Impact of electricity pricing strategy on residential energy consumption decisions in China: empirical evidence from a household survey

ABSTRACT In this study, the direct impact of knowledge about the electricity pricing policies on residents’ electricity saving behaviour and the indirect impact of these pricing strategies on residential consumers’ fuel choices are analysed by adopting a traditional two-stage-least-squares model. Moreover, due to the different levels of affordability of energy, differences between rural and urban households are also examined. Estimations are based on an analysis of data from 3653 households from the Chinese General Social Survey of 2015. We find that energy sources with higher health risks – raw coal and briquettes – are more likely to be used in rural households than in urban households. However, our results confirm that applying for time-of-use (TOU) tariffs can help rural residents reduce their electricity expenditure, and thus increase their ability to consume cleaner energy – LPG instead of coal. Similarly, choosing TOU and possessing a higher understanding of tiered electricity pricing (TEP) significantly improves urban residents’ electricity saving behaviours. Urban residents with higher energy saving awareness are more likely to purchase energy sources with more convenience and less carbon emissions – natural gas instead of LPG. Finally, we suggest that more information on the TEP pricing scheme should be offered to rural residents to improve their energy saving knowledge levels.