Economics Seminar（2019-02）

Topic: Setting the Price Right: Evidence from Heating Price Reform in China

Speaker: Shuang Zhang,University of Colorado Boulder

Time: Tuesday,26February, 13:30-15:00

Location: Room 217, Guanghua Building 2

Abstract:

Inefficient energy pricing and the lack of incentives to conserve energy are common problems indeveloping countries and result in substantial allocative inefficiency. We evaluate a recent majorreform in the residential heating system in China that replaced a non-metered fixed paymentsystem with a two-part tariff, called consumption-based billing. We develop an event-studyresearch design that exploits quasi-experimental variation in the staggered rollouts of the reformover ten years. Using household-level daily heating usage data before and after the reform, wefind that the reform induced substantial reduction in heating usage, by 37 percent reductionin four years. We also find evidence of learning. Households reduced heating usage graduallyover time, with larger reduction in warmer days (i.e. days when the value of heating wasrelatively low) in later years. We then use plant-level emission data to examine environmentalbenefits of the reform. The reduced heating usage was associated with 35 percent reductionin SO2 emission concentration. We use these results to calculate the reduction in deadweightloss that was produced by the policy. Our findings provide important implications for energypolicy because a growing number of developing countries are in the process of implementingconsumption-based energy billing in lieu of pre-existing inefficient fixed-charge billing.

Introduction:

Pro.Zhang Shuang is an assistant professor of the department of Economics, University of Colorado Boulder. Her research interests include: Environment and Energy, Health, Development, China.

Your participation is warmly welcomed!