Research On China's Fossil Fuel Subsidy Reform And Residential Cross-subsidy

In the context of coping with climate change,fossil fuel subsidies are a global problem.The G20 summit meeting in 2009 proposed the complete phasing out of fossil fuel subsidies,but a little progress has been made in the years since then.As a big consumer of energy,China is usually accused of large amount of fossil fuel subsidies.China has been engaged since 2009 in reducing energy subsidies through reforms to energy pricing mechanisms.This paper applied the price gap approach to analyze the change of fossil fuel subsidies in China.It indicated that benefited from energy prices fall sharply,energy demand growth slows down and energy pricing reform promotes effectively,fossil fuel subsidies have been cut substantially since 2013,and subsidies in the fiscal sense have been abolished by 2015.Especially for natural gas within active pricing reform,change of pricing mechanism has greatly contributed to the cut of subsidies.But the phenomenon of cross-subsidy for residents is still widespread,and at the same time large-scale coal consumption leads to such high external environmental costs that energy subsidies taking such costs into account have been maintained.In view of the government's need to reach a balance between the three major energy goals of economic development,broad coverage of energy services,and environmental sustainability,a certain amount of effective energy subsidy should be allowed,but it necessary to use clean development and energy pricing reform to continue reducing ineffective energy subsidies,basically solve the problem of residential cross-subsidies,reduce external environmental costs,and prevent a rebound in energy subsidies.Improving the designation of residential electricity subsidy mechanism and solving the problem of residential cross-subsidies is the key point of further phasing out the fossil fuel subsidies.The Chinese government carried out the residential increasing block pricing in pilot areas in 2004 and spread it to the nationwide in 2012.Evaluation of policy effects for the implemented schemes of increasing block pricing can improve and optimize the designation of increasing block pricing in the future.In this paper,we applied the difference-in-difference method to evaluate the electricity saving effect of increasing block pricing in Zhejiang and Fujian provinces,and based on the macro-data of Shanghai and Shenzhen,we depict the specific implementation of increasing block pricing in typical city in China.The results indicated that the increasing block pricing can be improved through strengthening the propaganda,optimizing the volume and pricing of each block to explore a more reasonable price gap,guiding the residents' correct understanding of subsidies and promoting the household energy-efficient appliance and time of use price.In addition,the continual growth of electricity consumption impedes to solve the problem of residential cross-subsidies.Different from the secondary industry,China's residential electricity consumption depends more on the increase in the quantity of household appliance and the time they work,which is driven by resident income growth,urbanization and other factors.This paper applied the diffusion model to conduct an empirical analysis of residential appliance consumption in China.Results show that rise in resident income and urbanization rate has a positive impact on the ownership of urban household appliances,while the increase in household appliance price has a negative impact.With the continuous growth in urban resident income,its impact on the purchase of household appliance gradually declines,while the influence of urbanization process is getting more and more obvious.Considering the relatively apparent "lock-in effect" on household appliance in China,in the process of urbanization,the government can carry out policies on household energy-efficient appliance subsidy,energy efficiency upgrading to stimulate purchase of household energy-efficient appliance and promote technological upgrading of enterprise,in order to promote energy conservation and emission reduction.