China's Coal Consumption Elasticity Study

Coal is the most important primary energy of China, and electric power is the main secondary energy. The two energies are closely related to China's national economy and have strategic significance to China's sustainable development. Electric coal is the bond of the two energies, so it is an important matter in relation to China's national interest and people's livelihood to study on China's consumption of electric coal so as to ensure the supply of electric coal and guarantee the normal provision of electricity. This study has important theoretical and practical significance. Moreover, in the recent years, shortage of electric coal and consequent stoppage of generator set happen in some parts of China. Meantime, price of electric coal rises. However, because of regulation of electric power price, electric power price does not rise at the same extent. Therefore, most electric power enterprises suffer losses, which threatens the normal provision of electric power. This issue makes study on consumption of electric coal of greatly urgent.This paper summarizes existed literatures relevant to study on electric coal at first, putting forward research method and innovation of this paper, and then introduces the overall status of China's energy in order to get its overall picture and realize the important roles of coal and electric power in China's energy. Then, this paper analyzes China's supply status of electric coal to get some qualitative knowledge about the status of connecting between China's coal and electric power industries. On that basis, this paper studies elasticity of China's residents' demand on electric power and elasticity of China's electric coal consumption in different phases of economic cycle together with the influence of Coal and Electric Power Price Linkage Mechanism on method of ridge regression. In order to differentiate the influence in the short term and in the long term, this paper introduces a variable representing the stock of residents' domestic appliances when studying on the former elasticity, and introduces the one-stage lagged variable of electric coal consumption when studying on the latter elasticity. At last, this paper summarizes the conclusion of its study and makes policy proposals.This paper's study has got the following conclusions:1. The increase of China's GDP will stimulate both China's electric power consumption (including residents' electric power consumption, industrial electric power consumption, etc) and China's electric coal consumption, especially in the long term. Therefore, as China's economy continues developing rapidly, China's demand for electric power and electric coal will increase greatly. Especially on the rising phase of economic cycle, the consumption of electric coal will rise by a larger margin with the rise of its price. Without government's interference, the supply of electric coal will meet bottle-neck sooner or later.2. China's residents' electric power consumption, industrial electric power consumption and electric coal consumption are all not sensitive to the price of electric power in the short term, while the cross price elasticity of electric power consumption with the price of other energy is relatively big, and rise of coal's price will obviously give positive influence to electric coal consumption. Moreover, the long-term influence of each factor is much greater than the short-term one.3. Concerning the influence of policy, the Coal and Electric Power Price Linkage Mechanism will reduce the price elasticity of electric coal consumption, which will stabilize electric coal consumption.Based on its study conclusion, this paper makes following policy proposals. On one hand, the government can advocate electric power saving from the source and encourage developing new energy and renewable energy to substitute for thermal power so as to reduce electric coal consumption and relax the restriction to China's sustainable development from shortage of electric coal. On the other hand, the government can quicken the pace of deregulation of on-grid electric power price and deregulate selling price of electric power gradually when conditions permit to reduce the distortion of electric power price and sufficiently bring market's automatic adjustment to optimal allocation of resources into play.