China’s Electrical Power Sector, Environmental Protection and Sustainable Trade

The document examines China's heavy reliance on coal-fired power, which makes it a global leader in sulphur dioxide and carbon dioxide emissions. It analyzes the 'big up/small down' strategy to replace inefficient small thermal units with larger, cleaner ones and reviews international best practices—including carbon taxes, feed-in tariffs, and emission trading—to suggest policy options for China to reduce its carbon intensity and protect its exports from future climate-related trade barriers.

• China's electrical power sector is characterized by an extreme dependency on thermal power, which accounted for 77.7% of installed capacity and 84.2% of power production in 2007, making its coal-based supply roughly twice the world average.
• The power industry is a primary source of pollution in China; in 2006, it contributed 59.0% of sulphur dioxide, 44.8% of industrial soot, and 0.19% of industrial dust emissions, despite representing only 7.6% of industrial value.
• Small thermal power units (below 100 MW) are disproportionately polluting and inefficient, producing approximately 39% of the sector's sulphur dioxide emissions while generating less than 26% of its power.
• China has implemented a 'big up/small down' strategy during the 11th Five-Year Plan, aiming to close 50 gigawatts of small thermal power units and replace them with larger, more efficient ultra-superscale units.
• The document argues that while environmental regulation can impact energy-intensive sectors like aluminum and steel, broad competitiveness losses are unlikely, and stringent regulation can actually drive innovation and technology exports (the Porter hypothesis).
• International best practices for low-carbon transitions include economic instruments such as feed-in tariffs (successful in Germany, Denmark, and Spain), carbon taxes (Sweden), and tradable emission permits like the EU ETS.
• China's power consumption relative to GDP is significantly higher than developed nations, being 3.4 times that of the United States, 4.79 times that of Japan, and 2.07 times that of South Korea.
• Adopting low-carbon energy policies is presented as a strategic shield for China's exports against potential border trade measures based on embedded carbon being contemplated by the EU and US.

APA

Hong, S., Cosbey, A., & Savage, M. (2009). China’s Electrical Power Sector, Environmental Protection and Sustainable Trade. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/china_power_sector_sd.pdf

Chicago

Hong, Song, Aaron Cosbey, and Matthew Savage. China’s Electrical Power Sector, Environmental Protection and Sustainable Trade. International Institute for Sustainable Development, 2009. https://www.iisd.org/system/files/publications/china_power_sector_sd.pdf.

Wikipedia

{{cite report |last1=Hong |first1=Song |last2=Cosbey |first2=Aaron |last3=Savage |first3=Matthew |title=China’s Electrical Power Sector, Environmental Protection and Sustainable Trade |publisher=International Institute for Sustainable Development |date=December 2009 |url=https://www.iisd.org/system/files/publications/china_power_sector_sd.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{hong2009chinas, author = {Hong, Song and Cosbey, Aaron and Savage, Matthew}, title = {{China’s Electrical Power Sector, Environmental Protection and Sustainable Trade}}, institution = {International Institute for Sustainable Development}, year = {2009}, month = dec, url = {https://www.iisd.org/system/files/publications/china_power_sector_sd.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }