Air Quality, Public Health, and Low Carbon Co-benefits and Economic Costs of Household Energy Transition in China

Abstract

Over an extended period, the household sector has heavily relied on energy consumption, particularly solid fuels like coal, resulting in significant environmental and health consequences. This outdated energy utilization approach has severely contaminated residents’ living environments, posing a substantial threat to their health, and significantly contributing to air pollution and greenhouse gas emissions through widespread decentralized coal combustion. Addressing these challenges necessitates a transition away from the extensive rural heating model. However, there is a critical research gap in quantitatively assessing the economic costs and benefits of different transition pathways, especially considering the specific context of Chinese household energy consumption and transition scenarios. This gap is pivotal in shaping effective government and household transition strategies.

Utilizing data from the China Health and Retirement Longitudinal Study (CHARLS), this study reveals that substituting solid fuels like coal with natural gas or electricity can significantly reduce the probability of individuals suffering from chronic obstructive pulmonary disease, heart diseases, stroke, and related ailments. Leveraging the case of household energy transition in Shaanxi Province, we assess the environmental benefits resulting from improved resident health, while also considering the additional benefits of reduced carbon emissions and the economic costs associated with this transition. Our study comprehensively assesses the net benefits associated with three transition pathways: “coal to gas”, which replaces coal heaters with wall-mounted natural gas heaters; “coal to electricity with heat pumps”, which replaces coal heaters with air source heat pumps; and “coal to electricity with resistance heaters”, which replaces coal heaters with resistance heaters with thermal storage. Results indicate that, given the current state of electricity generation and energy prices in Shaanxi, all three transition pathways result in negative net benefits. However, the extent of negative net benefits varies significantly among these pathways, with transitioning to heat storage electric heaters yielding considerably lower net benefits compared to using natural gas or energy-efficient air source heat pumps. Furthermore, due to their higher electricity consumption, heat storage electric heaters pose an elevated risk of carbon emissions in power generation structures heavily reliant on fossil fuels. To expedite the clean energy transformation of the household sector, short-term government guidance and support are needed, offering subsidies and incentives for the adoption of energy-efficient equipment. In addition, efforts should focus on accelerating the development of the natural gas market and promoting the clean and low-carbon transformation of the power generation sector.

This study contributes in two primary aspects compared to previous literature. First, unlike many previous studies constrained to specific regions, our research employs a comprehensive and large sample size dataset, offering a more representative depiction of the overall situation. Second, existing research on the impacts of energy consumption has predominantly focused on outdoor pollution, with limited exploration into indoor air quality and its effects on public health. We take Shaanxi as a case study and consider multiple factors such as heating demand, electricity structure, and fuel prices to provide a comprehensive comparison of different transition pathways.

This research facilitates the interdisciplinary application of economics in the realms of environment, health, and climate change, providing decision-making insights for governments in formulating and implementing policies for household energy transition. Ultimately, it aims to accelerate the adoption of clean energy sources in households and contribute to national goals such as “Beautiful China” and “Carbon Neutrality”.