The Enemy Within? Green Industrial Policy and Stranded Assets in China’s Power Sector

19 Pages Posted: 19 Aug 2021

See all articles by Jonas Nahm

Jonas Nahm

Johns Hopkins School of Advanced International Studies

Johannes Urpelainen

Johns Hopkins SAIS

Date Written: August 17, 2021

Abstract

Social science research has often portrayed green industrial policy as a hard test for state capacity.
Defined here as state initiatives that allocate public resources to accelerate economic growth
through low carbon, structural change in the economy, green industrial policies often mobilize
external opposition from incumbent groups whose financial interests are threatened by
decarbonization. This article examines potential interest group opposition to green industrial
policies through the lens of state investment in the Chinese coal power sector—a key obstacle to
China’s 2060 carbon neutrality goal. Using a novel dataset on financial investments in 2675
Chinese coal power plants, the article shows that different levels of government have remarkably
similar potential for exposure to stranded assets as a result of green industrial policy. Not only do
state actors have controlling stakes in the majority of nominally private coal plants in China, but
the majority of such plants have investments from agencies at multiple levels of governments. Our
findings suggest that green industrial policies could therefore also face resistance from economic
coalitions within the state: both state-owned coal plants and government agencies with substantial
investments in such enterprises could object to policies that harm their financial interests.
Theoretically, this implies the need for a conceptualization of state capacity that includes the ability
to overcome internal opposition to green industrial policy. Empirically, our study highlights a
predicament for the Chinese state in climate policy: it has set ambitious goals to decarbonize, but
also has a vested interest in ensuring the profitability of the world’s largest coal-fired power
generation fleet.

Keywords: climate policy, energy policy, political economy, China

Suggested Citation

Nahm, Jonas and Urpelainen, Johannes, The Enemy Within? Green Industrial Policy and Stranded Assets in China’s Power Sector (August 17, 2021). Global Environmental Politics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3906901

Jonas Nahm

Johns Hopkins School of Advanced International Studies ( email )

1740 Massachusetts Avenue, NW
Washington, DC 20036-1984
United States

Johannes Urpelainen (Contact Author)

Johns Hopkins SAIS ( email )

1740 Massachusetts Avenue, NW
Washington, DC 20036-1984
United States

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