This paper reviews the incentives for pursuing a low-carbon electricity sector that are embedded in China's regulatory and policy framework. To do so, we first describe the industry structure and the regulatory framework. Second, we explicitly review the policies that were developed to promote energy efficiency and renewable energy. These policies range from the introduction of legal requirements to undertake particular actions to pricing mechanism and financial incentives. Based on this, we tease out the challenges faced by a sector governed by a myriad of complex arrangements, different institutions and agents who face different and often conflicting incentives for pursuing environmental and energy efficiency objectives. Finally, we provide suggestions to scientifically set up low-carbon policies and to achieve the expected goals with minimum social cost. (C) 2018 Elsevier Ltd. All rights reserved.