IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v156y2021ics0301421521003104.html
   My bibliography  Save this article

Elasticities of residential electricity demand in China under increasing-block pricing constraint: New estimation using household survey data

Author

Listed:
  • Jia, Jun-Jun
  • Guo, Jin
  • Wei, Chu

Abstract

China has implemented the residential increasing-block electricity pricing (IBEP) policy since the second half of 2012, which is considered the most effective economic instrument in improving residential energy efficiency. Price and income elasticity are two fundamental parameters to guide both scholars and policy-makers in assessing whether and to what extend Chinese households respond to the policy. However, it presents the challenge of simultaneous determination of marginal price and electricity consumption; further, it is less examined from an empirical perspective due to the absence of micro-level data. To fill this gap, this study estimates price and income elasticity by establishing two instrumental variables, based on a unique dataset from the Chinese Residential Energy Consumption Survey 2014. Results show that the residential demand for electricity is price inelastic and that electricity is an essential commodity for households in the short run. It also shows great urban-rural disparity and regional heterogeneity of household electricity consumption behavior regarding short-run income elasticity. The estimated parameters of short-run price and income elasticities provide a valuable reference for policy-making regarding both a nationwide uniform and a differential regional perspective.

Suggested Citation

  • Jia, Jun-Jun & Guo, Jin & Wei, Chu, 2021. "Elasticities of residential electricity demand in China under increasing-block pricing constraint: New estimation using household survey data," Energy Policy, Elsevier, vol. 156(C).
  • Handle: RePEc:eee:enepol:v:156:y:2021:i:c:s0301421521003104
    DOI: 10.1016/j.enpol.2021.112440
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421521003104
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.enpol.2021.112440?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    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. Sun, Chuanwang & Lin, Boqiang, 2013. "Reforming residential electricity tariff in China: Block tariffs pricing approach," Energy Policy, Elsevier, vol. 60(C), pages 741-752.
    2. Bose, Ranjan Kumar & Shukla, Megha, 1999. "Elasticities of electricity demand in India," Energy Policy, Elsevier, vol. 27(3), pages 137-146, March.
    3. Alberini, Anna & Filippini, Massimo, 2011. "Response of residential electricity demand to price: The effect of measurement error," Energy Economics, Elsevier, vol. 33(5), pages 889-895, September.
    4. Dinusha Dharmaratna & Edwyna Harris, 2012. "Estimating Residential Water Demand Using the Stone-Geary Functional Form: The Case of Sri Lanka," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 26(8), pages 2283-2299, June.
    5. Dilaver, Zafer & Hunt, Lester C, 2011. "Modelling and forecasting Turkish residential electricity demand," Energy Policy, Elsevier, vol. 39(6), pages 3117-3127, June.
    6. Hung, Ming-Feng & Huang, Tai-Hsin, 2015. "Dynamic demand for residential electricity in Taiwan under seasonality and increasing-block pricing," Energy Economics, Elsevier, vol. 48(C), pages 168-177.
    7. R. Bruce Billings, 1982. "Specification of Block Rate Price Variables in Demand Models," Land Economics, University of Wisconsin Press, vol. 58(3), pages 386-394.
    8. Beenstock, Michael & Goldin, Ephraim & Nabot, Dan, 1999. "The demand for electricity in Israel," Energy Economics, Elsevier, vol. 21(2), pages 168-183, April.
    9. Alberini, Anna & Gans, Will & Velez-Lopez, Daniel, 2011. "Residential consumption of gas and electricity in the U.S.: The role of prices and income," Energy Economics, Elsevier, vol. 33(5), pages 870-881, September.
    10. 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.
    11. Filippini, Massimo & Pachauri, Shonali, 2004. "Elasticities of electricity demand in urban Indian households," Energy Policy, Elsevier, vol. 32(3), pages 429-436, February.
    12. Jones, Rory V. & Fuertes, Alba & Lomas, Kevin J., 2015. "The socio-economic, dwelling and appliance related factors affecting electricity consumption in domestic buildings," Renewable and Sustainable Energy Reviews, Elsevier, vol. 43(C), pages 901-917.
    13. Paul, Anthony & Myers, Erica & Palmer, Karen, 2009. "A Partial Adjustment Model of U.S. Electricity Demand by Region, Season, and Sector," Discussion Papers dp-08-50, Resources For the Future.
    14. Jing Cao, Mun S. Ho, and Huifang Liang, 2016. "Household energy demand in Urban China: Accounting for regional prices and rapid income change," The Energy Journal, International Association for Energy Economics, vol. 0(China Spe).
    15. Liu, Chang & Lin, Boqiang, 2020. "Is increasing-block electricity pricing effectively carried out in China? A case study in Shanghai and Shenzhen," Energy Policy, Elsevier, vol. 138(C).
    16. Ziramba, Emmanuel, 2008. "The demand for residential electricity in South Africa," Energy Policy, Elsevier, vol. 36(9), pages 3460-3466, September.
    17. Shimei Wu & Xinye Zheng & Chu Wei, 2017. "Measurement of inequality using household energy consumption data in rural China," Nature Energy, Nature, vol. 2(10), pages 795-803, October.
    18. Massimo, Filippini, 2011. "Short- and long-run time-of-use price elasticities in Swiss residential electricity demand," Energy Policy, Elsevier, vol. 39(10), pages 5811-5817, October.
    19. Bernard, Jean-Thomas & Bolduc, Denis & Yameogo, Nadège-Désirée, 2011. "A pseudo-panel data model of household electricity demand," Resource and Energy Economics, Elsevier, vol. 33(1), pages 315-325, January.
    20. 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.
    21. Kamerschen, David R. & Porter, David V., 2004. "The demand for residential, industrial and total electricity, 1973-1998," Energy Economics, Elsevier, vol. 26(1), pages 87-100, January.
    22. Narayan, Paresh Kumar & Smyth, Russell, 2005. "The residential demand for electricity in Australia: an application of the bounds testing approach to cointegration," Energy Policy, Elsevier, vol. 33(4), pages 467-474, March.
    23. Nakajima, Tadahiro, 2010. "The residential demand for electricity in Japan: An examination using empirical panel analysis techniques," Journal of Asian Economics, Elsevier, vol. 21(4), pages 412-420, August.
    24. Blázquez, Leticia & Boogen, Nina & Filippini, Massimo, 2013. "Residential electricity demand in Spain: New empirical evidence using aggregate data," Energy Economics, Elsevier, vol. 36(C), pages 648-657.
    25. Alberini, Anna & Gans, Will & Velez-Lopez, Daniel, 2011. "Residential Consumption of Gas and Electricity in the U.S.: The Role of Prices and Income," Sustainable Development Papers 99637, Fondazione Eni Enrico Mattei (FEEM).
    26. Holtedahl, Pernille & Joutz, Frederick L., 2004. "Residential electricity demand in Taiwan," Energy Economics, Elsevier, vol. 26(2), pages 201-224, March.
    27. Ang, B.W. & Goh, T.N. & Liu, X.Q., 1992. "Residential electricity demand in Singapore," Energy, Elsevier, vol. 17(1), pages 37-46.
    28. Halicioglu, Ferda, 2007. "Residential electricity demand dynamics in Turkey," Energy Economics, Elsevier, vol. 29(2), pages 199-210, March.
    29. Brounen, Dirk & Kok, Nils & Quigley, John M., 2012. "Residential energy use and conservation: Economics and demographics," European Economic Review, Elsevier, vol. 56(5), pages 931-945.
    30. Lester C Hunt & Claudio Salgado & Andy Thorpe, 1998. "The Policy of Power and the Power of Policy: Energy Policy in Honduras," Surrey Energy Economics Centre (SEEC), School of Economics Discussion Papers (SEEDS) 96, Surrey Energy Economics Centre (SEEC), School of Economics, University of Surrey.
    31. Yang, Changhui & Meng, Chen & Zhou, Kaile, 2018. "Residential electricity pricing in China: The context of price-based demand response," Renewable and Sustainable Energy Reviews, Elsevier, vol. 81(P2), pages 2870-2878.
    32. Berkhout, Peter H. G. & Ferrer-i-Carbonell, Ada & Muskens, Jos C., 2004. "The ex post impact of an energy tax on household energy demand," Energy Economics, Elsevier, vol. 26(3), pages 297-317, May.
    33. Yoo, Seung-Hoon & Lee, Joo Suk & Kwak, Seung-Jun, 2007. "Estimation of residential electricity demand function in Seoul by correction for sample selection bias," Energy Policy, Elsevier, vol. 35(11), pages 5702-5707, November.
    34. Xinye Zheng & Chu Wei (ed.), 2019. "Household Energy Consumption in China: 2016 Report," Springer Books, Springer, number 978-981-13-7523-1, December.
    35. Donatos, George S. & Mergos, George J., 1991. "Residential demand for electricity: The case of Greece," Energy Economics, Elsevier, vol. 13(1), pages 41-47, January.
    36. Cao, Jing & Ho, Mun Sing & Li, Yating & Newell, Richard G. & Pizer, William A., 2019. "Chinese residential electricity consumption: Estimation and forecast using micro-data," Resource and Energy Economics, Elsevier, vol. 56(C), pages 6-27.
    37. Peter C. Reiss & Matthew W. White, 2005. "Household Electricity Demand, Revisited," Review of Economic Studies, Oxford University Press, vol. 72(3), pages 853-883.
    38. John A. Nordin, 1976. "A Proposed Modification of Taylor's Demand Analysis: Comment," Bell Journal of Economics, The RAND Corporation, vol. 7(2), pages 719-721, Autumn.
    39. Lester D. Taylor, 1975. "The Demand for Electricity: A Survey," Bell Journal of Economics, The RAND Corporation, vol. 6(1), pages 74-110, Spring.
    40. Hondroyiannis, George, 2004. "Estimating residential demand for electricity in Greece," Energy Economics, Elsevier, vol. 26(3), pages 319-334, May.
    41. Zhou, Shaojie & Teng, Fei, 2013. "Estimation of urban residential electricity demand in China using household survey data," Energy Policy, Elsevier, vol. 61(C), pages 394-402.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hung, Ming-Feng & Huang, Tai-Hsin, 2015. "Dynamic demand for residential electricity in Taiwan under seasonality and increasing-block pricing," Energy Economics, Elsevier, vol. 48(C), pages 168-177.
    2. Tiwari, Aviral Kumar & Menegaki, Angeliki N., 2019. "A time varying approach on the price elasticity of electricity in India during 1975–2013," Energy, Elsevier, vol. 183(C), pages 385-397.
    3. Cialani, Catia & Mortazavi, Reza, 2018. "Household and industrial electricity demand in Europe," Energy Policy, Elsevier, vol. 122(C), pages 592-600.
    4. Zhou, Shaojie & Teng, Fei, 2013. "Estimation of urban residential electricity demand in China using household survey data," Energy Policy, Elsevier, vol. 61(C), pages 394-402.
    5. Pellini, Elisabetta, 2021. "Estimating income and price elasticities of residential electricity demand with Autometrics," Energy Economics, Elsevier, vol. 101(C).
    6. Adewuyi, Adeolu O., 2016. "Determinants of import demand for non-renewable energy (petroleum) products: Empirical evidence from Nigeria," Energy Policy, Elsevier, vol. 95(C), pages 73-93.
    7. Krishnamurthy, Chandra Kiran B. & Kriström, Bengt, 2015. "A cross-country analysis of residential electricity demand in 11 OECD-countries," Resource and Energy Economics, Elsevier, vol. 39(C), pages 68-88.
    8. Ziramba, Emmanuel, 2008. "The demand for residential electricity in South Africa," Energy Policy, Elsevier, vol. 36(9), pages 3460-3466, September.
    9. Kiran B Krishnamurthy, Chandra & Kriström, Bengt, 2013. "A cross-country analysis of residential electricity demand in 11 OECD-countries," CERE Working Papers 2013:5, CERE - the Center for Environmental and Resource Economics, revised 30 Jun 2014.
    10. Zhang, Zibin & Cai, Wenxin & Feng, Xiangzhao, 2017. "How do urban households in China respond to increasing block pricing in electricity? Evidence from a fuzzy regression discontinuity approach," Energy Policy, Elsevier, vol. 105(C), pages 161-172.
    11. Gaivoronskaia, Elizaveta, 2020. "Electricity demand elasticity and regional effects: Spatial econometric approach," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 58, pages 76-95.
    12. Athukorala, Wasantha & Wilson, Clevo & Managi, Shunsuke & Karunarathna, Muditha, 2019. "Household demand for electricity: The role of market distortions and prices in competition policy," Energy Policy, Elsevier, vol. 134(C).
    13. Kostakis, Ioannis & Lolos, Sarantis & Sardianou, Eleni, 2021. "Residential natural gas demand: Assessing the evidence from Greece using pseudo-panels, 2012–2019," Energy Economics, Elsevier, vol. 99(C).
    14. Çetinkaya, Murat & Başaran, Alparslan A. & Bağdadioğlu, Necmiddin, 2015. "Electricity reform, tariff and household elasticity in Turkey," Utilities Policy, Elsevier, vol. 37(C), pages 79-85.
    15. Desiderio Romero-Jordán & Pablo del Río & Cristina Peñasco, 2014. "Household electricity demand in Spanish regions. Public policy implications," Working Papers 2014/24, Institut d'Economia de Barcelona (IEB).
    16. Desiderio Romero-Jordán & Pablo del Río & Cristina Peñasco, 2014. "Household electricity demand in Spanish regions. Public policy implications," Working Papers 2014/24, Institut d'Economia de Barcelona (IEB).
    17. Khanna, Nina Zheng & Guo, Jin & Zheng, Xinye, 2016. "Effects of demand side management on Chinese household electricity consumption: Empirical findings from Chinese household survey," Energy Policy, Elsevier, vol. 95(C), pages 113-125.
    18. Javier Bueno & Desiderio Romero-Jordán & Pablo del Río, 2020. "Analysing the Drivers of Electricity Demand in Spain after the Economic Crisis," Energies, MDPI, vol. 13(20), pages 1-18, October.
    19. Cho, Seong-Hoon & Kim, Taeyoung & Kim, Hyun Jae & Park, Kihyun & Roberts, Roland K., 2015. "Regionally-varying and regionally-uniform electricity pricing policies compared across four usage categories," Energy Economics, Elsevier, vol. 49(C), pages 182-191.
    20. Nina Boogen & Souvik Datta & Massimo Filippini, 2014. "Going beyond tradition: Estimating residential electricity demand using an appliance index and energy services," CER-ETH Economics working paper series 14/200, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.

    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:enepol:v:156:y:2021:i:c:s0301421521003104. 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: . General contact details of provider: http://www.elsevier.com/locate/enpol .

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    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.