Ensuring the supply and stable price of energy: The role of energy state-owned enterprises

Jinzhi Chen, Lu Song and Li Xie

Energy, 2025, vol. 322, issue C

Abstract: We find that against the backdrop of China's increasing dependence on external energy, in response to the external energy price shocks, Chinese government subsidizes or taxes imported energy price to guarantee the ability of state-owned enterprises (SOEs) to ensure supply and stabilize price of energy, which is essential for macroeconomic stability. Stylized facts show that nowadays the SOEs has firmly controlled the energy industry, which enhances Chinese government's control over energy prices. Then, we construct a DSGE model and find that the policy of ensuring supply and stabilizing prices can smooth the economic fluctuations caused by energy shocks and improve total welfare. The mechanism analysis further suggests that the higher the dependence on (external) energy of the import channel, the intermediate goods channel and the consumption channel, the greater the impact of external energy price shocks and the greater the role played by the policy. Furthermore, taking the sharp rise in external energy price as an example, the fiscal multipliers for subsidizing imported energy raw materials, energy intermediates and energy consumer goods all exceed 1 in the long run, among which direct subsidy for imported energy raw materials is the most effective.

Keywords: DSGE model; Ensuring supply; Stabilizing prices; Economic fluctuations; Energy state-owned enterprises (search for similar items in EconPapers)
JEL-codes: P28 Q41 Q43 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:322:y:2025:i:c:s0360544225012861

DOI: 10.1016/j.energy.2025.135644

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