An environmentally related policy impact analysis considering wind effect: evidence from suspending old coal-fired generators in South Korea

This study measures the causal effect of an individual, aged coal-fired generator on PM2.5 concentration. For this, the policy of shutting down old coal-fired power plants in Korea as a quasi-natural experiment was examined. This study adopts the difference-in-differences technique and controls both for wind effects and overseas pollutant effects. The results show that the shut-down policy reduces daily PM2.5 concentration by 2.04–3.65 μg/m3 across the number of generators suspended, and the share of wind effects in the total policy effects is estimated as about 50%. In addition, overseas effects account for about 20% (5.64 μg/m3) of regional PM2.5 concentration on average. These results imply that although the closure of old coal-fired power plants can reduce average PM2.5 concentration, the policy alone is not enough to expect a remarkable improvement in air quality when PM2.5 concentration is high. Thus, these findings suggest that the Korean government must consider domestic policies and cross-border cooperative policies to resolve the high PM2.5 concentration issue.