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Reform of the Coal Sector in an Open Economy: The Case of China

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  • Shengbao Ji
  • Yin-Fang Zhang
  • Tooraj Jamasb

Abstract

Cheap, abundant and easy to transport and store, coal has been produced and consumed to meet people’s energy needs. The last decade’s growth in global coal use has been driven mainly by developing economies like China, whose phenomenal economic growth has been powered by coal-fired electricity and promoted by the export of manufactured goods. A recent reform focus in China’s coal sector is on coal taxation. The paper develops a game-theoretic model tailored to the context of China where coal taxation reform takes place against the background of privatisation of coal firms and an open economy. It finds that the adoption of special coal taxes is optimal for social welfare under most circumstances, but may induce coal firms to commit opportunistic behaviour in the process of privatisation. The paper also cautions about potential resistance to the reform from consumers, coal firms and government officials.

Suggested Citation

  • 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.
    • Handle: RePEc:cam:camdae:1445
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    Cited by:

    1. Liu, Huihui & Chen, ZhanMing & Wang, Jianliang & Fan, Jihong, 2017. "The impact of resource tax reform on China's coal industry," Energy Economics, Elsevier, vol. 61(C), pages 52-61.
    2. 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.
    3. Song, Yi & Zhang, Yangxueying & Zhang, Yijun, 2022. "Economic and environmental influences of resource tax: Firm-level evidence from China," Resources Policy, Elsevier, vol. 77(C).
    4. 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.

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    More about this item

    Keywords

    Coal taxation; energy; China; open economy; privatisation; game theory;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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