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China's State-Owned Enterprises as Climate Policy Actors

The Power and Steel Sectors

image of China's State-Owned Enterprises as Climate Policy Actors

A significant share of the greenhouse gas emitting activities of China is operated by state owned enterprises (SOEs). This report, written by Fridtjof Nansen Institute for the Nordic Council of Ministers, discusses the role of SOEs on the electricity and steel sectors, for instance, in upgrading technologies, centralizing operations and developing alternative energy sources. Informal networks, guanxi and nomenklatura, and financial ties provide the state control over SOEs. This makes SOEs a preferable alternative to private companies. As policies limiting emission growth have been economically attractive to SOEs so far, they have shown little opposition but this may change should costly measures be introduced in the future. While China’s position in climate negotiations is determined by the political leadership, the SOEs deserve attention due to their impact on China’s emission trends.

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Discussion

Various policies launched by the Chinese bureaucracy rely on tasking the SOEs to proceed with policy implementation, including efficiency improvements and the launch of new technologies (wind power) and infrastructures (LNG, a modern power grid). The central bureaucracy sees the SOEs as a preferable alternative in terms of controlling key sectors; this is reflected in the centralization of activities, as well as in keeping control of large-scale power-generation units in the hydro and nuclear sectors in hands of few selected SOEs. As a wider mitigation-relevant task, the SOE-led modernization of the steel industry to enable betterquality products also aims at supporting the development of new hightech sectors, like renewable energy. Finally, SOEs have made significant contributions to targeted mitigation measures implemented in China, especially through the 1000 Enterprises Programme, while also making it possible to close down small, inefficient plants: this accounted for a significant share of emission reductions (as shown in Graph 2 on page 19). Clearly, then, SOEs have played a significant role in mitigation actions in the two sectors in focus here.

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