A System Dynamics Based Study of Policies on Reducing Energy Use and Energy Expense for Chinese Steel Industry
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Chinese steel industry is one of the energy intensive industries in China. Coal and electricity are the two main energy sources for steel making. Steel industry in China is experiencing its transition period because of economy transition during the industrialization period. Steel demand has increased significantly in recent years, which correspondingly enlarges the energy demand. On the other hand, energy prices of coal and electricity have been increasing dramatically since 1980 because of the macro-control from the government. Large energy demand leads to high energy consumption and high energy price raises the energy expense of steel making. Motivated by the need to reduce energy use and energy expense, a System Dynamics based model is built to investigate policies in order to help Chinese steel industry ease energy problems during its transition period. The model helps to foster learning about a dynamically complex system, and thus contributes to a better understanding on the effectiveness, validity of energy policies. Results show that most of the investigated policy options are cost-effective. However, implementation remains a critical issue, the viability of energy tax and R&D subsidy is still questionable in the real world. Developing the technology of recycling scrapped steel is found to be useful in limiting carbon emission with comparatively easy implementation.