The health impacts of two policies regulating SO2 air pollution: Evidence from China

In developing countries widespread air pollution poses a major threat to public health calling for effective environmental regulation. This paper adds to the limited literature on the health impact of different environmental regulations. Using data from eight waves of the China Health and Nutrition Survey (1993–2015), we employ a difference-in-differences model to investigate the health impact of two policies combatting SO2 air pollution: the command-and-control environmental regulation represented by the Two Control Zones (TCZ) and the market-oriented environmental regulation represented by the SO2 Emissions Trading Scheme (ETS). The main findings are that the TCZ policy resulted in a 39% reduction in the 4-week prevalence of air pollution-related diseases through channels such as reducing industrial SO2 emissions and industrial fumes emissions, and increasing individuals' amounts of physical exercise. In contrast, the ETS had no positive health effects, likely due to imperfect market mechanisms and environmental policy uncertainties. The health impact of the TCZ was most pronounced for respiratory illnesses, and was increasing over the period during which the policy was implemented. The positive health impact is stronger for outdoor, less educated, and lower income workers. Residents in Eastern regions and urban areas (especially the rural hukou holders living there) benefitted more from the environmental regulation.