Business Effects of Economic and Environmental Reform on the Diffusion of Cleaner Coal Technology in China

Despite the urgent need to address severe air pollution problems caused by China’s coal consumption, diffusion of cleaner coal technologies (CCTs) has been slow. This contribution utilizes the fragmented authoritarianism model to explain this slow diffusion by examining the structure of bureaucratic decision making and changes in incentives that have accompanied fiscal decentralization and enterprise deregulation. Case studies on the diffusion of two CCTs — flue gas desulphurization (FGD) and coal washing — highlight challenges of environ-mental policy design and implementation during the economic reforms of the past decade. Enterprises had little incentive to adopt FGD when central government agencies disagreed on promoting the technology and local agencies did not rigorously enforce national air pollution control policies. For washed coal, pro-duction slowed when coal pricing reform and coal industry restructuring were not co-ordinated with environmental policies. Further promotion of CCTs in China requires changes in incentive structures for local governments and enterprises, as well as enhanced policy co-ordination among central government agencies