BEIJING—China’s cabinet has announced that 10 billion yuan ($1.6 billion U.S.) has been set aside this year to reward cities and regions that make significant progress in controlling air pollution, highlighting how the issue has become a priority for the leadership.

The fund will be set up to reward rather than offer subsidies for the prevention and control of air pollution in the key areas, according to a statement released after a Wednesday meeting of the State Council led by Premier Li Keqiang. It said controlling pollutants such as particulate matter in the air should be a key task.

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The statement said the consumption of coal should be controlled and also called for increased efforts to promote high-quality gasoline for vehicles, energy saving in construction and the use of environmentally friendly boilers.

The government is eager to bring about a visible improvement in China’s bad air, which has caused discontent among its citizens and tarnished the country’s image abroad.

While heavily polluting industries have emissions standards, they are not necessarily enforced, and local governments often favour pollution-intensive projects that can generate growth, which is what their performance is judged on.

Separately Wednesday, the official Xinhua News Agency reported that Beijing’s city government said it would shut down 300 polluting factories this year and eventually phase out some industries to improve the city’s air, citing a document detailing the capital’s action plan to 2017 to clean up its air. Energy and pollution-intensive projects such as steel and cement are not to be approved on principle, it said.

Xinhua said a list of industrial projects to be suspended or stopped would be published by the end of April.

Pollution campaigners have cautioned that the capital’s pollution can’t just be tackled on a citywide basis, because much of Beijing’s pollution wafts in from the surrounding regions.

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