Quality air

By Matthew Kahn

This article was originally published on Corporate Knights and is republished with permission.


Over the last 40 years, hundreds of millions of people in China have escaped poverty as this enormous nation urbanized and became a manufacturing powerhouse fueled by cheap coal and cheap labor. But this development strategy has imposed enormous environmental costs on the Chinese people. Air pollution levels have soared, rural areas face severe water pollution and food safety continues to be a major concern.



China’s growth strategy also has international consequences. Air pollution from China travels east to Japan, Taiwan and South Korea and across the Pacific to the U.S. west coast. And China’s heavy use of fossil fuel has made it the world’s largest greenhouse gas emitter, raising the risk of severe climate change.


The Chinese people are well aware of how pollution is eroding their quality of life. The Weibo blogging platform, China’s version of Twitter, features daily discussions about the nation’s environmental challenges. And in Chinese cities, residents are demanding cleaner conditions through their words and their spending choices.


Dirty air and crowded streets


Although wealth has greatly increased in China in recent decades, life satisfaction surveys indicate that the Chinese people are not as happy as one might expect. We believe that pollution is the major cause.


In our book “Blue Skies Over Beijing: Economic Growth and the Environment in China,” Professor Siqi Zheng of Tsinghua University and I argue that rising demand for environmental protection in China is an emerging trend that will improve the standard of living in China and increase overall global sustainability.


Multiple studies have shown that exposure to pollution in China is affecting public health and quality of life. Epidemiologists estimate exposure to air pollution shortens residents’ life expectancy by about 5.5 years in coal-dependent north China. Economists have found that both outdoor and indoor workers are less productive when exposed to higher levels of air pollution.


While China is ending its notorious one-child policy, urban Chinese couples still frequently choose to have just one child and arrange their lifestyles to invest in him or her. Many of these parents are proud of China’s economic growth but worried about how pollution may harm their child’s health.


In one interview for our book we talked to a Beijing resident with a Ph.D. from Tsinghua University, whom we identified at his request as Mr. Wu (many Chinese hesitate to be quoted by name criticizing urban living conditions). He said that his family planned to move to Canada or the United States after he earned enough money, in order to protect his daughter from dirty air and contaminated food and water in Beijing.


We also interviewed an urban planning scholar with a Ph.D. from the University of California at Berkeley whom we referred to as Dr. Zhang. In 2015 Zhang was recruited by Renmin University in Beijing and accepted an appointment as assistant professor. But after six months he decided to move to another university because he could not tolerate Beijing’s heavy haze and worried that it would harm his two young children’s health. Zhang’s case is not unique: Chinese urbanites told us that many top universities in Beijing lose out to Hong Kong universities when they try to recruit new economics and business Ph.D. graduates because of Beijing’s air pollution.


Paying for greener lifestyles


Chinese urbanites’ desire for cleaner, healthier living conditions is evident in their purchases. Looking at real estate transaction data from Chinese cities, we found a willingness to pay to live in a city or a location with higher environmental quality. Using data on all of the apartments sold in Beijing around the year 2005, we found evidence that apartment prices were higher in parts of the city featuring easy access to fast public transit, clean air (pollution levels vary across the metropolitan area) and access to green parks.


For example, all else equal, we calculated that in neighborhoods where levels of fine particulate air pollution (known as PM10) are 10 micrograms per cubic meter higher than other neighborhoods, real estate prices are 4 percent lower. In a cross-city study we found that apartments sell for higher prices in less polluted cities than units of the same quality and size in dirtier locations.


And city dwellers are acting to protect themselves. By examining internet sales data, we found daily sales of masks and air filters are much higher on days when the government announces that a city’s air pollution is “hazardous” versus days when government announces that local air quality is “excellent.” (Urban dwellers can track these reports with an Iphone app.)


These results suggest that China’s urban consumers trust government pollution announcements now — but this was not always true. Past research has documented that government agencies manipulated data to overstate the number of “blue sky” days between 2001 and 2010.


Recently, however, the cost of independently monitoring air pollution has declined. In 2008 the U.S Embassy in Beijing installed rooftop monitoring equipment and began providing measurements of local ambient air pollution. Growing competition in the “market for environmental information” has given the Chinese government incentive to truthfully report air pollution levels.

View all reports