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

The Power and Steel Sectors

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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Author(s):
Nordic Council of Ministers

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This report has described the role of state-owned enterprises (SOEs) in activities relevant to climate mitigation in the Chinese economy, with case studies of the role of SOEs within two high-emitting sectors: power generation, and steel production. It is evident that SOEs are set to become even more important actors in connection with China’s future GHG emissions path. Western criticisms of the role of the SOEs may not be the most constructive approach. As regards mitigation, it is more important to understand how the Chinese central bureaucracy sees SOEs and their role in the future, and to identify the related uncertainties, especially in terms of the division of power. Even though SOEs are not known to be involved in formulating the country’s international climate positions, which are driven largely by considerations of ideology, it is SOEs that predominate, in terms of reducing emissions and reforming industrial sectors, when mitigation-relevant tasks are divided among actors. They thus merit greater attention in climate-policy research: after all, as the world’s largest emitter of greenhouse gases, it is on China that the success or failure of international climate mitigation efforts will depend.