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The relationship among energy prices and energy consumption in China

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  • Yuan, Chaoqing
  • Liu, Sifeng
  • Wu, Junlong

Abstract

The pricing mechanism for energy is not in line with the international standards, because the energy prices are controlled by the government partly or completely in China. Chinese government made a lot of efforts to improve the pricing mechanism for energy. The relations between Chinese energy prices and energy consumption are the foundations to reform the mechanism. In this paper, the relations between Chinese energy consumption and energy prices are researched by cointegration equations, impulse response functions, granger causality and variance decomposition. The cointegration relations among energy prices, energy consumption and economic outputs show that higher energy price will decrease energy consumption in Chinese industrial sectors but will not reduce the economic output in the long run. The cointegration relation between energy price and household energy consumption shows that higher energy price will decrease household energy consumption in the long run and increase it in the short run. So Chinese government should deepen the reform of pricing mechanism for energy, and increase the energy prices reasonably to save energy.

Suggested Citation

  • Yuan, Chaoqing & Liu, Sifeng & Wu, Junlong, 2010. "The relationship among energy prices and energy consumption in China," Energy Policy, Elsevier, vol. 38(1), pages 197-207, January.
  • Handle: RePEc:eee:enepol:v:38:y:2010:i:1:p:197-207
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    References listed on IDEAS

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    3. Plappally, A.K. & Lienhard V, J.H., 2012. "Energy requirements for water production, treatment, end use, reclamation, and disposal," Renewable and Sustainable Energy Reviews, Elsevier, vol. 16(7), pages 4818-4848.
    4. Yun Fei Yao & Qiao-Mei Liang & Dong-Wei Yang & Hua Liao & Yi-Ming Wei, 2016. "How China’s current energy pricing mechanisms will impact its marginal carbon abatement costs?," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 21(6), pages 799-821, August.
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    7. Wang, Bing & Kocaoglu, Dundar F. & Daim, Tugrul U. & Yang, Jiting, 2010. "A decision model for energy resource selection in China," Energy Policy, Elsevier, vol. 38(11), pages 7130-7141, November.
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    9. Lin, Boqiang & Xie, Chunping, 2013. "Estimation on oil demand and oil saving potential of China's road transport sector," Energy Policy, Elsevier, vol. 61(C), pages 472-482.
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    16. Li, Ke & Lin, Boqiang, 2015. "How does administrative pricing affect energy consumption and CO2 emissions in China?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 42(C), pages 952-962.
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    19. Lin, Boqiang & Wu, Ya & Zhang, Li, 2012. "Electricity saving potential of the power generation industry in China," Energy, Elsevier, vol. 40(1), pages 307-316.
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