Evaluating Economic and Environmental Benefits of Heating Price Reform in China

Most households in China have had no incentive to conserve their heating usage because heating payment has been a fixed payment regardless of their usage. In this project, the researchers are evaluating a recent major reform in the residential heating system in China that replaced a non-metered fixed payment system with a two-part tariff that is a combination of a fixed fee and a marginal price per usage. A key advantage is that some households started the new pricing in earlier years, and others started later, allowing the researchers to exploit this design to estimate a causal impact of this new pricing on heating usage. Preliminary estimates suggested that the policy reduced heating usage nearly 15 percent in the first year, 30 percent in the second year, and 35 percent in the following years, delivering a social welfare gain of $253 million per year.

The Environmental and Economic Consequences of Reducing State-Firm Information Asymmetry

For the government, measuring firm-level emissions accurately is critical for the enforcement of well-targeted regulation programs, and is also the building block to the establishment of potential Emission Trading Systems. The Chinese government spends substantial resources on firm-level automatic emission monitors: more than 30,000 polluting plants are being monitored by the central government, and another more than 200,000 by local governments. However, firms are able to manipulate the readings of the monitors, leaving the government with inaccurate readings. The researchers are studying the randomized roll-out of a device that detects manipulation of monitors to estimate the effect of improved monitoring quality (reduced government-firm information asymmetry) on firm production and emission outcomes.

Double-Random Inspections and Marginal Abatement Costs of Chinese Firms

In 2016, the Chinese government started to oversee polluting firms’ environmental performances through the “Double-Random Inspections” (DRI) program. The program requires local governments at different levels to randomly select inspectors to check the environmental compliance and emissions of randomly-selected polluting firms. In this project, the researchers are  estimating the marginal emission abatement costs for different types of polluting manufacturing firms, which are critical for optimal environmental policy design.

Economic Activity, Pollution, and Health: Evidence from China’s Air Pollution Alert System

As part of China’s “war on pollution,” local officials are permitted to require emissions reductions from polluting factories, and often do so by closing down factories that are high polluters. The researchers are taking advantage of a natural experiment where “yellow,” “orange,” and “red” alerts are triggered at different pollution levels, with higher alert levels requiring higher reductions in industrial emissions. For each alert type, the local government has a pre-set “action plan” describing which firms will be required to shut down or curtail production. The researchers are comparing days that had forecasted pollution barely below an alert threshold to those with forecasted pollution barely above an alert threshold, as well as comparing between locations just inside and just outside prefecture city boundaries. This allows them to estimate the effects of pollution forecasts on emissions, government actions, firm production, and health outcomes.

Analyzing Incentive Policies to Scale Renewable Energy

China has led the world in its solar power installation capacity since 2013. But over the last few years, China has begun to phase down its solar power incentives. What impact has this had on the solar market? On one hand, policymakers have been struggling to make efficient phase-down strategies without knowing the financial bottom line of the solar industry. On the other hand, the lack of policy transparency and delay of incentives have posed a serious challenge to solar investors who need to appropriately price solar assets and make sound investment decisions.  The researchers are analyzing this information failure and its impacts on the industry. They are working to discover: 1) How to benchmark the financial impact of a solar policy on different types of solar power plants 2) How to compare financial effects of differed solar policies 3) And, when the China’s solar industry can reach grid parity and be truly competitive with fossil fuel-based power plants, as well as how the government could phase down the solar incentives.

Implementing a Low-Carbon Energy Alternative and Promoting the Ecological Environment of the Qinghai-Tibet Plateau

Access to reliable energy has been a key challenge for the Qinghai-Tibet Plateau—a region which has relied on yak dung for energy needs for decades. While this form of energy can satisfy the basic needs for cooking and heating in this pastoral area, it cannot meet the needs of various household appliances and the improvement of working/production tools needed to boost living standards in these communities. Further, it produces significant indoor and outdoor pollution and greenhouse gas emissions. Wind and solar, supplemented with in-home energy storage, would be efficient and affordable green low-carbon alternatives and the Plateau offers the right conditions for these resources to thrive. The researchers are studying an alternative energy program in the region and are providing a demonstration model to improve living conditions, economic productivity and social mobility through innovative policies and practices to promote wind and solar.