Policy Study on Adjustments to Electric Power Prices for China’s Air Pollution Abatement
2019
Kun Xiao and Jingdong Zhang
In the past decade, the deterioration in atmospheric quality caused by emissions of ambient particulate matter with an aerodynamic diameter of less than 2.5 μm (PM2.5) has become an urgent problem in China. As this problem can be mainly attributed to the large amount of coal consumption, a strategy to promote electric power substitution was initiated, and in this case, cutting the price of electricity is considered useful. However, since it was announced that the price of electric power used in the service industry will be reduced by 10%, the proper target to cut the price of electric power used in the secondary industry was under debate. By using the computable general equilibrium (CGE) model, the policy to cut the price of electric power used in the secondary industry was simulated and the effects of the policy on the economy and the environment were explored. The results show that the policy to cut electric power prices will contribute to promoting the strategy of electricity substitution, and further contribute to environmental improvement. This policy can result in positive effects on the systems of the economy and the environment at the same time, and when the target to cut the price of electric power used in the secondary industry is –3%, the maximum positive effects will be obtained: gross domestic product (GDP) growth will be accelerated by 0.015‰, while PM2.5 emissions will be abated by 394.2 tons. Moreover, based on the unique cross-subsidy mechanism in China’s electric power industry, although residents’ consumption welfare can be fully compensated, less cross-subsidy will have a negative effect on the agriculture industry.
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