Natural Gas Pricing Reform in China: Getting Closer to a Market System?
Recent policy in China targets an increase in the contribution of natural gas to the nation’s energy supply. Historically, China’s natural gas prices have been highly regulated with a goal to protect consumers. The old pricing regime failed to provide enough incentives for natural gas suppliers, whi...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | en_US |
| Published: |
MIT Joint Program on the Science and Policy of Global Change
2016
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| Online Access: | http://hdl.handle.net/1721.1/102605 |
| _version_ | 1826188264916123648 |
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| author | Paltsev, S. Zhang, D. |
| author_facet | Paltsev, S. Zhang, D. |
| author_sort | Paltsev, S. |
| collection | MIT |
| description | Recent policy in China targets an increase in the contribution of natural gas to the nation’s energy supply. Historically, China’s natural gas prices have been highly regulated with a goal to protect consumers. The old pricing regime failed to provide enough incentives for natural gas suppliers, which often resulted in natural gas shortages. A new gas pricing reform was tested in Guangdong and Guangxi provinces in 2011 and was introduced nationwide in 2013. The reform is aimed at creating a more market based pricing mechanism. We show that substantial progress toward better predictability and transparency of prices has been made. China’s prices are now more connected with international fuel oil and liquid petroleum gas prices. The government’s approach for temporary two tier pricing when some volumes are still traded at old prices reduced potential opposition during the new regime implementation. Some limitations created by the natural gas pricing remain: it created biased incentives for producers and favors large natural gas suppliers. The pricing reform at its current stage falls short of establishing a complete market mechanism driven by an interaction of supply and demand of natural gas in China. |
| first_indexed | 2024-09-23T07:57:02Z |
| format | Working Paper |
| id | mit-1721.1/102605 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T07:57:02Z |
| publishDate | 2016 |
| publisher | MIT Joint Program on the Science and Policy of Global Change |
| record_format | dspace |
| spelling | mit-1721.1/1026052019-04-09T15:43:04Z Natural Gas Pricing Reform in China: Getting Closer to a Market System? Paltsev, S. Zhang, D. Recent policy in China targets an increase in the contribution of natural gas to the nation’s energy supply. Historically, China’s natural gas prices have been highly regulated with a goal to protect consumers. The old pricing regime failed to provide enough incentives for natural gas suppliers, which often resulted in natural gas shortages. A new gas pricing reform was tested in Guangdong and Guangxi provinces in 2011 and was introduced nationwide in 2013. The reform is aimed at creating a more market based pricing mechanism. We show that substantial progress toward better predictability and transparency of prices has been made. China’s prices are now more connected with international fuel oil and liquid petroleum gas prices. The government’s approach for temporary two tier pricing when some volumes are still traded at old prices reduced potential opposition during the new regime implementation. Some limitations created by the natural gas pricing remain: it created biased incentives for producers and favors large natural gas suppliers. The pricing reform at its current stage falls short of establishing a complete market mechanism driven by an interaction of supply and demand of natural gas in China. We are thankful to industry representatives in China (Shell, CNPC) for their valuable contribution regarding natural gas information. The MIT Joint Program on the Science and Policy of Global Change, where the authors are affiliated, is supported by the U.S. Department of Energy, Office of Science under grants DE-FG02-94ER61937, DE-FG02-08ER64597, DE-FG02-93ER61677, DE-SC0003906, DE- SC0007114, XEU-0-9920-01; the U.S. Department of Energy, Oak Ridge National Laboratory under Subcontract 4000109855; the U.S. Environmental Protection Agency under grants XA-83240101, PI-83412601-0, RD-83427901-0, XA-83505101-0, XA-83600001-1, and subcontract UTA12-000624; the U.S. National Science Foundation under grants AGS-0944121, EFRI-0835414, IIS-1028163, ECCS-1128147, ARC-1203526, EF-1137306, AGS-1216707, and SES-0825915; the U.S. National Aeronautics and Space Administration under grants NNX06AC30A, NNX07AI49G, NNX11AN72G and Sub Agreement No. 08-SFWS-209365.MIT; the U.S. Federal Aviation Administration under grants 06-C-NE-MIT, 09-C-NE-MIT, Agmt. No. 4103-30368; the U.S. Department of Transportation under grant DTRT57-10-C-10015; the Electric Power Research Institute under grant EP-P32616/C15124, EP-P8154/C4106; the U.S. Department of Agriculture under grant 58-6000-2-0099, 58-0111-9-001; and a consortium of 35 industrial and foundation sponsors (for the complete list see: http://globalchange.mit.edu/sponsors/all). 2016-05-23T14:58:28Z 2016-05-23T14:58:28Z 2015-07 Working Paper http://hdl.handle.net/1721.1/102605 Report 282 en_US MIT Joint Program Report Series;282 application/pdf MIT Joint Program on the Science and Policy of Global Change |
| spellingShingle | Paltsev, S. Zhang, D. Natural Gas Pricing Reform in China: Getting Closer to a Market System? |
| title | Natural Gas Pricing Reform in China: Getting Closer to a Market System? |
| title_full | Natural Gas Pricing Reform in China: Getting Closer to a Market System? |
| title_fullStr | Natural Gas Pricing Reform in China: Getting Closer to a Market System? |
| title_full_unstemmed | Natural Gas Pricing Reform in China: Getting Closer to a Market System? |
| title_short | Natural Gas Pricing Reform in China: Getting Closer to a Market System? |
| title_sort | natural gas pricing reform in china getting closer to a market system |
| url | http://hdl.handle.net/1721.1/102605 |
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