Chapter Four lays the groundwork by discussing the critical components of coal sector regulation in China, including pricing, investment approval, and capacity control. While the coal sector in China has been steered towards marketisation, government intervention, primarily through pricing regulation and investment approval, has created regulatory ambiguities and complexities for implementation. This chapter also discusses the implications of the capacity control mechanism on coal production and consumption, raising essential questions about the scope of fuel switching under the existing legal and regulatory arrangements.