What with the heaters going full blast, the winter season in China always puts a stress on the electrical grid. On November 30 China's National Development and Reform Commission (NDRC) released a price adjustment plan for electricity. They announced that from January 12 there will be an increase of 3 cents per kilowatt hour. In addition the NDRC will also conduct a nationwide coal price adjustment plan.
But it is the heavy reliance of coal that is at the center of China's energy and environment problems. And the mechanism of electricity price and coal price adjustments will not solve the problem.
In the past, China's low energy price encouraged its high energy industries to develop; and consequently China's development model is increasingly addicted to high energy consumption industries. Adjusted prices are not enough to curb unreasonable energy demand and to put more controls on market based coal prices is nothing but a regressive step.
A more drastic overhaul of the coal pricing system is a must, such as launching carbon tax, or introducing resource tax on coal, in order to reflect the external cost of burning coal.
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