Unraveling effects of coal output cut policy on air pollution abatement in China using a CGE model

Abstract

Recently frequent hazy weather in China caused by PM2.5 is mainly attributed to irrational energy consumption structure, so the policies cutting coal output and promoting electric power substitution were initiated. Facing some resistance in the policy implementation, what the proper target of cutting coal output is, or whether there is a need to cut electricity prices for electric power substitution, are still unknown or debatable. To exploring this knowledge gap, this paper set the eight action plan policy scenarios, in which the coal output cut is set from −3% to −10% respectively. Further, in order to observe whether the policy of cutting electric price will reduce the negative effects of action plan policy scenarios, the eight enhanced action plan policy scenarios were also set, in which the coal output cut is set from −3% to −10% respectively with the hypothetical electric price cut −3%. By using the developed computable general equilibrium (CGE) model, the policy scenarios are simulated, and the economic and environmental effects are tested. The results showed that: First, in most policy scenarios, the environmental and economic effects were changing synchronously in inverted U shapes, but the policy to cut coal output would lead to positive environmental effects and negative economic effects. Second, cutting electricity price could contribute to promoting electricity substitution, though it couldn’t be conducive to improving the electricity structure. Third, the reduction of electricity price could also help to reduce the resistance in policy implementation. Consequently, for optimal environmental effects and economic resistance, it is recommended to set the policy target of cutting coal output as −6%, while the moderate reduction of electricity price is needed and set as −3%.