Evaluating the Atkinson index of household energy consumption in China

Improving equality and efficiency of household energy distribution is the primary concern of China's policy makers in their effort to reform the energy pricing system. In this paper, we use Atkinson Index as an analytical tool to quantitatively and systematically evaluate the equality and efficiency of household energy distribution. The result shows that the Atkinson index of electricity expenditure is much smaller than that of transportation expenditure, which indicates that transportation expenditure responds better to income differences. Furthermore, a geographical distribution analysis indicates that households in Middle China suffer greater inequality in energy distribution than those in Eastern and Western China. In view of the oncoming energy pricing reform in China, we reevaluate the Atkinson index under the new pricing scenarios for electricity and petroleum products. Compared to the current household energy pricing mechanism, the simulated new policies generate more allocative efficiency of household energy and ensure more equality of energy consumption for low income households. On this account, we suggest that geographical differences and equality in energy distribution be duly addressed in reforming energy policies in China.