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An Intersectoral Assessment of the Impact of Removing Energy Subsidies in China

In: Institutional Policy and Economic Impacts of Energy Subsidies Removal in East Asia

Author

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  • Lei Zhu
  • Yuan Li

Abstract

Energy subsidies are used in many countries, but their negative impacts are gradually being recognised. At the same time, energy price fluctuations may also have a negative influence on different sectors in China. In this study, we estimate the value of the energy subsidies and show that China’s total energy subsidy in 2010 was around CNY1,929.65 billion, accounting for 4.7 % of the country’s gross domestic product. Taking the iron and steel industry as an example, we analyse the impacts of removing the energy subsidy on industry competitiveness, emissions, welfare, and technology diffusion. We also analyse the joint impacts of removing the energy subsidy and implementing an emissions trading system. The results show that removing the energy subsidy would reduce CO2 emissions and increase social welfare. However, when combined with an emissions trading system, not all sectors would profit from the policy combination. Removing the energy subsidy would at the same time reduce the equilibrium CO2 price.

Suggested Citation

  • Lei Zhu & Yuan Li, 2017. "An Intersectoral Assessment of the Impact of Removing Energy Subsidies in China," Chapters, in: Han Phoumin & Shigeru Kimura (ed.), Institutional Policy and Economic Impacts of Energy Subsidies Removal in East Asia, chapter 4, pages 61-82, Economic Research Institute for ASEAN and East Asia (ERIA).
    • Handle: RePEc:era:chaptr:2015-rpr-23-4
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    References listed on IDEAS

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