Costs and benefits of clean heating subsidies for rural residents in northern China

PurposeWe aim to comprehensively assess the costs and benefits of energy subsidies in northern rural China. This study focuses on the fuel costs for rural households adopting clean energy and government subsidy expenditures. The benefits include environmental benefits from reducing premature deaths associated with air pollution and low-carbon benefits from decreasing greenhouse gas emissions.Design/methodology/approachUtilizing a translog cost function, this paper calculates the energy price elasticity between coal, natural gas and electricity. Furthermore, it applies this elasticity to study the changes in rural household energy consumption patterns under clean energy transition policies and analyzes the costs and benefits of clean energy subsidies.FindingsThe results indicate that under government subsidies, the transition to clean energy heating is unlikely to increase the heating burden on residents in most provinces. The total net benefit of “coal to electricity” is 63.29bn CNY and that of “coal to gas” is 59.03bn CNY. On average, transitioning from coal to electricity results in greater net benefits. However, uncertainties exist regarding the low-carbon benefits, contingent on the cleanliness of electricity generation. Disparities in net benefits under the current subsidy approach highlight inequalities, necessitating further scrutiny.Originality/valueCompared to using policy effect evaluation methods like DID or scenario assumptions, we identify the transformative effects using energy subsidies from various provinces that are more closely aligned with real-world implementation. Besides, unlike previous studies using uniform heat demand, we acknowledge that divergent costs in distinct transition paths can impact resident heating behavior. This is addressed by incorporating energy price elasticity.