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Measurement of the Price Distortion Degree for Exhaustible Energy Resources in China: A Discount Rate Perspective

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  • Keyi Ju
  • Qunwei Wang
  • Lifan Liu
  • Dequn Zhou

Abstract

This paper uses the marginal opportunity cost (MOC) pricing method to calculate theoretical prices of energy resources (namely coal, crude oil, and natural gas). The theoretical price encompasses the marginal production cost (MPC) for exploitation, marginal user cost (MUC) for the scarcity of the exhaustible resources, and the marginal external cost (MEC) for environmental impacts. Compared with the existing compensation mechanism, this study estimates the degree of energy price distortions under different discount rates. The results show that each resource price presents different degrees of distortion with varying causes for the distortions. The crude oil price had the highest distortion degree, followed by coal and natural gas, and the lower the discount rate, the more serious is the energy price distortion.

Suggested Citation

  • Keyi Ju & Qunwei Wang & Lifan Liu & Dequn Zhou, 2019. "Measurement of the Price Distortion Degree for Exhaustible Energy Resources in China: A Discount Rate Perspective," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 55(12), pages 2718-2737, September.
    • Handle: RePEc:mes:emfitr:v:55:y:2019:i:12:p:2718-2737
    DOI: 10.1080/1540496X.2019.1587708
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    Cited by:

    1. Sha, Ru & Li, Jinye & Ge, Tao, 2021. "How do price distortions of fossil energy sources affect China's green economic efficiency?," Energy, Elsevier, vol. 232(C).
    2. Xu, Mengmeng & Tan, Ruipeng, 2021. "Removing energy allocation distortion to increase economic output and energy efficiency in China," Energy Policy, Elsevier, vol. 150(C).
    3. Ru Sha & Tao Ge & Jinye Li, 2022. "How Energy Price Distortions Affect China’s Economic Growth and Carbon Emissions," Sustainability, MDPI, vol. 14(12), pages 1-27, June.
    4. Ekananda, Mahjus, 2022. "Role of macroeconomic determinants on the natural resource commodity prices: Indonesia futures volatility," Resources Policy, Elsevier, vol. 78(C).
    5. Zhang, Shangfeng & Chen, Congcong & Huang, Duen-Huang & Hu, Lang, 2022. "Measurement of factor price distortion: A new production function method with time-varying elasticity," Technological Forecasting and Social Change, Elsevier, vol. 175(C).

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