Is the price elasticity of demand for coal in China increasing?

- We estimate the price elasticity of coal demand using provincial data for China.
- Our estimations cover 1998-2012 and include a variety of controls.
- Our results suggest that China's coal demand is becoming more price elastic.
- As of 2012, China's coal price elasticity of demand was in the range − 0.3 to − 0.7.
- Removing subsidies could help to reduce China's CO2 emissions from coal.

China's dependence on coal is a major contributor to local and global environmental problems. In this paper we estimate the price elasticity of demand for coal in China using a panel of province-level data for 1998-2012. We find that provincial coal demand has become increasingly price elastic. As of 2012 we estimate that this elasticity was in the range − 0.3 to − 0.7 in point estimate terms when responses over two years are considered. The results imply that China's coal market is becoming more suited to price-based approaches to reducing emissions. The elimination of coal consumption subsidies could reduce national coal use and related emissions by around 2%.