Natural gas price effects in China based on the CGE model

Abstract

Natural gas is a clean energy source with many benefits and its proportion in the energy consumption structure in China has been gradually increasing over the recent years. Since the price of natural gas in China has been controlled and maintained at a relatively low level by the government, reforming the natural gas industry in China has been the matter of much attention in light of its macroeconomic effects on the overall economy. Using the Computable General Equilibrium model and the 2012 Social Accounting Matrix, the results show increases in natural gas prices lead to an increase in the consumer price index (CPI) and lead to reductions in GDP. The chemical industry sector is strongly influenced by a natural gas price increase. Furthermore, chemical fertilizer manufacturing industry and chemical products’ manufacturing have very significant effects in China. Therefore the government may gradually establish and improve the management of natural gas price to avoid negative effects, and implement a differential price as the industries exhibit different levels of resistance in response to natural gas price changes.