Do energy subsidies reduce fiscal and household non-energy expenditures? A regional heterogeneity assessment on coal-to-gas program in China

In China, central, provincial, and prefecture-level governments have issued coal-to-gas subsidies to households since 2017, with the goal of encouraging the transition of residential heating energy from coal to natural gas. This study responds to the resulting public concerns that coal-to-gas subsidies reduce fiscal and household non-energy expenditures. To be specific, we measured the reductions in fiscal non-energy expenditures created by superior governmental subsidies (SGS) and local governmental subsidies (LGS). For households, we examined whether device subsidies (DS) and consumption subsidies (CS) encourage natural gas consumption, and thereby reduce household non-energy expenditures. A regional heterogeneity analysis was conducted to assess these subsidies. We found that reductions in fiscal and household non-energy expenditures mainly occur in cities with a higher proportion of natural gas in household energy consumption, and are induced by LGS and DS, respectively. SGS and CS are essential to remedy the fiscal and household reductions, respectively. Subsidies perform best in highly air-polluted cities, where CS encourage natural gas consumption without reducing household non-energy expenditures. This study recommends rearranging the coverage of coal-to-gas subsidies, transitioning to regionally differentiated subsidies and management according to city conditions.