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FOSSIL ENERGY SUBSIDIES REFORM AND THE SUSTAINABILITY OF CHINA ’ S ENERGY SYSTEM

Sustainable development is big topic for China, which under rapid economic growth, environment deterioration and resource depletion. And in this theme, energy system sustainability is special important due to the role it plays in the national economy. This paper focused on the interaction between energy subsidies policy and the sustainability of energy system in China. With price-gap approach, subsidies scale was calculated. The fossil energy subsidies scale in China was 535.01 billion CNY in 2006, 582.0 billion CNY in 2007 and 700.28 billion CNY in 2008 respectively. Based on the triple-bottom line principle of sustainable development, assessment indicators for the sustainability were established. Then a hybrid physical input and monetary output model was constructed to simulate the effects of removing subsidies. Results indicated that the subsidies reform would contribute to the improvement of the sustainability in terms of money saving, energy saving and pollutants reduction. However, in terms of societal well-being, proper policy implication needed to be proposed.