(Abstract: Adhere to the principles of overall design and phased implementation. Uphold a gradual reform approach, scientifically define the overarching objectives of the reform, meticulously develop a comprehensive reform plan, carefully weigh the pros and cons and assess their impact on relevant parties, and advance the reform in a proactive yet prudent manner, striving to minimize the negative impacts and uncertainties associated with resource price reform. Fully take into account the capacity of all stakeholders, closely align the intensity of the reform with society’s ability to absorb it, carry out thorough publicity and explanation efforts, gain understanding and support from the public and various social sectors, and maintain social stability.)

Resource prices refer to the prices of natural resources and their products (resource-based products). Whether resource prices are reasonable or not directly affects the efficient and sustainable utilization of natural resources and determines whether the process of building an ecological civilization can proceed smoothly. However, China’s current resource pricing system faces numerous challenges, making it urgently necessary to accelerate resource price reform with the wisdom and courage to deepen reform. Resource price reform is an essential component of building an ecological civilization system.

　　 There are numerous problems with the mechanism for forming resource prices.

　　 Currently, the problems existing in resource prices are primarily manifested in issues with the price formation mechanism, specifically in the following three aspects:

　　 First, government pricing remains relatively widespread, and resource prices still fail to reflect the true value and true costs of resources. In particular, prices for water, coal gas, natural gas, and refined petroleum products are currently still subject to government-set or guided pricing, which has resulted in a relatively low degree of market participation in the formation of prices for natural gas, water, and other such commodities, leading to widespread price distortions.

　　 Second, full-cost accounting for resources has not yet been widely implemented. In particular, with regard to the pricing mechanisms for resources or resource-based products, there are still issues such as missing cost items (e.g., the absence of costs associated with ecological and environmental damage caused by resource development), low cost standards (e.g., insufficiently high standards for safe production costs), and a lack of cost transparency (e.g., limited transparency in the costs of tap water supply). These problems collectively make it difficult to truly implement comprehensive cost accounting for the production of resources or resource-based products at present.

　　 Third, the mechanism for transmitting resource prices is not functioning smoothly. In particular, the transmission of price changes between primary and secondary energy sources is hindered, prominently manifested in the decoupling of electricity prices from coal prices, the disconnect between retail electricity prices and electricity generation costs, the separation between transmission and distribution tariffs and on-grid electricity prices, and the unreasonable relative pricing among energy sources—such as coal, natural gas, and petroleum—that have direct substitution relationships.

　　 Resource price reform faces numerous pressures.

　　 Currently and in the period ahead, resource price reform faces numerous pressures and challenges, particularly bearing pressure or challenges from the following three areas:

　　 First, there is the dual pressure of resource price reform and controlling persistently high prices. Resource prices are fundamental and guiding prices; their adjustment can easily trigger a cascade of price adjustments, thereby impacting the Consumer Price Index (CPI). CPI ) Regulatory targets are often unfavorable. Resource price reforms frequently face the dual pressure—or dilemma—of curbing resource degradation and wasteful practices on the one hand, and controlling price increases on the other. This calls for a scientific, prudent, and artful balancing and handling of this contradictory relationship.

　　 Second, there is a contradiction between resource price cost accounting and the monopolistic operation of resources. The supply of resources—particularly strategic mineral resources and land for construction—is monopolized by the government. The business models, cost accounting, and price adjustments associated with these resources often have a direct impact on the operations of state-owned enterprises that rely on such resources. Consequently, the relationship between the accounting practices of state-owned resource enterprises, their monopolistic status, profits, and tax obligations warrants special attention and careful handling. From this perspective, resource-price reform is closely linked to the reform of state-owned enterprises.

　　 Third, there is a contradiction between the reform of market-oriented resource allocation and the need to ensure the basic needs of low-income groups. Ensuring people’s livelihoods is of equal importance to safeguarding national resource security. On the one hand, meeting the basic resource needs of low-income groups is an essential component of livelihood保障; on the other hand, the market-oriented allocation of resources—especially commercially exploitable natural resources—is an inevitable trend. This underscores the need for resource-price reform to strike a balance among market-based allocation, price adjustments, and the guarantee of meeting the most fundamental needs.

　　 The Basic Principles of Resource Price Reform

　　 The reform of resource prices, both currently and in the period ahead, must adhere to the following five fundamental principles and be advanced in a scientific, orderly, and solid manner:

　　 First, we must adhere to the principles of market orientation and government regulation. Relax the government’s direct control over prices, allowing resource and resource-based product prices to be truly determined by the market, so that they fully reflect supply-demand relationships and genuine scarcity levels, and thus fully leverage price signals to guide resource market supply and demand and optimize resource allocation. For certain types of resources or resource products that currently cannot yet foster competition, the government should strengthen and improve its price regulation and oversight mechanisms to ensure the stable operation of these markets and national resource security.

　　 Second, we must adhere to the principle of putting people first and promoting harmony. Pay attention to balancing the interests among producers, consumers, and other stakeholders, and fully take into account the economic and psychological affordability of resource price reforms by all segments of society. In particular, give special consideration to the economic and psychological affordability of resource prices for low-income groups. When necessary, resource price subsidies can serve as an important complementary measure in resource price reform, with a focus on providing moderate subsidies to low-income groups. Moreover, a differentiated pricing system—including tiered pricing—is also an effective approach for taking into account the interests of different groups.

　 　 Third, we must adhere to the principle of integrated planning and coordinated advancement. We should be guided by a development philosophy that emphasizes comprehensive, coordinated, and sustainable growth, and proactively yet steadily advance resource price reform. It is important to strengthen the coordination and support of fiscal and tax policies, including resource taxes and resource fees. We must properly balance the interests of all parties—especially those of producers and consumers—and carefully manage the relationship between producers’ prices (and their expectations) and consumers’ prices (and their expectations).

　　 Fourth, we must adhere to the principle of overall design and phased implementation. Adhere to a gradual reform approach, scientifically define the overall objectives of the reform, meticulously develop a comprehensive reform plan, carefully weigh the pros and cons and assess their impact on relevant parties, and advance the reform in a proactive yet prudent manner, striving to minimize the negative impacts and uncertainties associated with the reform of resource prices. It is essential to fully take into account the capacity of all stakeholders, closely align the intensity of the reform with society’s tolerance level, carry out thorough publicity and explanation efforts, gain understanding and support from the public and various social sectors, and maintain social stability.

　　 Fifth, we must adhere to the principle of seizing opportunities and guiding development in accordance with trends. We must be adept at identifying opportunities, creating favorable conditions, pursuing development, and continuously improving ourselves by leveraging the mutual transformation between international and domestic conditions as well as the complementary advantages of resources. For instance, given the current marked slowdown in global economic growth and the decline in international resource and asset prices, we can seize this opportunity to vigorously develop and utilize overseas resources and enhance our own scientific and technological capabilities.

　　 The basic direction of resource price reform

　　 Currently, resource price reform should focus on the following six aspects:

　　 First, Improve the mechanism for forming resource prices. By making rational use of price control measures and establishing a market-based price regulation mechanism, the government should timely adjust and continuously improve its own functions, swiftly transitioning from being the direct setter and regulator of resource-product prices to assuming a multifaceted role as both a setter, regulator, and supervisor of market economy prices. The reforms aimed at price regulation primarily involve two key aspects: liberalizing prices and adjusting existing price levels. Price adjustment refers to rationalizing prices—especially those of products directly subject to government pricing—to bring them to appropriate levels and to establish suitable differential and comparative price relationships among various products. Particular attention should be paid to properly managing the price relationships between resource prices and prices of resource-based products, between renewable and non-renewable resource prices, between the prices of resource-based products such as oil, coal, and natural gas, and between domestic and international prices of resource-based products, thereby building a sound and rational pricing system.

　　 Secondly, Reasonably define resource costs. Leaving resource prices to be determined by the market is the fundamental direction of resource price reform. In this context, resource costs also seem to warrant being left to the market—or rather, to enterprises themselves—to decide. However, resource costs are composed of multiple factors: first, the direct costs of resource extraction (production), which are the most closely watched by enterprises and are typically fully reflected in resource prices; second, the ecological and environmental costs associated with resource development and utilization—costs that enterprises often pay insufficient attention to or that take a long time to accurately quantify; and third, safety production costs, which resource enterprises currently tend to overlook. The underinvestment in safety production is a major contributing factor to the high incidence of safety accidents. Therefore, resource prices must fully reflect both the ecological and environmental costs as well as the safety production costs associated with resource development and production.

　　 Third, Streamline the price comparison relationship among resources. In accordance with the requirement of sustainable resource utilization, we must properly manage the price differentials between natural resources and their products, as well as between renewable and non-renewable resources. We should refine the resource pricing system, provide accurate price signals to the market, and promote the optimal allocation of resources. At present, the most urgent task is to focus on adjusting the unreasonable price ratios among crude oil, natural gas, and coal used for power generation. Such optimization and adjustment will, on the one hand, facilitate the optimization and restructuring of resource production and consumption patterns, and on the other hand, contribute to the steady, sustainable, and healthy development of China’s resource sector.

　　 Fourth, Standardize government pricing procedures. Standardizing the resource pricing procedure is a crucial guarantee for ensuring that government pricing is scientific and reasonable. Under the current circumstances, the government’s active promotion of law-based administration and the growing awareness among the public about their rights are placing ever-higher demands on government price management in terms of standardization, scientific rigor, and transparency. To gain acceptance from all parties, the government’s pricing procedures must be lawful, open, fair, and just. Before setting or adjusting prices for resource-based products, the government should engage experts, scholars, or independent third parties from relevant economic and resource fields to conduct comprehensive, scientific investigations, analyses, and justifications of the operations and management of enterprises supplying these resources—particularly regarding resource production costs—and use the findings of these investigations, analyses, and justifications as key evidence for determining government resource prices.

　　 Fifth, Resource prices are best left to be determined by the market. To this end, we must further streamline the catalog of government-set prices and narrow the scope of resource pricing, thereby fostering the development and growth of market systems for resources and resource-based products. In particular, we should accelerate the marketization process for raw water for urban water supply, refined petroleum products, natural gas, and other such resources and resource-based products.

　　 Finally, Government regulation to improve resource pricing. Imposing varying degrees of intervention or regulation on resource prices is a common practice among governments worldwide. It is crucial to focus on improving and strengthening government oversight of resource prices and market access, ensuring that such oversight is more transparent, fair, and standardized, and preventing the abuse of regulatory power.

　　 China’s resource-price reform is sensitive and challenging, with a long road ahead and much work to be done. Nevertheless, we must, from the broader perspective of ecological civilization building and from the standpoint of our responsibility to ensure national resource security and meet the people’s resource needs, fully push forward with the reform of resource prices.

Author: Gu Shuzhong, Deputy Director and Researcher at the Institute of Resource and Environmental Policy, Development Research Center of the State Council; Li Weiming, Associate Researcher at the Institute of Resource and Environmental Policy, Development Research Center of the State Council.