Putting a price tag on air pollution

Will northern China be cloaked in thick yellow smog again this spring from sandstorms originating in Mongolia? And which movies will be box office hits in 2024?

Surprisingly, these two seemingly unrelated events are connected, according to Dr. Junjie Zhang’s research exploring the impact of air pollution on movie theater admissions.

It is a typical project for Zhang, a professor of environmental economics at the Nicholas School of the Environment at Duke University, and director of the Initiative for Sustainable Investment at Duke Kunshan University, driven by both personal interest and the practical impact it can deliver.

Considered one of the first carbon market scholars in China, Zhang started research work in this field in his junior year at college during the late 1990s, working with a professor on climate change issues with a focus on the Kyoto Protocol, an international treaty aimed at reducing greenhouse gas emissions. His research journey had an unintentional start, he says.

“I had no idea when I enrolled at college that I was studying in the Renmin-Tsinghua University dual-degree program in environmental economics and environmental engineering,” he says. “But the cross-disciplinary training benefited me greatly in building a solid foundation in both economics and environmental engineering.”

Zhang has since become a motivated scholar driven by passion and curiosity for his research topics, which is illustrated in his project on the link between air pollution and movie theater visits.

“I found this topic very intriguing. I had a question: when air pollution is very bad, do more or fewer young people choose to go to the movie theater? Most of my colleagues thought more would go as young people prefer hanging out indoors where air purifiers are installed, when the outdoor air quality becomes horrific. But I was not so sure, so I decided to find out the answer using soundly designed research,” he says.

In doing the research, the team had to overcome several challenges, including finding a willing partner cinema where they could measure pollution.

“The movie theater managers we approached were concerned about measuring the air quality on their premises, worried that the results might be unsatisfactory. We had to find the investors of a movie theater to convince them directly. Fortunately, they eventually agreed and asked us to share the data,” says Zhang.

Zhang and his team used information from a variety of sources to conduct the study. These included a dataset of daily ticket sales for 829 movies released in 60 cities from 2012 to 2014, indoor and outdoor air quality information from a cinema in Kunshan city, and film ratings from Douban.com, a Chinese online rating and reviewing website. Analyzing this, and other information, using an econometric approach, they built models featuring movie-going behaviors to establish causal links.

Their findings, published in 2022 in the Journal of Environmental Economics and Management, showed a connection between pollution and lower movie attendance, estimated at one pollution day causing a market share drop of 2.26%, other things being equal.

“We were joking that we should sell these models to Wang Sicong,” says Zhang with a smile. Wang Sicong, a high-profile social media influencer in China, is son of the chairman of Wanda Group, who owns one of China’s well-known movie theater chains.

The research also assessed the spillover effect on other industries that could be impacted by falling cinema audiences, estimating losses of around US$1.6 billion for the dining industry, and US$9.4 billion for domestic tourism from 2012 to 2014.

“Through this research, we quantified the economic impact of pollution on one sector and further applied the environmental consumption effect estimated in the movie theater market to the dining and tourism industries, which share many common characteristics with the theatrical market,” says Zhang.

“As Chinese cities are transforming themselves from centers of manufacturing to centers of consumption, reducing environmental pollution improves urban quality of life and boosts urban consumption,” he adds.

After the price tag of air pollution is calculated, the next natural question is to work out the tradeoff between economic development and environmental performance.

Zhang believes that well-designed environmental policy tools can help balance the two goals. He has long worked on climate transition policies, assessing their impact on corporate competitiveness.

For his four-year project “Economic Impact of Climate Transition Risks: An Empirical Study Based on Chinese Firms”, conducted with funding from the National Natural Science Foundation of China, Zhang explored the effectiveness of China’s regional carbon market pilots in reducing firm emissions.

His findings, published in the Proceedings of the National Academy of Sciences and reprinted in the Nature Climate Change, showed that the pilots of the emission trading system, an important policy instrument for China to achieve its climate targets, were effective in reducing company emissions.

According to the research, firms responded to carbon regulations by reducing labor and capital while improving energy efficiency, suggesting they primarily took advantage of low-hanging fruit to reduce energy consumption and carbon emissions.

It is a clear example of how human behavior is “driven by complex emotions”, according to Zhang.

“Human beings are not objects whose interactions with other objects can be explained and predicted using the concept of forces,” he says.

“Environmental policies sometimes have unexpected effects. So, it is essential that we do research projects to understand how policies lead to outcomes if policymakers are to intervene effectively and reduce harmful or unintended consequences.”

Job opportunities in environmental economics have grown significantly over the past 20 years, according to Zhang. For his Ph.D. students, the number one destination is jobs at academic institutions, while international organizations, including the World Bank, the Asian Development Bank and the International Monetary Fund, are also major employers, he says.

Demand from financial institutions, consultancies and other firms has been on the rise since 2020, he adds, as environmental, social and corporate governance have grown in importance.

There are diverse opportunities for graduate students in environmental science and policy hoping to contribute to the health of our planet, says Zhang.

The International Master of Environmental Policy (iMEP) program at Duke Kunshan University is ideally placed to provide the next generation of environmental leaders to work in government, civil society and the private sector with world-class environmental education and cross-disciplinary training, he adds.

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Media Contact

Senior Editor/Writer

Gareth McPherson

Email: gareth.mcpherson@dukekunshan.edu.cn

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