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How do urban households in China respond to increasing block pricing in electricity? Evidence from a fuzzy regression discontinuity approach

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  • Zhang, Zibin
  • Cai, Wenxin
  • Feng, Xiangzhao

Abstract

China is the largest electricity consumption country after it has passed the United States in 2011. Residential electricity consumption in China grew by 381.35% (12.85% per annum) between 2000 and 2013. In order to deal with rapid growth in residential electricity consumption, an increasing block pricing policy was introduced for residential electricity consumers in China on July 1st, 2012. Using difference-in-differences models with a fuzzy regression discontinuity design, we estimate a causal effect of price on electricity consumption for urban households during the introduction of increasing block pricing policy in Guangdong province of China. We find that consumers do not respond to a smaller (approximately 8%) increase in marginal price. However, consumers do respond to a larger increase in marginal price. An approximately 40% increase in marginal price induces an approximately 35% decrease in electricity use (284kWh per month). Our results suggest that although the increasing block pricing could affect the behavior of households with higher electricity use, there is only a limit potential to overall energy conservation.

Suggested Citation

  • Zhang, Zibin & Cai, Wenxin & Feng, Xiangzhao, 2017. "How do urban households in China respond to increasing block pricing in electricity? Evidence from a fuzzy regression discontinuity approach," Energy Policy, Elsevier, vol. 105(C), pages 161-172.
    • Handle: RePEc:eee:enepol:v:105:y:2017:i:c:p:161-172
    DOI: 10.1016/j.enpol.2017.02.025
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    More about this item

    Keywords

    C54; D12; L94; Q41; Difference-in-differences; Electricity demand; Increasing block pricing; Price elasticity; Fuzzy regression discontinuity;
    All these keywords.

    JEL classification:

    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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