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The Effect of China’s Natural Gas Pricing Reform

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  • Boqiang Lin
  • Chang Liu
  • Lei Lin

Abstract

In recent years, the rapid increase in natural gas consumption and huge dependency on foreign gas have forced China to speed up the process of natural gas pricing reform. The price-gap approach is applied to estimate China’s natural gas subsidies, and the results indicate that China's natural gas subsidies increased from CNY 93.341 billion in 2010 to CNY 188.537 billion in 2012. We also apply the input-output model and find that a natural gas price increase of 10–15 percent has less effect on various price indexes than does complete removal of subsidies. Currently, China’s natural gas accounts for a relatively small proportion of the country’s primary energy consumption, and thus gas pricing reform will not have a significant negative effect on the macroeconomy. The government needs to implement fiscal policies such as direct subsidies, tiered pricing for natural gas, and city-gate price discounts to relatively underdeveloped provinces to ensure the smooth implementation of reform.

Suggested Citation

  • Boqiang Lin & Chang Liu & Lei Lin, 2015. "The Effect of China’s Natural Gas Pricing Reform," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 51(4), pages 812-825, July.
    • Handle: RePEc:mes:emfitr:v:51:y:2015:i:4:p:812-825
    DOI: 10.1080/1540496X.2015.1043791
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    Cited by:

    1. Boute, Anatole & Fang, Mandy Meng, 2022. "China's textbook approach to regulatory reform of the natural gas market," Utilities Policy, Elsevier, vol. 76(C).
    2. Rioux, Bertrand & Galkin, Philipp & Murphy, Frederic & Feijoo, Felipe & Pierru, Axel & Malov, Artem & Li, Yan & Wu, Kang, 2019. "The economic impact of price controls on China's natural gas supply chain," Energy Economics, Elsevier, vol. 80(C), pages 394-410.
    3. Lin, Boqiang & Kuang, Yunming, 2020. "Natural gas subsidies in the industrial sector in China: National and regional perspectives," Applied Energy, Elsevier, vol. 260(C).
    4. 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.
    5. Lin, Boqiang & Xu, Mengmeng, 2019. "Good subsidies or bad subsidies? Evidence from low-carbon transition in China's metallurgical industry," Energy Economics, Elsevier, vol. 83(C), pages 52-60.
    6. Li, Jianglong & Sun, Chuanwang, 2018. "Towards a low carbon economy by removing fossil fuel subsidies?," China Economic Review, Elsevier, vol. 50(C), pages 17-33.

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