4. Case study – energy policy
4.2. Coal fired power plants and energy policy in the governance theory framework
4.2.2. Allocation of economic, social and environmental resources
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4.2.2. Allocation of economic, social and environmental resources
One way governance is defined is the manner in which economic, social and environmental resources are allocated and used. Since coal-fired power plants are relevant to a wide range of governance issues, the following analysis of the three
„resource-dimensions‟ represent a selection of relevant aspects.
Use of economic resources
There are two aspects to studying the use and allocation of economic resources in the context of coal-fired power plants. Energy is the main economic resource, with an input (primary energy) and an output (electricity). First, power plants mostly rely on domestic coal supplied from the “main coal mines in the north and northwest, while energy demand is greatest in the eastern and south-eastern coastal areas.”329 The negative impact of using coal for electricity is found both in coal mining and in burning coal in the power plants for generating electricity. Since electricity is most cost effectively produced near the electricity demand, the negative impact is not limited to the mining location. Nevertheless, the positive economic impact is hard to determine, as mining operations have virtually no demand for employees with high qualifications and do not contribute to developing an advanced economy. The use of economic resources has some several shortcomings which at least has a limited global impact. The exception is, of course, the emission of CO2 during coal burning, which falls outside the scope of this discussion.
Second, on the output side, since the breakdown of the central government‟s monopoly, its supply and distribution of electricity has ended. Ownership of power plants is mostly state controlled. But attempts to create an inter-provincial wholesale market have shown initial results,330 including the privatization of SOEs and opening the market to international corporations. To protect the periphery, wholesale tariffs for electricity have been politically set below the market value, but this has had not influence on other issues such as corporate governance, environmental regulation or end-user price.331
329 International Energy Agency, "Cleaner Coal in China", 47.
330 Zhang and Parsons, "Market Power and Electricity Market Reform in Northeast China", (
331 Zhang and Heller, "Reform of the Chinese Electric Power Market: Economics and Institutions", 86(
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Use of social resources
Perhaps the most prominent social issues of coal-fired power plants is their negative impact on environment and health. As previously discussed, domestic coal mines have a complex ownership structure with poor governmental control and a liability to corruption. The safety record on coal mines is a good illustration of the use of social resources. Pei332 uses it as a key argument for his pessimistic outlook for China‟s further (social) development.
China‟s coal mine safety record is doubtlessly one of the world‟s worst and accounts for “80% of the total death in coal mine accidents worldwide.”333 Its fatality rate per million metric tons of coal is considerably higher than, for example, India‟s which was able to reduce its rate to 4% of China‟s in 2006.334 Small and medium mines are mostly in the spotlight for improving the safety record. They use, on the one hand, more risky mining methods like room-and-pillar or shortwall compared to larger mines that use the safer longwall mining method. On the other hand, corruption is a severe problem in the coal-mining industry and especially within the smaller mines.
Smaller coal mines are also considerably less mechanized (45% for small compared to 83% for the large key state-owned mines).335
Table 25: Coal mining fatalities: annual total and rate per million tons of coal mined, 1949-2006336
332 Pei, "China's trapped transition the limits of developmental autocracy".
333 Jianjun Tu, "Coal Mining Safety: China's Achilles' Heel," China Security, Vol. 3, No. 2 (2007), 38.
334 Ibid., 38.
335 International Energy Agency, "Cleaner Coal in China", 44.
336 Ibid., 45.
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The current situation gives not much room for a positive interpretation of the use of social resources. But it may also not be as worse as most authors conclude. Although the absolute number of fatalities remains high and despite the fact that the data may be underestimated (media control, corruption, not reported illegal mines, etc.337), the fatality rate has been declining: by 2007 it was less than half what it had been in 2000.
If this trend points to a turnaround toward a better safety record, the outlook can be considered to be slightly optimistic.
Use of environmental resources
China‟s environmental policy at the national level has been mainly formulated by the State Environmental Protection Agency (SEPA, replaced in 2008 by the Ministry of Environmental Protection). Implementation and enforcement are delegated to the authority of provincial and municipal levels where the SEPA runs offices. With a governance perspective, the local SEPA has to face a trade-off between the goals formulated at the central level and the locality‟s main goal to achieve economic growth. The need for cheap electric power is generally given more weight than that of environmental enforcement. Furthermore, the financing of the local SEPA produces more conflicts. The SEPA “must rely either on the collection of local pollution emission fees or on handouts from the local governments […]. Either [the SEPA]
allows emitters to pollute or accepts payment from the local government in return for
337 Tu, "Coal Mining Safety: China's Achilles' Heel," 38.
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ignoring emissions entirely.”338 The combination of these two facts made the enforcement of central policies very difficult. Lieberthal339 observed similar effects as he studied the impact of China‟s governing system on environmental policy implementation, and concluded that “much of the environmental energy generated at the national level dissipates as it diffuses through the multilayered state structure, producing outcomes that have little concrete effect.” The negative impact on the environment is immense both in coal mining, coal transport and coal burning in the power plants. Only for the mining, the “Government estimates of damage from coal mining, including wasted resources, environmental pollution, ecological destruction and surface subsidence, total about RMB 30 billion per year.”340 China has not yet developed an effective control mechanism for a less environmentally damaging production and use of coal. At least, a clean coal strategy was listed as “one of four major strategies in the „10th Five-Year Plan for the Coal Industry‟.”341
338 Lester and Steinfeld, "China's Real Energy Crisis," 37.
339 Kenneth Lieberthal, "China‟s Governing System And Its Impact on Environmental Policy Implementation," China Environment Series, Vol. 1, (1997), 3.
340 International Energy Agency, "Cleaner Coal in China", 46.
341 Ibid., 5.
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