The effect of increasing block pricing on urban households’ electricity consumption: Evidence from difference-in-differences models

Abstract

Currently, energy conservation and environmental protection have become a significant challenge for China’s sustainable development. To effectively promote energy saving, China has a policy of initiated increasing block pricing (IBP) for electricity nationwide since 2012. In this study, we investigate in-depth the effect of the IBP policy on the conservation of electricity based on a monthly panel dataset covering the Guangdong, Sichuan and Shanghai in China between 2011 and 2012. Using difference-in-differences models, we find the overall treatment effect of the IBP on electricity consumption and electricity charge to be negative and statistically significant, implying that the switch from uniform pricing to the IBP policy is playing a positive role in electricity conservation and cannot lead to welfare loss of residents. We also compare the treatment effects across different income groups and provinces. We find that for urban residents in Guangdong, the consumption threshold for the second block pricing is too high and below the basic needs. However, the second block pricing of the IBP in Sichuan and Shanghai is reasonable for urban residents.