Impact of Transboundary Haze Pollution on Household Utilities Consumption
73 Pages Posted: 28 Mar 2017 Last revised: 13 Apr 2018
Date Written: August 31, 2017
We study the causal effects of air pollution on the household consumption of water and electricity in Singapore using the transboundary haze pollution caused by forest fires in Indonesia as an exogenous shock. Increases in pollutant standard index (PSI) lead to significant increases in water and electricity consumption, with a greater public awareness of air pollution related to a greater rise in energy consumption. The intraday and interday analysis on hourly household water consumption points to the prevalence of risk avoidance and risk mitigation behaviors during severe haze episodes. During periods of poor air quality, households tend to stay indoors to minimize their exposure to possible health risks if it is easy for them to avoid outdoor activities (e.g., on the weekend). If they need to be outdoors (e.g., during the week), they tend to increase their utilities usage in their efforts to mitigate the impacts of air pollution. Moreover, the impact of air pollution on utilities consumption varies based on the duration of the pollution event. While household utilities consumption quickly returns to normal after transitory pollution exposure, the effects are stronger and persistent after a longer period of air pollution; households maintain a higher level of utilities consumption for two months after a lengthy haze episode. Back-of-the-envelope calculations suggest a substantial spending on additional water and electricity usage due to air pollution events, raising the productivity and healthcare costs associated with haze.
Keywords: Transboundary air pollution, haze, environmental externalities, risk avoidance economic activities, household utilities
JEL Classification: D12, F62, Q53, Q54
Suggested Citation: Suggested Citation