Clearing the air through pipes? An evaluation of the air pollution reduction effect of China's natural gas pipeline projects

Abstract

Natural gas is one of the most important clean energy and has played crucial roles in curbing air pollution in developed world. To facilitate the use of natural gas and reduce air pollution by reaching a similar energy consumption structure to the developed world, Chinese government has vigorously constructed natural gas pipeline projects (NGPPs) during the past decades. This paper evaluates the impact of China's NGPPs on air pollution reduction, by using national data of pollutant emissions of over 800,000 firm-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 17.41 million metric tons, a size of 7.33% of the total industrial SO2 discharge from 1998 to 2010. We also find that a substitution effect channel that NGPPs facilitate firms to replace fuel coal with natural gas under tightening environmental regulations.