Clean energy substitution: The effect of transitioning from coal to gas on air pollution

Abstract

Air pollution from energy represents a global challenge. China, in particular, is facing a trade-off between growing demands for energy and worsening energy-related air pollution. Energy transition policies were adopted in mainland China in an attempt to reduce air pollutant emissions. This study investigated the causal impact of coal-to-gas (CTG) policies — programs that substitute “dirty” coal for “clean” natural gas — on air pollution. Using a spatial difference-in-difference analysis, we found that the implementation of CTG policies was strongly associated with reduced air pollution. On average, cities that transitioned to gas witnessed a 5.9 and 1.2% drop per year in SO2 and PM2.5 emissions, respectively. Having a neighboring city adopt a CTG policy was also beneficial as it led to a 7.0 and 3.8% reduction in SO2 and PM2.5 emissions. Sensitivity analysis confirmed that these effects were due to the expansion of natural gas use. Further, our study found that the effects of CTG policies on air pollution levels varied by region. CTG policies reduced both SO2 and PM2.5 levels in Southern cities but had no meaningful impacts on Northern cities. Our findings provide a strong rationale for local governments and decision-makers to enact reasonable urban clean energy substitution policies that reduce coal consumption.