Multiple energy price distortions and improvement of potential energy consumption structure in the energy transition

Abstract

Price distortion correction is considered an effective way to improve the energy consumption structure (ECS) in the era of carbon neutrality. However, the quantitative relationship between multiple energy price distortions and ECS has not been verified from the sector's perspective. Taking China's heavy industry as the research sample, we first estimate multiple energy price distortions (including coal, oil, and natural gas) from 2003 to 2019. Then, we employ the system generalized method of moments model to explore the impact of price distortion on ECS. On this basis, we further apply the input– output price and price- shifting models to analyze potential ECS improvement resulting from price distortion correction. The main results indicate the following: (1) The price distortion of natural gas is the most serious (− 25.54%), followed by oil (−15.99%) and coal (−7.25%). (2) The effects of absolute price distortion of coal and natural gas on ECS are positive, while oil price distortion negatively affects ECS. And relative price distortion for oil negatively affects ECS, while natural gas exerts a positive effect. (3) Removing the price distortion of coal and natural gas and slightly increasing the oil price will significantly improve the ECS without price control. Eliminating distortions of coal or natural gas individually under price controls would have a greater positive impact on ECS upgrade than that under non-price control. The results may offer policy support for the low-carbon transition of China's heavy industry.