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Consumption effects of an electricity decarbonization policy: Hong Kong

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  • Woo, C.K.
  • Shiu, A.
  • Liu, Y.
  • Luo, X.
  • Zarnikau, J.

Abstract

This paper estimates the consumption effects of an electricity rate increase triggered by an electricity decarbonization policy's implementation. Underscoring its real-world relevance is the policy's net impact on CO2 emissions, the sum of (a) the supply-side impact attributable to using generation resources with low emissions to displace those with high emissions, and (b) the demand-side impact caused by energy consumption changes in response to the electricity rate increase. For Hong Kong, the changes in (b) are decreases in electricity consumption and increases in town gas consumption. Using a sample of monthly data for the period of 1981–2016, we document the low price responsiveness of Hong Kong's electricity and town gas demands by customer class (residential, commercial and industrial). Hence, the 40% projected electricity rate increase due to Hong Kong's adopted electricity decarbonization policy may only have a small demand-side impact on CO2 emissions. Finally, the electricity demands' low price responsiveness has two important policy implications. First, Hong Kong's demand-side-management should rely more on energy-efficiency improvements than price-induced consumption reductions. Second, restructuring Hong Kong's electricity industry to introduce wholesale competition should consider the potential for large electricity price spikes and market power abuse in connection to price-inelastic electricity demands.

Suggested Citation

  • Woo, C.K. & Shiu, A. & Liu, Y. & Luo, X. & Zarnikau, J., 2018. "Consumption effects of an electricity decarbonization policy: Hong Kong," Energy, Elsevier, vol. 144(C), pages 887-902.
    • Handle: RePEc:eee:energy:v:144:y:2018:i:c:p:887-902
    DOI: 10.1016/j.energy.2017.12.074
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    3. Aijun Liu & Qiuyun Zhu & Xiaohui Ji & Hui Lu & Sang-Bing Tsai, 2018. "Novel Method for Perceiving Key Requirements of Customer Collaboration Low-Carbon Product Design," IJERPH, MDPI, vol. 15(7), pages 1-32, July.
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    5. Wang, Yongpei & Li, Jun, 2019. "Spatial spillover effect of non-fossil fuel power generation on carbon dioxide emissions across China's provinces," Renewable Energy, Elsevier, vol. 136(C), pages 317-330.
    6. Li, Raymond & Woo, Chi-Keung & Tishler, Asher & Zarnikau, Jay, 2022. "How price responsive is industrial demand for natural gas in the United States?," Utilities Policy, Elsevier, vol. 74(C).
    7. Consolación Quintana-Rojo & Fernando-Evaristo Callejas-Albiñana & Miguel-Ángel Tarancón & Isabel Martínez-Rodríguez, 2020. "Econometric Studies on the Development of Renewable Energy Sources to Support the European Union 2020–2030 Climate and Energy Framework: A Critical Appraisal," Sustainability, MDPI, vol. 12(12), pages 1-26, June.
    8. He, J.Y. & Chan, P.W. & Li, Q.S. & Lee, C.W., 2022. "Characterizing coastal wind energy resources based on sodar and microwave radiometer observations," Renewable and Sustainable Energy Reviews, Elsevier, vol. 163(C).

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