IDEAS home Printed from https://ideas.repec.org/a/eee/chieco/v33y2015icp111-122.html
   My bibliography  Save this article

The distributional impacts of removing energy subsidies in China

Author

Listed:
  • Jiang, Zhujun
  • Ouyang, Xiaoling
  • Huang, Guangxiao

Abstract

The distributional impact on households is an important factor for the acceptance of energy subsidy reform. Based on energy consumption features of the Chinese households at different income levels, this paper adopts an input–output price model to analyze possible impacts of removing energy subsidies on income distribution under different scenarios. Results show that: (1) The distributional impacts of removing subsidies vary by fossil fuels. From the perspectives of combined effects, transport fuel subsidy removal and coal subsidy removal have the strongest and the weakest progressive effects respectively, while the removal of electricity subsidies has a regressive effect. Moreover, the removal of petroleum product subsidies has the greatest impact on households, followed by the removal of electricity and coal subsidies, respectively. (2) Indirect impacts of energy subsidy reform are greater than direct impacts on households. (3) Government price controls can reduce the negative impact of energy subsidy reform. Policy implications are thus summarized. Energy subsidy reform can start from the energy that has the strongest progressive effect and the minimum impact on households. The Chinese government can take certain compensatory measures to mitigate the impact of reform on poor households.

Suggested Citation

  • Jiang, Zhujun & Ouyang, Xiaoling & Huang, Guangxiao, 2015. "The distributional impacts of removing energy subsidies in China," China Economic Review, Elsevier, vol. 33(C), pages 111-122.
  • Handle: RePEc:eee:chieco:v:33:y:2015:i:c:p:111-122
    DOI: 10.1016/j.chieco.2015.01.012
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1043951X15000231
    Download Restriction: Full text for ScienceDirect subscribers only

    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. Dartanto, Teguh, 2013. "Reducing fuel subsidies and the implication on fiscal balance and poverty in Indonesia: A simulation analysis," Energy Policy, Elsevier, vol. 58(C), pages 117-134.
    2. Mathur, Aparna & Morris, Adele C., 2014. "Distributional effects of a carbon tax in broader U.S. fiscal reform," Energy Policy, Elsevier, vol. 66(C), pages 326-334.
    3. Jensen, Jesper & Tarr, David, 2002. "Trade, foreign exchange, and energy policies in the Islamic Republic of Iran : reform agenda, economic implications, and impact on the poor," Policy Research Working Paper Series 2768, The World Bank.
    4. Zhang, Fan, 2011. "Distributional impact analysis of the energy price reform in Turkey," Policy Research Working Paper Series 5831, The World Bank.
    5. Ahmad, Ehtisham & Stern, Nicholas, 2009. "Effective carbon taxes and public policy options: insights from India and Pakistan," LSE Research Online Documents on Economics 38348, London School of Economics and Political Science, LSE Library.
    6. Kangni Kpodar & David Coady & Moataz El-Said & Robert Gillingham & Paulo Medas & David Newhouse, 2006. "The Magnitude and Distribution of Fuel Subsidies: Evidence from Bolivia, Ghana, Jordan, Mali, and Sri Lanka," Post-Print hal-00130176, HAL.
    7. Kangni R Kpodar, 2006. "Distributional Effects of Oil Price Changeson Household Expenditures; Evidence From Mali," IMF Working Papers 06/91, International Monetary Fund.
    8. Jiang, Zhujun & Tan, Jijun, 2013. "How the removal of energy subsidy affects general price in China: A study based on input–output model," Energy Policy, Elsevier, vol. 63(C), pages 599-606.
    9. Plante, Michael, 2014. "The long-run macroeconomic impacts of fuel subsidies," Journal of Development Economics, Elsevier, vol. 107(C), pages 129-143.
    10. Daniel Leigh & Moataz El-Said, 2006. "Fuel Price Subsidies in Gabon; Fiscal Cost and Distributional Impact," IMF Working Papers 06/243, International Monetary Fund.
    11. Benedict CLEMENTS & Hong-Sang JUNG & Sanjeev GUPTA, 2007. "Real And Distributive Effects Of Petroleum Price Liberalization: The Case Of Indonesia," The Developing Economies, Institute of Developing Economies, vol. 45(2), pages 220-237.
    12. Wier, Mette & Birr-Pedersen, Katja & Jacobsen, Henrik Klinge & Klok, Jacob, 2005. "Are CO2 taxes regressive? Evidence from the Danish experience," Ecological Economics, Elsevier, vol. 52(2), pages 239-251, January.
    13. 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.
    14. Masera, Omar R. & Saatkamp, Barbara D. & Kammen, Daniel M., 2000. "From Linear Fuel Switching to Multiple Cooking Strategies: A Critique and Alternative to the Energy Ladder Model," World Development, Elsevier, vol. 28(12), pages 2083-2103, December.
    15. Kebede, Bereket, 2006. "Energy subsidies and costs in urban Ethiopia: The cases of kerosene and electricity," Renewable Energy, Elsevier, vol. 31(13), pages 2140-2151.
    16. Siddig, Khalid & Aguiar, Angel & Grethe, Harald & Minor, Peter & Walmsley, Terrie, 2014. "Impacts of removing fuel import subsidies in Nigeria on poverty," Energy Policy, Elsevier, vol. 69(C), pages 165-178.
    17. Dias, Rubens A. & Mattos, Cristiano R. & P. Balestieri, Jose A., 2006. "The limits of human development and the use of energy and natural resources," Energy Policy, Elsevier, vol. 34(9), pages 1026-1031, June.
    18. Dube, Ikhupuleng, 2003. "Impact of energy subsidies on energy consumption and supply in Zimbabwe. Do the urban poor really benefit?," Energy Policy, Elsevier, vol. 31(15), pages 1635-1645, December.
    19. Xavier Labandeira & José M. Labeaga, 1999. "Combining input-output analysis and micro-simulation to assess the effects of carbon taxation on Spanish households," Fiscal Studies, Institute for Fiscal Studies, vol. 20(3), pages 305-320, September.
    20. Saboohi, Y., 2001. "An evaluation of the impact of reducing energy subsidies on living expenses of households," Energy Policy, Elsevier, vol. 29(3), pages 245-252, February.
    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. Jun E Rentschler & Nobuhiro Hosoe, 2017. "Illicit dealings: Fossil fuel subsidy reforms and the role of tax evasion and smuggling," GRIPS Discussion Papers 17-05, National Graduate Institute for Policy Studies.
    2. repec:oup:renvpo:v:11:y:2017:i:1:p:138-155. is not listed on IDEAS
    3. Saari, M. Yusof & Dietzenbacher, Erik & Los, Bart, 2016. "The impacts of petroleum price fluctuations on income distribution across ethnic groups in Malaysia," Ecological Economics, Elsevier, vol. 130(C), pages 25-36.
    4. 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.
    5. Scobie, Michelle, 2017. "Fossil fuel reform in developing states: The case of Trinidad and Tobago, a petroleum producing small Island developing State," Energy Policy, Elsevier, vol. 104(C), pages 265-273.
    6. repec:aen:journl:ej38-si1-chen is not listed on IDEAS
    7. Andrew Feltenstein & Biplab Datta, 2018. "Broad Based Subsidies or Targeted Transfers? An Analysis of the Electricity Subsidy in Pakistan," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1801, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    8. repec:eee:eneeco:v:71:y:2018:i:c:p:186-200 is not listed on IDEAS
    9. repec:eee:eneeco:v:70:y:2018:i:c:p:37-44 is not listed on IDEAS
    10. repec:era:chaptr:2015-rpr-23-4 is not listed on IDEAS

    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:chieco:v:33:y:2015:i:c:p:111-122. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/chieco .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.