China faces complex challenges to reduce air pollution while still promoting economic growth. No simple solution exists—but policy reforms to reduce excess capacity and get prices right can help in both the near and long terms.
We describe China’s state institutions, the electric power control system, and past reform efforts, including the challenges of implementation within the existing governance structure. This context is key for designing future reforms and carbon pricing.
Mun S. Ho and Zhongmin Wang trace China’s rapid economic growth and the associated environmental problems to its unique and fundamental institutions—and discuss the implications for a more sustainable path.