Who benefits from China’s coal subsidy policies? A computable partial equilibrium analysis

Xiang, Haitao; Kuang, Yanxiang

doi:10.1016/j.reseneeco.2019.101124

Cited by 16 publications

(4 citation statements)

References 25 publications

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“…With the caveat that subsidy estimates are uncertain and highly aggregated, recent estimates place overall production subsidies at CNY 17-18 per tonne of coal [70], implying a CNY 350-375 billion production subsidy to the approximately 2.08 billion tonnes of coal consumed by thermal plants in 2021. Annual generation subsidies for coal power are estimated at CNY 120 billion [71] to CNY 263 billion [72] (although, in the latter case, the bulk of these subsidies were expected at the time of writing to be eliminated by 2020 amid the end of funding for pollution control upgrades and deregulation of price controls).…”

Section: Estimating Taxes and Subsidiesmentioning

confidence: 99%

Estimating the Employment and Fiscal Consequences of Thermal Coal Phase-Out in China

Clark

Zhang

2022

Energies

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China hosts over half of global coal-fired power generation capacity and has the world’s largest coal reserves. Its 2060 carbon neutrality goal will require coal-fired electricity generation to shrink dramatically, with or without carbon capture and storage technology. Two macroeconomic areas in which the socioeconomic impact of this decline is felt are losses in jobs and tax revenues supported by thermal coal mining, transport and power generation. At the national level, under a ‘baseline’ (B) scenario consistent with China’s carbon neutrality goal, labour productivity growth in coal mining implies that significant job losses will occur nationally in the medium term, even if all coal plants continue operating as planned. Jobs supported by the coal power industry would decline from an estimated 2.7 million in 2021, to 1.44 million in 2035 and 94,000 in 2050, with jobs losses from mining alone expected to exceed 1.1 million by 2035. Tax revenues from thermal coal would total approximately CNY 300 billion annually from 2021–2030, peaking in 2023 at CNY 340 billion. This is significantly less than estimated subsidies of at least CNY 480 billion, suggesting coal is likely a net fiscal drain on China’s public finances, even without accounting for the costs of local pollution and the social cost of carbon. As coal plant retirements accelerate, from 2034 onwards, fiscal revenues begin to fall more rapidly, with rates of decline rising from 1% in the 2020s to over 10% a year by the 2040s. More aggressive climate policy and technology scenarios bring job and tax losses forward in time, while a No Transition policy, in which all currently planned coal plants are built, delays but does not ultimately prevent these losses. At the provincial level, China’s major coal-producing provinces will likely face challenges in managing the localised effects of expected job losses and finding productive alternative uses for this labour. Governments of coal-producing provinces like Inner Mongolia, with an industry highly dependent on exports to other provinces, are more exposed than others to declining tax revenues from coal, and more insulated from job losses, given their high current degree of labour efficiency. Although their provincial revenues are likely to remain stable until the early 2030s under the B scenario, the possibility of increasing policy stringency underlines the need for revenue and skill base diversification. At the firm level, China’s ‘Big Five’ state-owned power companies were responsible for over 40% of both jobs and tax revenues in 2021. The number of jobs supported by the activities of each of the largest ten firms, with one exception, will decline by 71–84% by the early 2040s, with the tax contribution of each declining by 43–69% in the same period.

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Section: Estimating Taxes and Subsidiesmentioning

confidence: 99%

Estimating the Employment and Fiscal Consequences of Thermal Coal Phase-Out in China

Clark

Zhang

2022

Energies

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“…In terms of government failure, existing studies have found that government intervention and government spending can lead to pollutant emissions and overcapacity (Işik et al 2022 ; Zhang et al 2017 ). Specifically, government subsidy (Wang et al 2018b ; Xiang and Kuang 2020 ; Yu et al 2021 ; Zhang et al 2016 ) and credit support (Ma et al 2020 ) are the main factors. Because the mature market mechanism has not been established, studying the causes of overcapacity from the perspective of government intervention is more in line with China’s national conditions.…”

Section: Literature Reviewmentioning

confidence: 99%

Reducing coal overcapacity in China: a new perspective of optimizing local officials’ promotion system

Zhang

Etienne

Wang

2022

Environ Sci Pollut Res

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Reducing coal overcapacity is an important strategy to achieve carbon peak and carbon neutralization in China. Determining the drivers of coal overcapacity is the first step toward this strategy. The existing literature focuses mainly on the macro determinants of coal overcapacity. Micro factors such as local officials’ intervention motivation also plays a role, but has received less attention in the literature. Using data from 25 coal-producing provinces in China, we demonstrate that local officials’ promotion pressure under the GDP-based promotion system significantly leads to coal overcapacity. Mediation effect analysis suggests that factor market distortion is one important channel through which local officials’ promotion pressure affects overcapacity in the coal sector, and the distortion in the capital market plays a more dominant role than distortion in the labor market. To alleviate the negative effect of officials’ promotion pressure on capacity utilization rate, we build a diversified promotion system incorporating environmental indicators. Results show that when the environmental pressure index accounts for at least 50% of the weights in the diversified promotion system, the negative effect of promotion pressure disappears. Our results suggest that to reduce coal overcapacity problem, policymakers may wish to weaken the GDP-based political promotion incentive by adding environmental and ecological indicators and reducing interventions on factor allocation. Results from the present paper has implications for resource-dependent countries facing similar overcapacity problems, especially in the context of the open economy and green recovery in the post-COVID-19 period.

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“…These models are applied to capture the impact of changing trends in technological energy, climate, productivity etc. (Carbone et al, 2020; Farajzadeh & Bakhshoodeh, 2015; Jiang et al, 2020; Kim et al, 2004; Lisenkova et al, 2013; Mostert & Van Heerden, 2015; Niamir et al, 2020; O’Ryan et al, 2020; Rokicki et al, 2020; Xiang & Kuang, 2020). They focus more on market variables and help in a more informed judgement about the potential implications of future policies and trends (Akbulut & Eğen, 2020; Dellink et al, 2020; Itakura, 2020; McKibbin & Fernando, 2020; Strutt et al, 2015; Strutt & Walmsley, 2011).…”

Section: Modelling Framework and Simulation Settingmentioning

confidence: 99%

Isolating China: Deglobalisation and its Impact on Global Value Chains

Narayanan

Chakravarthy

Tewary

2021

Foreign Trade Review

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As global value chains (GVCs) account for 80% of global trade, the revival of protectionism, amidst the looming trade tensions between United States and other trading partners, particularly China will dampen the international input–output relations. By using a multi-regional and multi-sectoral dynamic computable general equilibrium model, this study analyses China driven GVCs. The study explores the impact of tariff change on China and its major trading partners on economic variables like consumption, investment, government expenditure, exports and imports and sectors like electronic goods, coal, crude oil and machine equipment for the five-year period, that is, 2021–2025. GTAP 10 database has been used. The findings of the study suggest that although China’s dominance may diminish, yet it would continue to be one of the prominent players in GVC. Further, based on the results, the global economy can look forward to fragmented and locally oriented supply chains. At the sectoral level, the shorter supply chains would lead a further disjoint global trade system with a wider range of suppliers for similar products and hence increased regionalisation of production. JEL Codes: F10, F17, F60, F16, D58

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Who benefits from China’s coal subsidy policies? A computable partial equilibrium analysis

Cited by 16 publications

References 25 publications

Estimating the Employment and Fiscal Consequences of Thermal Coal Phase-Out in China

Estimating the Employment and Fiscal Consequences of Thermal Coal Phase-Out in China

Reducing coal overcapacity in China: a new perspective of optimizing local officials’ promotion system

Isolating China: Deglobalisation and its Impact on Global Value Chains

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