Quota allocation of coal overcapacity reduction among provinces in China

Abstract

Laying down fair and economically viable policies to allocate quotas of coal overcapacity reduction to provinces has drawn great attention from both governments and enterprises. In this study, the production function method and panel variable coefficient model are used to estimate the boundary production function and coal capacities of 25 coal-producing provinces. The results predict that China's coal overcapacity will reach more than 0.803 billion tons by 2020. Then, a quota allocation model of coal overcapacity reduction among the provinces is proposed based on nonlinear programming, with the aim of minimizing the total cost of national overcapacity reduction. The results show that the total cost of national overcapacity reduction based on the optimal allocation scheme is 56.6695 billion yuan less than that based on the government allocation scheme. The Gini coefficient of the optimal allocation scheme is smaller than 0.3, indicating that this plan considers effectiveness and fairness. Furthermore, we calculate the optimal proportions for the provinces to reduce coal overcapacity based on different capacity utilizations and different national coal production control targets. The results show that the optimal proportions for most provinces are approximately the same under different conditions, which means the optimal allocation scheme is robust and efficient.