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China Must Address Its Air-Pollution Problem, and Soon

• Concentrations of pollutants exceed standards recommended by the World Health Organization (WHO) in virtually every major urban area in China.
• The large costs of air pollution are driven by health impacts and loss of productivity, running 6.5 percent of China's gross domestic product (GDP) each year between 2000 and 2010, and rising as China's population becomes more urbanized and productive.
• The Chinese government will need to not only enforce existing anti-pollution regulations much more aggressively, but also substitute other sources of energy for coal to achieve substantial reductions in air pollution.

Three Main Approaches Can Be Taken to Improve Air Quality

• For China's cities to meet WHO standards for air quality, the burning of coal, biomass, and plastic wastes in urban areas by residential and commercial users will have to stop.
• To reach healthy air quality levels, China will have to replace a substantial amount of coal-fired electric power, especially in or near major population centers, with generation from power plants that use other, less-polluting fuels, such as natural gas, nuclear, wind, or solar.
• Motor vehicles have been a rapidly rising source of air pollution in China, especially emissions of nitrogen oxides. China has been addressing this problem by adopting and enforcing the more stringent air pollution standards of the European Union. Scrapping highly polluting vehicles that have remained on China's highways is the most efficient way to reduce air pollution from motor vehicles already on the road.

These Measures Come at a Cost

• Replacing coal with natural gas for residential and commercial heating could run $32 billion to $52 billion.
• Replacing half of China's coal-fired electric power generation with renewables or nuclear power could cost $184 billion.
• Implementing limited buyback programs of old vehicles to get them off the road would be of relatively short duration; and could run $21 billion to $42 billion.
• However, given that the health costs of current air pollution run 6.5 percent of China's GPD (approximately $535 billion in 2012), improved air and economic output could offset these costs.