Where Wai (outer) meets Nei (inner): How China’s international and domestic policy positions reinforce each other

From the Paris Climate Negotiations

National goal-setting—an expected key outcome from the Paris climate talks currently underway—is a common fixture of policy-making in China and many other countries. Collectively, the current pledges still show significant gaps toward meeting long-term climate goals. Nevertheless, they represent an important increase in scope and ambition over those pledged in advance of the 2009 Copenhagen summit, and those established earlier under the Kyoto Protocol. There is great importance in—and a growing consensus around—enhancing these previous rounds of commitments through a pledge-and-review institution, which if designed properly can also mobilize domestic constituencies even across a wide range of political systems. As China and other countries begin to consider their next steps, we explain here the interaction of international and domestic policy-making in setting climate action targets in China.

China’s Increasingly Stringent International Commitments

China in particular stands out for its evolution over this period as it has taken on increasingly stringent international commitments in tandem with massive climate and energy programs at home. Looking at its domestic constituencies—including extremely powerful fossil fuel and local government interests that are net losers under a carbon control program without compensation—this transition over the span of less than a decade is striking.

Economic advantages as a major clean energy equipment exporter, international pressure as China transitioned to the world’s largest emitter, and pervasive concerns over air pollution have helped persuade central policymakers. In turn, we find that central figures have created and used international pledges (outer – Wai) as a lever to push for and prioritize domestic action (inner – Nei). To understand how this works, we describe how underneath China’s unitary central government lies a complex policy-making hierarchy, which reinforces actions and realigns interest groups to further a transition toward low-carbon energy sources.

Climate Targets in Three Flavors

China’s energy-related climate targets come in three flavors: 1) intensity-based targets with respect to economic growth; 2) shares of energy supply, i.e., minimum non-fossil proportion of primary energy; and, most recently, 3) a CO2 peaking year (though not peaking amount). A sudden increase in energy-intensive production over 2002-2005 created concerns of energy insecurity and led to the establishment of the first flavor, energy intensity “binding targets” (约束性目标) in the 11th Five-Year-Plan (2006-2010). A medium-term target of the second flavor, to achieve a non-fossil energy share in primary energy1 of 15% by 2020, was established in a 2007 energy strategy document together with a range of other expansion goals meant more as guidelines than targets. At that point in time, there was no discussion of peaking emissions on the horizon.

In studies of China’s governance system—especially the target-setting process—it is well-known that more targets are given than are expected to be followed. Thus, prioritizing central directives is a crucial exercise for provincial governments, the typical implementing institutions (state-owned enterprises are the other). These decisions are made based on different assessments of importance, but binding targets established in five-year-plans as well as internationalized commitments are given high weight.

In 2010, on the heels of the Copenhagen climate talks, it was announced that several provinces were behind schedule in reducing energy intensity. Premier Wen Jiabao, who had delivered China’s international climate commitment, became the central domestic figure rounding up the laggards. China’s pledge in preparation for those talks also raised the non-fossil energy target out of obscurity and enshrined a CO2 intensity objective, which joined energy as a binding target in the 12th Five-Year-Plan released two years later.

Over the next five years, China’s central agencies set forth a number of climate and energy policies, ranging from traditional mandatory approaches such as scaled-up industrial energy efficiency mandates to newer economic incentives such as standardized electricity tariffs for all renewable energies and carbon cap-and-trade pilots. These had the support of the important National Leading Group on Climate Change, Energy Conservation and Emissions Reduction, which in turn has cited responsibility to meet internationalized commitments.

Inside China’s Policymaking

A simplified sketch of the importance of highly publicized goals, using the recent round of electricity reform as an example, is instructive. In 2013, central party leaders set guiding principles on a new round of market reforms through small leading groups—which have a long history of directing central policy—chaired by President Xi Jinping, and last year set timetables for specific reforms. Language—e.g., related to the role of the market—was translated into a high-level State Council energy strategy document in 2014 and ultimately a blueprint for electricity sector reorganization released this year. Finally, agencies such as the National Development and Reform Commission (NDRC) and the National Energy Administration (NEA) have visited localities to emphasize the importance of the specific reform measures, and have established policy and implementing measures (e.g., to improve renewable energy utilization). At each step, the crucial link with central goals was preserved, ensuring that the drafting—typically not done by State Council staff—helped unambiguously establish priorities.

International and Domestic Policy Reinforcing Each Other

China’s Paris commitment expands this process by incorporating the three flavors of targets and helping shape future domestic actions. To increase non-fossil energy share, China promised to implement “green power dispatch” in a joint US-China announcement made prior to this year’s UN talks. And a CO2 peaking year of no later than 2030 will provide much-needed urgency to establishing rules and accountability for the upcoming national cap-and-trade system.

This policy process has clear implications for the importance of a robust pledge-and-review institution. China’s commitments—including a US$3.1 bn climate fund for developing countries—helped build momentum for Paris. The UN process can also help ratchet up and improve implementation of commitments by ensuring there are frequent reviews of existing pledges and continued opportunities for new ones. This will not only prompt central leaders to make bolder commitments but also provide ammunition for those seeking further domestic reforms to achieve them.

1.Importantly, China’s calculation of primary energy deviates from international conventions. See Lewis et al 2015.

Author Information:
Michael Davidson is a PhD candidate in engineering systems at the Massachusetts Institute of Technology (MIT), and a research assistant in the Joint Program on the Science and Policy of Global Change.
Dr. Valerie Karplus, a ChinaFAQs expert, is an Assistant Professor in the Global Economics and Management Group at the MIT Sloan School of Management, and a Faculty Affiliate of the MIT Joint Program on the Science and Policy of Global Change.

China and U.S. pavilions at COP21. The U.S. and China announced their international commitments together in advance of the Paris talks.
Credit: Michael Davidson