Costs of Selected Policies to Address Air Pollution in China

Rand Corp. / by Keith Crane and Zhimin Mao
http://www.rand.org/pubs/research_reports/RR861.html

Air pollution has been one of the most pernicious consequences of China’s last three decades of economic transformation and growth. Concentrations of pollutants exceed standards recommended by the World Health Organization in virtually every major urban area. The large costs of air pollution are driven by health impacts and loss of productivity, running 6.5 percent of China’s gross domestic product each year between 2000 and 2010, and rising as China’s population becomes more urbanized and productive. This report estimates the costs of three measures to reduce air pollution in China: replacing coal with natural gas for residential and commercial heating, replacing half of China‘s coal-fired electric power generation with renewables or nuclear power, and scrapping highly polluting vehicles. The recurring annual costs of replacing coal with natural gas for residential and commercial heating could run from $32 billion to $52 billion, and replacing half of China‘s coal-fired electric power generation with renewables or nuclear power would run about $184 billion, for total recurring costs ranging from $215 billion to $235 billion annually. China could also incur one-off costs of $21 billion to $42 billion for scrapping highly polluting vehicles. Subtracting the value of the coal ($75 billion) for which these fuels would substitute, net annual costs in aggregate would run $140 billion to $160 billion annually, less than one-third of the annual cost of air pollution in China, which was roughly $535 billion in 2012. [H/T: Full Text Reports]

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