China's failure of policy innovation: the case of sulphur dioxide emission trading

Abstract

Sulphur dioxide (SO₂) emissions and acid rain have been one of the most serious environmental problems in China. In order to address these problems, the Chinese government has shown much interest in SO₂ emission trading scheme. In spite of the government's enthusiasm, full support from US government and international organisations, and overall success of the pilot projects in several local areas in China, SO₂ emission trading has never been institutionalised in any of the Chinese provinces, and therefore, became virtually unavailable. Why did China fail to adopt and institutionalise the SO₂ emission trading scheme? What are the factors that affect a country's policy innovation process? Based on the diffusion and innovation literature, it is argued that policy innovation is constrained by domestic institutional factors and that lack of domestic preconditions for effective diffusion and innovation makes policy adoption costly, and therefore, leads local governments to decide not to adopt the policy.

Keywords:

• emission trading
• SO₂
• China
• diffusion
• innovation

Acknowledgements

This work was supported by the National Research Foundation of Korea Grant funded by the Korean Government (NRF-2011-332-B00016).

Notes

1. For a survey on the empirical findings in existing diffusion and convergence literature, see Heichel et al. (2005).

2. In this article, the term convergence is used differently from diffusion. Diffusion is more about a process while convergence is about the outcome. I assume that international policy diffusion does not necessarily bring about international policy convergence.

3. In China, emission trading for other pollutants such as Chemical Oxygen Demand (COD) in the case of water pollution has also been experimented.

4. The papers presented in this forum and discussions are published in China. See Wang et al. (2000).

5. CO2 emission trading has been increasingly diffused recently in Europe and North America. However, it has a problem of carbon leakage, a typical collective action problem, among countries. On the other hand, SO₂ emission trading is relatively free from the collective action problem. Countries can just reduce their own SO₂ emissions and maintain better air quality in their territory.

6. Interview with emission trading specialists in the Environmental Defense Fund Beijing, February 2011. I conducted a series of personal interviews with government officials, scholars and other specialists who were directly involved in China's adoption process of emission trading scheme (pilot projects, research, government consultation meetings, foreign advisory groups) in Beijing for this research in January 2010 and February 2011.

7. Interview with an official in the Ministry of Environment, February 2011.

8. Interview with a scholar in the Chinese Academy for Environmental Planning, January 2010.

9. I borrowed the terms, ‘pioneering’ and ‘bandwagoning’ from Jae Ho Chung's (2000) discussion on different patterns of local policy implementation during post-Mao decollectivisation.

10. In China, there was an attempt in the mid-2000s to consider environmental aspects of local development such as the idea of the Green gross domestic product (GDP). The Green GDP is the subtraction of the financial cost of environmental degradation and resource consumption from conventional GDP. However, it soon turned out to be a big mistake and thus stopped because it produced unrealistic and undesirable figures for the central as well as local leaders. In some provinces, the pollution-adjusted growth rates were reduced even almost to zero. See Kahn and Yardley (2007).

11. Interview with a scholar in Beijing University and project leaders in Tianjin and Beijing Exchanges, January 2010.

12. I visited Beijing and Tianjin Exchanges in January 2010 and discussed the possibility of full institutionalisation of CO₂ emission trading in those cities.

13. Interview with a China environment specialist in Beijing, January 2010.

14. For the role of the local governments in climate change politics, see Qi et al. (2008) and Schreurs (2008).