Price strategies that will matter

Before introducing the Guangdong and Guangxi pilot reform program to the entire country, the commission plans to implement three-tier-tariffs for household use of natural gas across China by the end of next year. These price reforms and the pilot scheme in Guangdong and Guangxi help to establish a market-oriented natural gas pricing mechanism that fully reflects demand and supply conditions.

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The government still retains control over electricity tariffs. But to encourage coal-fired power plants to install and operate flue gas desulphurization and denitrification facilities the government has since 2004 accorded a price premium for electricity generated by coal-fired power plants with flue gas desulphurization facilities installed and since November 2011 a price premium for electricity generated by power plants with flue gas denitrification facilities.

The level and scope of the price premium have been amended since their initial implementation in order to achieve the mandated emission reductions.

The government has also charged differentiated power tariffs for companies classified as "eliminated types" or "restrained types" in eight energy-guzzling industries from October 2006 onwards.

Since July 2012, the commission has used three-tier-tariffs for household electricity use, and in January this year expanded the three-tiered electrify pricing approach to the aluminum sector to phase out outdated production capacity and promote industrial restructuring more quickly.

Similar tiered power pricing policies are likely to be implemented in industries like cement to force industrial upgrades and promote sustained, healthy development.