Integrating environmental considerations into economic regulation of China's electricity sector

•The paper relates the regulatory framework to environmental issues in China's electricity sector.•Environmental concerns have not integrated well into electricity regulation.•Potential gains from pollution-control measures have not fully realised.

One of the key challenges for China's transition towards sustainable development is how to supply adequate and reliable electric power by an environmentally benign electricity sector. This paper examines to what extent environmental concerns have been integrated into economic regulation and the difficulties of doing so under the current regulatory framework. It finds that there has been a failure to adequately and systematically incorporate environmental considerations into the formulation and enforcement of electricity regulation. As a result, some of the potential gains of the adopted emission-control measures have not materialised and challenges remain for future adoption of other pollution-reduction initiatives.