China’s energy consumption is the highest in the world, and it still drives the largest share of demand growth. Building efficient, adaptable energy markets and supportive public policies is essential to delivering affordable, reliable energy. EPIC-China will work to uncover the policies, prices and information needed to help energy markets work efficiently.
EPIC scholars have already begun evaluating China’s policies to improve energy efficiency. EPIC scholar Koichiro Ito and his coauthor are working with a heating provider in Tianjin to see if introducing a usage-based price in addition to the annual fixed payment consumers are accustomed to paying could encourage households to conserve heat. Their preliminary findings suggest that the usage-based price causes households to reduce their heat use by 30 percent. Their estimate suggests that the welfare gain from this policy is substantially larger than the cost of the policy, which includes meter installation and a new billing system.
“Our work shows that it is important to provide correct price incentives to conserve energy and reduce pollution. Financial incentives push people to change their habits and develop new ones.” – Koichiro Ito, Associate Professor, Harris Public Policy