Abstract

Coal-fired power plants are among the biggest air polluters both in China and globally. In 2013, China launched a pilot project to switch its power plants from coal to natural gas to curb coal-fired plants’ detrimental effects on air quality. Debates about this policy mainly invoke the costs, but no study examines whether the change led to cleaner air and associated economic benefits. This article provides the first causal estimate of the capitalization effect of coal-to-gas conversion on housing prices. We estimate a triple difference model using housing transaction data from 2011 to 2015 and administrative data on all power plants in Beijing. Our results, although marginally significant, show that coal-to-gas conversion leads to a positive price premium of 11% for nearby properties. We provide suggestive evidence that our findings of positive price premiums are likely attributable to the reduction in air pollutants following the coal-to-gas switch, including a 4.9% reduction in particulate matter and 5.2% decrease in SO2.