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Air pollution, caused by the use of fossil fuel, has been an environmental plague in China. It has a strong negative impact on human health. Since the costs of damage to health are not born by the pollution producers, these costs translate to social externality. Policies have an important role in optimizing resource allocation, such as penalizing the pollutant producers and incentivizing clean energy development. Among others, replacing coal with natural gas for heating represents an important example of air quality improvement measures. This paper presents a study that evaluates the health impacts from air pollution and the external cost of the "Coal-To-Gas" policy in district heating using Changping District (Beijing, China) as an example. Four scenarios were considered based on the historical and standard PM2.5 concentration. Results show that PM2.5 is responsible for causing an increase of 40% premature deaths in 2015 and that the monetary value of damage to health is higher than 1.2 billion CNY. In 2016 and 2017, the reported air quality was better than that in 2015. As a result, 13.3% and 26% premature deaths caused by air pollution were avoided in 2016 and 2017 compared to 2015 respectively. If the PM2.5 concentration level were to be reduced to national standard, the number of premature deaths attributed to PM2.5 could further decrease to 47.7% compared to 2015. Overall, the Coal-To-Gas policy in district heating reduces 0.017%~0.45% of premature death caused by air pollution each year. Air pollution reduction policies, which are expected to improve air quality together in the future, and the specific policy of Coal-To-Gas in district heating, could make great contribution to reducing the premature death caused by environmental problem and need more attention from the government and the public.