Wentao Yang / Sun Staff Photographer

Prof. Shanjun Li, applied economics and management, reanalyzed China's pollution problem through an economic lens at a lecture last week.

November 27, 2016

Professor Recommends Use of Economic Principles to Tackle Chinese Pollution, Traffic Congestion

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Innovators seeking to reduce China’s air pollution and traffic congestion must address these problems with economic principles in mind, according to Prof. Shanjun Li, applied economics and management.

“Air pollution and traffic congestion really have become the most pressing challenges in major urban areas in China,” Li said in lecture last week, adding that these two issues have large impacts on both human health and economic growth.

Factors including the growth of industry and vehicle ownership, reliance on fossil fuels and lack of government intervention have created a “perfect storm” for China’s environmental degradation, according to Li.

As government officials focused on increasing the country’s gross domestic product, “environmental protection really was an afterthought” for most of them, Li said.

Li stressed the need for an economic approach to possible solutions, explaining that clean air and water should be reanalyzed as resources in the market. Market-based solutions essentially place a price on using these resources, he said.

To an economist, Li said traffic can be considered excess demand for road capacity. He suggested implementing a congestion charge — a fee imposed on drivers — to help raise the cost of owning a vehicle and reduce demand for road space, and using the revenues for improvements in public transportation.

Li’s research focused on finding the ideal congestion charge for Beijing by evaluating costs in terms of time lost due to slow traffic. He said he and his students found that the optimal price is between nine and thirteen cents yuan per kilometer, varying by time of day and location.

Li concluded that despite China’s severe air pollution problems, the country has shown promise in reducing its environmental impact.

“China actually is uniquely positioned really to be a leader in climate change, and more importantly, in actually in producing clean energy for China, for the U.S., for the world as a whole,” he said.