extent the Chinese government, after three decades of reform, has developed the requisite governing capacity to implement a market-based policy initiative such as the emission trading programme. In particular we focus on three forms of governance capacities: namely, state capacity, policy capacity, and administrative capacity. We evaluate the role of the Chinese government in steering China's accelerating economic development and in solving its environmental problems as it transits to a market economy to realize its goal of a well-off society. In this paper we draw on data and information derived from desktop studies and site interviews. Nine site visits and interviews were conducted between 2004 and 2005 in Beijing,

Powered by the state or finance? The organization of China’s carbon markets

“…Frustrated with the unsatisfactory outcomes of direct regulation, Chinese policy-makers became increasingly sympathetic towards market mechanisms. Although China's experience with SO 2 emission trading was not a great success (Chang and Wang 2010;Tao and Mah 2009), policy-makers decided to embark on another environmental market experiment at an even larger scale.…”

Is the Red Dragon Green? An Examination of the Antecedents and Consequences of Environmental Proactivity in China

“…This focus stems from the traditional perspective of the 'state-led' pseudo market of China where government plays a significant role in shaping corporate behaviors (FranceschHuidobro, Lo, and Tang, 2012;Lo and Fryxell, 2005;Lo, Fryxell, and Van Rooij, 2009;Ma and Ortolano 2000;Tang, Lo and Fryxell, 2003;Tao and Mah, 2009;Van Rooij, 2006). Nevertheless, studies that also investigate motivations or the role of other types of stakeholders have started to emerge (e.g., Liu et al, 2010;Zhang et al, 2008;Zhu, Sarkis and Lai, 2007).…”

Assessing the design of three carbon trading pilot programs in China

“…In addition, anecdotal evidence suggests that local governments and exchanges may play a strong role in orchestrating trades-including determining the buyer, seller, and transaction price of some transactions. This type of political intervention in the market has precedent in China's SO 2 ETS experience (Chang and Wang, 2010;Tao and Mah, 2009). Nevertheless, the turnover ratios in the three pilots are quite low, compared with other ETSs.…”