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China's Cap on Coal Consumption (CCC) Policy serves as a key strategy to address the serious air pollution in China, and it helps to address coal's climate, environment and health damages. Current implementation of it focuses on substituting coal used in power plants and boilers with natural gas, whereas phasing out household coal use is less emphasized. This study estimates the benefits and costs of interventions for phasing out coal used in power plants and in households in Beijing. The results suggest that the phasing out of household coal use can result in net social benefits. However, coal-to-gas projects for power plants actually bring net social losses, a result largely attributable to the relative high price of natural gas in China. In addition to the actual policy evaluations of phasing out coal, this study outlines how to conduct economic analysis of air pollution policies in China taking into account uncertainty and correlations of key parameters. With the importance at a national and global level to reduce the negative effects of coal consumption, together with the trend of scaling up coal reduction interventions in China from local pioneers to the national level, this study provides implications on how to achieve more socially beneficial results for such interventions.

AbstractThis paper analyses the implications of government control over public information about air pollution. First, we model the incentives for a local government with control over the media to affect popular perception concerning pollution. We argue that biased announcements can influence the inflows of labour force in a municipality beyond economic factors. Then, we examine some evidence on information misreporting in the context of Beijing, China. We show that official air pollution announcements diverge systematically from an alternative source of information, provided by the US Embassy. The results point at a manipulation of popular perception consistent with the motives indicated in our model. Furthermore, using an original household survey, we examine whether the distorted public signal affects agents' behaviour. We find that households that depend upon government-controlled media are significantly less responsive to pollution peaks.