IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v128y2019icp125-135.html
   My bibliography  Save this article

Can energy-price regulations smooth price fluctuations? Evidence from China’s coal sector

Author

Listed:
  • Zhang, Yanfang
  • Nie, Rui
  • Shi, Xunpeng
  • Qian, Xiangyan
  • Wang, Ke

Abstract

Due to the dominance of coal in China’s energy mix, coal prices have always been a challenging part of pricing reform. The recent frequent government interventions raise the key research questions: what is the actual impact of price policies on coal price fluctuations, and how can forward-looking pricing policies be made. By proposing a novel classification of coal pricing policies and introducing an expectation and forward-looking coefficient, the paper examines the relationship between coal price fluctuations and pricing policies using the generalized method of moments (GMM) method. It shows that the lagging coal price and coal demand play a positive role in regulating coal prices, while coal supply and marketization have significantly negative effects on coal price fluctuations. The heterogeneous impacts of price policies are due to differences in market players’ expectations, policy instruments and the methods of policy release. In addition, China’s coal pricing policy portfolio from 2013 to 2016 exerted synergy effects on the restraint of coal price fluctuations. As the forward-looking coefficient was considerably low, the government's intervention behaviors were obviously biased towards ex post facto responses. The paper suggests short run and long run policies to advance marketization of coal prices amid the energy transition.

Suggested Citation

  • Zhang, Yanfang & Nie, Rui & Shi, Xunpeng & Qian, Xiangyan & Wang, Ke, 2019. "Can energy-price regulations smooth price fluctuations? Evidence from China’s coal sector," Energy Policy, Elsevier, vol. 128(C), pages 125-135.
    • Handle: RePEc:eee:enepol:v:128:y:2019:i:c:p:125-135
    DOI: 10.1016/j.enpol.2018.12.051
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421518308565
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.enpol.2018.12.051?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Littlechild, Stephen, 2014. "RPI-X, competition as a rivalrous discovery process, and customer engagement – Paper presented at the Conference The British Utility Regulation Model: Beyond Competition and Incentive Regulation?," Utilities Policy, Elsevier, vol. 31(C), pages 152-161.
    2. Kanamura, Takashi, 2009. "A supply and demand based volatility model for energy prices," Energy Economics, Elsevier, vol. 31(5), pages 736-747, September.
    3. ZHENG, Tingguo & WANG, Xia & GUO, Huiming, 2012. "Estimating forward-looking rules for China's Monetary Policy: A regime-switching perspective," China Economic Review, Elsevier, vol. 23(1), pages 47-59.
    4. Ben S. Bernanke & Mark Gertler & Mark Watson, 1997. "Systematic Monetary Policy and the Effects of Oil Price Shocks," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 91-157.
    5. Egger, Peter & Larch, Mario & Pfaffermayr, Michael & Walde, Janette, 2009. "Small sample properties of maximum likelihood versus generalized method of moments based tests for spatially autocorrelated errors," Regional Science and Urban Economics, Elsevier, vol. 39(6), pages 670-678, November.
    6. Shimizutani, Satoshi, 2006. "Consumer response to the 1998 tax cut: Is a temporary tax cut effective?," Journal of the Japanese and International Economies, Elsevier, vol. 20(2), pages 269-287, June.
    7. Zhang, Chengsi & Dang, Chao, 2018. "Is monetary policy forward-looking in China?," International Review of Economics & Finance, Elsevier, vol. 57(C), pages 4-14.
    8. Ma, Hengyun & Oxley, Les, 2010. "The integration of major fuel source markets in China: Evidence from panel cointegration tests," Energy Economics, Elsevier, vol. 32(5), pages 1139-1146, September.
    9. Ellerman, A Denny, 1995. "The world price of coal," Energy Policy, Elsevier, vol. 23(6), pages 499-506, June.
    10. Weyman-Jones, Thomas G., 1990. "RPI--X price cap regulation : The price controls used in UK electricity," Utilities Policy, Elsevier, vol. 1(1), pages 65-77, October.
    11. Zhihua Ding & Caicai Feng & Zhenhua Liu & Guangqiang Wang & Lingyun He & Manzhi Liu, 2017. "Coal price fluctuation mechanism in China based on system dynamics model," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 85(2), pages 1151-1167, January.
    12. Patrick A. Imam, 2015. "Shock from Graying: Is the Demographic Shift Weakening Monetary Policy Effectiveness," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 20(2), pages 138-154, March.
    13. Sheffrin,Steven M., 1996. "Rational Expectations," Cambridge Books, Cambridge University Press, number 9780521479394.
    14. repec:zbw:bofitp:2018_006 is not listed on IDEAS
    15. Sun, Qi & Xu, Lin & Yin, Hua, 2016. "Energy pricing reform and energy efficiency in China: Evidence from the automobile market," Resource and Energy Economics, Elsevier, vol. 44(C), pages 39-51.
    16. Leduc, Sylvain & Sill, Keith, 2004. "A quantitative analysis of oil-price shocks, systematic monetary policy, and economic downturns," Journal of Monetary Economics, Elsevier, vol. 51(4), pages 781-808, May.
    17. Ma, Hengyun & Oxley, Les, 2012. "The emergence and evolution of regional convergence clusters in China's energy markets," Energy Economics, Elsevier, vol. 34(1), pages 82-94.
    18. Ju, Keyi & Su, Bin & Zhou, Dequn & Wu, Junmin, 2017. "Does energy-price regulation benefit China's economy and environment? Evidence from energy-price distortions," Energy Policy, Elsevier, vol. 105(C), pages 108-119.
    19. Papież, Monika & Śmiech, Sławomir, 2013. "Causality-in-mean and causality-in-variance within the international steam coal market," Energy Economics, Elsevier, vol. 36(C), pages 594-604.
    20. Shengbao Ji & Yin-Fang Zhang & Tooraj Jamasb, 2014. "Reform of the Coal Sector in an Open Economy: The Case of China," Cambridge Working Papers in Economics 1445, Faculty of Economics, University of Cambridge.
    21. Adelman, M A, 1974. "Politics, Economics, and World Oil," American Economic Review, American Economic Association, vol. 64(2), pages 58-67, May.
    22. Shi, Xunpeng & Rioux, Bertrand & Galkin, Philipp, 2018. "Unintended consequences of China’s coal capacity cut policy," Energy Policy, Elsevier, vol. 113(C), pages 478-486.
    23. Wang, Qiang & Qiu, Huan-Ning & Kuang, Yaoqiu, 2009. "Market-driven energy pricing necessary to ensure China's power supply," Energy Policy, Elsevier, vol. 37(7), pages 2498-2504, July.
    24. Zhang, Yanfang & Zhang, Ming & Liu, Yue & Nie, Rui, 2017. "Enterprise investment, local government intervention and coal overcapacity: The case of China," Energy Policy, Elsevier, vol. 101(C), pages 162-169.
    25. Cui, Herui & Wei, Pengbang, 2017. "Analysis of thermal coal pricing and the coal price distortion in China from the perspective of market forces," Energy Policy, Elsevier, vol. 106(C), pages 148-154.
    26. Shi, Xunpeng, 2013. "China's small coal mine policy in the 2000s: A case study of trusteeship and consolidation," Resources Policy, Elsevier, vol. 38(4), pages 598-604.
    27. Best Gabriela & Kapinos Pavel, 2016. "Monetary policy and news shocks: are Taylor rules forward-looking?," The B.E. Journal of Macroeconomics, De Gruyter, vol. 16(2), pages 335-360, June.
    28. Yoon, Jong-Han & Sim, Kwang-ho, 2015. "Why is South Korea's renewable energy policy failing? A qualitative evaluation," Energy Policy, Elsevier, vol. 86(C), pages 369-379.
    29. Ma, Hengyun & Oxley, Les & Gibson, John, 2009. "Gradual reforms and the emergence of energy market in China: Evidence from tests for convergence of energy prices," Energy Policy, Elsevier, vol. 37(11), pages 4834-4850, November.
    30. Sheng, Yu & Shi, Xunpeng & Zhang, Dandan, 2014. "Economic growth, regional disparities and energy demand in China," Energy Policy, Elsevier, vol. 71(C), pages 31-39.
    31. Andrews-Speed, Philip & Ma, Guo & Shao, Bingjia & Liao, Chenglin, 2005. "Economic responses to the closure of small-scale coal mines in Chongqing, China," Resources Policy, Elsevier, vol. 30(1), pages 39-54, March.
    32. Edelstein, Paul & Kilian, Lutz, 2009. "How sensitive are consumer expenditures to retail energy prices?," Journal of Monetary Economics, Elsevier, vol. 56(6), pages 766-779, September.
    33. Shi, Xunpeng & Sun, Sizhong, 2017. "Energy price, regulatory price distortion and economic growth: A case study of China," Energy Economics, Elsevier, vol. 63(C), pages 261-271.
    34. Zhao, Xiaoli & Ma, Chunbo & Hong, Dongyue, 2010. "Why did China's energy intensity increase during 1998-2006: Decomposition and policy analysis," Energy Policy, Elsevier, vol. 38(3), pages 1379-1388, March.
    35. Simshauser, Paul, 2017. "Monopoly regulation, discontinuity & stranded assets," Energy Economics, Elsevier, vol. 66(C), pages 384-398.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Shiqiu Zhu & Yuanying Chi & Kaiye Gao & Yahui Chen & Rui Peng, 2022. "Analysis of Influencing Factors of Thermal Coal Price," Energies, MDPI, vol. 15(15), pages 1-16, August.
    2. Zhang, Yanfang & Shi, Xunpeng & Qian, Xiangyan & Chen, Sai & Nie, Rui, 2021. "Macroeconomic effect of energy transition to carbon neutrality: Evidence from China's coal capacity cut policy," Energy Policy, Elsevier, vol. 155(C).
    3. Wang, Xiaofei & Liu, Chuangeng & Chen, Shaojie & Chen, Lei & Li, Ke & Liu, Na, 2020. "Impact of coal sector’s de-capacity policy on coal price," Applied Energy, Elsevier, vol. 265(C).
    4. Shi, Xunpeng & Yu, Jian & Cheong, Tsun Se, 2020. "Convergence and distribution dynamics of energy consumption among China's households," Energy Policy, Elsevier, vol. 142(C).
    5. Teti, Emanuele & Dallocchio, Maurizio & De Sanctis, Daniele, 2020. "Effects of oil price fall on the betas in the Unconventional Oil & Gas Industry," Energy Policy, Elsevier, vol. 144(C).
    6. Wang, Yadong & Wang, Delu & Shi, Xunpeng, 2022. "Exploring the multidimensional effects of China's coal de-capacity policy: A regression discontinuity design," Resources Policy, Elsevier, vol. 75(C).
    7. Mo, Jianlei & Cui, Lianbiao & Duan, Hongbo, 2021. "Quantifying the implied risk for newly-built coal plant to become stranded asset by carbon pricing," Energy Economics, Elsevier, vol. 99(C).
    8. Zehua Yu & Zheng Li & Linwei Ma, 2023. "Strategies for the Resilience of Power-Coal Supply Chains in Low-Carbon Energy Transition: A System Dynamics Model and Scenario Analysis of China up to 2060," Sustainability, MDPI, vol. 15(9), pages 1-19, April.
    9. Sha, Ru & Li, Jinye & Ge, Tao, 2021. "How do price distortions of fossil energy sources affect China's green economic efficiency?," Energy, Elsevier, vol. 232(C).
    10. Qiao, Sen & Chen, Hsing Hung & Zhang, Rong Rong, 2021. "Examining the impact of factor price distortions and social welfare on innovation efficiency from the microdata of Chinese renewable energy industry," Renewable and Sustainable Energy Reviews, Elsevier, vol. 143(C).
    11. Li, Zheng-Zheng & Su, Chi-Wei & Chang, Tsangyao & Lobonţ, Oana-Ramona, 2022. "Policy-driven or market-driven? Evidence from steam coal price bubbles in China," Resources Policy, Elsevier, vol. 78(C).
    12. Gu, Fu & Wang, Jiqiang & Guo, Jianfeng & Fan, Ying, 2020. "How the supply and demand of steam coal affect the investment in clean energy industry? Evidence from China," Resources Policy, Elsevier, vol. 69(C).
    13. Wang, Xiaofei & Miao, Chenglin & Wang, Chongmei & Yin, Dawei & Chen, Shaojie & Chen, Lei & Li, Ke, 2022. "Coal production capacity allocation based on efficiency perspective—taking production mines in Shandong Province as an example," Energy Policy, Elsevier, vol. 171(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wang, Xiaofei & Liu, Chuangeng & Chen, Shaojie & Chen, Lei & Li, Ke & Liu, Na, 2020. "Impact of coal sector’s de-capacity policy on coal price," Applied Energy, Elsevier, vol. 265(C).
    2. Zhang, Yanfang & Shi, Xunpeng & Qian, Xiangyan & Chen, Sai & Nie, Rui, 2021. "Macroeconomic effect of energy transition to carbon neutrality: Evidence from China's coal capacity cut policy," Energy Policy, Elsevier, vol. 155(C).
    3. Ru Sha & Tao Ge & Jinye Li, 2022. "How Energy Price Distortions Affect China’s Economic Growth and Carbon Emissions," Sustainability, MDPI, vol. 14(12), pages 1-27, June.
    4. Shi, Xunpeng & Rioux, Bertrand & Galkin, Philipp, 2018. "Unintended consequences of China’s coal capacity cut policy," Energy Policy, Elsevier, vol. 113(C), pages 478-486.
    5. Wang, Delu & Liu, Yifei & Wang, Yadong & Shi, Xunpeng & Song, Xuefeng, 2020. "Allocation of coal de-capacity quota among provinces in China: A bi-level multi-objective combinatorial optimization approach," Energy Economics, Elsevier, vol. 87(C).
    6. Sha, Ru & Li, Jinye & Ge, Tao, 2021. "How do price distortions of fossil energy sources affect China's green economic efficiency?," Energy, Elsevier, vol. 232(C).
    7. Wang, Xiaolei & Bai, Mengqi & Xie, Chunping, 2019. "Investigating CO2 mitigation potentials and the impact of oil price distortion in China's transport sector," Energy Policy, Elsevier, vol. 130(C), pages 320-327.
    8. Elliott, Robert & Sun, Puyang & Zhu, Tong, 2020. "Shell shocked: The impact of foreign entry on the gasoline retail market in China," Energy Economics, Elsevier, vol. 86(C).
    9. Herrera, Ana María & Lagalo, Latika Gupta & Wada, Tatsuma, 2015. "Asymmetries in the response of economic activity to oil price increases and decreases?," Journal of International Money and Finance, Elsevier, vol. 50(C), pages 108-133.
    10. Wang, Yadong & Wang, Delu & Shi, Xunpeng, 2021. "Exploring the dilemma of overcapacity governance in China's coal industry: A tripartite evolutionary game model," Resources Policy, Elsevier, vol. 71(C).
    11. Todd E. Clark & Stephen J. Terry, 2010. "Time Variation in the Inflation Passthrough of Energy Prices," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(7), pages 1419-1433, October.
    12. Lang, Korbinian & Auer, Benjamin R., 2020. "The economic and financial properties of crude oil: A review," The North American Journal of Economics and Finance, Elsevier, vol. 52(C).
    13. Guangyong Zhang & Lixin Tian & Min Fu & Bingyue Wan & Wenbin Zhang, 2020. "Research on the Transmission Ability of China’s Thermal Coal Price Information Based on Directed Limited Penetrable Interdependent Network," Sustainability, MDPI, vol. 12(18), pages 1-23, September.
    14. Jihoon Lee & Hong Chong Cho, 2021. "Impact of Structural Oil Price Shock Factors on the Gasoline Market and Macroeconomy in South Korea," Sustainability, MDPI, vol. 13(4), pages 1-23, February.
    15. Jo, Soojin & Karnizova, Lilia & Reza, Abeer, 2019. "Industry effects of oil price shocks: A re-examination," Energy Economics, Elsevier, vol. 82(C), pages 179-190.
    16. Francesco Lippi & Andrea Nobili, 2012. "Oil And The Macroeconomy: A Quantitative Structural Analysis," Journal of the European Economic Association, European Economic Association, vol. 10(5), pages 1059-1083, October.
    17. James D. Hamilton, 2012. "Oil Prices, Exhaustible Resources, and Economic Growth," NBER Working Papers 17759, National Bureau of Economic Research, Inc.
    18. Xu, Mengmeng & Lin, Boqiang, 2022. "Energy efficiency gains from distortion mitigation: A perspective on the metallurgical industry," Resources Policy, Elsevier, vol. 77(C).
    19. Ahmed, Khalid & Bhutto, Niaz Ahmed & Kalhoro, Muhammad Ramzan, 2019. "Decomposing the links between oil price shocks and macroeconomic indicators: Evidence from SAARC region," Resources Policy, Elsevier, vol. 61(C), pages 423-432.
    20. Gao, Kang & Yuan, Yijun, 2022. "Does market-oriented reform make the industrial sector “Greener” in China? Fresh evidence from the perspective of capital-labor-energy market distortions," Energy, Elsevier, vol. 254(PA).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:128:y:2019:i:c:p:125-135. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.