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Current Air Pollution and Willingness to Pay for Better Air Quality: Revisiting the Temporal Reliability of the Contingent Valuation Method

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Abstract

In this study we examine whether and why preferences for environmental quality improvements depend on current quality. We conducted contingent valuation surveys over the course of a year in Nanjing, China, and find that the willingness to pay for future air quality improvements increases by 0.693% for every 1% increase in the current PM2.5 level. Therefore, the issue of "when" a valuation study is conducted has important implications for the estimation of benefits, and further deserves consideration when applying benefit transfer methods. One possible explanation for this result is projection bias, which arises when people exaggerate the extent to which future preferences will align with current tastes.

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Notes

  1. The AQI is measured by China’s Ministry of Environmental Protection (MEP) in 163 major Chinese cities. The measurement is based on the level of six atmospheric pollutants, namely, sulfur dioxide (SO2), nitrogen dioxide (NO2), suspended particulates smaller than 10 µm (PM10), suspended particulates smaller than 2.5 µm (PM2.5), carbon monoxide (CO), and ozone (O3). According to the AQI scale, the index below 100 actually includes two levels of AQI: good (The air quality is considered satisfactory, and air pollution causes little or no risk to health. This indication is presented in a green color in the AQI scale) and moderate (The air quality is acceptable. However, there may be a moderate health concern for a small number of people who are usually sensitive to air pollution. This indication is presented in a yellow color in the AQI scale). More information about AQI and its relationship with PM2.5 can be found on http://aqicn.org/city/. Annex 1 at the end of the paper also provides technical details about how China’s AQI is calculated from the six pollutants. The positive correlation between PM2.5 and AQI is also illustrated in the Annex. Note that the MEP of China’s AQI (called API before 2013) is more linearly and positively correlated to the PM2.5 concentration index than that of the EPA of the United States.

  2. The choice of the highest bid price at 5000 Yuan per year was based on the discussion in the focus group, in which all members believed 5000 Yuan per season, representing 20,000 Yuan per year, was a very high payment, and that very few respondents would be willing to pay that amount. Among the 751 respondents that encountered the 5000 yuan bid price, 77 persons answered yes.

  3. One explanation for the lower frequency of observing outdoor workers in our samples during more polluted days is the so-called phenomenon of “more smog, more courier services” (in Chinese, “越霾越忙).” That is, during high-pollution days, more people choose to stay inside, which results in a significant increase in restaurant delivery services and other general electronic commerce courier services. To a certain extent, when air pollution becomes more serious, general population displacements are simply replaced by courier service worker displacements. Such a phenomenon becomes so important that it was used as the main argument during the 2017 and 2018 Chinese People's Political Consultative Conference, which advocated the urgency to establish necessary labor protection measures for outdoor workers. The replacement of the displacements of the general population by those of courier workers, however, did not seem to contribute to the increase in the frequency of courier workers in our samples, because the courier workers’ busy work may in fact have reduced the chance for them to accept participation in our survey.

  4. For the two variables, we tried to produce a scatter plot in both log and linear form. The logarithm is found to provide a better presentation of the data, since the PM2.5 provides few outliers at a very high level (> 190 mg), while most of the other waves were conducted when the air quality was relatively good. The same comment is also applicable to WTP; since the bid price proposed in our paper varies from 10 to 5000 yuan, a non-linear transformation helps in establishing a linear correlation between WTP and PM2.5.

  5. Liang et al. (2018) assessed the excess mortality associated with both short- and long-term exposure to ambient PM2.5 in urban Beijing in 2013. They found that the effects attributable to long-term exposure to PM2.5 (the 2004–2013 nine-year average ambient concentration level) were significantly larger than those attributable to short-term exposure (daily value in year 2013). Yitshak-Sade et al. (2018) also reported similar conclusions based on New England hospital admissions (morbidity) data. These authors confirmed that long-term exposures to PM2.5 (annual average level) had stronger effects than short-term exposures to PM2.5 (moving average at lag day 0–1).

  6. More details about how the AQI is calculated from PM2.5 can be found in the Annex.

  7. Other values of N = 45, N = 60, etc. have been tested, and the results illustrated similar patterns as those presented in Fig. 6.

  8. In addition to the gap of 1.5 SD, we also tried 2 SD, 1 SD and 0.5 SD, and the results were similar to those we present in Table 10.

  9. The large improving or deteriorating novelty effect for this estimation is calculated from the PM2.5 level of the day of the survey with respect to the average PM2.5 of the past week. Therefore, to the estimation corresponding to a week and reported in the column of n = 7 days in Table 8, we further added the supplementary novelty effect cross-terms identified for each of the 13 weeks around the Youth Games.

  10. Since the first large improvement happened during the fourth week before the games, we can also regard this frequency of equal-quality weeks as the maintenance of unprecedented, good air quality in Nanjing.

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Acknowledgements

The author gives thanks for the research assistance provided by Ph.D. student Mamour Fall of the University of Sherbrooke. Jie He thanks for the travel fund provided by the FRQNT project 2016-MI-198161 and by the FRQSC project 2020-AUDC-271442. This research is also supported by the National Natural Science Foundation of China (Grant No. 71825005).

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Authors and Affiliations

  1. Department of Economics, Université de Sherbrooke, 2500 boulevard de l’Université, Sherbrooke, QC, J1K2R1, Canada

    Jie He

  2. School of Business and Institution of Green Development, University of Jinan, Jinan, China

    Bing Zhang

  3. State Key Laboratory of Pollution Control and Resource Reuse, School of Environment, Nanjing University, Nanjing, China

    Bing Zhang

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  1. Jie He
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Appendices

Appendix 1: Discussions About the Similarities and Differences Between AQI and PM2.5 Concentration

See Fig. 5.

Fig. 5
figure 5

The comparison of the US AQI and China API calculation from PM2.5 concentration

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Appendix 2: AQI Calculation Details (Translated by Authors from the Environmental Protection Standard HJ633-2012)

See Fig. 6. See Tables 9,10 and 11.

Fig. 6
figure 6

Day level mean and standard deviation of PM2.5 measured hourly (the length of the box provided the 95% CI)

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Table 9 AQI and the concentration index of related pollutants
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Table 10 Related information about AQI (translated from the MEP standard HJ633–2012)
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Table 11 Comparison between subsamples when the air quality is good, medium or bad1,3
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He, J., Zhang, B. Current Air Pollution and Willingness to Pay for Better Air Quality: Revisiting the Temporal Reliability of the Contingent Valuation Method. Environ Resource Econ 79, 135–168 (2021). https://doi.org/10.1007/s10640-021-00556-y

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