Time preferences and energy consumption of rural household in China

Abstract

Recent empirical evidence suggests that time preferences have significant effects on intertemporal investment, saving behavior and asset pricing. However, limited research has been conducted on the impact of time preferences on energy consumption. This study aims to investigate the relationship between time preferences and energy consumption among rural households in China, using survey data collected on energy consumption patterns. The results reveal that as time preferences increase, there is a reduction in the diversity of energy sources used by households, and this finding remains robust after rigorous testing. Moreover, our findings support the applicability of the energy ladder theory in rural China, indicating that higher household income can mitigate the inhibiting effect of time preferences on the transition and improvement of energy sources. Additionally, policies promoting energy accessibility, raising awareness about high-quality energy sources, and facilitating credit access significantly promote rural households' advancement on the energy ladder toward superior-quality sources. These policy measures, along with heightened awareness and credit access, can alleviate time preference constraints on the energy transition of rural households. Consequently, we recommend enhancing future policies focusing on efficiency and providing customized financial support for energy initiatives.