Lin, B., Jiang, Z, 2012. Designation and influence of household increasing block electricity tariffs in China. Energy Policy 42, pp. 164–173: How biased is the measurement of household’s loss?

Evens Salies

MPRA Paper from University Library of Munich, Germany

Abstract: The three-tier inclining block tariff (‘‘IBT’’) issued by the Chinese government in 2010 is focusing attention of energy economists, among whom Lin and Jiang (2012. Designation and influence of household increasing block electricity tariffs in China. Energy Policy 42, 164–173) who assert that the issued tariff is unsuited to meet the social and environmental objectives it was designed for. These authors offer an alternative four-tiered IBT, the performance of which they show by evaluating its welfare and income distribution effects taking the current uniform tariff as reference. To measure the surplus loss to a representative household in a given block the authors use the trapezoid approach. But, because of the limited data on demand, they calculate the household’s response by using a constant point estimate of the own-price elasticity of electricity demand. In this note I show there is an incompatibility between these two modeling assumptions. Combining them is causing an upward bias in the surplus loss, which is of significance given the large price change associated with the IBT. I then offer a correction to this bias.

Keywords: Increasing block tariffs; Electricity demand; Welfare measurement (search for similar items in EconPapers)
JEL-codes: D11 D63 Q41 Q48 (search for similar items in EconPapers)
Date: 2012-09
New Economics Papers: this item is included in nep-ene and nep-tra
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Related works:
Working Paper: Lin, B., Jiang, Z, 2012. Designation and influence of household increasing block electricity tariffs in China. Energy Policy 42, pp. 164-173: How biased is the measurement of household's loss? (2012)
Working Paper: Lin, B., Jiang, Z, 2012. Designation and influence of household increasing block electricity tariffs in China. Energy Policy 42, pp. 164-173: How biased is the measurement of household's loss? (2012)
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