UNIVERSITY OF CALIFORNIA SAN DIEGO Corporate Concentration and Air Pollution Governance in China A dissertation submitted in partial satisfaction of the Requirements for the degree Doctor of Philosophy in Political Science and International Affairs by Deborah Jane Seligsohn Committee in charge: Professor Emilie M. Hafner-Burton, Chair Professor Victor C. Shih, Co-Chair Professor Stephan Haggard Professor Susan L. Shirk Professor David G. Victor 2018 Copyright Deborah Jane Seligsohn, 2018 All rights reserved. The Dissertation of Deborah Jane Seligsohn is approved, and it is acceptable in quality and form for publication on microfilm and electronically: Co-Chair Chair University of California San Diego 2018 iii DEDICATION To my mother Ann D. Seligsohn who sparked my interest in the world and in memory of my father Walter I. Seligsohn whose words I still hear in my head every time I write iv TABLE OF CONTENTS Signature page ...................................................................................................................... iii Dedication ............................................................................................................................ iv List of abbreviations ............................................................................................................ vii List of figures........................................................................................................................ ix List of tables .......................................................................................................................... x Acknowledgements ............................................................................................................... xi Vita ..................................................................................................................................... xiv Abstract of the dissertation .................................................................................................. xvi Chapter 1 Introduction: Corporate Concentration and Corporate Capture ............................... 1 State Capture:..................................................................................................................... 6 A Model for Environmental Regulatory Relations: ............................................................. 9 Four key assumptions of the model .............................................................................. 15 Chapter 2 A Brief History of China’s Major Fossil Fuel Consuming Sectors ........................ 21 Longstanding features of the Chinese energy sector ......................................................... 22 Industry Structure ............................................................................................................. 24 Coal: China’s Most Plentiful Resource ............................................................................. 27 Power: Critical Engine of Growth .................................................................................... 31 Oil and Gas: Defining Communist Success ...................................................................... 37 The Evolution of a Corporate Regulatory Structure .......................................................... 43 From Planning to Development and Reform ................................................................. 44 Managing State Assets ................................................................................................. 45 Chapter 3 The Setting of Meaningful Power Sector Standards .............................................. 48 The Evolution of Environmental Regulation..................................................................... 48 Setting New Power Sector Standards ................................................................................ 50 The Standard-setting Process ........................................................................................ 52 The Standard-setting Timeline ...................................................................................... 54 The 2003 Standard ....................................................................................................... 55 The 2011 Standard ....................................................................................................... 58 The Ultra-Low Emissions Standard .............................................................................. 60 Chapter 4 How Corporate Concentration Influences Enforcement ........................................ 67 Enforcing Emissions Standards ........................................................................................ 67 Independent Variables ...................................................................................................... 70 Corporate Concentration .............................................................................................. 70 v Additional Controls ...................................................................................................... 72 Dependent Variable .......................................................................................................... 73 Air Pollution Mitigation ............................................................................................... 73 Results ............................................................................................................................. 75 Robustness Checks ........................................................................................................... 78 Conclusion ....................................................................................................................... 84 Chapter 5 Getting to Euro 4: Breaking the Oil and Gas Duopoly .......................................... 86 The Vehicle Emissions Challenge .................................................................................... 87 SINOPEC Dominates Standard-setting ............................................................................. 89 Lagging Fuel Standards .................................................................................................... 91 The Chinese Refining Sector ............................................................................................ 93 Dominated by a Duopoly .............................................................................................. 93 The Quixotic “Teapots” ................................................................................................ 96 The Teapots See an Opportunity ................................................................................. 101 The Fall of the “Oil Clique” ....................................................................................... 103 The Strategic Use of Competition................................................................................... 105 Chapter 6 Conclusion ......................................................................................................... 107 References ......................................................................................................................... 111 vi LIST OF ABBREVIATIONS AQSIQ Administration of Quality Supervision, Inspection and Quarantine CCP Chinese Communist Party CDU Crude distillation facility CEMS Continuous Emissions Monitoring System CNOOC China National Offshore Oil Corporation CNPC China National Petroleum Corporation CO2 Carbon dioxide DPF Diesel particulate filter DV Dependent variable EIA Environmental impact assessment EPA Environmental Protection Agency (United States) EPB Environmental Protection Bureau FGD Flue gas desulfurization GDP Gross domestic product Genco Power generation company GHG Greenhouse gas GW gigawatt HHI Herfindahl Hirschman Index IV Independent variable MEP Ministry of Environmental Protection MLR Ministry of Land and Resources MOE Ministry of Energy vii MPI Ministry of Petroleum Industry NBS National Bureau of Statistics NDRC National Development and Reform Commission NEA National Energy Administration NOx Nitrogen oxides PM 2.5 Particulate matter of less than 2.5 microns SASAC State-owned Assets Supervision and Administration Commission SCR Selective catalytic reduction SEPA State Environmental Protection Administration SERC State Electricity Regulatory Commission SETC State Economic and Trade Commission SINOPEC China Petroleum and Chemical Corporation SO2 Sulfur dioxide SOE State-owned enterprise SPC State Power Corporation SDPC State Development Planning Commission ULE Ultra-low emissions USEIA United States Energy Information Administration VOC Volatile organic compound viii LIST OF FIGURES Figure 1: Annual Average Atmospheric Sulfur Concentration ................................................ 2 Figure 2: Monopolies Under Price Controls Generate Shortages .......................................... 14 Figure 3: Chinese Energy Organization Over Time .............................................................. 26 Figure 4: Total Electricity Output, 2017 ............................................................................... 33 Figure 5: Installed Power Capacity in China, 2000-2015 ...................................................... 51 Figure 6: The Standard-setting Timeline .............................................................................. 55 Figure 7: National power sector sulfur emissions 2002-2012 ................................................ 58 Figure 8: : Continuous Emissions Monitoring and Electricity Generation and Sales 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