Impact of coal sector’s de-capacity policy on coal price

Xiaofei Wang, Chuangeng Liu, Shaojie Chen, Lei Chen, Ke Li and Na Liu

Applied Energy, 2020, vol. 265, issue C, No S0306261920303147

Abstract: Coal is the main energy source of China. A decline in coal prices caused by overcapacity not only determines the survival of coal enterprises but also directly affects economic growth, energy security and industrial raw material supply. This study uses the difference-in-differences model to quantitatively evaluate the treatment effect of coal de-capacity policies on coal prices. Empirical results are summarised as follows. Firstly, the de-capacity policy positively influenced coal prices. The de-capacity policies in 2013 and 2016 increased coal price by 3.24% and 3.44%, respectively. Secondly, significant differences in the timeliness of the two de-capacity policies were observed. The effects of the 2013 and 2016 policies were observed in the first and seventh month after promulgation and lasted for 3 and 13 months, respectively. The main reason for this difference is that the latter policy clearly defined the task of de-capacity and its deadline. Thirdly, different de-capacity policy measures had various effects on coal prices. Strengthening the management of coal import and export decelerated the downward trend of coal prices, and restrictions on 276 working days per year boost coal prices. A market-oriented, early warning mechanism for overcapacity should be established considering the importance of policies to the stability of coal price. In addition, the policy should ensure the smooth operation of the coal industry through strict measures and synergy.

Keywords: Coal price; De-capacity policy; Difference-in-differences model; China (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (20)

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DOI: 10.1016/j.apenergy.2020.114802

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