Local Pollution as a Determinant of Residential Electricity Demand

Alberto Salvo

Journal of the Association of Environmental and Resource Economists, 2020, vol. 7, issue 5, 837 - 872

Abstract: This study finds that a significant and hitherto ignored determinant of home energy demand is ambient particle pollution. I access longitudinal data for Singapore, a newly affluent Asian city-nation and arguably a harbinger of what is to come in the urbanizing tropics. Singapore today combines high (yet unequal) defensive capital stocks, such as residential air conditioning, with widely varying particle pollution. Overall, residential electricity demand grows by 1.1% when PM2.5 rises by 10 µg/m3. I compare the pollution-electricity response to the well-known heat-electricity response, and show how it varies over the socioeconomic distribution. Local pollution control has the cobenefit of reducing electricity generation, via lower household demand, and thus mitigating carbon emissions. The observed inequality in defensive expenditure may also exacerbate health inequalities, as suggested by an exchange between epidemiologists and government.

Date: 2020
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