Clearing the Air Through Pipes? An Evaluation of the Air Pollution Reduction Effect of China’s Natural Gas Pipeline Projects

Abstract

This paper evaluates the impact of China’s natural gas pipeline projects (NGPPs) on air pollution reduction, by using national data of pollutant emissions of over 800,000 institute-level observations from 1998 to 2010. The difference-in-differences approach shows that the introduction of pipeline natural gas reduces sulfur dioxide (SO2) discharge intensity in connected cities by about 22.8%. The magnitude of the reduced SO2 emissions is estimated to be at least 17.4 million tons, a size of 7.37% of the total industrial SO2 discharge from 1998 to 2010. Heterogeneity analysis shows that the air pollution reduction effect of NGPPs increases over time, is larger for firms surviving longer in our data, for large firms, in heavy pollution industries or cities, and when environmental policy is more stringent. It also finds that a substitution effect channels the effect by facilitating firms and institutes to replace coal with natural gas or drive away under strict environmental regulations.