Journal of Chinese Governance
ISSN: 2381-2346 (Print) 2381-2354 (Online) Journal homepage: http://www.tandfonline.com/loi/rgov20
Energy policy design and China’s local climate governance: energy efficiency and renewable energy policies in Hangzhou Ting Guan & Jørgen Delman To cite this article: Ting Guan & Jørgen Delman (2017): Energy policy design and China’s local climate governance: energy efficiency and renewable energy policies in Hangzhou, Journal of Chinese Governance, DOI: 10.1080/23812346.2017.1284430 To link to this article: http://dx.doi.org/10.1080/23812346.2017.1284430
Published online: 07 Feb 2017.
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Date: 07 February 2017, At: 23:36
JOURNAL OF CHINESE GOVERNANCE, 2017 http://dx.doi.org/10.1080/23812346.2017.1284430
RESEARCH ARTICLE
Energy policy design and China’s local climate governance: energy efficiency and renewable energy policies in Hangzhou Ting Guana and Jørgen Delmanb a Institute of East Asian Studies, University of Duisburg-Essen, Duisburg, Germany; bDepartment of Cross-cultural and Regional Studies (China Studies), University of Copenhagen, Copenhagen, Denmark
ABSTRACT
ARTICLE HISTORY
This study probes into climate policy design at city level in China, with Hangzhou’s energy efficiency and renewable energy policies between 2005 and 2014 as a case. The study applies a political action arena approach to accentuate the importance of different normative preferences behind climate change policies in relation to Hangzhou’s emerging urban climate governance regime. Three main categories of policy instruments are identified: i.e. command-and-control, market-based, and collaborative governance instruments, and their development over time is examined. It is concluded that in Hangzhou energy efficiency is a more mature and comprehensive political action arena than renewable energy. The study also finds that there has been a significant shift away from preferences towards command-and-control to more marketbased instruments, while cooperative governance instruments are still in their infancy. It finally shows that the design and implementation of local programs, especially the selection of policy instruments, are strongly influenced by the normative preferences of local officials. Thus, the approach of Hangzhou’s government to the design and implementation of climate policies seem to gradually become less authoritarian, more market based, and more accountable, due to the inherent complexity of this political action arena.
Received 11 November 2016 Accepted 2 January 2017 KEYWORDS
China; local policy design; climate policy instruments; energy efficiency; renewable energy
1. Policy design in climate change politics China’s urban climate change politics evolved rapidly during the 2000s,1 since the central government had quickly recognized that cities are important levels of intervention in relation to climate change. Cities need policy support and incentives to act2 and through a short period of time, China’s national leadership designed a series of comprehensive low carbon urban development programs3 to guide policy development and implementation at local level. The policies designed include a broad array of low CONTACT Ting Guan
[email protected] Institute of East Asian Studies, University of Duisburg-Essen, LE 611—Forsthausweg 2, 47057 Duisburg, Germany Research was conducted at School of Public Affairs, Zhejiang University. ß 2017 Zhejiang University
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carbon initiatives, including green innovation and new business solutions, not least in relation to energy efficiency (EE) and renewable energy (RE).4 Other critical mitigation interventions, such as expanding green coverage for carbon storage, are also important.5 However, as energy consumption accounted for 78.5% of China’s GHG emissions in 20126 and since fossils will continue to dominate in the Chinese energy supply for years to come, energy policies focusing on EE and the transition towards clean and renewable energies will remain the dominant political action arenas7 to mitigate CO2 emissions for a long time.8 China’s city governments are embedded in a hierarchical party-state system, which is dominated by a top-down, command-and-control approach to policy development and implementation, and therefore they do not control all aspects of GHG emissions on their own. However, like in climate politics elsewhere,9 they have been prompted to design or adopt instruments of governance that bridge traditional intra-bureaucratic divides as well as gaps between state and non-state stakeholders in order to be able to mitigate the inherent tendency in Chinese politics towards fragmented policy implementation.10 Even more, within the climate change arena, municipal authorities have been accorded significant flexibility to shape local behaviors in order to reduce GHG emissions.11 Effectively, the traditional approach of the authoritarian party-state is being re-negotiated and re-developed. Internationally, the instruments that national and local governments have used to mitigate climate change fall within three distinct categories, i.e. command-and-control, market-based, or collaborative governance instruments.12 These instruments are increasingly being used in different mixes in China as well.13 These three types of instruments are evidently based on divergent normative assumptions about the role of government and about how to structure economies and societies. Although China is ruled under an authoritarian one-party regime, there does not seem to be a priori normative barriers to the choice of policy instruments. In fact, even in liberal societies, liberal rationalities not only require a certain kind of autonomous individual subject to regulate or facilitate, they also have to employ certain sovereign and authoritarian tactics to sustain themselves.14 A similar logic applies to China where city leaderships may maintain their authoritarian approach to government while simultaneously developing a more flexible and adaptive approach to implementation that involves sets of tools and mechanisms aimed to make the policy cycle more effective.15 While the city is a crucial level of governance for implementation of climate change mitigation policies,16 the design of China’s urban climate politics17 is under-studied. €der, Mai and Francesch-Huidobro, and The few available studies, such as Schro Koehn,18 are substantial and informative when it comes to examining and explaining the nature of urban/local climate politics and climate governance, but they do not address the nature and development of the total package of policy designs and instruments systematically. To address this gap, we wish to analyze the overall implications of specific climate policy instruments at city level. First, we propose a model for policy design analysis to capture the normative choices and preferences in energy policies and the potential for governance innovations. Second, we examine specific climate governance innovations in China based on a case study of energy policy designs in Hangzhou, the capital city
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of Zhejiang Province. We focus on two core dimensions of climate mitigation policies, namely EE and RE due to their importance for climate change mitigation.19 Finally, we discuss the consequences and prospects for climate governance innovations in China.
2. Contextualizing the analysis of climate change policy design The examination of city climate change policies will provide a basis for explaining the normative assumptions or ‘frameworks’ (more below) underlying these policies, and the implications for the institutional architecture of China’s urban climate governance. Our analytical approach is anchored in Ostrom’s20 Institutional Analysis and Development (IAD) framework which allows us to reflect on how rules-in-use are designed in the climate change policy arena, rather than just rules-in-form.21 We wish to examine how specific climate change policies socialize climate change mitigation as rules-in-use. We look at five dimensions of policy design: (1) political decisions (frameworks and policy priorities); (2) policy instruments and tools; (3) participants and target groups; (4) implementation modalities; and (5) evaluation. Our analytical model (Figure 1) helps us ‘organize diagnostic, analytical, and prescriptive capabilities. It also aids in the accumulation of knowledge from empirical studies and in the assessment of past efforts in reforms’.22 The model further allows us to follow the institutionalization of the policy design process and the development of rule configurations for policy designs that socialize climate change mitigation efforts through all stages of the policy process.23 In the following sections, the model is used to contextualize China’s existing climate change politics and subsequently to analyze specific policy designs in the subsequent sections.
2.1. Political decision Frameworks are theoretically or normatively anchored conceptions that can be used to compare not only theories,24 but also underlying conceptual or normative approaches within a political action arena such as climate change policy. Like elsewhere,25 and as discussed above, China’s government has had a choice between different types of
Figure 1. Climate policy design at the city level: analytical model.
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policy instruments to deal with the climate change challenge, based on distinctly different normative preferences. The preferred instruments have been: Command-andcontrol approaches that are associated with hierarchies26 with distinct preferences for a central planning rationality,27 and markets28 or market-based instruments associated with a neo-liberal approach to mobilization of markets for delivery of the required public goods or services.29 Planning authorities at the apex of the hierarchy, such as the National Development and Reform Commission (NDRC), are now working with both types of interventions.30 In Figure 1, policy priorities relate to basic decisions about what to do and how to do it. China’s climate change policies work with climate strategies and legislation, action plans and detailed regulations and standards. They can provide and enhance incentives for climate change mitigation, they design mechanisms for mainstreaming of climate change interventions, and they provide focal points of interaction for actors, e.g. government departments, firms, and NGOs. China has largely followed what the OECD countries have been doing and it has taken a lead with other major Asian countries during the period 2007–2012 in relation to nationally binding legislation and action plans.31 China’s national policies are generally based on a mixture of commandand-control and market-based instruments and a variety of pilot programs have intended to mobilize markets in support of GHG reductions.32 While cooperative instruments are mentioned in policy documents and national plans, they are mainly designed, as we shall see below, at local level to fit the local situation.
2.2. Policy instruments 2.2.1. Command-and-control instruments The most common approach used worldwide to address environmental problems is to set standards, e.g. technology or design standards, or performance based standards, e.g. emission standards, to directly regulate the activities of firms, organizations and individuals. Product prohibitions are also used.33 Generally, an increasing number of such administrative instruments are used in China to ensure compliance with national targets, rules and standards,34 and during the last four decades, China has put out more than 28 environmental and resource laws, 150 national administrative environmental regulations, 1300 national environmental standards, and 200 departmental administrative regulations.35 The performance review system based on key performance indicators (KPI) for party-state organizations and leaders in China is an important intra-bureaucratic command-and-control instrument inspired by neo-liberal thinking. It is used by the central government to control, guide, or incentivize local governments and officials to take responsibility for meeting economic growth and other important policy targets within their territory.36 Normally, KPIs comprise: (1) ‘guidance targets’ (zhidao xing 指导性 or yiban zhibiao 一般指标) also considered ‘soft’ indicators, (2) ‘hard indicators’ (ying zhibiao 硬指标), or (3) ‘indicators with veto power’ (yipiao fojue mubiao 一 票否决目标). ‘Veto’ indicators are the most important and failure to meet them leads to sanctions.37 From 2011, the responsibility for attaining climate change related KPIs have been put squarely on the shoulders of leaders at all levels of the party-state. As for EE, KPI
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obligations were incorporated into the Energy Conservation Law already in 2007,38 and since then environmental, energy, and climate change related performance criteria have become increasingly important KPIs for local leaders.39 There is no doubt that the KPI instrument is important to incentivize and regulate the behavior of the local party-state40 and that it is likely to reinforce the authoritarian approach of the partystate.41
2.2.2. Market-based instruments China’s ‘socialist arts of government’ increasingly refer to new normative preferences and strategies which ‘call for governing through autonomy, whether that be through market mechanisms or the autonomous conduct of individuals’.42 Market-based or economic instruments are used widely to encourage behavioral change to reduce GHG emissions. They include charges, fees, and taxes, e.g. a carbon tax, taxes on fossil fuels and other energy taxes, trading in carbon rights and ‘emission reduction’ credits in socalled carbon markets.43 China’s climate and energy policies already use a combination of such instruments, including subsidies, taxation and market instruments.44 However, due to weak market preconditions and considerable state intervention in emission trading formats, allocation methods, and pricing approaches, the instruments are not yet widespread. The market-based instruments are still in their infancy, and generally China’s environmental governance system continues to rely heavily on top down command-and-control instruments.45 Given the importance accorded to the role of the market in recent years,46 we do however speculate that market-based instruments will stimulate the improvement of capacity in local settings to address climate change issues, for example leading to higher EE through development of better monitoring, review, and verification systems (MRV). In fact, non-state agents could replace the party-state in providing services, and capacity development at the level of enterprises.
2.2.3. Cooperative instruments and co-governance Governments can also seek to engage with external stakeholders, incl. third parties (disanfang 第三方), through cooperation or interactive/collaborative governance processes to address societal complexities and dynamics, also in relation to climate change. The co-governance approach moderates overlapping and cross-cutting authorities and responsibilities. The parties involved must join hands to address a common purpose and invest their identities and autonomy in the process. However, practices vary considerably across different societal scales, from the local to the global.47 Mai and Francesch-Huidobro48 found that the exclusive intra-governmental and hierarchical coordination structure in China is moving towards more cross-sector collaboration. It mobilizes external actors in business and society and thus becomes more inclusive and pluralistic. Co-governance is often based on shared democratic values throughout the policy process, while coordination is still authoritarian. The outcome of such processes is a semi-authoritarian climate change governance regime. The state seeks external support for its policies to make them more effective than under traditional authoritarian coordination.49 Such developments make it possible to speculate that, while these
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instruments are still relatively immature and underdeveloped, we may see more of such institutional innovation in the future.
2.3. Participants and target groups Climate change is a political action arena that encompasses different sets of participants or actors.50 In the context of this study, participants encompass those who issue or formulate policies, often but not necessarily encompassing themselves as acting agents, and target groups that are chosen to participate or to receive benefits or burdens from these policies.51 In some cases, the study of policy designs will help us identify the chosen potential winners and losers in the local climate politics action arena, e.g. those chosen to receive benefits or burdens or to be included or excluded respectively.
2.4. Implementation modalities Policy design entails design of implementation instruments and envisaged outcomes. Two dimensions are particularly important. First, central policies are adapted locally,52 and local or decentralized ‘experimentation under hierarchy’ has become institutionalized as a key element in policy processes. This implies that novel approaches tested through local experiments are systematically re-adapted into national and local policies.53 The policy documents examined below from Hangzhou contain many provisions for establishing experiments or pilots. Secondly, evaluation is important for learning and readjustment of policy designs. China has gradually developed its domestic reporting processes for effects of mitigation policies and measures across the multiple arenas and sectors of climate change politics. The Chinese system is mixed and combines provincial, municipal and national systems. But, the system is not fully developed or integrated. In some instances, it is perfectly coordinated, while in others it is uncoordinated.54 Furthermore, the top–down mode of operation of the party-state system frequently lead to the ‘gaming’ of implementation policies by lower-level governments and businesses, e.g. through over-reporting, to avoid problems or even to obtain praise when the actual performance has been less than satisfactory.55
3. Hangzhou as a case Since the detailed study of climate change policy instruments at the city level in China is new, we have chosen one city as a case to examine how national policies interact with local approaches to governance. While many comparable cities could have been chosen, we have decided to focus on Hangzhou due to its position as a progressive provincial capital that promotes ‘green city making’.56 We use the analytical dimensions in Figure 1 as entry points to analyze the local EE and RE policy designs to identify and explain the normative conceptions underlying local climate change politics as well as their institutional implications. The analysis focuses on the three dimensions to the left in Figure 1, whereas the expected outcomes are covered in the right hand box. In order to implement the
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12th five-year plan (2011–2015), Hangzhou’s city authorities elaborated at least 71 general and sector plans.57 While they cover a broad range of policy arenas, we use EE and RE as exemplary cases within the climate politics action arena in Hangzhou. As discussed above, EE and RE represent two different, yet interlinked and critically important political arenas for climate change mitigation. While we seek for explanations about the normative conceptions and preferences underlying policy design in these two arenas, we also acknowledge that policy designs develop and change over time. Therefore, we will focus on the period 2005–2014 as far as the empirical material allows. We primarily examine policy documents of various types from the period. This material will be complemented by other official documents and reports, local media coverage, and official statistics. Finally, we also examine the practical implementation measures.
4. Energy policy design in Hangzhou 4.1. Energy efficiency Hangzhou’s government has noted that the EE arena is a key to the green transformation of the city’s economic growth model, and an increasing number of policies for EE have been formulated and implemented since 2006 based on national policies. The efforts have reduced energy consumption per unit of GDP by about 32% from 2006 till 2013, exceeding the average percentage reduction at both provincial and national levels.58
4.1.1. Political decisions The two most important EE indicators are energy intensity and total energy consumption.59 In the 11th Five Year Plan (FYP), Hangzhou’s over-riding goal for EE was to reduce energy intensity by 20% between 2005 and 2010.60 A further 15–18% reduction was introduced in the 12th FYP (2010-2015).61 In 2012, the city government defined total energy consumption as an additional target. Table 1 shows the compulsory goals over time and how these targets were gradually disaggregated to the target localities. From 2006 to 2008, all districts and counties in Hangzhou received uniform reduction targets, while the targets were gradually localized from 2009. From 2011, the city districts were all assigned individual reduction targets. Furthermore, based on a target for annual reduction of energy consumption per unit of GDP, three new indicators were added, i.e. reduction of electricity consumption per unit of GDP, total energy consumption and total electricity consumption. This system with four target indicators was initiated as of 2012. To realize these targets, Hangzhou’s government released specific 11th and 12th FYPs for EE and associated annual work plans from 2007. The basic normative framework underlying these interventions were the following: First of all, the policy design combined command-and-control instruments with market-based instruments. Secondly, the policies provided subsidies and other supporting measures while regulating their use through monitoring and auditing, and, finally, there was a focus on promoting technological innovation through preferential policies.62
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Table 1. Hangzhou’s annual energy efficiency (EE) targets. Annual sub-district targets Eight districts and five counties in Hangzhou
Annual targetsa
Year
Reduction Reduction of of energy total energy intensity (%) consumption (%)
2006 2007 2008 2009
3.2 4 4.4 4.6
– – – –
2010
3
–
2011
4.1
–
2012
5.6
4.3%
2013 2014
4.8 6.4
4.9% 1.6%
Reduction of energy consumption per unit GDP (%)
Reduction of electricity consumption per unit GDP (%)
– – – j 4.6% in the districts of Xiaoshan, Yuhang, Tonglu, Jiande, Fuyang and Lin’an j 1% in Chun’an County j 6% in districts of Shangcheng, Xiacheng, Gongshu, Jianggan, Xihu, Binjiang and the Economic Development Zone j 3% in Xiaoshan, Lin’an j 5.2% in Yuhang j 4% in Fuyang, Jiande, Shangcheng, Xiacheng, Gongshu, Jianggan, Xihu, Binjiang and The Economic Development Zone j 2% in Tonglu j 1% in Chun’an j 3.8% in Shangcheng, Xiacheng, Gongshu, Jianggan, Xihu, Binjiang and the Economic Development Zone j 5.0% in Fuyang j 4.8% in Jiande and Xiaoshan j 4.4% in Yuhang j 4.2% in Lin’an, Tonglu j 2.0% in Chun’an
– – – –
–
j 3.5% in Shangcheng, Xiacheng, Gongshu, Jianggan, Xihu, Binjiang and The Economic Development Zone j 4.6% in Fuyang j 4.5% in Jiande and Xiaoshan j 4.1% in Yuhang j 3.5% in Lin’an, Tonglu j 1.0% in Chun’an All districts get different targets. The main indicators include annual reduction in percent of energy consumption per unit GDP, electricity consumption per unit GDP, total energy consumption, total reduction of electricity consumption. Indicators are the same as above, but with different targets. Indicators are the same as above, but with different targets.
a
Year-on-year percentage reduction. Sources: Annual Work Plans for Energy Efficiency in Hangzhou 2007–2014.
4.1.2. Governance instruments During the period, Hangzhou’s government opted for a mix of policy instruments. Command-and-control instruments were seen as critical. The party-state’s performance review system with its KPIs functions as the crucial institutional framework to regulate the behaviour of the participants.63 The officials of city district and county level governments had to sign responsibility contracts (zerenshu 责任书) with the city government. The contracts oblige them to attain energy intensity targets within their jurisdictions, and to do so they sign responsibility contracts with managers of targeted local enterprises who have to commit themselves to specific energy consumption targets. Specific and highly restrictive regulations have been elaborated to link the KPIs of city leaders and officials to the targets set in the contracts.64
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One of the key command-and-control initiatives for realizing EE goals is the Key Energy Consuming Enterprises Program. The high energy consuming enterprises were selected as target enterprises due to their high level of emissions of GHGs and pollutants. They were required to employ an energy manager to take charge of energy auditing within the company as well as for reporting to the government. Regulations were designed subsequently to develop supervision and enforcement capacity. An Energy Management Centre in Hangzhou was set up in 2012 to collect energy data from enterprises, to establish an energy information network and introduce a distributed monitoring system.65 Since 2013, a requirement for mandatory installation of equipment for measuring energy consumption within the companies has been put into force.66 The program has had significant results. At the outset in 2007, the program targeted enterprises with annual energy consumption above 3000 tons of standard coal. 65 enterprises were forced to accept energy auditing.67 From 2009 to 2014, the target group was widened to cover enterprises using more than 1000 tons of standard coal annually and about 190 additional enterprises were included.68 In 2012, totally 329 enterprises were enrolled and they accounted for almost 50% of total energy consumption in Hangzhou.69 Meanwhile, market-based instruments have gained in prominence. Most of the relevant programs prescribe that ‘third parties’ get involved, primarily different types of energy service companies (ESCOs), i.e. market-based intermediaries like energy consultants and energy saving service companies. They provide independent technology consultancy and support project implementation. As shown in Table 2, a variety of these programs were designed over time, such as a Cleaner Production Programs that employ an integrated preventive environmental strategy to processes, products, and services to increase eco-efficiency and reduce risks to humans and the environment, a Power Balance Test Program that intends to increase production efficiency by testing the power balance systems and a Circular Economy Program that strives to achieve EE through industrial ecology and life-cycle management approaches. Table 2 shows that since 2007 the number of target enterprises has increased sharply which implies a Table 2. Annual plans for market-based projects in Hangzhou. Year Year 2007 2008 2009 2010 2011 2012 2013 2014 2013-2015
Cleaner production – 50 100 150 200 500 400 300 1000 (three-year plan 2013–2015)
Power balance test 50 50 50 100 – – 300 200 No number (three-year plan 2013–2015)
Circular economy 36 100 120 130 100þ – – 170 projects were designed to be included in Hangzhou’s Circular Economy “770 Project” (2014 plan), with a total investment of 11.9 bill. RMB, of which 3.3 bill. RMB will be distributed in 2014.
Unit: Number of planned projects. Sources: Annual work plans for EE in Hangzhou 2007–2014; Hangzhou Circular Economy “770 Project”; Hangzhou Three-year Action Plan of Innovation and Development for Energy-saving and Environmental Protection Industries.
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rapid expansion in the use of market-based instruments. To get these programs off the ground, Hangzhou’s government provides various subsidies for individual projects, depending on their type, scale and outcome. At the same time, there has been a rapid development of third party organizations. Among the 2339 ESCOs approved by authorities across China as of January 2012, 74 were from Hangzhou. Furthermore, the number and size of them are expected to continue growing with support from Hangzhou’s government.70 Generally, the Chinese government sees mechanisms such as standardized measurements, verification protocols and differentiated support modes as essential to mobilize the market.71 Although such instruments are designed and implemented by an authoritarian regime and fall under the ‘competition under hierarchy’ approach,72 nongovernmental actors exert increasing influence on them through their involvement, and the assessment systems are continuously made more transparent and more fair, which suggests a mode of governance that will increasingly combine command-andcontrol with market-based instruments. As most programs are designed by the government, there are only few examples in Hangzhou of a cooperative approach with multiple actors. One exception is that Hangzhou’s government encourages fundraising for local EE projects. Local enterprises can raise external funds for EE projects instead of paying the total expense up front themselves, if they cannot be subsidized by the government. In 2011, Hangzhou’s government collaborated with the International Finance Centre to build a risk-sharing pool to provide a fundraising platform for enterprises.73 The Hangzhou branch of China Zheshang Bank was the first bank to participate in the scheme. Since it is officially recognized that multiple actors can play more important roles in climate politics, the co-governance mode is expected to become more prominent in Hangzhou in the future.
4.1.3. Implementation modalities Hangzhou’s government has set a mandatory cap on energy use which combines KPIs for government officials and specific target responsibility contracts for local governments and enterprises. These are tightly linked, and the contracts are compulsory rather than voluntary. These instruments are seen as crucial to incentivize and force officials and leaders of enterprises to attain the EE targets. Meanwhile, the assigned targets are linked to a variety of regulatory instruments, market-based mechanisms and capacity building programs which are increasingly used in combination. The market-based programs are clearly used by the government to increase the capacity for self-management in the market.
4.1.4. Participants and target groups Hangzhou’s government seems to spare no effort to incentivize, persuade or even force enterprises to take action. It has initiated and guided various forms of financial support, established an Energy Conservation Association and further strengthened mandatory auditing.74 Energy end-users and ESCOs are the main participants in these programs, yet the government is still dominant due to the preference for state intervention and the lack of market preconditions.75
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4.2. Renewable energy Hangzhou’s government started to promote RE in 2008.76 Since then, the so-called ‘new energy’ industry has developed rapidly. According to a KPMG report, the projected sales volumes of the new energy industry in Hangzhou was planned to increase from 16 bill. RMB in 2010 to 32 bill. in 2014,77 with strong guidance and support from the government.
4.2.1. Political decisions According to the national 12th FYP on Renewable Energy, clean energy should account for more than 9.5% of total energy consumption by 2015, including 290 GW of installed hydropower capacity, 100 GW of wind power and 21 GW of solar.78 However, Hangzhou’s government only uses sales output from RE industries as a key indicator for RE development, and, since Hangzhou is highly dependent on import of energy, the government mainly focuses on the development of the new energy industry, rather than on producing or acquiring RE.79 In 2010, Hangzhou’s target of new energy industry sales output was set at 100 bill. RMB for 2015, of which 40 bill from solar photovoltaic industry, 30 bill. from wind power equipment, 15 bill. from new battery industry, and 15 bill. from other industries.80 However, in 2012, the ambition had been sharply reduced and the targets for 2015 had been changed to 50 billion RMB, and the sales volume amounted to 25, 15, 10 billion RMB in solar PV, wind power and new batteries, respectively.81 Even so, Hangzhou’s government continued to emphasize that low carbon industries, especially new energy industries should be taken as the backbone of the city’s climate change mitigation efforts.82 To achieve its goals, the government’s RE framework focused on: (1) policy reinforcement to institute more market-based instruments within the RE sub-sectors; (2) promotion of RE development and deployment through pilot and demonstration projects to test and demonstrate pathways for the new energy industry; (3) technology innovation and new production facilities; (4) identification of urban and new rural construction and transportation as the key priority sectors; (5) government support for research and development (R&D) and innovation in the business sector, incl. establishment of a platform RE R&D.83 Overall, generous subsidies were to be provided through the habitual command-and-control approach.
4.2.1. Governance instruments Due to its late development, the conditions in Hangzhou’s RE sector are still immature as compared to many other cities in China, and local policy instruments and tools for RE development are different from those within EE. Most prominently, RE has not been included into the KPI system yet. Command-and-control instruments are primarily used to develop infrastructure and considerable support is given to pilot programs based on specific planning initiatives or to adapt best practice cases. Hangzhou’s government supports development of auxiliary industrial parks for the new energy industry, such as Hangzhou New Energy Development Zone, and two other key zones, Hangzhou High-tech Industrial Development Zone and Qianjiang Economic
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Development Zone. There are also other more specialized zones.84 These dedicated industrial parks are designed to support preferred or targeted industrial sectors and enterprises and to stimulate a cluster effect in relation to development of capacity to produce RE technology. The pilot programs receive considerable support from the government through preferential policies, financial aid and allocation of other resources. From 2009, Hangzhou provided subsidies totaling more than 100 mill. RMB for new energy projects,85 e.g. the Golden Roof Demonstration Project initiated by the national government in 2009. It is estimated that about 10 bill. RMB were allocated for this program at the national level. In response, Hangzhou’s government decided to cover 700,000 m2 of roof tops with solar PV from 2009 to 2013, increasing its solar capacity to 70 MW. This project is considered a pillar for adjusting and optimizing the structure of the energy system.86 Similar pilot projects can be found in relation to the city’s low carbon plan, new energy autos, new batteries and wind power equipment. The infrastructure projects and the dedicated industrial parks are clearly the dominant policy measures with the RE arena in Hangzhou. In addition, Hangzhou’s government also promotes market-based instruments. A typical example is governmental subsidies for distributed solar PV. In addition to subsidies for distributed PV projects from the central and the provincial government, which amounted to 0.42 RMB/kWh and 0.1 RMB/kWh respectively from 2014 to 2015, Hangzhou’s government provides a subsidy of 0.1 RMB/kWh for completed projects that comply with specific standards.87 This policy is based on a demand-side subsidy that is particularly aimed at energy end users who benefit directly. Compared to EE polices, cooperative instruments are used even less in RE. However, similar to the EE arena, there is also a wish to encourage fund-raising of local private capital to widen the investment channels and secure stable investment.88
4.2.2. Implementation modalities RE interventions mostly occur through infrastructure programs, pilot projects and some market-based policies. Unlike EE, RE targets are not linked with the KPIs of organizations and officials, and they are not included in the responsibility contracts of local officials and enterprise leaders. Thus, the targets for the sector are not compulsory and not as constraining as those for EE.
4.2.3. Participants and target groups The major participants in Hangzhou's RE initiatives are: (1) The local government; (2) the energy producers and end-users, e.g. individual households, enterprises, and government organizations; (3) appointed ESCOs, especially research institutes and new energy technology companies. Since Hangzhou’s pre-conditions for development of RE were immature, the city government has taken the lead in initiating the programs. It has designed policies and it distributes subsidies and supervises implementation. Besides, non-government actors such as enterprises, appointed ESCOs and end users are meant to benefit from engaging in the projects designed by the government. The relevant R&D organizations and technical service companies are expected to develop quickly by relying on generous subsidies for R&D and innovation to support the RE sector.
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However, unlike with the EE, not many market-based ESCOs can be found in the RE arena and no specific regulations have been identified regarding third party organizations. Most of the new energy companies have contracts with the government for their projects. Finally, cooperative governance instruments hardly exist.
5. Comparing energy policy designs The two political action arenas examined reveal that local policy design responds loyally to central policies, but they also point to emerging innovative elements developed at the local level. Table 3 synthesizes the findings that relate to the policy design dimensions examined. It is evident from the table that the policy design modalities in the EE and RE arenas differ considerably. Even though both were initiated in recent years, EE policies are more comprehensive and mature than RE policies. The two cases differ primarily in relation to their pre-conditions, e.g. the nature of the implementing agencies and the conditions in the specific sectors and the sector markets. EE policies are designed with basic standards and rules for sustained market operation, while the RE policy designs mostly promote short-term pilot programs or subsidies to develop local industry. While the capacity and influence of the actors participating in EE are likely to increase in the future due to the chosen approach, the sustainability of the government dominated mode in the RE arena may be doubtful since activities may be discontinued when the government terminates its support. The implementation modalities designed are also different. The EE arena is predominantly market-oriented ‘under hierarchy’ while the RE arena is dominated by the government. The analysis allows us to expect that the EE arena is likely to experience more changes in the mode of governance in the future. New policy and institutional mechanisms have already been put in place to shift the focus away from traditional government support to infrastructure and demonstration projects with direct financial allocations. Furthermore, target indicators within the EE arena are included in the KPIs of government organizations while this is not the case within the RE arena. KPI fulfilment is an important institutional arrangement. The target responsibility contracts for local governments are linked to individual KPIs and the performance assessments knit together organizations across the party-state to mitigate the tendency towards fragmented implementation. Contracts function as legally binding instruments that aim to incentivize and pressure local officials to satisfy their higher-ups while also contemplating how to secure and promote their own position by doing what they are told to. Targets are also forced upon enterprise leaders as a quasi-legal obligation.89 RE is a new political action arena in Hangzhou. The absence of local market demand has forced the government to support the sector to get off the ground. At the same time, it appears to be considered premature to incorporate this arena under the KPI system. This would, however, not preclude that the sector could follow a development trajectory similar to that of the EE arena at a later stage. Only few cooperative instruments have been identified and they are relatively immature due to the asymmetric power relationships between the participating actors. Hangzhou’s government is still in the driver’s seat and none of the instruments appear
Policy Framework
Industrial park planning; Golden Solar Pilot Program; New Energy Automobile Pilot Program; RE use in the countryside
Target responsibility system; Ten Thousand Enterprises Program; Technology promotion (e.g. CWS, industrial boiler technology); Close down outdated production facilities; Energy auditing; Energy conservation assessment; Best practice awards; Power control
Command-andcontrol Cooperative
Subsidy for distributed PV program; Subsidy for R&D projects
RE fund-raising program
Cleaner Production Energy performProgram; ance contractCircular Economy ing; Program; Energy conservaLabelling for energy contion fund-raisservation products; ing program Electricity Balance Program; Demand-IDE electricity control
Market-based
Governance instruments Implementation modalities
Local government;" Energy producer and end-users! ESCOs!
Government- dominated; Policy experiment
Local government" Market-oriented Energy end-users" under hierarchy ESCOs"
Target groups
Action Arena
Government-led mode expected to continue
Multi-actor interaction mechanisms are expected to develop and expand in future
Implication for Governance
Implication
Target groups—arrows are used to indicate the potential winners and losers in the action arenas. '"' indicates that the actor receives benefits and is expected to play an important role in future. '!' indicates that the actor receives benefits and burdens simultaneously, but the incentive structure for the actor is largely unchanged.
Renewable Energy New energy Combined industry sales instruments; output: 50 bil- Pilot projects; lion RMB Financial (2015) support
Energy conservation Energy intensity: Target respon15–18% sibility sys(2010–2015) tem; KPIs; Combined instruments
Target
Political decision
Table 3. Analysis of policy design in energy conservation and renewable energy in Hangzhou.
14 T. GUAN AND J. DELMAN
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to be designed collaboratively. Yet, with the growing recognition by the government of the need for engaging with non-state actors, we speculate that the few traces of local co-governance based on multiple actor collaboration and the partnerships that we have identified could indicate that such cooperative arrangements may become more prominent in the future as the partners get more familiar with them and with each other. In summary, the Hangzhou case reflects that new local policy designs and instruments may contribute to gradually transform the local mode of climate governance. First, Hangzhou’s government has gradually announced increasingly detailed regulations for interventions to stimulate the role of the market, e.g. regulations for energy conservation service organizations and more strict technical standards for equipment using energy. Second, the local market capacity is nurtured by selective government support. As an example, Hangzhou’s government introduced an expert evaluation system, and based on the feedback from this system the government financed targeted enterprises differently according to the effects of their energy conservation actions. The aim is to enhance the energy management capacity of the local enterprises and other actors as well as it could raise the competitiveness of the enterprises. Third, new market-based mechanisms are firmly promoted by the government. The most illustrative example is fund-raising schemes for energy conservation where the government has increasingly diversified the channels for provision of funds and fund-raising. Finally, it is noteworthy that the carbon-price and the cost–benefit of the proposed interventions do not appear to be a concern in Hangzhou, nor do we find specific requirements for evaluating the policies designed.
6. New dimensions in urban climate change politics and governance Hangzhou’s climate change policy instruments testify to a local climate governance regime that responds loyally to the policies and guidelines issued by the central authorities. While the traditional top-down approach of the city government is still dominant in its climate politics, the study shows that, when dealing with the local economic and social conditions, the city government is willing and able to undertake pilots and to experiment. It has flexibly tailored the policies of the central government to the local needs through the use of different types of instruments. This approach has paved the way for new ways to distribute resources and burdens, and it has contributed to empowerment of market players and emerging non-state organizations. We do not find traces of local debates in Hangzhou about how the use of the diverse policy instruments may affect the local political economy or even the local political system itself. There seems to be an assumed belief that—under the continued control and guidance of the authoritarian party-state—the seemingly incongruous policy preferences will not disrupt or undermine the hegemonic position of the partystate in the local political economy. We would argue, however, that such a conclusion is premature. It is not unlikely that continued experimental designs and piloting that employ more neo-liberally inclined policy instruments may contribute to transform the local mode of governance even more dramatically than is the case now. Despite the local scope of our study, our findings and conclusions speak to important national issues in China. Most prominently, the performance review system with
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KPIs is used forcefully to foster greater leadership ‘attention’ to the need for climate change mitigation at the local level. The Qinghua Climate Initiative rightly calls the use of KPI based performance reviews: ‘the most significant institutional change in the management system of EE and … the most important institutional innovation in China’s low-carbon development in recent decade’.90 In Hangzhou, it has still only been used in the ‘mature’ EE arena until now. It has not been used as yet in the more nascent RE arena. There is also a strong interest to deploy a variety of market-based instruments that are likely to increasingly empower actors in the market. This may, in turn, lead to the formulation and deployment of more cooperative instruments over time. On many dimensions, Hangzhou’s climate change politics follow patterns that are well known from urban climate governance outside China, not least in OECD countries. This leads us to argue that, just like the national and the local contexts, international experience is also an important driver in climate politics in Hangzhou and that the three sets of drivers combined may well contribute to further innovations in the approach of the city leadership to climate governance in the future Finally, to generalize our findings, we would argue, with reference to Ostrom,91 that climate change policy designs do not only socialize climate mitigation efforts into an existing rule-ordered system of behavior, but that it also prompts the rule-ordered system to develop in new directions through local rules-in-use. Thus, the approach of Hangzhou’s government to the design and implementation of climate change policies seem to gradually become less authoritarian, more market based, and more accountable, due to the inherent complexity of this political action arena. The city government has recognized the need for leveraging information asymmetries to create a multi-level playing field for external non-state stakeholders with whom it enters into contractual relationships to enable them and to ensure that they are able to deliver on their contracts. The use of instruments with different normative preferences as local rules-in-use may thus tease out new modes of governance that make the relationships between the party-state and the market actors less asymmetric and more collaborative. These developments warrant more comparative research to assess whether such phenomena are observable across China’s urban climate governance regimes.
Notes 1. See Qi and Wu, “Politics of Climate Change”; CPI, The Policy Climate; Baeumler et al., Sustainable Low-Carbon City Development in China. 2. See OECD, “Cities and Climate Change”. 3. Here, based on Chinese practice, we use “low carbon development programs/policies” as a concept that embraces policies that contribute to reducing CO2 emissions. 4. See Boyd, “China’s Energy and Climate”. 5. See Zhou and Delbosc, “Chinese Climate and Energy”. 6. Song et al., “China’s Climate Policies”. 7. See Ostrom, “Institutional Rational Choice”. 8. See Koehn, China Confronts Climate Change; Song et al., “China’s Climate Policies”; Odgaard and Delman, “China’s Energy Security Challenges”. 9. Cf. Pattberg and Stripple, “Remapping Transnational Climate Governance”.
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10.
11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36.
37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52.
17
Lieberthal and Oxenberg (1988) argued that China’s political system can be seen as a fragmented authoritarian system. Also see Delman, “Urban Climate Change Politics”; Koehn, China Confronts Climate Change. See Koehn, China Confronts Climate Change. See Stavins, “Policy Instruments for Climate Change”. See Guo, “China’s Administrative Reform”. See Sigley, “Chinese Governmentalities”. See Heilmann and Perry Mao's invisible hand; Yu and Wang, “Applicability of Governance Theory”. See OECD, “Cities and Climate Change”; Broto and Bulkeley, “Urban Climate Change Experiments”; Bulkeley, Cities and Climate Change. We use “climate policies” as another generic term that comprises policies within the fields of climate change, environment and renewable energy/energy security. €der, Local Climate Governance; Mai and Francesch-Huidobro, Climate Change See Schro Governance; Koehn, China Confronts Climate Change. See Song et al., “China’s climate policies”; IPCC, Climate Change 2014. See note 7 above. See Ostrom, “Institutional Rational Choice,” 23. See Ostrom, “Institutional Rational Choice,” 26. See Ostrom, “Institutional Rational Choice,” 36. See Ostrom, “Institutional Rational Choice”; Schlager, “A Comparison of Frameworks”. Cf. note 12 above. Cf. Ostrom, “Institutional Rational Choice”. See Chow, “Economic Planning in China”. See note 7 above. See Sigley, “Chinese Governmentalities”; Rhodes, “Governing without Government”. See note 27 above. See Dubash et al., “National Climate Change Mitigation”. See CPCCC, “Decision on Deepening Reforms”. See note 12 above. See Xu et al., “Chinese Climate Change Mitigation”. See Kostka, “Barriers of Environmental Policies”. See Delman, “Urban Climate Change Politics”; Koehn, China Confronts Climate Change; Kostka, “Barriers of Environmental Policies”; CPCCC “Decision on Deepening Reforms”; Wang, “Search for Sustainable Legitimacy”. See Wang, “Search for Sustainable Legitimacy”. See Qi, “Low-Carbon development in China”. See Koehn, China Confronts Climate Change; Wang, “Search for Sustainable Legitimacy”; MF, “Energy Conservation & Emission Reduction”. See Qi and Wu, “Politics of Climate Change”. See note 35 above. See Sigley, “Chinese Governmentalities”. See note 12 above. Cottrell et al., “Revenues for Green Energy”; Zhou and Delbosc, “Chinese Climate and Energy”. Zhan, “Carbon Trading in China”; Kostka, “Barriers of Environmental Policies”. Culminating with the CPC Central Committee’s 2013 reform program. See CPCCC, “Decision on Deepening Reforms”. Kooiman et al., “Interactive Governance and Governability”. See Mai and Francesch-Huidobro, Climate Change Governance. See note 48 above. See note 7 above. Cf. Ingram, Schneider and DeLeon, “Social Construction and Policy Design”. See Guan et al., “Improving China’s Environmental Performance”.
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53. 54. 55. 56. 57. 58. 59.
60. 61. 62. 63. 64. 65. 66. 67. 68.
69. 70. 71. 72. 73. 74.
75. 76. 77. 78. 79.
80. 81. 82. 83.
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See Heilmann, “Local to National Policy”. See Boyd et al., “Emerging Arrangements for MRV”; See Zhou and Delbosc, “Chinese Climate and Energy”. See Qi and Wu, “Politics of Climate Change”. See Odgaard and Delman, “China’s Energy Security Challenges”. See Hangzhou Government, “Preparing the Twelfth Five-year Plan”. See Hangzhou Government, “Energy Reduction Report 2014”. Energy intensity, energy consumption per unit of GDP, has been set as a national indicator for energy conservation since 2006 (State Council of China, 2005). Additionally, total energy consumption was set as a second national indicator for energy conservation in late January 2013, when China’s State Council approved an “energy consumption control target” below the equivalent of 4 bill. ton of coal per year by 2015 (See State Council of China, 2013). Additionally, total energy consumption was set as a second national indicator for energy conservation in late January 2013, when China’s State Council approved an “energy consumption control target” below the equivalent of 4 bill. ton of coal per year by 2015 (See State Council of China, 2013). See Hangzhou Government, “Hangzhou 11th Five Year Plan for Energy Conservation”. See Hangzhou Government, “Hangzhou 12th Five Year Plan for Energy Conservation”. See Hangzhou Government, “Hangzhou 11th Five Year Plan for Energy Conservation”; “Hangzhou 12th Five Year Plan for Energy Conservation”. See Delman, “Urban Climate Change Politics”. See Zhejiang Economy and Trade Committee (ZETC) and Zhejiang Statistics Bureau (ZSB), “Guideline for Energy Consumption”. See Hangzhou Government, “Plan for Energy Conservation (2012)”; “Plan for Energy Conservation (2013)”. See General Administration of Quality Supervision (GAQS), “Measuring Instrument of Energy “; Hangzhou Government, “Plan for Energy Conservation (2013)”. See Hangzhou Government, “Plan for Energy Conservation (2007)”. See Hangzhou Government, “Plan for Energy Conservation (2009)”; “Plan for Energy Conservation (2010)”; “Plan for Energy Conservation (2011)”; “Plan for Energy Conservation (2012)”; “Plan for Energy Conservation (2013)”; “Energy Reduction Report 2014”. See Hangzhou Government, “Plans for Energy-Saving Program”. See KPMG, “Green Economy-invest in Hangzhou”. See Kostka and Shin, “Energy Conservation Service Companies”. €bel, “Uneven Policy Implementation in Rural China”. See Go See Liu, “Credits for Energy Conservation”. See Hangzhou Government, “Plan for Energy Conservation (2007)”; “Plan for Energy Conservation (2009)”; “Plan for Energy Conservation (2010)”; “Plan of Strategic Industries (2011–2015)”; “Plan for Energy Conservation (2012)”; “Plan for Energy Conservation (2013)”; “Plan for Energy Conservation (2014)”; KPMG, “Green Technology–Invest Hangzhou”. Cf. Kostka, “Barriers of Environmental Policies”. The first policies primarily aimed at solar energy and new energy autos. See KPMG, “New Energy”. See National Development and Reform Commission (NDRC) and National Energy Bureau (NEB), “Renewable Energy’s 12th Five-year Plan”. Hangzhou’s government has little influence on the acquisition of energy or on determining the sources of its power supply. This responsibility rests with the province (interview with official from Hangzhou Development and Reform Commission, 13 November 2015. See Hangzhou Government, “New Energy Industry Plan (2010–2015)”; “Plan for Major Industries (2011–2015)”. See Hangzhou Government, “Three-year Plan for Energy-saving”; “Development of the Photovoltaic Industry”. See Hangzhou Government, “'Twelfth Five Year Low Carbon Plan”. See Hangzhou Government, “New Energy Industry Development (2010–2015)”.
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84. 85. 86. 87. 88. 89. 90. 91.
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See note 83 above. See KPMG, “New energy”. See note 82 above. See Hangzhou Government, “Hangzhou Municipal Government Opinions on the Better Development of the Distributed Photovoltaic Industry by Accelerating the Applications”. See note 87 above. Cf. note 63 above. See Qi, “Low-Carbon Development in China”. See note 7 above.
Acknowledgements We are grateful to Prof. Yu Jianxing for his support to the project, to Zhang Liyan for her research assistance and to Andrew Podger for comments on an initial draft. We would like to thank the Alexander von Humboldt Foundation for funding Ting Guan’s research visit in the University of Copenhagen under German Chancellor Fellowship as an initiative of this study.
Disclosure statement The authors report no conflicts of interest. The authors alone are responsible for the content and writing of this article.
Funding This work was supported by Alexander von Humboldt-Stiftung and the Sino-Danish Center for Research and Education (SDC) in Beijing.
Notes contributors Ting Guan is a postdoctoral researcher at the Institute of East Asia Studies at the University of Duisburg-Essen. Her current research focuses on local environmental and energy governance from comparative perspective. She has been named as Humboldt Scholar, German Chancellor Fellow, Green Talents Fellow, Global Governance 2020 Fellow, and Visiting Academic Fellow at MERICS. Jørgen Delman is Professor of China Studies at the Department of Cross-Cultural and Regional Studies at Copenhagen University. He has been working with China for 45 years. His recent publications on China focus on state-business and state-society interaction, climate change and renewable energy politics, climate governance at city level, urban sustainable development, and energy security.
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