Can power market reform reduce air pollution?——Evidence from prefecture-level cities in China

Abstract

The market-oriented reform of China’s power market has gradually transformed power prices from government pricing to market regulation, which not only promotes the production efficiency of industrial enterprises, but also inhibits the excessive consumption and waste of power by residential power users. This paper uses the data from 2006–2018 combined with the precious industrial power price data and macroeconomic data of 100 cities in China, takes the marketization reform of the power market in 2015 as a quasi-natural experiment, and uses the difference-in-differences model to empirically study the causal relationship between power market reform and air pollution for the first time. The study found that power market reform can reduce air pollution, and this conclusion is also supported by a number of robustness tests. Mechanism analysis shows that power market reform can reduce air pollution by improving power market efficiency, promoting technological progress, and reducing power consumption. Heterogeneity analysis shows that power market reform can suppress air pollution more significantly in eastern regions, regions with severe air pollution, and regions with larger populations. This paper not only provides new research perspectives and research ideas for air pollution prevention and control, but also provides empirical evidence for the positive externalities of power market reform.