How to design subsidy policies for clean energy projects? A study on "coal-to-gas" project in China

The "coal-to-gas" project is a major initiative in China to optimize the energy structure and promote the transition to clean energy in the residential sector. Assessing the effects of subsidy policies is conducive in promoting the "coal-to-gas" project sustainably. This study takes Cangzhou as an example and uses Changzhi, Zibo, Luoyang, Tongchuan, and Tianjin as supplements to evaluate different subsidy policies of the "coal-to-gas" project in northern China in 2015-2035 based on cost-estimation and system dynamic method. The key findings are as follows. First, increasing the proportion of initial installation subsidy reduces the local government burden by up to 0.5%-4.1%, but it may increase residents' burden by up to 1.6%-2.8% between 2015 and 2022. Besides, the impact of different initial installation subsidy policies on government burden and residents' burden is so slight that can be ignored. In addition, gradually reducing operating subsidies at an even rate each year is more effective in decreasing the local government burden compared to abrupt reductionsin recent years. Finally, energy-saving buildings and natural gas furnaces can significantly alleviate the local government burden by up to 1.45% and 0.47% respectively, and reduce residents' burden by up to 1.47% and 0.53% respectively. These findings provide valuable insights for designing subsidy policies for the "coal-to-gas" project and other energy transition initiavtives.