The Role of Institutional Support in Energy Technology Diffusion in Rural China

In the past China’s rural areas, home to 70% of its population, suffered energy shortages. China’s indigenous energy resources are limited, with the exception of coal. The widespread use of coal requires large investments in production and transport –making it costly-, and degrades the environment. As a result the Chinese government has implemented an energy policy that aims at the use of renewable energy resources and increasing energy efficiency. For this the Chinese government has reorganised its institutional framework, which now aims at learning and improving profitability to diffuse technologies. Simultaneously the decision to use a technology has been shifted from officials to the consumers and profitability of a technology has become the main decision criterion. This paper analyses the effect of learning and profitability in technology diffusion and looks at the effectiveness of the institutional efforts.