Estimates of energy subsidies in China and impact of energy subsidy reform
For a transitional economy such as China, some energy subsidies are reasonable, and sometimes even necessary for achieving social goals. However, with rising energy prices and environmental concerns, we see conflicts emerging between energy subsidies, energy demand/supply fundamentals and climate change considerations. Energy subsidies have important implications for sustainable development through their effects on energy use, efficiency and the choice of fuel source. This paper applies the price-gap approach to estimate China's energy subsidies. Results indicate that China's energy subsidies amounted to CNY 356.73 billion in 2007, equivalent to 1.43% of GDP. Subsidies for oil products consumption are the largest, followed by subsidies for the electricity and coal sectors. Furthermore, a CGE model is used to analyze the economic impacts of energy subsidy reforms. Our findings show that removing energy subsidies will result in a significant fall in energy demand and emissions, but will have negative impacts on macroeconomic variables. We conclude that offsetting policies could be adopted such that certain shares of these subsidies are reallocated to support other sustainable development measures, which could lead to reducing energy intensity and favoring the environment.
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.:
- Espey, Molly, 1998. "Gasoline demand revisited: an international meta-analysis of elasticities," Energy Economics, Elsevier, vol. 20(3), pages 273-295, June.
- John M. Piotrowski & David Coady & Justin Tyson & Rolando Ossowski & Robert Gillingham & Shamsuddin Tareq, 2010. "Petroleum Product Subsidies; Costly, Inequitable, and On the Rise," IMF Staff Position Notes 2010/05, International Monetary Fund.
- 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.
- Riedy, Chris & Diesendorf, Mark, 2003. "Financial subsidies to the Australian fossil fuel industry," Energy Policy, Elsevier, vol. 31(2), pages 125-137, January.
- Chattopadhyay, Pradip, 2004. "Cross-subsidy in electricity tariffs: evidence from India," Energy Policy, Elsevier, vol. 32(5), pages 673-684, March.
- ANDERSON, KYM & McKIBBIN, WARWICK J., 2000.
"Reducing coal subsidies and trade barriers: their contribution to greenhouse gas abatement,"
Environment and Development Economics,
Cambridge University Press, vol. 5(04), pages 457-481, October.
- Kym Anderson & Warwick J. McKibbin, 1997. "Reducing Coal Subsidies and Trade Barriers: Their Contribution to Greenhouse Gas Abatement," Economics and Environment Network Working Papers 9703, Australian National University, Economics and Environment Network.
- McKibbin, W.J. & Anderson, K., 1997. "Reducing Coal Subsidies and Trade Barriers: Their Contribution to Greenhouse Gas Abatement," Papers 135, Brookings Institution - Working Papers.
- Anderson, Kym & McKibbin, Warwick, 1997. "Reducing Coal Subsidies and Trade Barriers: Their Contribution to Greenhouse Gas Abatement," CEPR Discussion Papers 1698, C.E.P.R. Discussion Papers.
- Brons, Martijn & Nijkamp, Peter & Pels, Eric & Rietveld, Piet, 2008. "A meta-analysis of the price elasticity of gasoline demand. A SUR approach," Energy Economics, Elsevier, vol. 30(5), pages 2105-2122, September.
- W. M. Corden, 1957. "The Calculation Op The Cost Op Protection1," The Economic Record, The Economic Society of Australia, vol. 33(64), pages 29-51, 04.
- 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.
- Jean-Marc Burniaux & Jean Château & Rob Dellink & Romain Duval & Stéphanie Jamet, 2009. "The Economics of Climate Change Mitigation: How to Build the Necessary Global Action in a Cost-Effective Manner," OECD Economics Department Working Papers 701, OECD Publishing.
- Vedenov, Dmitry & Wetzstein, Michael, 2008. "Toward an optimal U.S. ethanol fuel subsidy," Energy Economics, Elsevier, vol. 30(5), pages 2073-2090, September.
- Gangopadhyay, Shubhashis & Ramaswami, Bharat & Wadhwa, Wilima, 2005. "Reducing subsidies on household fuels in India: how will it affect the poor?," Energy Policy, Elsevier, vol. 33(18), pages 2326-2336, December.
- Xie, Jian & Saltzman, Sidney, 2000. "Environmental Policy Analysis: An Environmental Computable General-Equilibrium Approach for Developing Countries," Journal of Policy Modeling, Elsevier, vol. 22(4), pages 453-489, July.
- Chattopadhyay, Pradip, 2007. "Testing viability of cross subsidy using time-variant price elasticities of industrial demand for electricity: Indian experience," Energy Policy, Elsevier, vol. 35(1), pages 487-496, January. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:33:y:2011:i:2:p:273-283. 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)
If references are entirely missing, you can add them using this form.