Acquiring and using energy damages the environment more than almost any other set of human activities. However, increased energy usage does not necessarily lead to environmental degradation. As China's energy system undergoes sporadic bouts of market liberalisation, decentralisation, internationalisation, and urbanisation, governance plays an important role in influencing environmental outcomes. A review of institutional reforms since 1978, focusing on coal, hydropower, and rural energy, illustrates the role of government policy, implementation, and institutions in augmenting and abating the environmental degradation that can accompany expanded energy usage. This article explores the interaction between energy, governance, and the environment in China, and identifies key variables that can influence the environmental impacts of future energy usage.