Disclaimer: The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent. ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. The mention of specific companies or products of manufacturers does not imply that they are endorsed or recommended by ADB in preference to others of a similar nature that are not mentioned. By making any designation of or reference to a particular territory or geographic area, or by using the term “country” in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area. Environmental Economic Analysis for Air Pollution Control in greater BTH region SHI Lei School of Environment and Natural Resources, Renmin University of China November 2018

OUTLINES 4 Analysis 1 Background 2 Issues 3 Data and Methodology 5 Conclusion

OUTLINES 4 Analysis 1 Background 2 Motivation 3 Data and Methodology 5 Conclusion

Air pollution problem is still urgent in China 1 Fig.1 China's nominal GDP and GDP growth rate from 1978 to 2015 * Source: China Statistical Yearbook Fig.2 China’s air quality level ratio of 338 cities in 2016 * Source: China Environmental Status Bulletin in 2016 During the 12th Five-Year Plan period: The cumulative decrease of total SO2 and NOx emissions was 18%, 18.6%. During the 13th Five-Year Plan period ： The national SO2 and NOx emissions total targets are 15.8 million tons and 15.74 million tons, which are 15% and 15% lower than that in 2015 respectively.

Fig.3 Schematic of Greater BTH region Greater BTH region is key for Joint Prevention and Control of Air Pollution 1 Greater BTH region： Beijing, Tianjin, Hebei, Shandong, Shanxi, Henan, Inner Mongolia Autonomous Region Fig.3 Schematic of Greater BTH region Greater BTH region are regions where air pollution is extremely serious in China.

Greater BTH region are key for Joint Prevention and Control of Air Pollution 1 Policy requirements People's Republic of China Air Pollution Prevention and Control Law： To improve the quality of the atmospheric environment. Proposal of two mountains theory Air pollution: cross-regional pollution Chinese government has proposed joint prevention and control measures to ensure the intensity and effectiveness of pollution prevention. Policy evolution - strengthening joint prevention and control 2010, Guiding Opinions on Promoting Air Pollution Joint Prevention and Control Work to Improve Regional Air Quality 2012, The 12th Five-Year Plan for the Prevention and Control of Air Pollution in Key Areas 2013, Ten measures for the Air Pollution Prevention Action Plan 2014, Air pollution control plan for key industries in BTH and surrounding areas within a limited period 2015, Environmental Protection Plan of BTH Collaborative Development Ecological 2017, BTH and Surrounding Areas Air Pollution Prevention and Control Work Plan in 2017

OUTLINES 4 Analysis 1 Background 2 Motivation 3 Data and Methodology 5 Conclusion

2 Motivation Economic V.S Air Pollution （Damage? ） The relationship between economy and air pollution The impact of air pollution on economy The impact of economy on air pollution abatement Now we will discuss the progress and implementation status of the project.

OUTLINES 4 Analysis 1 Background 2 Motivation 3 Data and Methodology 5 Conclusion

3 Data and Methodology Tapio Decoupling model ρt+1 represents the decoupling state of the t+1th period △ECt+1 represents the environmental pressure change rate of the t+1th period Ect is the environmental pressure of period t △IOt+1indicates the economic changing rate of the t+1th period IOt is the economic growth level of the t-th period Environmental Pressure Economic Growth Expansive Negative Decoupling ρ>1.2 Recessive Decoupling Strong Negative Decoupling ρ<0 Strong Decoupling Weak Negative Decoupling 0<ρ<0.8 Weak decoupling 0<ρ<0.8 Expansive Coupling 0.8<ρ<1.2 Recessive Coupling 0.8<ρ<1.2 𝜌 𝑡+1 = ∆ 𝐸𝐶 𝑡+1 𝐸𝐶 𝑡 ∆ 𝐼𝑂 𝑡+1 𝐼𝑂 𝑡 Quadrant(ˈkwɑ:drənt)象限

3 Data and Methodology Vector Auto-Regression (VAR Model) yt=β1yt-1+β2yt-2+…+βpyt-p+αxt+ εt （t=1,2,3，……t） yt is a k-dimensional endogenous variable vector，xt is a d-dimensional exogenous variable vector ，p is lag order ，t is the number of samples. No-residual complete decomposition model based on Lasbel index I represents atmospheric environmental pressures generated during economic activities; S represents industrial structural factors; G represents economic scale factors (2000 is the base period); T represents technical factors. In accordance with the principle of Common Generation, Balanced Distribution I= 𝑄 𝐺𝐷𝑃 ×𝐺𝐷𝑃× 𝐼 𝑄 =𝑆×𝐺×𝑇 Residual （[rɪˈzɪdʒuəl） ∆I= 𝐼 𝑡 − 𝐼 𝑡−1 = 𝑆 ∗ + 𝐺 ∗ + 𝑇 ∗ The rebound effect is ：R*= S*+G*+T* 𝑺 ∗ =∆𝑺× 𝑮 𝒕−𝟏 × 𝑻 𝒕−𝟏 + 𝟏 𝟐 ×∆𝑺× 𝑮 𝒕−𝟏 ×∆𝑻+ 𝑻 𝒕−𝟏 ×∆𝑮 + 𝟏 𝟑 ∆𝑺×∆𝑮×∆𝑻 𝑮 ∗ =∆𝑮× 𝑺 𝒕−𝟏 × 𝑻 𝒕−𝟏 + 𝟏 𝟐 ×∆𝑮× 𝑺 𝒕−𝟏 ×∆𝑻+ 𝑻 𝒕−𝟏 ×∆𝑺 + 𝟏 𝟑 ∆𝑺×∆𝑮×∆𝑻 𝑻 ∗ =∆𝑻× 𝑺 𝒕−𝟏 × 𝑻𝑮 𝒕−𝟏 + 𝟏 𝟐 ×∆𝑻× 𝑺 𝒕−𝟏 ×∆𝑮+ 𝑮 𝒕−𝟏 ×∆𝑺 + 𝟏 𝟑 ∆𝑺×∆𝑮×∆𝑻

3 Data and Methodology Economic indicators: GDP, Industrial Structure Pollution indicators: Industrial Waste Gas, Industrial Sulfur Dioxide, Industrial Smoke&Dust Space range: Beijing, Tianjin, Hebei Time scale: 2000~2015 Sources: China Statistical Yearbook, Beijing Statistical Yearbook, Tianjin Statistical Yearbook, Hebei Economic Yearbook, China Environmental Statistics Yearbook and 60 Years Statistical Data Collection of New China Data processing: Economic data are converted into 2000 prices.

OUTLINES 4 Analysis 1 Background 2 Motivation 3 Data and Methodology 5 Conclusion

Decoupling Analysis of Economic Growth and Air Pollution in Hebei 4 SO2: Generally distributed in weak decoupling and strong decoupling areas. Industrial Waste Gas: Increase Fast, Expansive Negative Decoupling Industrial Smoke&Dust: From strong decoupling to negative decoupling The degree of decoupling SO2, smoke&dust emissions and economic development is generally better than that of industrial waste gas emissions. The control of industrial exhaust emissions needs to be strengthened

Decoupling Analysis of Economic Growth and Air Pollution in Beijing 4 SO2: Obvious strong decoupling trend Industrial Waste Gas: Fluctuations, its relationship with the economy is basically between weak decoupling and expansion negative decoupling. Industrial Smoke&Dust: Stable, Strong Decoupling The degree of decoupling between SO2, smoke&dust emissions and economic development is generally better than that of industrial waste gas emissions.

Decoupling Analysis of Economic Growth and Air Pollution in Tianjin 4 SO2: Generally distributed in weak decoupling and strong decoupling areas. Industrial Waste Gas: Expansion coupling and expansion negative decoupling Industrial Smoke&Dust: Weak decoupling and strong decoupling The degree of decoupling between SO2 and economic development is generally better than that of industrial exhaust emissions and smoke&dust emissions. Since 2013, industrial waste gas and smoke &dust emissions showed a relatively obvious rebound trend.

The Impact of Air Pollution on Economic Growth in Hebei 4 Industrial Waste Gas: It has positive impact on per capita GDP, but the boost is small. Industrial SO2: It has negative impact on per capita GDP, has a small inhibitory effect on economic growth. Industrial Dust: It has negative impact on per capita GDP, has significant inhibition of the economy and long lasting effect.

The Impact of Air Pollution on Economic Growth in Beijing 4 Industrial Waste Gas: It has negative impact on per capita GDP, has inhibitory effect on economic growth, and has long duration. Industrial SO2: It has negative impact on per capita GDP, has small inhibitory effect on economic growth, and has long duration. Industrial Dust: It has positive impact on per capita GDP, has small positive incentive for the economy.

The Impact of Air Pollution on Economic Growth in Tianjin 4 Industrial Waste Gas: It has positive impact on GDP per capita, has small effect on economic growth. Industrial SO2: It has negative impact on per capita GDP, has small inhibitory effect on economic growth, and has long duration. Industrial Dust: It has negative impact on per capita GDP and sustained negative incentives for the economy.

Factors Affecting Economic Growth and Air Pollution in Hebei 4 The technical effect is the main effect of promoting the reduction of SO2 emissions in Hebei. Economic scale is the main driving force for SO2 and smoke dust emissions. Regarding smoke dust, the technical effect is complicated, which will promote the smoke & dust emissions after 2010.

Factors Affecting Economic Growth and Air Pollution in Beijing 4 SO2 Smoke & Dust Industrial structural is the major effect of promoting the reduction of SO2 emissions. The effect of technology on the reduction of SO2 is increasingly apparent. Technology has a controlling effect on smoke dust, but economic scale expansion promotes smoke & dust emissions.

Factors Affecting Economic Growth and Air Pollution in Tianjin 4 SO2 Smoke & Dust Technical effect is the main factor driving SO2 reduction. Industrial restructuring reduces SO2 emissions. Technical effect is the main factor in reducing smoke & dust. Economic scale expansion promotes smoke & dust emissions.

OUTLINES 4 Analysis 1 Background 2 Motivation 3 Data and Methodology 5 Conclusions

Conclusion 5 The view that Economic growth will inevitably promotes pollutant emissions is not reasonable in BTH region, and air pollution in Beijing, Tianjin and Hebei has an inhibitory effect on economic growth. The increase of pollutant emissions will not significantly promote economic growth, pollution control and economic development are not contradictory. Significant regional differences Hebei: Technical factors promote pollutant reduction. Beijing: Industrial structure factors have a significant reduction effect on pollutants. Tianjin: Technology and structure work together to promote pollutant reduction.

Thank You SHI Lei shil@ruc.edu.cn School of Environment and Natural Resources, Renmin University of China November 2018