Opinion

Progressive pricing

(China Daily)
Updated: 2010-10-12 11:26

A tiered electricity pricing mechanism for residents is a necessary starting measure to help China adapt to a more energy-saving future.

Chinese policymakers should be encouraged to come up with more such initiatives to raise awareness of the scarcity of resources and the environmental cost of power among consumers, as well as producers.

Last Saturday, the National Development and Reform Commission announced its intention to introduce a progressive pricing reform for residential electricity use.

Electricity prices for residential users will be charged according to three tiers of power usage to reflect, not only the basic cost of power generation, but also, the impact on resources and the environment.

Though recent rising inflationary pressure has forced the Chinese authorities to shun any reform that might lead to a significant rise in the living cost for most households, the country's growing energy appetite is demanding a smarter and more effective pricing system to promote market-based energy conservation.

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As one of the world's largest energy consumers, China's per capita energy use remains quite low compared to developed economies. But the country's rapid urbanization and rising living standard means the average Chinese household is likely to consume more power than ever.

Statistics showed that the country's residential tariff of 0.48 yuan ($0.07) per kWh and industrial tariff of 0.56 yuan last year were much lower than the world average.

In the absence of a progressive pricing mechanism, it is hard to imagine how the Chinese government can curb the rapid growth of residential electricity consumption without causing a marked increase in the cost of power for the majority.

By setting a first-tier price as low as the current one, the proposed pricing reform will leave 70 to 80 percent of Chinese households almost unaffected as they consume no more than 110 kWh or 140 kWh per month. Additional power use will be charged at a higher price below a level roughly double the base tier and at an even higher price beyond that level.

Admittedly, such a three-tier pricing mechanism is a far from perfect solution, for it takes into account neither family size nor living conditions, such as geographical and weather differences. Yet, as a first-step effort to heighten the public's awareness of energy conservation, it is badly needed as the country is set to take bigger strides in pursuing sustainable development in the coming years.

The modest rise in the cost of electricity for some is unlikely to be enough to persuade people that consume more power than they need to change their lifestyle. But once adopted, the progressive pricing mechanism can be frequently upgraded to proportionally reflect the increasingly greater value the nation attaches to energy conservation and environmental protection.