Externality Cost And Policy Evaluation Of Urban Air Pollution

The 2017 Government Work Report stated that "to strengthen ecological and environmental protection" and "to speed up the improvement of the ecological environment,especially air quality,is the urgent desire of the people and an inherent requirement of sustainable development",and stressed that "we must resolutely fight to protect the blue sky".With the development of industrialization and urbanization,the increasingly severe air pollution in China has aroused people’s great attention.In particular,the negative externalities of urban air pollution bring great efficiency and welfare losses to urban development and urban residents’ lives.Air pollution reduces urban housing prices,increases the mortality rate of heart and lung diseases of urban residents,lowers the labor productivity of enterprises,and even does harm to mental health.This paper focuses on the effect of urban air pollution and the assessment of governance policies.Chapter3 and 4 study the impact of air pollution on urban traffic congestion,and Chapter 5 studies the impact of urban air pollution on household and industrial power consumption.Chapter 6 evaluates the effect of a transboundary air pollution governance policy.Air pollution can affect traffic congestion in a few ways:decreases visibility;increases driving in a car to avoid exposure to outdoor air pollution,increases drivers’anxiety;and increases road accidents.Chapter 3 tests the effect of air pollution on traffic congestion in Beijing.Air pollution is measured by daily air pollution index ranging between 0 and 500;and congestion is measured by the daily average traffic performance index(TPI).Based on daily workday data from October 2009 to April 2011 in Beijing,causal effect is identified from time-series variation in air quality and intra-day variation in daily average traffic performance.To deal with the endogeneity of air pollution due to traffic congestion,we use the daily air pollution index and visibility in Tianjin(a city nearby Beijing)as the instrument variables of the air pollution level and visibility in Beijing.And the 2SLS regressions produce robust results.Our study indicates that air pollution has a positive effect on traffic congestion and this provides empirical evidence for policy makers to assess the appropriateness of local traffic management strategies and air pollution emission control policies.In Chapter 4,the daily data of 78 cities at and above the prefecture level in China from 2015 to 2018 were used to further discuss this problem.It was found that air pollution had a negative impact on traffic congestion on the whole,mainly because people would avoid going out when the air pollution was serious.Meanwhile,the effect was positive and negative for different cities.Air pollution can damage people’s health and welfare,and accurate estimation of these externalities is of great significance for the formulation of environmental pollution regulation policies.However,policymakers generally focus on the direct damage of air pollution and ignore the indirect damage caused by pollution avoidance.Air pollution can increase household energy consumption by making people spend less time outdoors and more time indoors.In Chapter 5,we estimats the impact of air pollution on the average electricity consumption of active urban households using the daily electricity consumption data in China from 2018 to 2019.In order to solve the potential endogeneity problem,the random wind direction is used to construct the instrumental variables.The study argues that an increase of one standard deviation in AQI and PM10 resulted in an increase of 0.33kwh(or 2.5%)or 0.55kwh(or 4.1%)in the average daily electricity consumption of active urban households,respectively.This effect is only statistically significant when the air quality level(AQI)is moderate pollution(AQI>150)or above,and increases with increasing pollution levels.In chapter 6,we use daily air pollution data and weather data for the Pearl River Delta region and Hong Kong from 2004 to 2012 to estimate the impact of the Cleaner Production Partnership scheme(CPP),a cross-boundary subsidy policy,on air quality in the Pearl River Delta region and Hong Kong.The CCP,which was implemented by the Hong Kong government,aims to provide financial subsidies and technical support to Hong Kong-invested enterprises in the Pearl River Delta region to promote cleaner production.In this paper,the effect of the policy on air quality in the Pearl River Delta region was estimated by using the double difference method(DID),and then the changes in the concentration of air pollutants drifting from the Pearl River Delta region to Hong Kong after the implementation of the policy were separated by the exogeneity of the wind direction changes.This paper found that the cross-boundary subsidy policy significantly reduced the concentration of air pollutants in the Pearl River Delta region and the concentration of air pollutants drifting to Hong Kong--after the implementation of the policy,the average PM10 concentration in the Pearl River Delta region decreased by 14.6%and the PM10 concentration in Hong Kong decreased by 12.8%.This policy is a good application of Coase Theorem in solving transboundary pollution problem.