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Analysis of the changes in the scale of natural gas subsidy in China and its decomposition factors

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  • Liu, Chang
  • Lin, Boqiang

Abstract

This paper applied the price-gap approach to estimate natural gas subsidy in China during 2007–2015 and employed the LMDI method to analyze the influencing factors of the changes in the subsidy scale. The results showed that the Chinese government raised the domestic gas price in contrast to the slump in global gas price in 2009, which accelerated the huge decrease in the natural gas subsidy scale. But the stagnation in price adjustment immediately led to a rebound in natural gas subsidy during 2010–2012. However, the level of natural gas subsidy has declined substantially in the industrial and commercial sectors since the natural gas pricing mechanism reform began in 2013. But the level of residential natural gas subsidy still remained high because the city gate pricing mechanism was not extended to this sector. The pricing mechanism was the most important decomposition factor of changes in the level of natural gas subsidy. The contribution rates of competitive gas price, pricing mechanism, consumption structure and natural gas consumption on decrease in natural gas subsidy scale were 11.08%, 101.21%, −3.15% and −9.14% respectively during 2013–2015. A reasonable and well-implemented pricing mechanism can prevent a rebound in natural gas subsidy. Therefore, the government should seize the current opportunity of sufficient natural gas supply and relatively low gas price to deepen and advance the natural gas pricing mechanism reform.

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  • Liu, Chang & Lin, Boqiang, 2018. "Analysis of the changes in the scale of natural gas subsidy in China and its decomposition factors," Energy Economics, Elsevier, vol. 70(C), pages 37-44.
    • Handle: RePEc:eee:eneeco:v:70:y:2018:i:c:p:37-44
    DOI: 10.1016/j.eneco.2017.12.025
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    More about this item

    Keywords

    Natural gas subsidy; Subsidy scale; Pricing reform; LMDI;
    All these keywords.

    JEL classification:

    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • P22 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Prices
    • P28 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Natural Resources; Environment

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