IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v135y2019ics0301421519306020.html
   My bibliography  Save this article

Fossil energy subsidies in China's modern coal chemical industry

Author

Listed:
  • Li, Yiming
  • Li, Changqing

Abstract

The issue of whether there is a fossil energy subsidy in China's modern coal chemical (MCC) sector remains controversial, although domestic coal prices have been liberalized since 2013. To identify potential fossil energy subsidies in the MCC industry, an inventory approach is used in subsidy measurement. Three representative forms of coal consumption subsidization are identified and measured in this paper: feed coal supply at a preferential price, prior access to coal mining rights, and privilege in coalmine M&A (mergers and acquisitions) cases. Using China's coal-to-liquids (CTL) industry as a case study, we find that the current subsidy helps save 50% of the coal consumption cost of a typical plant, and the total amount of subsidy in the CTL industry will reach 16.4 billion Yuan in 2022. However, according to the results of efficiency, wastefulness and effectiveness tests, 47.03% of the current subsidy in the industry is excessive, leading to overinvestment and energy waste. To compensate for the deficiency of the subsidizing mechanism, we suggest replacing subsidizing channels that rely on mining rights concessions or M&A cases with channels using long-term coal supply contracts that couple contract prices and oil prices.

Suggested Citation

  • Li, Yiming & Li, Changqing, 2019. "Fossil energy subsidies in China's modern coal chemical industry," Energy Policy, Elsevier, vol. 135(C).
    • Handle: RePEc:eee:enepol:v:135:y:2019:i:c:s0301421519306020
    DOI: 10.1016/j.enpol.2019.111015
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421519306020
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.enpol.2019.111015?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. Zhaoyang Kong & Xiucheng Dong & Bo Xu & Rui Li & Qiang Yin & Cuifang Song, 2015. "EROI Analysis for Direct Coal Liquefaction without and with CCS: The Case of the Shenhua DCL Project in China," Energies, MDPI, vol. 8(2), pages 1-22, January.
    2. Mr. David Coady & Ian W.H. Parry & Louis Sears & Baoping Shang, 2015. "How Large Are Global Energy Subsidies?," IMF Working Papers 2015/105, International Monetary Fund.
    3. Kojima,Masami & Koplow,Doug, 2015. "Fossil fuel subsidies : approaches and valuation," Policy Research Working Paper Series 7220, The World Bank.
    4. Zhou, Wenji & Zhu, Bing & Chen, Dingjiang & Zhao, Fangxian & Fei, Weiyang, 2011. "Technoeconomic assessment of China’s indirect coal liquefaction projects with different CO2 capture alternatives," Energy, Elsevier, vol. 36(11), pages 6559-6566.
    5. Lin, Boqiang & Jiang, Zhujun, 2011. "Estimates of energy subsidies in China and impact of energy subsidy reform," Energy Economics, Elsevier, vol. 33(2), pages 273-283, March.
    6. Polzin, Friedemann & Migendt, Michael & Täube, Florian A. & von Flotow, Paschen, 2015. "Public policy influence on renewable energy investments—A panel data study across OECD countries," Energy Policy, Elsevier, vol. 80(C), pages 98-111.
    7. Gunton, Thomas, 2004. "Energy rent and public policy: an analysis of the Canadian coal industry," Energy Policy, Elsevier, vol. 32(2), pages 151-163, January.
    8. Qi, Ye & Stern, Nicholas & Wu, Tong & Lu, Jiaqi & Green, Fergus, 2016. "China's post-coal growth," LSE Research Online Documents on Economics 67503, London School of Economics and Political Science, LSE Library.
    9. Steenblik, Ronald P & Coroyannakis, Panos, 1995. "Reform of coal policies in Western and Central Europe : Implications for the environment," Energy Policy, Elsevier, vol. 23(6), pages 537-553, June.
    10. Jiang, Zhujun & Lin, Boqiang, 2014. "The perverse fossil fuel subsidies in China—The scale and effects," Energy, Elsevier, vol. 70(C), pages 411-419.
    11. Haarlemmer, Geert & Boissonnet, Guillaume & Peduzzi, Emanuela & Setier, Pierre-Alexandre, 2014. "Investment and production costs of synthetic fuels – A literature survey," Energy, Elsevier, vol. 66(C), pages 667-676.
    12. Bartelmus, Peter, 1999. "Green accounting for a sustainable economy: Policy use and analysis of environmental accounts in the Philippines," Ecological Economics, Elsevier, vol. 29(1), pages 155-170, April.
    13. Jacobsson, Staffan & Johnson, Anna, 2000. "The diffusion of renewable energy technology: an analytical framework and key issues for research," Energy Policy, Elsevier, vol. 28(9), pages 625-640, July.
    14. Libecap, Gary D., 1984. "The Political Allocation of Mineral Rights: A Re–Evaluation of Teapot Dome," The Journal of Economic History, Cambridge University Press, vol. 44(2), pages 381-391, June.
    15. Vallentin, Daniel, 2008. "Policy drivers and barriers for coal-to-liquids (CtL) technologies in the United States," Energy Policy, Elsevier, vol. 36(8), pages 3188-3201, August.
    16. George Fane, 2012. "Allocating and taxing rights to state-owned minerals," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 48(2), pages 173-189, August.
    17. Yang, Chi-Jen, 2015. "China׳s precarious synthetic natural gas demonstration," Energy Policy, Elsevier, vol. 76(C), pages 158-160.
    18. Kojima,Masami, 2016. "Fossil fuel subsidy and pricing policies : recent developing country experience," Policy Research Working Paper Series 7531, The World Bank.
    19. Harborne, Paul & Hendry, Chris, 2009. "Pathways to commercial wind power in the US, Europe and Japan: The role of demonstration projects and field trials in the innovation process," Energy Policy, Elsevier, vol. 37(9), pages 3580-3595, September.
    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. Shuangyan Li & Anum Shahzadi & Mingbo Zheng & Chun-Ping Chang, 2022. "The impacts of executives’ political connections on interactions between firm’s mergers, acquisitions, and performance," Economic Change and Restructuring, Springer, vol. 55(2), pages 653-679, May.
    2. Shi, Jingxin & Huang, Wenping & Han, Hongjun & Xu, Chunyan, 2021. "Pollution control of wastewater from the coal chemical industry in China: Environmental management policy and technical standards," Renewable and Sustainable Energy Reviews, Elsevier, vol. 143(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. Xu, Shang & Zhang, Jun, 2023. "The welfare impacts of removing coal subsidies in rural China," Energy Economics, Elsevier, vol. 118(C).
    2. Cecile Couharde & Sara Mouhoud, 2020. "Fossil Fuel Subsidies, Income Inequality, And Poverty: Evidence From Developing Countries," Journal of Economic Surveys, Wiley Blackwell, vol. 34(5), pages 981-1006, December.
    3. Wesseh, Presley K. & Lin, Boqiang & Atsagli, Philip, 2016. "Environmental and welfare assessment of fossil-fuels subsidies removal: A computable general equilibrium analysis for Ghana," Energy, Elsevier, vol. 116(P1), pages 1172-1179.
    4. Lin, Boqiang & Kuang, Yunming, 2020. "Natural gas subsidies in the industrial sector in China: National and regional perspectives," Applied Energy, Elsevier, vol. 260(C).
    5. Hosan, Shahadat & Rahman, Md Matiar & Karmaker, Shamal Chandra & Saha, Bidyut Baran, 2023. "Energy subsidies and energy technology innovation: Policies for polygeneration systems diffusion," Energy, Elsevier, vol. 267(C).
    6. Hellsmark, Hans & Frishammar, Johan & Söderholm, Patrik & Ylinenpää, Håkan, 2016. "The role of pilot and demonstration plants in technology development and innovation policy," Research Policy, Elsevier, vol. 45(9), pages 1743-1761.
    7. Neil McCulloch, 2017. "Energy subsidies, international aid, and the politics of reform," WIDER Working Paper Series wp-2017-174, World Institute for Development Economic Research (UNU-WIDER).
    8. Lin, Boqiang & Li, Zhensheng, 2020. "Analysis of the natural gas demand and subsidy in China: A multi-sectoral perspective," Energy, Elsevier, vol. 202(C).
    9. Thijs Van de Graaf & Harro van Asselt, 2017. "Introduction to the special issue: energy subsidies at the intersection of climate, energy, and trade governance," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 17(3), pages 313-326, June.
    10. Sovacool, Benjamin K., 2017. "Reviewing, Reforming, and Rethinking Global Energy Subsidies: Towards a Political Economy Research Agenda," Ecological Economics, Elsevier, vol. 135(C), pages 150-163.
    11. Husaini, Dzul Hadzwan & Puah, Chin-Hong & Lean, Hooi Hooi, 2019. "Energy subsidy and oil price fluctuation, and price behavior in Malaysia:A time series analysis," Energy, Elsevier, vol. 171(C), pages 1000-1008.
    12. Martin Kalthaus, 2020. "Knowledge recombination along the technology life cycle," Journal of Evolutionary Economics, Springer, vol. 30(3), pages 643-704, July.
    13. Ilyas, Rubina & Hussain, Khadim & Ullah, Mehreen Zaid & Xue, Jianhong, 2022. "Distributional impact of phasing out residential electricity subsidies on household welfare," Energy Policy, Elsevier, vol. 163(C).
    14. McKitrick, Ross, 2017. "Global energy subsidies: An analytical taxonomy," Energy Policy, Elsevier, vol. 101(C), pages 379-385.
    15. Henseler, Martin & Maisonnave, Helene, 2018. "Low world oil prices: A chance to reform fuel subsidies and promote public transport? A case study for South Africa," Transportation Research Part A: Policy and Practice, Elsevier, vol. 108(C), pages 45-62.
    16. Zhan-Ming Chen, 2017. "Inventory and Distribution of Energy Subsidies of China," The Energy Journal, International Association for Energy Economics, vol. 0(KAPSARC S).
    17. Burke, Paul J. & Liao, Hua, 2015. "Is the price elasticity of demand for coal in China increasing?," China Economic Review, Elsevier, vol. 36(C), pages 309-322.
    18. Li, Aijun & Peng, Dan & Wang, Daoping & Yao, Xin, 2017. "Comparing regional effects of climate policies to promote non-fossil fuels in China," Energy, Elsevier, vol. 141(C), pages 1998-2012.
    19. Zhao, Xu & Luo, Dongkun & Lu, Kun & Wang, Xiaoyu & Dahl, Carol, 2019. "How the removal of producer subsidies influences oil and gas extraction: A case study in the Gulf of Mexico," Energy, Elsevier, vol. 166(C), pages 1000-1012.
    20. Jun Rentschler & Morgan Bazilian, 2017. "Policy Monitor—Principles for Designing Effective Fossil Fuel Subsidy Reforms," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 11(1), pages 138-155.

    More about this item

    Keywords

    Modern coal chemical; Coal-to-liquids; Energy subsidy; G20; Inventory approach; Energy subsidy reform;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General

    Statistics

    Access and download statistics

    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:135:y:2019:i:c:s0301421519306020. 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.