Can energy-price regulations smooth price fluctuations? Evidence from China’s coal sector

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Due to the dominance of coal in China’s energy mix, coal prices have always been a challenging part of pricing reform. The recent frequent government interventions raise the key research questions: what is the actual impact of price policies on coal price fluctuations, and how can forward-looking pricing policies be made? By proposing a novel classification of coal pricing policies and introducing an expectation and forward-looking coefficient, the paper examines the relationship between coal price fluctuations and pricing policies using the generalised method of moments (GMM) method. It shows that the lagging coal price and coal demand play a positive role in regulating coal prices, while coal supply and marketization have significantly negative effects on coal price fluctuations. The heterogeneous impacts of price policies are due to differences in market players’ expectations, policy instruments and the methods of policy release. In addition, China’s coal pricing policy portfolio from 2013 to 2016 exerted synergy effects on the restraint of coal price fluctuations. As the forward-looking coefficient was considerably low, the government's intervention behaviors were obviously biased towards ex post facto responses. The paper suggests short run and long run policies to advance marketization of coal prices amid the energy transition.

Read the article online here.

Note: This article was published in Energy Policy, volume 128, May 2019, 125-135.

Authors:

Yanfang Zhang, School of Management, China University of Mining and Technology, and Australia-China Relations Institute, University of Technology Sydney

Rui Nie, School of Management, China University of Mining and Technology

Xunpeng Shi, Australia-China Relations Institute, University of Technology Sydney

Xiangyan Qian, School of Management, China University of Mining and Technology

Ke Wang, Centre for Energy and Environmental Policy Research & School of Management and Economics; Beijing Institute of Technology, Sustainable Development Research Institute for Economy and Society of Beijing, and Beijing Key Lab of Energy Economics and Environmental Management