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%.