Volume 12: Low Carbon Cities and Urban Energy Systems: Part I

CAN NATURAL GAS PRICING REFORM ESTABLISH AN EFFECTIVE MECHANISM: EMPIRICAL EVIDENCE FROM CHINA Boqiang Lin, Zhensheng Li

Abstract

Due to the requirements of clean development and economic transition, China’s natural gas consumption has grown rapidly over the years. However, the price of natural gas in China has been regulated by the government for a long time. Cross-subsidy and price inversion have distorted price mechanism, and are not conducive to the development of the natural gas market. In June 2013, nationwide price reform was implemented in the non-residential sector. To explore the effect of the reform on price distortion, this paper uses monthly data from 27 key cities to estimate the scale and rate of natural gas price subsidy from 2008 to 2017. The results show that the natural gas subsidy is still severe, and there are differences between sectors. The time interval in the implementation of the policy provides a quasi-natural experiment for studying the reform. The difference-in-difference-in-difference estimations prove that the natural gas pricing reform has significantly cut down the subsidy rate in the non-residential sector, and an effective terminal pricing mechanism has been conducted.

Keywords Subsidy rate, Pricing reform, Policy evaluation, China