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Impact of Vertical and Horizontal Governance on the Policy Outcome of the Emissions Trading Scheme in China

China
Governance
Local Government
Policy Analysis
Yun Cao
Freie Universität Berlin
Yun Cao
Freie Universität Berlin

Abstract

Market-based climate governance mechanisms have been widely applied by countries and regions, yet policy outcomes in different jurisdictions vary. China, the biggest emitter in the world, has speed up its pace in building a national emission trading scheme (ETS) to achieve its emission reduction goal, starting with seven local emission trading pilots. After three years of trial run, a certain degree of heterogeneity on ETS program design and implementation among local ETS pilots in China has been observed. While some pilots are running relatively smoothly, others are struggling with limited market activity. In the forming process of a new climate governance regime, the design of a national ETS market has also been put under multifaceted challenges, like it compatibility with long-term macroeconomic development goals, the demand over a strong legal framework and a balance on differentiated regional interests. Who are the leading actors in the program design and implementation of the local emission trading pilots? What institutional setups have a major impact on the divergent policy outcome? How can we evaluate the vertical and horizontal dimensions of the ETS governance model and the potential impact of local pilots on the formation process of the national scheme? By combining the strengths of the sociological institutionalism and the de facto federalism, I have conducted an empirical comparative analysis on the dynamic interactions between local DRC agencies with NDRC, major industries, governmental agencies and civil society in China. This paper intends to shed light on the institutional characteristics of local climate governance models in China by focusing on the interactions among different key actors on the vertical and horizontal dimensions, to explain how the authority allocation choice on the subnational level has caused the regional variation in policy outcome, and how this heterogeneity has contributed to policy learning through local experimentation for national policymakers.