Economic and environmental gains of China’s fossil energy subsidies
reform:A rebound effect ca study with EIMO model
Li Hong a,n,Dong Liang b,c,1,Wang Di d
a School of Economics,Peking University,Haidian District,5Yi HeYuan AV.,Beijing100871,PR China
b National Institute for Environmental Studies(NIES),16-2Onogawa,Tsukuba-City,Ibaraki305-8506,Japan
c Graduate School of Environmental Studies,Nagoya University,Furo-cho,Chikusa-ku,Nagoya City464–8601,Japan
d Institut
e o
f Population Rearch,PekingUniversity,Haidian District,5Yi HeYuan AV.,Beijing100871,PR China
H I G H L I G H T S
c Analyze the economic an
d environmental gains of fossil energy subsidies reform in China.
c Energy input an
英语四级考试报名d monetary output model was applied for analysis.
c Subsidies reform woul
d help to reduc
e the rebound effect.
c The benefits of money saving,energy saving an
d CO2mitigation wer
e achieved.
a r t i c l e i n f o
Article history:
Received16May2012
Accepted20November2012
Available online21December2012
Keywords:
Energy subsidies
Rebound effect
EIMO model
a b s t r a c t
Energy consumption and efficiency emerged as the hottest topic in the context of China’s sustainable
development.Energy subsidies and‘‘rebound effect’’were cloly related to this topic while few
combinative studies on them with a focus on China.This paper employed a co-thinking approach,
focusing on how the energy subsidies reform could mitigate the rebound effect in China,and how to
achieve an‘‘economic and environmental gains’’that reduced pecuniary spending,improved the
distorted energy market and reduced energy consumption simultaneously.Firstly,with price-gap
approach we calculated the total energy subsidies scale of China in2007,which amounted to582.0
billion CNY;then we detected and identified rebound effect of China energy consumption with the
features.Furthermore,bad on China2007monetary input–output table and energyflow analysis,we
compiled a hybrid physical energy input and monetary output model(EIMO)to simulate the mitigation
effect of subsidies reform.Results showed that removing energy subsidies would decrea ultimate
demand of different economy ctors and reduce the accumulatively physical consumption of coal,oil,
natural gas and electricity by17.74,13.47,3.64and15.82million tce,respectively.Finally we discusd
relevant policy issues on China’s energy subsidies reform in depth.
&2012Elvier Ltd.All rights rerved.
1.Introduction
With rapid economic growth,China has faced more and more
emerging conflicts in terms of energy supply and demand,as well
as ries of related environmental problems.In2007,China
became the world’s largest CO2emitter(BP,2008)and in2010,
it overtook United States becoming the world largest energy
consumer,contributing to a share of20.3%of total worldwide
energy consumption(BP,2011).
China is a developing country in industrialization pha with
economic development,population growth,and living standard-
improving.Undoubtedly its energy demand will soar in the
future.Therefore improving energy efficiency is of vital impor-
tance for energy conrvation and CO2emissions reduction,and
Chine government has shown growing concern about tho
issues.Since2002,veral national policies such as the Cleaner
Production Promotion law,Circular Economy Promotion law have
been launched in which enhancing energy efficiency is one key
aspect,and lots of advanced energy conrvation technologies
have been utilized(Li et al.,2010).Due to tho efforts,the energy
consumption per unit of GDP of China has decread by40%over
the past decade.
However,although the energy efficiency in China has been
shorterenhanced significantly,it is disappointing that the energyaccomplish的用法
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Energy Policy
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n Corresponding author.Tel.:þ8613671366001,þ861062755658;
fax:þ861062751460.
E-mail address:(L.Hong),
dong.jp(D.Liang).
1Tel.:þ8108040902595;fax:þ810298502314.
Energy Policy54(2013)335–342
consumption is still increasing aggressively rather than decreas-ing (Fig.1).The most important reason is the huge energy demands driven by rapid economic growth,while the ‘‘rebound effect’’also played an important role (IEA,1999).
The ‘rebound effect’is the term referring to the behavioral or other systemic respon to improved resource utilization effi-ciency due to new technologies (Greening,2000;Ouyang et al.,2010;Ruzzenenti and Basosi,2008;Saunders,1992;Wang et al.,2012c ).Unintended conquences always complemented with technology advances in houhold level and industries;specifi-cally,part of the energy savings derived from new technologies are offt by incread energy consumption.The mechanism is that energy efficiency enhancement would reduce the prices of energy products or rvices,thus leading to more demand and consumption.In theory,energy subsidies facilitate the rebound effect as it also lower the end-u price,conquently encourage the consumption and potentially damage the environment (de Moor,2001;IEA,1999;Li et al.,2011;Liu and Li,2011;OECD,2005;UNEP,2003,2008).Bad on this point,energy subsidies reform would be an effective way to mitigate the rebound effect,further make the energy efficiency measures more efficient,and ultimately achieve a collaborative benefit in terms of economic benefit and environmental benefit.
Since the early study on rebound effect in estimation of energy savings (Khazzoom,1980),such issues have been widely dis-cusd and debated as rebound effect in different energy con-sumption ctors (Bentzen,2004;Khazzoom,1980;Li and Yonglei,2012;Ouyang et al.,2010;Wang et al.,2012b ),empirical studies in developed and developing regions or countries like UK,
Hong Kong,India and China (Barker et al.,2007;Freire Gonza
´lez,2010;Haas and Biermayr,2000;Mizobuchi,2008;Roy,2000;Sorrell et al.,2009;Wang et al.,2012b ,2012c ),modeling the rebound effect with partial equilibrium model (Ouyang et al.,2010),general equilibrium model (Grepperud and Rasmusn,2004)and econometric method (Barker et al.,2007;Bentzen,2004),and specific technologies or policy (de Haan et al.,2006;Matos and Silva,2011;Safarzynska,2012).As for the study about China,most studies focud on direct rebound effect in certain ctors (Li and Yonglei,2012;Ouyang et al.,2010;Wang et al.,2012b ,2012c ).
However,although rebound effect and subsidies are intrinsi-cally connected,few studies innovatively have them linked and in quantified method.Energy efficiency measures in cooperation with environmental and energy policy tools are considered to be esntial cushion for the rebound effect (Maxwell et al.,2011),therefore rearch studying the interaction of energy subsidies and rebound effect would provide a beneficial discussion on the topic of energy conrvation and climate change.
This paper adopts a co-thinking approach to study the eco-nomic and environmental gains of energy subsidies reform and its contribution to reduce the rebound effect,with China as the ca study,in application with an improved hybrid physical energy input and monetary output model (EIMO).We mainly contribute to the following aspects:first of all,with the calculation of the national fossil energy subsidies scale in China in 2007,we analyzed its inherent interaction with energy rebound effect in depth;then we propod an improved energy input–output model bad on the 2007China monetary input–output table;thirdly,with the EIMO model,we quantitatively analyzed the economic and environmental gains of subsidies reform;lastly bad on the quantified analysis we discuss the policy issues about China’s energy policy reform.We hope this study would offer an improved understanding of subsidies reform and climate change.
2.Analytical framework and methodology
Several terminologies,conceptions and methodologies were quoted and applied in this paper.This ction would clarify their interconnection under the general analytical framework of this study.In the following part we analyzed the intrinsic connection between rebound effect and subsidies so as to prent why the subsidies reform could generate economic growth while reduce the rebound effect.In the context of methodology,price-gap approach is adopted to quantify the scale of China fos
sil energy subsidy,empirical study approach ud to qualitatively analyze the relationship of subsidies reform and rebound effect,and the hybrid energy input–output model applied to quantitatively simulate how subsidies reform would indirectly affect rebound effect.
2.1.Interaction among energy subsidies and rebound effect The so called ‘‘rebound effect’’is the increasing energy consump-tion enabled by energy efficiency enhancement.According to a partial equilibrium theory,as energy consumption per unit of economic output decreas,the efficiency improvement would implicitly lead to a reduction in the price of products,in other words people can afford more energy-using outputs if costs per unit have fallen,which is an income effect (Herring and Roy,2002;Roy,2000;Sorrell et al.,2009).Basically the key mechanism of rebound effect is that technical advancement enhances the efficiency,and further reduces the price.The effect of energy subsidies is that it could lower the end-u price of energy products or rvice,so to some extent subsidies would strengthen rebound effect.Fig.2showed an internal mechanism of how energy subsidies affect the rebound effect.
While rebound effect and subsidies has interctions,it is neces-sary to find a systematical approach to identify such interaction.Here we make the co-thinking:whether there would be one option that could reduce pollutants and/or save energy and/or make money meanwhile could reduce CO 2emiss
ions and/or other pollutants?Through the analysis in Fig.2,fossil energy subsidies reform could not only lower the governmental budget and ea the distortion of energy market (monetary issues),but reduce the energy consumption and related carbon emissions as well.The removal of price gap and ensuing energy consumption reduction would contribute to the mitigation of rebound effect,realizing the economic and environmental gains.2.2.Analytical framework
This study mainly focud on a quantified economic and environmental asssment on how energy subsidies reform con-tributes to the mitigation of rebound effect.The analytical
50000
100000150000200000250000300000350000E n e r g y c o n s u m p t i o n /G D P , t /10000R M B
E n e r g y c o n s u m p t i o n , 10000 t
Energy consumption Energy consumption/GDP
Fig.1.China’s energy consumption and efficiency.Source :(NBS,2011)
L.Hong et al./Energy Policy 54(2013)335–342
圣诞英文祝福
336
framework is shown in Fig.3.In the first step we identified the key points of economic and environmental gains and propo asssment indicators;then we calculated the subsidies scale in 2007.Subquently we established a hybrid energy input–output model with which to analyze and simulate.In the ca study ction,we further analyze the current energy consumption and efficiency situation of China,identify the topic of rebound effect and simulate the scenario of eliminating energy subsidies with the established model.The simulation results would be re-evaluated by the asssment indicators to figure out the benefits.In the last ction we discuss policy proposals.
It is noted that there are three types of rebound effects (Greening,2000;Wang et al.,2012c ;Wei,2010):
The direct effect:energy becomes cheaper,so an individual
us more direct energy products,such as heat;
The income effect or indirect effect:lower energy price cau more spending and subquent more energy u due to higher disposable income level;
The macroeconomic rebound effect:the energy efficiency technologies boost the entire macro economy so that produc-tion is upgraded,and as a result more energy is consumed.
In this study,through the hybrid input–output model,it is able to identify the energy consumption from a life cycle perspective,that the consumption in the whole supply chain could be considered.Or rather,we could explore how subsidies reform could contribute to the mitigation of the macroeconomic rebound effect.The analysis targets on the indirect one as we mainly focus on the physical amount of energy savings and emissions reduc-tion of subsidies reform.Before using the energy Input–output framework,it is necessary to quantify the variations in the end ur demand when energy efficiency is improved.
2.3.Asssment indicators for economic and environmental gains Bad on the analysis in Section 2.1,the economic-environmental gains mainly generated from the effect that sub-sidies reform would dismiss the price gap of energy products,thus reducing the end-ur demand in relevant ctors,and finally leading to the consumption and related carbon emissions reductions,which could be en as a mitigation of rebound effect.For evaluation,we propod two indicators:
a.Gains in terms of CO 2emissions reduction per unit of mone-tary saving (tCO 2/CNY),which means how much CO 2emission could be reduced when one unit of money is saved.
b.Gains in terms of energy saving per unit of monetary saving (tce/CNY),which means how much energy could be saved when one unit of money is saved.With the two propod indicators we could identify how subsidies reform could contribute to the mitigation of rebound effect (save energy)and at the same time achieve economic benefit.如果冬天来了
2.4.Price-gap approach
The Price-gap approach focus on consumer-side subsidies and quantifies the gap between reference prices and subsidized end-u prices.The methodology is described as follow (IEA,1999):
S i ¼PG i ÂC i ð1ÞPG i ¼M i ÀP i
ð2Þ
where S i is the subsidies scale of energy product I ,and PG i the price-gap of energy product i .C i denotes the consumption of energy product i ;M i denotes the reference price of energy product i (refers to the price without subsidies).P i is the end-u prices of energy product i .
According to the methodology,subsidies scale is calculable with reference price and end-u price.In most instances the end-u prices are available from statistics;thus in applying the methodology the
crux is to figure out the reference prices,which requires the data of market prices of international trade,taxes,transportation costs,and so on.In this paper we concentrate on three primary fossil energy including coal,oil and natural gas,and the condary energy electricity.
For coal,in 2007China was the net exporter of coal and net importer of oil products.According to the methodology of IEA,
the
Fig.2.Internal connection of energy subsidies and rebound
effect.
Fig.3.Analytical framework.
bitiL.Hong et al./Energy Policy 54(2013)335–342337
related reference coal prices are adjusted as follows(IEA,1999): M i¼FOB iþD iþVATð3Þwhere,FOB i is free-on-board export price lected as starting point price.D i is internal distribution cost added to reflect variations in different modes of transportation and distances between the ports and the location of consumer market.VAT stands for value added tax.
For oil products and natural gas,the reference prices are calculated according to Eq.(4):
M i¼International_price iþD iþTaxð4ÞTax includes VAT,customer tax,etc.
For electricity,the reference price is long-term marginal price (Lin and Jiang,2011).The detail description of price-gap approach was showed in our previous rearch(Li et al.,2011;Liu and Li, 2011).
2.5.Hybrid physical energy input and monetary output model
After obtaining the subsidy scale,we build a model to link subsidy and rebound effect as the further key step.Rebound effect relates to the energy prices and its consumption,while energy subsides affects the energy end-u prices,and it is of great importance in the way to connect the price(econo
mic issue)and consumption(physical issue).To resolve it hybrid input output model is a uful tool to estimate the issues combining economic and environmental matters as it explains the inherent relation-ship between materialflows and economicflows(Xu,2010). Inspired by the previous work of the physical input–output model and material physical input and monetary output model in environmental studyfields(Giljum and Hubacek,2009;Liang et al.,2010;Liang and Zhang,2011,2012),in this paper,we propo an improved physical energy input and monetary output model(EIMO)to simulate how subsidies reform could mitigate the rebound effect.
The EIMO model is bad on China monetary input–output table,and physical energy input was compiled with energyflow analysis.We categorize the42ctors into6divisions(A to Z) according to the energy consumption features:The primary industry,Industry,Construction industry,Transformation indus-try,Sale,Living and Catering industry,and the other Service ctors.
For each ctor,the energy input is in physical units and the output is in monetary units.In this way,the model quantitatively reprents the correlations between economic ctors by mone-tary input output table(MIOTs)and the connections between the ecological system and the economic system by the method of energy or materialflow analysis(EFA or MFA).Table1shows the structure of EIMO model.
The direct monetary consumption matrix A and Leontief inver matrix(IÀA)À1as well as the row balances are illustrated in various studies on I–O analysis(Holub and Schnabl,1985; Leontief,1936;Wu and Chen,1990).The row balances are shown in Eqs.(5)and(6):
AXþY¼Xð5ÞX¼IÀA
ðÞÀ1Yð6ÞThe mÂn matrix E could be en as the energy intensity among the ctors,or the direct energy consumption matrix.They could be obtained from the energy input data and economic output data of each ctor,and bad on the energy balance table and energy statistical data,the direct energyflow of each ctor is analyzed and the direct energy consumption matrix is obtained. Relationships between total energy consumption andfinal demand are shown in Eq.(7):
D¼EX¼E IÀA
ðÞÀ1Yð7Þwhere,D denotes the total or cumulative energy consumption.
Bad on above mathematical relationships,energy consump-tion can be inherently connected to economic activities.Analysis can be conducted by tting one of the parameters exogenous. The performance of the system,both ecologically and economic-ally,can be simulated from different aspe
cts by changing one of tho parameters.Particularly for this study,it could link the price with the real physical material consumption.It is noted that in this study,we allocated the electricity into different ctors due to our rearch demand(we want to investigate the consumption change of the electricity after the subsidies reform).To allocate the electricity,the issue of power generation and ctor lf-power generation are carefully considered.Here we explore it according to the physical energy balance table using energyflow analysis.For primary industry,transportation,construction,and rvice ctor,the allocation amount of electricity is theirfinal consumption transformed into energy unit.For the industry,we deducted the coal,oil and gas consumption of producing elec-tricity becau the existence of energy manufacturing process. The original data is avail in the energy balance table of China.For more details about the hybrid input–output table,e the‘‘Sup-plementary material’’.
3.Fossil energy subsidies scale
Detailed calculation can be referred to our previous work(Li et al.,2011;Liu and Li,2011).We calculated four categories of energy resources,including coal,oil,natural gas and electricity. Table2summarized the price-gap and consumption for different energy products in China in2007.
Bad on Eqs.(1)and(2),we calculate the fossil energy subsidies in China and the average subsidy r
ate for various energy products as a basic for following analysis.In theory,subsidy rate equates to the ratio between price-gap and the reference price. The results are shown as Table3.
According to Table3,China’s total fossil energy subsidies were 582.0billion CNY(76.6billion USD)in2007(IEA,2008)estimated that China’s energy subsidies were about300billion CNY(includ-ing electricity subsidies)in2007.Our results are higher than that of IEA due to different views on coal pricing mechanism and the lection of reference prices.
It is noted that in effect the subsidies produces a price-gap for the energy products,making the price of energy products and rvices lower than their real market value.Such lowering-down Table1
The structure of hybrid energy input monetary output model.
Monetary input Intermediate
monetary
output ctor
Final
demand
Total
output
Y X Intermediate monetary
input
1M Y1X1
y y y
n Y n X n刘苏曼
Added value V
Total monetary output X
Physical energy input Physical
input
distribution
Energy resource1E
y
m
L.Hong et al./Energy Policy54(2013)335–342 338
effect has the same effects as technical advancement to some extent,resulting in rebound effect;therefore removing such price-gap would rve as a buffer to the rebound effect,and in the following ction using an EIMO model we simulate how much energy consumption would be reduced through removing subsidies.
4.Ca study
In this ction,we conduct an empirical study about China’s energy consumption and efficiency as w
ell as analysis of rebound effect.Next we analyze how energy subsidies reform would affect the energy product or rvice prices.Bad on the two parts and through the established EIMO model,we make a simulation on the mitigating effect mechanism of subsidies reform.
4.1.Empirical study of current energy consumption
and efficiency in China
First we made an empirical study solely on the statement of energy consumption and efficiency and the results are illustrated in Fig.4.Although during thefirst decade of the century the energy efficiency was enhanced dramatically–mostly due to the innovative energy conrvation and efficient technologies–however,from the perspective of total energy consumption,it still kept increasing.During the decade,energy consumption per GDP decread by39%,while energy consumption per capita, residential energy consumption per capita for urban area and for rural area incread by99%,100%,57%and133%,respectively. Fig.5shows explicitly the different energy resources consump-tion over time.Electricity was the most rapidly increasing energy resource,from2000to2009its consumption per capita incread more than doubled,from1067kW h to2871kW h,the consump-tion of coal and oil ro from1117kg to2222kg and from178kg to288kg,res
pectively.Empirical study results indicate there was rebound effect.We only make a qualitative analysis as the focus of this study was not mechanism analysis on the rebound effect in China.
China’s rapid energy consumption was mainly driven by the rapid demand growth coming along with economic development; rebound effect,a common phenomenon in developed countries (Barker et al.,2007;Freire Gonza´lez,2010;Matos and Silva,2011; Maxwell et al.,2011;Wang et al.,2012b;Wei,2010),did exist in China.Various studies supported this conclusion and the average rebound effect of China in the past decades ranged from30to50% in general(Li and Yonglei,2012;LIU and LIU,2008;Ouyang et al., 2010;Wang et al.,2012a,2012c).A report in EU published in 2011also estimated that the rebound effect in China was about 30%(Maxwell et al.,2011).As can been en,both empirical data and literatures supports the existence of rebound effect in China. In the following part,we make a qualitative analysis on it and further analyze how subsidies reform reduces it.
Fig.6illustrates rebound effect.Line A shows an ideal condi-tion of energy efficiency measure,that is,the efficiency improve-ment reduces the total energy consumption;however in reality,it is nearly impossible to happen due to the rapid economic growth and increasing material requirement of mankind.Line B indicates that energy efficiency condition is affected little by rebound effect.
Table2
Price-gap and consumption of energy products of China,2007.
Energy products End-u
prices
Reference珍爱生命预防溺水
prices
Price-
gap
Consumption
Coal(CNY per ton)
Steam coal480.3500.720.4 1.33billion tons Coal contract285.0306.021.00.76billion tons
Oil products(CNY per ton)
Gasoline6464.17652.51188.45552.5Â104tons Diel5548.27105.91557.812466.4Â104
tons
Fuel oil3526.74088.1561.41932.2Â104tons Aviation
kerone
5106.76893.71787.045.3Â104tons
Natural gas(CNY per m3)
Industry 2.47 3.410.9450.9billion m3 Resident 2.15 3.41 1.2613.3billion m3 Public rvice 2.09 3.41 1.32 5.3billion m3 Electricity(CNY per kW h)
Resident0.49 1.030.54362.27billion
kW h
Table3
Calculation for fossil energy subsidies scale of China,2007.
Energy products Subsidies
scale(billion CNY)
Average
subsidies rate
Coal43.0 6.46% Oil products271.819.52% Gasoline65.915.53% Diel194.321.92% Fuel oil10.813.73% Aviation kerone0.825.92% Natural gas71.635.46% Electricity195.652.43 Total(billion CNY)582.0–
500
1000
1500
2000
衡水中学英语作文字体2500
k
g
c
e
Energy consumption per-GDP
Energy consumption per-capita
Annual Residential Energy Consumption Per Capita
venomUrban Annual Residential Energy consumption
Rural Annual Residential Energy consumption
Fig.4.The change of energy consumption and efficiency of China.
Source:Calculated by the authors through the data in(NBS,2010) 0
1000
2000
3000
4000
5000
6000
2000200120022003200420052006200720082009 Coal consumption per capita,kg
Oil consumption per capita,kg
Electricity consumption per capita,kWh
Fig.5.Different types of energy consumption per capita over time. Source:Calculated by the authors through the data in NBS(2010)
L.Hong et al./Energy Policy54(2013)335–342339
