Measurement of the Price Distortion Degree for Exhaustible Energy Resources in China: A Discount Rate Perspective

This paper uses the marginal opportunity cost (MOC) pricing method to calculate theoretical prices of energy resources (namely coal, crude oil, and natural gas). The theoretical price encompasses the marginal production cost (MPC) for exploitation, marginal user cost (MUC) for the scarcity of the exhaustible resources, and the marginal external cost (MEC) for environmental impacts. Compared with the existing compensation mechanism, this study estimates the degree of energy price distortions under different discount rates. The results show that each resource price presents different degrees of distortion with varying causes for the distortions. The crude oil price had the highest distortion degree, followed by coal and natural gas, and the lower the discount rate, the more serious is the energy price distortion.