Big Data & Environmental Quality
Over the last decade, a revolution in remote sensing and real-time monitoring—with technologies that are smaller, more accurate, cheaper and more mobile—has combined with advances in data analysis to create an opportunity to transform environmental protection. EPIC-China plans to work with regulators to apply these advances to improve environmental quality in China.
Globally, EPIC has a track record of using monitoring and data analysis to reduce environmental violations. In one project, EPIC Director Michael Greenstone and his colleagues in India are testing the effectiveness of real-time emissions monitoring in place of manual collections. By allowing regulators to pinpoint where pollution is occurring and if policies are working, the automated system is improving detection of violations. In a similar project, Greenstone and his colleagues measured the impact water meters installed in homes in a city in California had on reducing violations of water use laws and water use overall. The researchers compared homes where fines were issued based on water meter data to homes where fines were issued based on in-person inspections. Again, more accurate detection from the water meters deterred violators—with 17 percent fewer violations—and reduced water use by about 3 percent.
In some recent work, Greenstone, Guojun He, and their coauthors find that the automation of air pollution monitoring and reporting by the central government greatly improves the reliability of pollution concentration readings in China. The improvement is evidenced by the level, variance, seasonality of reported PM10 concentrations, as well as the correlation between reported PM10 and satellite data. This suggests that automatic monitoring greatly reduces the degree of data manipulation.
Energy Markets & Prices
China’s energy consumption is the highest in the world, and it still drives the largest share of demand growth. Building efficient, adaptable energy markets and supportive public policies is essential to delivering affordable, reliable energy. EPIC-China will work to uncover the policies, prices and information needed to help energy markets work efficiently.
EPIC scholars have already begun evaluating China’s policies to improve energy efficiency. EPIC scholar Koichiro Ito and his coauthor are working with a heating provider in Tianjin to see if introducing a usage-based price in addition to the annual fixed payment consumers are accustomed to paying could encourage households to conserve heat. Their preliminary findings suggest that the usage-based price causes households to reduce their heat use by 30 percent. Their estimate suggests that the welfare gain from this policy is substantially larger than the cost of the policy, which includes meter installation and a new billing system.
“Our work shows that it is important to provide correct price incentives to conserve energy and reduce pollution. Financial incentives push people to change their habits and develop new ones.” – Koichiro Ito, Associate Professor, Harris Public Policy
The Economics of Climate Change
Climate change will affect every sector of the economy, both locally and globally—from the amount of energy used to heat and cool homes, to our ability to work and play outside, to the performance of entire economic sectors, from agriculture to tourism. Chinese policymakers, business owners and investors, community planners, and a range of other stakeholders need more information about the specific effects climate change will have on their work in order to plan and adapt. EPIC-China will work with them to quantifying these impacts and help inform their decision-making.
EPIC has made substantial progress in advancing knowledge of the economics of climate change. Director Michael Greenstone is a co-founder of the Climate Impact Lab, a collaboration of economists, climate scientists and computational experts working to advance understanding of the social and economic costs of climate change. Through this work, he and his colleagues are producing estimates of the physical (e.g., temperature, precipitation, inundation, and flooding/storm surges) and economic impacts of climate change at a highly localized level for the world. Using the most comprehensive climate and economic data sets ever compiled, they are estimating these impacts across seven categories: human health, agricultural production, energy demand, labor productivity, conflict, migration, and coastal damage due to sea level rise and more severe storms. EPIC-China and the Climate Impact Lab plan to produce this highly localized information for China.
The Costs & Benefits of Energy and Environmental Policies
As China balances its need for economic growth and environmental quality, it is important that Chinese policymakers compare the costs and benefits of alternative policy options to ensure they are choosing the most efficient policies. EPIC-China will work with policymakers to conduct cost-benefit analyses based on real-world data.
Early work by EPIC scholars reveals the benefits of this approach. By studying the effects of the Huai River policy—under which people living north of the river were provided with free coal boilers and subsidized coal —EPIC Director Michael Greenstone, Guojun He (Director of Research, EPIC-China), and their coauthors found that people in the north live 3.1 fewer years than people in the south due to air pollution concentrations that are 46 percent higher.
In another study using the Huai River policy, EPIC scholar Koichiro Ito and his coauthor measured demand for air purifiers and found that Chinese households are on average willing to pay $1.34 per year to remove 1 μg/m3 of particulate pollution (PM10). This estimate suggests that a household is willing to pay $32.70 per year to eliminate the air pollution created by the Huai River heating policy. The authors also use this estimate to quantify the value of recent air quality improvements in China. Since China declared a war on pollution in 2013, particulate pollution decreased substantially, suggesting that a household is willing to pay at least $65.52 per year to have these air quality improvements.