Compliance, efficiency and instrument choice: evidence from 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%. Surprisingly, Stoerk finds that mandating the installation of desulphurisation ‘scrubbers’ is close to the most cost-effective SO2 abatement method for China.

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 contrast to the US experience two decades earlier, Stoerk finds that a technology mandate for the use of scrubbers would be nearly as cost-effective as a market-based policy in reducing SO2 emissions in China.

ISSN 2515-5717 (Online)