Reforming Inefficient Energy Pricing: Evidence from China

Koichiro Ito and Shuang Zhang

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: Inefficient energy pricing hinders economic development in many countries. We examine long-run effects of a recent heating reform in China that replaced a commonly-used fixed-payment system with individually-metered pricing. Using staggered policy rollouts and administrative data on household-level daily heating consumption, we find that the reform induced long-run reductions in heating usage and generated substantial welfare gains. Consumers gradually learned how to conserve heating effectively, making short-run evaluations underestimate the policy impacts. Our results suggest that energy price reform is an effective way to improve allocative efficiency and air quality in developing countries, where unmetered-inefficient pricing is still ubiquitous.

Pages: 34 pages
Date: 2020-06
New Economics Papers: this item is included in nep-cna, nep-ene and nep-reg
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:20062

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