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

Abstract:     
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.

Keywords: air pollution, total suspended particulates, China, externalities, environment, heating, coal, Huai river

JEL Classifications: H23, Q48, Q53, P36

Working Paper Series