Winter Heating or Clean Air? Unintended Impacts of China's Huai River Policy

This paper assesses the role of heating entitlements in generating stark air quality differences across China. During the 1950-1980 central planning period, the Chinese government established free winter heating of homes and offices as a basic right via the provision of free coal fuel for boilers. The combustion of coal in boilers is associated with the release of air pollutants, especially total suspended particulates (TSP). Due to budgetary limitations, however, this heating entitlement was only extended to areas to the north of the line formed by the Huai River and Qinling Mountains in central China. We find this procrustean policy led to dramatically higher TSP levels in the north; the difference is roughly 5-8 times current TSP concentrations in the US. This result holds both in a cross-sectional regression discontinuity-style estimation approach and in a panel data setting that compares the marginal effect of winter temperature on TSP in northern and southern China. In contrast, we fail to find evidence that the heating policy has a meaningful impact on sulfur dioxide (SO2) and nitrogen oxide (NOx) concentrations. Douglas Almond Department of Economics and SIPA Columbia University 420 West 118th Street, MC 3308 New York, NY 10027 and NBER Phone: 212-854-7248 Fax: 212-854-8059 Email: [email protected] Yuyu Chen Applied Economics Department Guanghua School oof Management Peking University Beijing, 100871 CHINA Phone:0086-10-62757902 Email: [email protected] Michael Greenstone MIT, Department of Economics 50 Memorial Drive, E52-359 Cambridge, MA 02142 and Brookings Institution and NBER Phone: 617-452-4127 Fax: 617-253-1330 Email: [email protected] Hongbin Li Department of Economics School of Economics and Management Tsinghua University Beijing 10084 CHINA Phone: 86-10-62792924 Fax: 86-10-62785562 Email: [email protected] Air quality in China is notoriously poor. Ambient concentrations of Total Suspended Particulates (TSP) 1981-1993 were more than double China’s National Annual Mean Ambient Air Quality Standard of 200 mg/m (Xiaohui Bi et al., 2007) and five times the level that prevailed in the U.S. before passage of the Clean Air Act in 1970. Further, it is frequently claimed that air quality is especially poor in northern Chinese cites. For example, following a career in the southern city of Shanghai, Prime Minister Zhu Rongi quipped in 1999: “If I work in your Beijing [in northern China], I would shorten my life at least five years” (The Economist, 2004, pp. 55-57). This paper assesses the role of a procrustean Chinese policy in generating stark differences in air quality within China. During the 1950-1980 central planning period, the Chinese government established free winter heating of homes and offices as a basic right via the provision of free coal fuel for boilers. The combustion of coal in boilers is associated with the release of air pollutants, especially TSP. Due to budgetary limitations, however, this right was only extended to areas located in northern China. The line formed by the Huai River and Qinling Mountains denotes the border between northern and southern China. Matching air pollution and weather data for 58 Chinese cities, we find the heating policy led to dramatically higher TSP levels in the north. This result holds both in a cross-sectional regression discontinuity-style estimation approach and in a panel data setting that compares the marginal effect of winter temperature on TSP in northern and southern China, after controlling for all permanent city-level determinants of TSP concentrations and transitory ones common to all Chinese cities. In contrast, we fail to find evidence that the heating policy leads to increases in sulfur dioxide (SO2) and nitrogen oxide (NOx) concentrations. I. Brief Background on China’s Heating System and Huai River Policy