The relationship among energy prices and energy consumption in China

The pricing mechanism for energy is not in line with the international standards, because the energy prices are controlled by the government partly or completely in China. Chinese government made a lot of efforts to improve the pricing mechanism for energy. The relations between Chinese energy price...

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Bibliographic Details
Published in:Energy policy 2010, Vol.38 (1), p.197-207
Main Authors: Yuan, Chaoqing, Liu, Sifeng, Wu, Junlong
Format: Article
Language:English
Subjects:
Applied sciences
Causality
China
China (People's Republic)
Cointegration
Cointegration analysis
Cointegration Energy consumption Energy price
Correlation analysis
Economic data
Energy
Energy consumption
Energy economics
Energy policy
Energy price
Energy prices
Energy sector
Exact sciences and technology
General, economic and professional studies
Government policy
Households
Industrial production
Methodology. Modelling
Price regulation
Price regulations
Prices
Studies
Supply and demand
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Summary:The pricing mechanism for energy is not in line with the international standards, because the energy prices are controlled by the government partly or completely in China. Chinese government made a lot of efforts to improve the pricing mechanism for energy. The relations between Chinese energy prices and energy consumption are the foundations to reform the mechanism. In this paper, the relations between Chinese energy consumption and energy prices are researched by cointegration equations, impulse response functions, granger causality and variance decomposition. The cointegration relations among energy prices, energy consumption and economic outputs show that higher energy price will decrease energy consumption in Chinese industrial sectors but will not reduce the economic output in the long run. The cointegration relation between energy price and household energy consumption shows that higher energy price will decrease household energy consumption in the long run and increase it in the short run. So Chinese government should deepen the reform of pricing mechanism for energy, and increase the energy prices reasonably to save energy.
ISSN:0301-4215
1873-6777
DOI:10.1016/j.enpol.2009.09.006