from Energy, Security, and Climate

Green Giants? Sectoral Obstacles and Opportunities to Reduce Carbon Emissions in China and India

A coal-fired power plant is pictured near a construction site in Beijing, China, December 9, 2016. REUTERS/Jason Lee CFR

January 9, 2018

A coal-fired power plant is pictured near a construction site in Beijing, China, December 9, 2016. REUTERS/Jason Lee CFR
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This guest post is co-authored by Joshua Busby, associate professor of public affairs at the Robert S. Strauss Center for International Security and Law at the LBJ School at the University of Texas at Austin; Sarang Shidore, a visiting scholar at the LBJ School at UT Austin; and, Xue Gao, a PhD Candidate at the LBJ School at UT Austin. This post discusses the findings in two recent papers by the authors investigating the feasibility of reducing emissions in China and India.

With the current U.S. administration turning sharply against the Paris agreement and carbon mitigation actions, attention has turned to other countries to take the lead, notably China and India.

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The two countries have reaffirmed their commitments to the Paris agreement even as the United States has announced its intent to withdraw under President Trump. The ability of both China and India to meet or even exceed their Paris commitments will be critical to the accord’s success. However, both countries face serious barriers to reducing emissions, motivating critical inquiry into how feasible their decarbonization plans really are.

From China, we have seen mixed signals in recent years. Though some reports show a sharp turn away from coal-fired power, China’s greenhouse gas emissions are projected to rise in 2017, raising questions about whether declining coal use in China was an artifact of a slow economy or faulty government data. In India, as we have written previously on this blog, the scale-up of renewable energy has begun with vigorous government support, but challenges remain. While declining prices for solar have brought it to near grid parity with coal, rock-bottom prices in solar auctions have raised concerns about low margins for developers and a potential solar bubble.


Assessing the Major Sectors

One way to assess the feasibility of greenhouse gas emissions mitigation in China and India is through sectoral analysis. For both countries, we have completed separate sectoral studies in the journal Energy Research and Social Science (the China piece is free to download until January 20, the India piece is behind a paywall.  we are happy to provide readers with copies via Twitter). In the articles, we analyze the feasibility of reducing greenhouse gas emissions (GHGs) in the main sectors responsible for emissions. The figures below break down emissions by sector in each of these countries in both 2010 and 2030 (projections).

Sectoral GHG Emissions in India (% of total)
Sectoral GHG Emissions in China (% of total)

We assess feasibility in two dimensions: what we call political/organizational feasibility and techno-economic feasibility. Political/organizational feasibility is underpinned by the premise that government or market fragmentation is harmful for collective action. A government with power fragmented among many different agencies or between the central government and state and local governments would have difficulty formulating and implementing coherent policy. And in an economic market where production is divided among many firms, behavioral change by any one of them would have limited impact on the overall market. By contrast, in more concentrated political institutions and more concentrated economic markets, the actions of a few policymakers and firms can have far-reaching effects on limiting greenhouse gases.  

We first assessed the degree of fragmentation in the government and market spaces. Sectors where both the state and the market were fragmented were graded as low. In sectors where there was concentration, our grade was higher with some additional consideration given to the relative power balance between the government and firms.

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The second dimension, techno-economic feasibility, also depends on two factors. First, for each emissions-producing sector in each country, we assessed how close the technologies in use were to the cleanest and most advanced technologies available worldwide. For example, we asked if cement plants in India were as efficient as the best plants worldwide (they were close). And second, we assessed how costly it would be to upgrade the technologies in use to get to the global gold standard. If a particular sector in either China or India already used efficient technologies and it would be very expensive to upgrade them, we graded the techno-economic feasibility of reducing emissions as low. By contrast, if the technologies in use were inefficient and it would be cheap to upgrade them, we scored techno-economic feasibility as high. Other combinations yield mixed cases.

In our final analysis, we evaluated the intersection of both dimensions of feasibility to make an overall judgment on the potential for greenhouse gas emissions reduction in India and China. Here are our key takeaways from both studies:


The electricity sector is a challenge in both countries.

Electricity production in both China and India tends to be quite fragmented from the market standpoint and relies heavily on coal. We found that the scope for emissions mitigation in the coal sector in China was more promising than that in India, given government concentration in the largely state-owned industry. For both countries, we found that there was ample room for efficiency gains in the electricity sector, but these would likely be expensive. 

In China, where the renewables sector is more established (indeed, China was projected to install an extraordinary 54 GW of solar capacity in 2017), we also found further renewables scale-up to be challenging given a more fragmented regulatory environment. While these barriers are not insurmountable, both countries will require sustained government attention and expenditure to reduce the role of coal and scale-up renewables in order to reduce emissions.


Buildings are low-hanging fruit but ironically just out of reach.

In both countries, energy consumption in buildings is responsible for a significant share of emissions through electricity consumption and, in China, heating demand. The countries’ building sectors have a lot of potential for low-cost emissions reductions, and energy efficiency technology is easily available. However, in each country there are thousands of construction companies, and the state’s responsibility for regulating construction  is fragmented between the central government and state/provincial/local governments. This market and political fragmentation stymies rapid efficiency gains.


Cement and fertilizers in India are already efficient, but there is room for improvement in China.

The cement and fertilizer industries already are near world efficiency standards in India, limiting the scope for further gains given current technology. Neither sector in China had achieved global efficiency standards, so there was considerable scope for further efficiency gains, though fertilizers were more expensive to reform than cement.


Steel, cement, and oil refining are the most feasible sectors for reducing emissions in China.

In China, steel, cement, and oil refining were the most feasible sectors for major emissions reductions. In all three, we assess the costs of efficiency gains to be manageable. Both steel and cement markets are fragmented, but given high government concentration and power in both, we think the Chinese government is in a good position to regulate these sectors.

Oil refining is a little different. Production is concentrated between state-owned companies CNPC and Sinopec. Because government policy is fragmented (hence limiting the impact of public policy), we actually found that the two companies have enormous room to make major emissions reductions if they were so inclined.


Road transport and petrochemicals appear promising in India.

Road transport and petrochemicals were evaluated as the most feasible sectors in India for emissions reductions, with a range of technical interventions that were judged to be economically viable. In India, both sectors have a limited number of producers.

Automotive production is both concentrated and lightly regulated with the power balance favoring a handful of automobile producers, meaning Indian car makers could potentially organize and collectively improve their efficiency standards through market-led interventions if they were so inclined. While assessing the motives of actors was beyond the scope of our study, the potential loss of market share to foreign competition might be one reason the auto industry might try to improve efficiency.  

On the petrochemicals side, both government power and the market are concentrated, and powerful regulators ought to be able to improve energy efficiencies.


Road transport in China is a mixed bag.

The vehicle production market is very concentrated in China. The government is fragmented but still possesses more power than producers. This limits the scope for self-regulation by auto companies, but the government lacks the capacity to issue coherent policies. That said, many interventions in this space are reasonably inexpensive.

The sector could improve efficiency potentially through centralization of government regulation or more liberalization that encouraged private producers to self-organize and bring their vehicles up to global efficiency standards. China may well be trying the former with bold plans to ramp up electric vehicle production.


Addressing agriculture-related emissions tends to be difficult in both countries.

There are hundreds of millions of farmers in India, many of whom are quite poor. Because they constitute the largest electoral constituency in the country, imposing costs on them through emissions mitigation actions is especially challenging.

Fertilizers in China also appear to be a difficult industry to decarbonize. Fertilizer production is fragmented, the market is liberalized with limited government regulation, and the costs of policies to improve efficiency were judged to be costly.


Steel has a ways to go in India.

Steel production is fragmented in India, and many of the measures to bring the sector up to international standards are expensive. Though government concentration is high, the sector has liberalized with power residing more on the market side, making efficiency gains through regulation also a challenge. The government might need to enhance its authority, particularly through tougher enforcement of efficiency standards under the so-called Perform Achieve and Trade (PAT) scheme, to be able to make gains in the steel space.



We recognize that there are major differences between the two countries. India is an long-established federal democracy with a legacy of a strong bureaucracy, while China is an authoritarian one-party system in which the central government has further expanded its authority of late. While both face severe air quality problems, China is more industrialized but also richer and better able to invest in climate mitigation goals.

Despite their differences, both countries face strong challenges of developing coherent national policy. As Elizabeth Economy and others have documented, China has long faced difficulties enforcing environmental policy at the provincial and local level, given strong preferences for economic growth. Indeed, the now classic model of Chinese governance in the reform era is called “fragmented authoritarianism.” While the Chinese government has re-centralized authority in some domains in recent years, some sectors such as fertilizers and renewables remain decentralized.

For its part, India faces a similar, though perhaps magnified, problem. Some sectors are constitutionally concurrent responsibilities of both the Indian federal government and states. That complicates policy coordination. That said, the current government of Narendra Modi is the strongest in thirty years, which has enabled the Indian federal government to impose its will more decisively in a some areas, notably its ambitious effort to scale-up solar power. Even in these cases however, implementation requires state-level collaboration so the problem does not entirely go away.

What these brief observations signal to us is that large countries face some common problems, and factors other than regime type may matter as much or more for whether countries can mitigate their greenhouse gases in different areas. This is one of the most important takeaways from our comparison between these two large, politically dissimilar Asian giants.

In sum, we see this stylized sectoral analysis as a way to reveal the structural barriers to and opportunities for collective action and emissions mitigation. We hope that the analytic approach we have developed can help practitioners anticipate the barriers to implementation and where it might be most productive to focus policy action.






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