Lin, B., Jiang, Z, 2012. Designation and influence of household increasing block electricity tariffs in China. Energy Policy 42, pp. 164–173: How biased is the measurement of household’s loss?
AbstractThe three-tier inclining block tariff (‘‘IBT’’) issued by the Chinese government in 2010 is focusing attention of energy economists, among whom Lin and Jiang (2012. Designation and influence of household increasing block electricity tariffs in China. Energy Policy 42, 164–173) who assert that the issued tariff is unsuited to meet the social and environmental objectives it was designed for. These authors offer an alternative four-tiered IBT, the performance of which they show by evaluating its welfare and income distribution effects taking the current uniform tariff as reference. To measure the surplus loss to a representative household in a given block the authors use the trapezoid approach. But, because of the limited data on demand, they calculate the household’s response by using a constant point estimate of the own-price elasticity of electricity demand. In this note I show there is an incompatibility between these two modeling assumptions. Combining them is causing an upward bias in the surplus loss, which is of significance given the large price change associated with the IBT. I then offer a correction to this bias.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 46811.
Date of creation: Sep 2012
Date of revision:
Increasing block tariffs; Electricity demand; Welfare measurement;
Find related papers by JEL classification:
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
- Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-05-11 (All new papers)
- NEP-ENE-2013-05-11 (Energy Economics)
- NEP-TRA-2013-05-11 (Transition Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lin, Boqiang & Jiang, Zhujun, 2012. "Designation and influence of household increasing block electricity tariffs in China," Energy Policy, Elsevier, vol. 42(C), pages 164-173.
- Arjan Ruijs, 2009. "Welfare and Distribution Effects of Water Pricing Policies," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 43(2), pages 161-182, June.
- Andres Vazquez, 1998. "An alternative definition of the arc elasticity of demand," Journal of Economic Studies, Emerald Group Publishing, vol. 25(6), pages 553-562, October.
- Wang, Zhaohua & Zhang, Bin & Zhang, Yixiang, 2012. "Determinants of public acceptance of tiered electricity price reform in China: Evidence from four urban cities," Applied Energy, Elsevier, vol. 91(1), pages 235-244.
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