Effectiveness and cost of air pollution control in China

China’s 11th Five-Year Plan set a goal to reduce the emission of sulphur dioxide (SO₂) by 10% between 2006 and 2010. Stoerk provides the first empirical evaluation of this target.

Using independent NASA satellite data to measure SO₂ pollution, Stoerk finds that the target was met: China reduced its SO₂ emissions by 11% over the span of five years. By analysing compliance over time, Stoerk shows that one of the likely mechanisms that allowed the policy to work is appropriate SO₂ emissions monitoring: monitoring and compliance seem to go hand in hand.

Stoerk finds that between 2006 and 2008, before reliable emissions monitoring began in China, provincial governments strongly adjusted their rhetoric around air pollution: a one-standard deviation increase in provinces’ SO₂ reduction target led to a 30% increase in political statements on air pollution, mainly driven by mentions of sulphur.

The research further quantifies the cost of SO₂ abatement across China to assess whether a different implementation of the target would have lowered the abatement cost. At the margin, Stoerk finds that a market-based emissions trading scheme would have lowered the abatement cost by 50%. Stoerk finds that a market-based emissions trading scheme would have lowered the abatement cost by 25% on average, and by 50% for the marginal unit.

Key points for decision-makers

• China’s flagship air pollution control policy in its 11th Five-Year plan (2006–2010) was successful, meeting targets to cut SO₂ pollution by 11%.
• This research uses independent NASA satellite data to confirm that SO₂ emissions in China reduced by 11% during the five-year period.
• In 2008 more comprehensive SO₂ monitoring was introduced by China’s ‘Reduction of the Three Ways’ law, after which compliance with the policy to control SO₂ emissions increased.
• Reductions in SO₂ pollution were made predominantly through the shutdown of inefficient and small thermal power plants but also through the use of low-sulphur coal and the installation of desulphurisation equipment (or ‘scrubbers’) in power plants and industrial facilities.
• In some Chinese provinces abating SO₂ emissions is cheaper than in others. The paper suggest China’s government could double the efficiency of SO₂ emissions reductions at the margin, reducing the cost per tonne of abatement, by allocating reduction targets across provinces in line with these variations in cost. This could be achieved through, for example, an emissions trading scheme.
• In some Chinese provinces abating SO₂ emissions is cheaper than in others. The paper suggest China’s government could increase the efficiency of SO₂ emissions reductions by 25%, and twice at the margin, by reducing the cost per tonne of abatement, by allocating reduction targets across provinces in line with these variations in cost. This could be achieved through, for example, an emissions trading scheme.
• This research calculates the cost of a 1 µg/m³ reduction in PM2.5 concentrations in China to be $217,100.

A previous version of this paper was published in August 2017 with the title Compliance, efficiency and instrument choice: evidence from air pollution control in China.

ISSN 2515-5717 (Online)