Subsidies, Clean Heating Choices, and Policy Costs: Evidence from Rural Households in Northern China

Clean heating renovation is important for optimizing the regional energy structure and improving the quality of the atmospheric environment in Northern China. According to survey data of 1298 rural households in the "coal-to-gas" reform in Hengshui of Hebei Province, in this paper, we construct a clean heating subsidy model which focuses on clean heating choices, the reburning rate, and the subsidy cost. The key parameters affecting farmers' choice of clean heating, including the lifeline, classification of rural households, and gas price elasticity, are estimated. Furthermore, we simulate changes between the existing and new subsidy policies, including the impact on the welfare of rural residents. We present the following findings: (1) under the current subsidy standard, the level of gas heating lifeline in Hengshui is 700 m(3), the proportion of low-gas-consumption households is approximately 47.38%, and the reburning rate ranges from 47.38% to 63.80%; (2) under a new subsidy standard which we designed to ensure that households will not reburn the coal, the optimal subsidy value is 1.23 CNY/m(3), the optimal subsidy volume is 970 m(3), and the total subsidy demonstrates an increase of 46.21%; and (3) the government's subsidy standards should focus on low-income households.