Skip to main content
SpringerLink
Log in

An event study analysis of price adjustment of refined oil and air quality in China

  • Research Article
  • Published:
Environmental Science and Pollution Research Aims and scope Submit manuscript

Abstract

Since marketization of the refined oil price, the Chinese government has used refined oil price adjustments to control air pollution. Using an event study analysis, we examine whether these price adjustments have impacted air quality. We test the abnormal returns of 12 price adjustments between 2014 and 2015 in 51 major cities of China. The results show that the impact on air quality of refined oil price decreases is larger than the impact of oil price increases. Although results indicate air quality has deteriorated, the impact is insignificant for most of the cities. Consequently, we conclude that price suspension of refined oil has had a negligible impact on air quality. This policy is not a viable method to improve the air quality in the short run.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1

Similar content being viewed by others

Notes

  1. A handful of studies have found that changes in gasoline taxes have significantly greater impacts on gasoline demand than market-induced changes in gasoline prices (Tiezzi and Verde 2016).

  2. Since June 1998, Chinese oil product pricing mechanism was established that the domestic oil product price could only fluctuate within a certain range of a baseline price. The baseline price is adjusted on a regular basis given the change of the international oil price. The National Development and Reform Commission (formerly the State Planning Commission) has the right to determine the timing and degree of the adjustment. The mechanism has been introduced to serve the Chinese economy by maintaining a relatively stable oil price (Zhang and Xie 2016). From 2013, China’s oil pricing reform brought the country one step closer to the full marketization of energy pricing.

  3. Data source: 2016 China’s Auto Market Almanac. Beijing: China Commercial Publishing House, 2016.

References

  • Almond D, Chen Y, Greenstone M, Li H (2009) Winter heating or clean air? Unintended impacts of China’s Huai River policy. Am Econ Rev 99(2):184–190

    Article  Google Scholar 

  • Anderson ST, Sallee JM (2016) Designing policies to make cars greener: a review of the literature. NBER Working Paper, 8(1):113–124

  • Arzaghi M, Squalli J (2015) How price inelastic is demand for gasoline in fuel-subsidizing economies. Energy Econ 50:117–124

    Article  Google Scholar 

  • Baranzini A, Weber S (2013) Elasticities of gasoline demand in Switzerland. Energy Policy 63(6):674–680

    Article  Google Scholar 

  • Barnett AG, Knibbs LD (2014) Higher fuel prices are associated with lower air pollution levels. Environ Int 66(2):88–91

    Article  CAS  Google Scholar 

  • Bhat CR, Sen S, Eluru N (2009) The impact of demographics, built environment attributes, vehicle characteristics, and gasoline prices on household vehicle holdings and use. Transp Res B Methodol 43(1):1–18

    Article  Google Scholar 

  • Binder JJ (1998) The event study methodology since 1969. Rev Quant Finan Acc 11:111–137

    Article  Google Scholar 

  • Blaufus K, Möhlmann A (2014) Security returns and tax aversion bias: behavioral responses to tax labels. J Behavioral Finance 15(1):56–69

    Article  Google Scholar 

  • BP (2017) BP statistical review of world energy June 2017. <https://www.bp.com/content/dam/bp/en/corporate/pdf/energy-economics/statistical-review-2017/bp-statistical-review-of-world-energy-2017-oil.pdf>

  • Brons M, Nijkamp P, Pels E, Rietveld P (2008) A meta-analysis of the price elasticity of gasoline demand: a SUE approach. Energy Econ 30(5):2105–2122

    Article  Google Scholar 

  • Brown SJ, Warner JB (1980) Measuring security price performance. J Financ Econ 8(3):205–258

    Article  CAS  Google Scholar 

  • Brown SJ, Warner JB (1985) Using daily stock returns: the case of event studies. J Financ Econ 14(1):3–31

    Article  Google Scholar 

  • Burke PJ, Nishitateno S (2013) Gasoline prices, gasoline consumption, and new-vehicle fuel economy: evidence for a large sample of countries. Energy Econ 36(3):363–370

    Article  Google Scholar 

  • Chao MC, Huang WH, Jou RC (2015) The asymmetric effects of gasoline prices on public transportation use in Taiwan. Transp Res Part D Transp Environ 41:75–87

    Article  Google Scholar 

  • Demirer R, Kutan AM (2010) The behavior of crude oil spot and futures prices around OPEC and SPR announcements: an event study perspective. Energy Econ 32(6):1467–1476

    Article  Google Scholar 

  • Espey M (1996) Explaining the variation in elasticity estimates of gasoline demand in the United States: a meta-analysis. Energy J 17(3):49–60

    Article  Google Scholar 

  • Fukui H, Miyoshi C (2017) The impact of aviation fuel tax on fuel consumption and carbon emissions: the case of the US airline industry. Transp Res Part D Transp Environ 50:234–253

    Article  Google Scholar 

  • Fung YW, Lee WL (2011) Identifying a common parameter for assessing the impact of traffic-induced noise and air pollutions on residential premises in Hong Kong. Habitat Int 35(2):231–237

    Article  Google Scholar 

  • Gonzalez R, Hosoda EB (2016) Environmental impact of aircraft emissions and aviation fuel tax in Japan. J Air Transp Manag 57:234–240

    Article  Google Scholar 

  • Hang L, Tu M (2007) The impacts of energy prices Tanaka on energy intensity: evidence from China. Energy Policy 35(5):2978–2988

    Article  Google Scholar 

  • Hasanov M (2015) The demand for transport fuels in Turkey. Energy Econ 51:125–134

    Article  Google Scholar 

  • Havranek T, Irsova Z, Janda K (2012) Demand for gasoline is more price-inelastic than commonly thought. Energy Econ 34(1):201–207

    Article  Google Scholar 

  • Hirota K, Poot J (2006) An international survey and statistical analysis of the effect of taxes on car use and CO2 emission. Stud Reg Sci 35(4):1109–1120

    Article  Google Scholar 

  • Labandeira X, Labeaga JM, López-Otero X (2017) A meta-analysis on the price elasticity of energy demand. Energy Policy 102:549–568

    Article  Google Scholar 

  • Li S, Linn J, Muehlegger E (2014) Gasoline taxes and consumer behavior. Am Econ J Econ Pol 6(4):302–342

    Article  Google Scholar 

  • Lin CYC, Prince L (2013) Gasoline price volatility and the elasticity of demand for gasoline. Energy Econ 38(2):111–117

    Article  Google Scholar 

  • Lin CYC, Zeng J (2013) The elasticity of demand for gasoline in China. Energy Policy 59(1):189–197

    Article  Google Scholar 

  • Liu M, Yang YZ, Sun WX (2013) The effects of refined oil price adjustment on energy stocks returns: an event study analysis. Econ Rev 3:109–117 (In Chinese)

    CAS  Google Scholar 

  • Mundaca G (2017) How much can CO2 emissions be reduced if fossil fuel subsidies are removed? Energy Econ 64:91–104

    Article  Google Scholar 

  • NDRC (National Development and Reform Commission) (2016) Oil pricing management, 2016-01-13

  • Oppenheim AV, Schafer RW (1975) Digital signal processing. Prentice-Hall, Englewood Cliffs

    Google Scholar 

  • Peterson PP (1989) Event studies: a review of issues and methodology. Q J of Bus and Econ 28:36–66

    Google Scholar 

  • Sabet AH, Heaney R (2016) An event study analysis of oil and gas firm acreage and reserve acquisitions. Energy Econ 57:215–227

    Article  Google Scholar 

  • Shaw C, Hales S, Edwards R et al (2018) What can fuel price increases tell us about the air pollution health co-benefits of a carbon price? Journal of Transport and Health 8:81–90

    Article  Google Scholar 

  • Stern D, ZHA DL (2016) Economic growth and particulate pollution concentrations in China. Environ Econ Policy Stud 18(3):327–338

    Article  Google Scholar 

  • Tanaka S (2015) Environmental regulations on air pollution in China and their impact on infant mortality. J Health Econ 42:90–103

    Article  Google Scholar 

  • Thompson R (1995) Empirical methods of event studies in corporate finance. In: Jarrow RA, Maksimovic V, Ziemba WT (eds) Handbook in operations research and management science – finance, vol 9(05), pp 963–992

    Google Scholar 

  • Tiezzi S, Verde SF (2016) Differential demand response to gasoline taxes and gasoline prices in the U.S. Resour Energy Econ 44:71–91

    Article  Google Scholar 

  • Xi PH, Liang RB (2015) The impact of oil price changes on air pollution: based on motor vehicle use. Chin Ind Econ 10:100–114 (In Chinese)

    Google Scholar 

  • Xin H (2015) China suspends fuel price adjustment. China Daily Asia, 2015-12-15

  • Yang S, Ling-Yun HE (2016) Fuel demand, road transport pollution emissions and residents’ health losses in the transitional China. Transp Res Part D Transp Environ 42:45–59

    Article  CAS  Google Scholar 

  • Ye Y (2015) NDRC suspends fuel price adjustment for air quality. 21 Finance search, 2015-12-15

  • Zhang J, Xie M (2016) China’s oil product pricing mechanism: what role does it play in China’s macroeconomy? China Econ Rev 38:209–221

    Article  Google Scholar 

  • Zhang X, Yu L, Wang S, Lai KK (2009) Estimating the impact of extreme events on crude oil price: an EM-based event analysis method. Energy Econ 31(5):768–778

    Article  CAS  Google Scholar 

  • Zhao B, Wang P, Ma JZ, Zhu S, Pozzer A, Li W (2012) A high-resolution emission inventory of primary pollutants for the Huabei region, China. Atmos Chem Phys 11(1):20331–20374

    Google Scholar 

  • Zheng S, Yi H, Li H (2015) The impacts of provincial energy and environmental policies on air pollution control in China. Renew Sust Energ Rev 49:386–394

    Article  CAS  Google Scholar 

Download references

Acknowledgements

We are grateful for the comments from David I. Stern.

Funding

Financial support from the National Natural Science Foundation of China (nos. 71673134, 71573186, and 71503039), the Fundamental Research Funds for the Central Universities (nos. NE2018105, NE2017005, and NW2018002), and Philosophy and Social Science Research in Colleges and Universities in Jiangsu Province (no. 2016ZDIXM040).

Author information

Authors and Affiliations

  1. College of Economics and Management, Nanjing University of Aeronautics and Astronautics, P.O.150, Jiangning District, Nanjing, 211106, China

    Donglan Zha, Ting Zhao, Fei Wu & Qunwei Wang

  2. Research Center for Energy Soft Science, Nanjing University of Aeronautics and Astronautics, Nanjing, 211106, China

    Donglan Zha, Fei Wu & Qunwei Wang

  3. Crawford School of Public Policy, Australian National University, Canberra, ACT, 2601, Australia

    Anil Savio Kavuri

Authors
  1. Donglan Zha
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Ting Zhao
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Anil Savio Kavuri
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. Fei Wu
    View author publications

    You can also search for this author in PubMed Google Scholar

  5. Qunwei Wang
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Qunwei Wang.

Additional information

Responsible editor: Philippe Garrigues

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Zha, D., Zhao, T., Kavuri, A.S. et al. An event study analysis of price adjustment of refined oil and air quality in China. Environ Sci Pollut Res 25, 34236–34246 (2018). https://doi.org/10.1007/s11356-018-3374-3

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11356-018-3374-3

Keywords

Search

Navigation