Policy Implications of the Clean Heating Transition: A Case Study of Shanxi

Abstract

This study provides empirical evidence of the impact of recentralized governance on environmental performance by examining the implementation of a clean heating transition. It investigated the impact of a centralized clean heating transition on sulfur dioxide (SO2) levels in Shanxi province from January 2015 to March 2021. Using a difference-in-differences approach, this study found that the centralized clean heating transition led to a significant improvement in air quality; however, the excessive response of Shanxi province prevented adequate heating supply for residents. As a result, the Chinese government had to reverse its initial plans for a coal ban and the promotion of gas plants. This outcome implies that recentralization cannot control the autonomy of local governments in responding to and achieving the central targets, even though it may provide incentives to prioritize environmental issues. The recentralization proved to be ineffective, in contrast to what was theoretically anticipated, and even undermined the energy transition efforts.