Electricity cross subsidies in the People’s Republic of China: Equity, reverse Ramsey pricing and welfare analysis

This ADBI Working Paper tests reverse Ramsey pricing to check if cross subsidies across different consumers in the PRC electricity sector is equitable and efficient. The paper finds that the pricing mechanism can be equitable as long as social welfare are accounted for, reverse Ramsey pricing can serve the avowed objectives. There are, however, the paper further posits, other subsidy schemes such as targeted subsidies based on level of consumption that can also be efficient and equitable.