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

This research paper analyzes the environmental impacts of China's electrical power sector and explores how a sustainable trade strategy can be linked to energy policy. It details China's heavy reliance on coal, the resulting pollution, and the regulatory frameworks used to manage these effects. The document also surveys international best practices in low-carbon energy policy—including economic and regulatory instruments—and suggests policy options for China to improve efficiency and competitiveness.

• 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. This reliance on coal is approximately twice the global average.
• The power industry is a primary source of pollution in China; in 2006, it was responsible for 59.0% of sulphur dioxide emissions, 44.8% of industrial soot, and 0.19% of industrial dust, despite contributing only 7.6% of industrial added value.
• Small thermal power units (those below 100 megawatts) are significantly less efficient and more polluting than larger units. In 2006, these small units produced approximately 39% of the sector's sulphur dioxide emissions while generating less than 26% of its power.
• China's power consumption relative to GDP is substantially higher than that of developed nations; in 2006, it was 3.4 times that of the United States, 4.79 times that of Japan, and 2.07 times that of South Korea.
• The Chinese government has implemented a "big up/small down" strategy to restructure the industry, aiming to close 50 gigawatts of inefficient small thermal power units during the 11th Five-Year Plan and replace them with larger, more efficient units.
• China utilizes a mix of administrative, command-and-control, economic, and voluntary policy instruments. Administrative tools include linking the promotion of government officials and state-owned business leaders to the achievement of energy conservation and emission reduction targets.
• International experience suggests that while environmental regulations can impose costs on energy-intensive sectors (such as aluminum or steel), they can also drive innovation and efficiency, potentially improving long-term competitiveness (the Porter hypothesis).
• The document identifies several international best practices for low-carbon transitions, including feed-in tariffs (successful in Denmark, Germany, and Spain), carbon taxes (Sweden), and tradable emission permits like the EU ETS.
• To protect its exports and improve its global brand, China is encouraged to adopt carbon pricing (such as a cap-and-trade scheme or carbon tax) to insulate itself from potential climate-related border trade measures in 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} }