Economic and environmental gains of China's fossil energy subsidies reform: A rebound effect case study with EIMO model

Energy consumption and efficiency emerged as the hottest topic in the context of China's sustainable development. Energy subsidies and “rebound effect” were closely related to this topic while few combinative studies on them with a focus on China. This paper employed a co-thinking approach, focusing on how the energy subsidies reform could mitigate the rebound effect in China, and how to achieve an “economic and environmental gains” that reduced pecuniary spending, improved the distorted energy market and reduced energy consumption simultaneously. Firstly, with price-gap approach we calculated the total energy subsidies scale of China in 2007, which amounted to582.0 billion CNY; then we detected and identified rebound effect of China energy consumption with the features. Furthermore, based on China 2007 monetary input–output table and energy flow analysis, we compiled a hybrid physical energy input and monetary output model (EIMO) to simulate the mitigation effect of subsidies reform. Results showed that removing energy subsidies would decrease ultimate demand of different economy sectors and reduce the accumulatively physical consumption of coal, oil, natural gas and electricity by 17.74, 13.47, 3.64 and 15.82 million tce, respectively. Finally we discussed relevant policy issues on China's energy subsidies reform in depth. - Highlights: ► Analyze the economic and environmental gains of fossil energy subsidies reform in China. ► Energy input and monetary output model was applied for analysis. ► Subsidies reform would help to reduce the rebound effect. ► The benefits of money saving, energy saving and CO₂ mitigation were achieved