The Unintended Consequences of Coal Fired Power Plant Closures: Evidence from China

This paper examines the impact of power plant closures on air quality and health outcomes in China by exploiting quasi-experimental variation from the closures. We collected information associated with more than 1,700 power plants across China, and combined with high resolution satellite data measuring monthly sulphur dioxide (SO2) levels. Our difference-in-difference (DID) estimates indicate that, while SO2 levels are 2.5% lower in areas surrounding closed power plants, areas surrounding power plants that remained opened suffer from 1.9% spike in SO2 levels. These results suggest that power plant closures lead to a displacement effect as plants that remained opened have to intensify their output to meet demands for electricity. We combine these localized reductions and displacement effects with granular information on population density to compute pollution exposure. Our results indicate that the displacement effects drastically undermine the effectiveness of plant closures. The net reduction in the exposure of SO2 levels from power plant closures is merely 11.6% of the localized reductions. It corroborates with the null effects associated with power plant closures on country-wide infant mortality rates, indicating that power plant closures have negligible benefits unless planners have cleaner alternative energy sources.