Thomas Stoerk

This research evaluates China's main air pollution control policy. In 2005, China decided on a 10% SO2 emissions reduction goal as part of the 11th Five-Year Plan (2006-2010). I study the effect of this policy on pollution outcomes, using both the official, misreporting-prone indicator and independent NASA SO2 satellite data in a differences-in-differences strategy that exploits variation in target stringency at the province level. I find that results from the official and the satellite data differ initially when the Chinese government lacked the ability to effectively monitor SO2 pollution. Ultimately, however, the policy worked and reduced air pollution by more than 10%. The regulated provincial governments react both through rhetorical compliance, measured by a unique dataset of quantified political statements, and through real compliance. Rhetorical compliance increases, especially before the government gained the ability to monitor SO2 in 2008. Real compliance sets in through the shutdown of small, inefficient thermal units. Next, I compute detailed marginal abatement cost curves for SO2 for each province in China, thus illustrating the large heterogeneity in abatement cost across provinces. I use those curves to construct the counterfactual cost-efficient allocation of SO2 reduction targets across provinces. Using this benchmark, I find that the cost-efficient allocation would increase efficiency by 49% at the margin, by lowering marginal abatement cost from 658€/tSO2 to 338€/tSO2. This finding is robust to inclusion of a back-of-the-envelope measure for the marginal benefits of abatement. I conclude that a market-based allocation of SO2 reduction targets would have doubled the efficiency of China's main air pollution control policy.

This research documents changes in likely misreporting in official air quality data from Beijing for the years 2008-2013. It is shown that, consistent with prior research, the official Chinese data report suspiciously few observations that exceed the politically important Blue Sky Day threshold, a particular air pollution level used to evaluate local officials, and an excess of observations just below that threshold. Similar data, measured by the US Embassy in Beijing, do not show this irregularity. To document likely misreporting, this analysis proposes a new way of comparing air quality data via Benford's Law, a statistical regularity known to fit air pollution data. Using this method to compare the official data to the US Embassy data for the first time, I find that the Chinese data fit Benford's Law poorly until a change in air quality measurements at the end of 2012. From 2013 onwards, the Chinese data fit Benford's Law closely. The US Embassy data, by contrast, exhibit no variation over time in the fit with Benford's Law, implying that the underlying pollution processes remain unchanged. These findings suggest that misreporting of air quality data for Beijing has likely ended in 2012. Additionally, I use aerosol optical density data to show the general applicability of this method of detecting likely misreporting in air pollution data.

• Also available as Grantham Research Institute on Climate Change and the Environment Working Paper No. 194