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Inventory and Distribution of Energy Subsidies of China

Abstract:
To provide support for the energy subsidy reform as a critical step of China's recent energy reform agenda, a comprehensive energy subsidy inventory of China is compiled and the associated distributional effect is investigated in this study. According to the results, the lower boundary estimation of annual energy subsidies of China was 90-202 billion CNY, equivalent to 0.22%-0.37% of GDP or 0.95%-1.21% of government expenditure, during 2010-2014. Thanks to the specific subsidies provided to rural grid construction and transportation, 72% of the energy subsidies were distributed to residents in 2012, while fixed capital and export carried another 13% and 10%. Poorer urban household received higher energy subsidy ratio through dwelling and food expenditures, but lower ratio through transportation and communication expenditures. The overall energy subsidies are slightly regressive, thus adequate reform can narrow wealth gap on the one hand and reduce budgetary pressure on the other.

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Keywords: energy reform in China, energy subsidy, welfare distribution

DOI: 10.5547/01956574.38.SI1.zche

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Published in Volume 38, KAPSARC Special Issue of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.