Air Pollution and Solar Energy: Evidence from Wildfires

There is strong evidence on the mortality and morbidity external costs of air pollution. This paper focuses on another source of air pollution externality: the loss in solar electricity generation from increased atmospheric opacity due to air pollution. We use data from residential rooftop solar panels and exploit quasi-random variation in air opacity from wildfire smoke and wind conditions to estimate that PM2.5 pollution reduced annual solar generation in California by over 450GWh, or 4% of total potential generation. This is equivalent to an annual externality of $177 per ton of PM2.5 emitted. Our findings suggest that there is a positive feedback from decarbonisation policies, where reduced dependence on fossil fuels improves air quality, leading to an even greater productivity of solar generation, further reducing emissions.