The greenhouse gas reduction effect of critical peak pricing for industrial electricity: Evidence from 285 Chinese cities, 2003–2019

Abstract

This paper assesses the impact of the Pilot of Critical Peak Pricing for Industrial Electricity (PCPPIE) on industrial Greenhouse Gas (GHG) emissions by employing the Difference-in-Differences (DID) methodology. It is found that the cities participating in PCPPIE underwent a significant 11.3% reduction in the GHGs emitted per industrial enterprise. These findings remain robust across various methodologies, including staggered DID estimators, propensity score matching, instrumental variable methods, and spatial econometric regression. The generalized DID analysis shows that a higher critical peak price corresponds to a more substantial decrease in GHG emissions. PCPPIE achieves weaker GHG reduction in higher-administrative level cities but stronger in those with higher industrial share, and the effectiveness of PCPPIE is compromised by cross-regional electricity imports. PCPPIE reduces GHG emission intensity of the power industry and contributes to additional reductions in GHG emissions from other sources by fostering green technological innovation and facilitating energy substitution. The practical significance of this paper is to reveal a richer dynamic mechanism for China's green and sustainable development, indicating that critical peak pricing is a power pricing strategy worthy of strengthening and optimization in the process of China's carbon peak and carbon neutrality.