Carnegie Mellon University - Heinz College
4800 Forbes Ave
Pittsburgh, PA 15213
Institutional Affiliation: Carnegie Mellon University
NBER Working Papers and Publications
|January 2019||Why Has China Overinvested in Coal Power?|
with Lee G. Branstetter, Brian K. Kovak, Daniel E. Armanios, Jiahai Yuan: w25437
Since 2005, the Chinese government has engaged in an ambitious effort to move China’s energy system away from coal and towards more environmentally friendly sources of energy. However, China’s investment in coal power has accelerated sharply in recent years, raising concerns of massive overcapacity and undermining the central policy goal of promoting cleaner energy. In this paper, we ask why China engaged in such a pronounced investment boom in coal power in the mid-2010s. We find the protective rules under which China’s coal power industry has historically operated have made excessive investment extremely likely unless the central government serves as a “gatekeeper,” slowing and limiting investment in the face of incentives for socially excessive entry. When coal-power project approval au...