Understanding China's Urban Pollution Dynamics

Abstract

China's ongoing urban economic growth has sharply increased the population's per capita income, lowered the count of people living below the poverty line, and caused major environmental problems. We survey the growing literature investigating the causes and consequences of China's urban pollution challenges. We begin by studying how urban population and industrial growth impacts local pollution levels and greenhouse gas production. As the urban population grows richer, its demand for private transportation and electricity sharply increases. Such privately beneficial activity exacerbates urban pollution externalities. Facing these severe environmental challenges, China's urbanites increasingly demand quality of life progress. We survey the emerging literature investigating the demand for environmental progress in China. Progress in mitigating externalities hinges on whether the powerful central and local governments choose to address these issues. We analyze the political economy of whether government officials have strong incentives to tackle lingering urban externalities. We conclude by discussing future research opportunities at the intersection of environmental and urban economics. (JEL O18, P25, P28, Q53, R23, R41, R58)