Nov 2 4 2009 B.S

A Portfolio Approach to Energy Governance: State Management of China's Coal and Electric Power Supply Industries by OF TECHNOLOGY Edward A. Cunningham, IV NOV 2 4 2009 B.S. Georgetown University (cum laude) 1998 LIBRARIES A.M. Harvard University 2000 SUBMITTED TO THE DEPARTMENT OF POLITICAL SCIENCE IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY IN POLITICAL SCIENCE AT THE MASSACHUSETTS INSTITUTE OF TECHNOLOGY ARCHIVES SEPTEMBER 2009 ©2009 Edward A. Cunningham, IV. All Rights Reserved The author hereby grants permission to reproduce and to distribute publicly paper and electronic copies of this thesis document in whole or in part in any medium now known or hereafter created. Signature of Author: 7 Department of Political Science 4JAy 28, 2009 Certified by: Edward S. Steinfeld Associate Professor of Political Science Thesis Supervisor Accepted by: Roger D. Petersen Associate Professor of Political Science Chair, Graduate Program Committee A Portfolio Approach to Energy Governance: State Management of China's Coal and Electric Power Supply Industries by Edward A. Cunningham, IV Submitted to the Department of Political Science on July 28, 2009 in partial fulfillment of the requirements for the degree of Doctor of Philosophy in Political Science Abstract This study addresses the extent to which China's central state devolved ownership and investment levels in its energy sector to other actors during the modern reform period (1978- 2008). The project focused on China's coal and electric power industries, leveraging industry and government data, interviews, two firm case studies and a unique survey to measure policy, ownership and investment change over time. The results show that such devolution has been neither incrementally advancing nor consistently lacking, but has fluctuated according to the national electric power balance. The study suggests that China's central state actively manages the range of firms in the strategic coal and electric power industries as a dynamic portfolio of assets, resulting in such fluctuation. These findings run counter to what the dominant theories in the literature would otherwise predict. Neo-liberal theory would predict the incremental reduction of central state ownership in these sectors, as is evident in many of China's other sectors. Arguments predicated on the ability of the central state to sustain "self-reproducing authoritarianism" would predict fairly stable levels of central state investment and ownership in this strategic sector through time as well as quite limited liberalization. Finally, a theory privileging elite politics would indeed predict fluctuations, yet at different turning points in time than those found in this study, and without the sustained pattern that is evident in the extended time period under examination, which spans four distinct political eras. This first implication of this study is that neo-liberal means can be deployed to achieve state- led ends. Second, the study provides evidence that such means of economic liberalization reform need not be cumulative and are, in fact, reversible. Third, the case studies reveal that firm decisions have a significant impact on the execution of these powerful broad central state policy changes that periodically reshape the structure of China's energy sector. Finally, this study also raises important implications relating to public policy, and in particular the ability of the Chinese state to fulfill aggressive greenhouse gas emission reductions in an effort to mitigate climate change. Thesis Supervisor: Edward S. Steinfeld Title: Associate Professor of Political Science TABLE OF CONTENTS Acknowledgements Chapter One: Liberalization as a Means: A Portfolio Approach to Energy Supply Chapter Two: Economic Growth and Industrial Organization: The State in China's Coal and Electric Power Industries Chapter Three: 119 Case One - The Jinyuan Group: A Local Firm's Persistence Chapter Four: 165 Case Two - The Luneng Group: A Local Firm's Nationalization Chapter Five: 197 Implications for Theory and Policy Appendices 222 Select Bibliography 226 ACKNOWLEDGEMENTS This study benefited from the collective efforts of many individuals to whom I am deeply grateful. I am most indebted to my committee chair, Edward Steinfeld, whom I first met a decade ago as a master's student. He first suggested that I apply to MIT's doctoral program and it is his academic and emotional support that has made this experience possible. His intellectual curiosity draws out the best in his students and his approach to political economy has set a standard that I strive to meet. 1 greatly value his advice and friendship and trust that I can engender the same level of enthusiasm in my own students. My other committee members also balanced demanding standards and nurturing support. Learning from Suzanne Berger was, and continues to be, one of the rarest of privileges. Her intellect is exceeded only by the depth of her compassion for, and dedication to, her students. Tony Saich exposed me first professionally, and then intellectually, to a set of individuals and ideas in China of which I previously had only a vague notion. He is the most generous scholar I have encountered, and repeatedly shared his considerable resources. The case studies in particular would not have been possible without his support. Richard Lester, kindly and patiently, taught me much about energy technology, energy policy, energy markets, and their regulation. He is a unique scholar who is able to span the considerable chasm that too often separates the physical and social sciences, and does so with such good humor and academic rigor. I look forward to continuing the intellectual dialogue with my committee members that this dissertation has created. The bulk of data and interviews for this study were attainable only through the generosity of a diverse set of friends and colleagues throughout China's academic, government and industry sectors. I owe these individuals an enormous debt of gratitude for opening their doors to me and for guiding me patiently through the dense labyrinth of their country's energy sector. 1 thank my cohort of colleagues, who taught me much and continue to be a source of support and knowledge: Llewelyn Hughes, Dan Breznitz, Austin Long, Doug Fuller, Chris Wendt, Sarah Sled, Will Norris, Josh Rovner, Mike Glosny, Julia Lee, Greg Distelhorst, Jonas Nahm, and Kyoung Shin. In addition, Victor Shih, Nancy Hearst, David Victor, Caitlin O'Connor, Yasheng Huang, Wu Yongping, Xue Lan, Meng Bo, Arthur Kroeber, Jim Brock, Eric Thun, George Gilboy, Marco DiCapua, Li Zheng, Scott Roberts, Fu Jun, Hu Angang, Emma Graham-Harrison, Stephen Terry, David Steinberg and Jonathan Sinton all provided critical perspectives at important junctures. I am also indebted to Dennis Encarnation, who, through his intelligence, wide-ranging interests and persistent logic prodded my arguments and aided greatly in lending them some degree of coherence. The opportunity to befriend and to teach alongside him at the Harvard Kennedy School for the past five years has served as a great source of instruction and pleasure. I was fortunate to have a range of stimulating intellectual homes during various stages of the project. I would like to thank the Fulbright Program, School of Public Policy and Management at Tsinghua University, MIT Center for International Studies, MIT Energy Initiative, MIT Industrial Performance Center, Asia Programs at the Harvard Kennedy School, and MIT Department of Political Science for providing financial and institutional support. Susan Twarog, Anita Kafka, Paula Kreutzer, Diana Gallagher, Monica Wolf, Helen Ray and Kate Searle always greeted my myriad questions with a smile. Most importantly, I have benefited from the support of a rare group of family members. My mother Elisa, aunt Vincenzina, and grandmother Rosina offered unconditional love, despite the scowling looks that at times met questions relating to "the book". My brother William and father Edward passed away much too early to see this project to its end, but instilled a tenacity and curiosity that have served me well. The Jordan clan helped maintain perspective through their humor and grilled delights - and Stephen's lab skills will never be forgotten. Finally, my godfather, Tom Humick, and his family continually redefine the boundaries of commitment to other human beings. It is to him that I dedicate this study. CHAPTER ONE Liberalization as a Means: A Portfolio Approach to Energy Supply The Outcome and the Argument in Brief "[flnstability is not the result of poor management or other inadequacies. Nor is it the expression of external dependency. It is rather at the heart of politics: creating and maintaining conditions for the exercise of power...lIt leads actors in the private sector to insure themselves' biv strengthening networks (which are a mix of public and private actors), multiplying contacts and relations with the public sector... The lack of a precise boundary between what is punished and what is allowed, between what is authorized, tolerated,and condemned, between licit and illicit, and the games surrounding conflicts of principles - all this creates the spacefor politicalintervention... and also leads to permanent negotiations among actors.,- The Outcome - FluctuatingIndusty Structure Powerful international trends of economic liberalization in the past three decades have restructured a spectrum of sectors, ranging from basic manufacturing to energy supply. Governments have

Load more