Energy Prices, Subsidies and Resource Tax Reform in China

The Chinese leadership in November 2013 is determined to embark upon a new wave of comprehensive reforms in China. This is clearly reflected by the key decision of the Third Plenum of the 18th Central Committee of Communist Party of China to assign the market a decisive role in allocating resources. To have the market to play that role, getting the energy prices right is crucial. While the overall trend of China's energy pricing reform since 1984 has been moving towards a more market-oriented pricing mechanism, the pace and scale of the reform differ across energy types. This article discusses the evolution of price reforms for coal, petroleum products, natural gas and electricity in China, provides some analysis of these energy price reforms, and suggests that few areas of reforms could take place in order to have the market play that decisive role and help China's transition to a low-carbon economy.