Exploring pathways of phasing out clean heating subsidies for rural residential buildings in China

To promote clean heating in rural areas, hundreds of billions of subsidies have been granted to boost its competitiveness in China. However, such high subsidies exacerbate the government's fiscal deficit while undermining the sustainability of clean heating. Therefore, we employ real options approach to evaluate the economic and environmental benefits of clean heating under multiple uncertainties and explore optimal phase-out paths of subsidies in the Beijing-Tianjin-Hebei (BTH) region. Results show that: i) without subsidies, raw coal with improved stoves is more cost-effective for heating than cleaner energy sources; ii) under the current subsidies, rural residents in Beijing and Tianjin are inclined to use air source heat pumps with fan coils, while using clean coal or electric heaters with thermal storage in Hebei province, except Zhangjiakou; iii) purchase subsidies for clean coal, natural gas heaters, and electric heaters with thermal storage can be removed immediately without delaying the best clean heating renovation timing; but operating subsidies need to be phased out; iv) phase-out paths of subsidies for air source heat pumps vary with the terminal radiators. These findings have significant policy implications not only for the BTH region but also for northern China, and further provide insights for future research.