Market-driven coal prices and state-administered electricity prices in China

Ming-Hua Liu, Dimitris Margaritis and Yang Zhang

Energy Economics, 2013, vol. 40, issue C, 167-175

Abstract: This paper analyzes how the Chinese government adjusts electricity prices for both industrial and residential users in response to changes in coal prices using an asymmetric error correction model. Our results show that there is a long-term relation between the coal price and electricity prices but the relationship is weak especially for residential pricing. In the short run, we find electricity prices are adjusting faster upwards than downwards. Price adjustment towards long-run equilibrium is faster for residential users upwards than downwards. On the other hand, we find no evidence of asymmetric equilibrium adjustment in the electricity price for industrial use. The weak long-term relationship reflects the rigidity in electricity pricing and government's reluctance to subject end users to fluctuations of raw materials cost shifts.

Keywords: Coal price; Electricity prices; Asymmetric adjustment; Error correction model; China (search for similar items in EconPapers)
JEL-codes: C22 Q41 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (45)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:40:y:2013:i:c:p:167-175

DOI: 10.1016/j.eneco.2013.05.021

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