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Is the price elasticity of demand for coal in China increasing?

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  • Burke, Paul J.
  • Liao, Hua

Abstract

China’s dependence on coal is a major contributor to local and global environmental problems. In this paper we estimate the price elasticity of demand for coal in China using a panel of province-level data for the period 1998–2012. We find evidence that provincial coal demand has become increasingly price elastic. As of 2012 we estimate that this elasticity was in the range –0.3 to –0.7 when responses over two years are considered. The results imply that China’s coal market is becoming more suited to price-based approaches to reducing emissions. Our estimates suggest that the elimination of coal consumption subsidies could reduce national coal use and related emissions by around 2%.

Suggested Citation

  • Burke, Paul J. & Liao, Hua, 2015. "Is the price elasticity of demand for coal in China increasing?," Working Papers 249510, Australian National University, Centre for Climate Economics & Policy.
  • Handle: RePEc:ags:ancewp:249510
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    References listed on IDEAS

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    Cited by:

    1. Tang, Erzi & Peng, Chong, 2017. "A macro- and microeconomic analysis of coal production in China," Resources Policy, Elsevier, vol. 51(C), pages 234-242.
    2. Burke, Paul J. & Yang, Hewen, 2016. "The price and income elasticities of natural gas demand: International evidence," Energy Economics, Elsevier, vol. 59(C), pages 466-474.
    3. Ma, Chunbo & Stern, David I., 2016. "Long-run estimates of interfuel and interfactor elasticities," Resource and Energy Economics, Elsevier, vol. 46(C), pages 114-130.
    4. Ian W.H. Parry & Baoping Shang & Philippe Wingender & Nate Vernon & Tarun Narasimhan, 2016. "Climate Mitigation in China; Which Policies Are Most Effective?," IMF Working Papers 16/148, International Monetary Fund.
    5. Fan, Xinghua & Wang, Li & Li, Shasha, 2016. "Predicting chaotic coal prices using a multi-layer perceptron network model," Resources Policy, Elsevier, vol. 50(C), pages 86-92.

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    Keywords

    Coal; price elasticity; demand; China; provincial; Demand and Price Analysis; Resource /Energy Economics and Policy; O13; Q41; P28; Q48;

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • P28 - Economic Systems - - Socialist Systems and Transition Economies - - - Natural Resources; Environment
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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