Is the implementation of the Increasing Block Electricity Prices policy really effective?--- Evidence based on the analysis of synthetic control method

Abstract

The implementation of Increasing Block Electricity Prices (IBEPs) aims to guide residents towards electricity savings and rational energy use, but there are questions over the effectiveness of the IBEPs to achieve these goals. To this end, this paper uses residential IBEPs policy implemented in Sichuan Province of China in 2006 as a natural experiment to answer the question of whether IBEPs effectively regulate residents’ electricity demand. Synthetic control method (SCM) was used to evaluate the treatment effect of the policy. The paper finds that the IBEPs policy significantly reduces urban and rural residential electricity consumption. The per capita electricity consumption of urban residents fell by 26.87–100.76 kWh/year with an average of 51.40 kWh/year, equivalent to a decrease of 5.93%–17.50% and average of 11.17%. On the other hand, the per capita electricity consumption of rural residents decreased by 20.86–48.28 kWh/year with an average of 26.28 kWh/year, which is equivalent of a decreased of 7.8%–16.79% and average of 12.75%. Electricity demand in urban areas decreased more than in rural areas, but rural residents are more sensitive to IBEPs than urban residents. In order to achieve “equity” and “efficiency”, China needs to further improve the design mechanism of residential IBEPs.