Wednesday, August 31, 2011

The cost of air pollution

A new study out of MIT calculates the long-term economic costs of lax air pollution standards in China. These costs include increased expenditure on health care and lost work and leisure time due to illness. The study estimates the total lost value (between 6 & 9 percent of GDP) and suggests that even modest pollution control efforts could have turned the loss into an economic gain via enhanced productivity. However, the authors of the study did not estimate the costs of implementing tighter standards. These would have to be accounted for to understand the true net change in economic welfare.

In related news, the US EPA is putting forth seven new environmental regulations for air pollution in the US. These regulations are being criticized for the extra costs that they will impose on businesses that have to comply. Read about it here at the News & Observer. The costs are indeed real (the price everyone pays for power will increase), but this is only half the story. There are also significant benefits to pollution control, as shown in the above MIT study. Fewer deaths and less illness means more productivity. Less illness means people can work harder, longer, stronger and smarter. Fewer sick children and elderly means parents and caregivers can work more. Framing the issue based only on an estimate of the costs or benefits is incorrect and misleading. We need both.


Tom Connolly said...

Good post. Wish I had read this before coming to class this afternoon.I can't believe it still surprises me when people try to fight against something that is so positive for human health and well-being, as well as the environments well-being. Despite the fact that it may costs billions of dollars to regulate these industries, the amount of money that would be spent on health care, etc. treating those affected by less-strict air quality strandards would far exceed the amount of money these corporations will have to spend to comply with the EPAs new regulations. The money coming from the corps. (which I'm sure they have plenty of) will be high at first, but in the long run the effects of not implementing these regulations will be much greater then the short term effects to corporations economic standpoints.

Anthony Stokes said...

While these new regulations are positive,it will be interesting to see if they become political rhetoric in next year's Presidential race. A Republican President would be almost certain to repeal these regulations.

Anthony Stokes said...
This comment has been removed by the author.
Erik Hopkins said...

According to the New York Times as of Friday President Obama opposed EPA's stricter standard for air quality. Obama stated that the stringent air quality standards would cause hardship for businesses during a troubled economic time. “Business groups and Republicans in Congress had complained that meeting the new standard, which governs emissions of so-called ground-level ozone, would cost billions of dollars and hundreds of thousands of jobs” (Broder, John).

Dr. Peter Schuhmann said...

Thanks for the updated info and link Erik.

Tom, don't we need to measure the value of the health and environmental effects before we can conclude that they exceed the costs of compliance?

The point of my original post was to suggest that we need estimates of both costs and benefits in order to determine the policy measures that most benefit society. Someone who says the environment is worth more than the costs to business without full information is no different than someone who says the opposite. It's easy to come to a conclusion based on preconceived notions. It's much harder to construct objective empirical evidence. But that's what we need here. Otherwise we form policy based on politics and ideology rather than facts (as Anthony alludes to).

I'm not saying that this particular set of regulations isn't worth it, but isn't it feasible that the benefits from some health and environmental regs are less than the costs of compliance? That is, isn't it possible that some environmental regulations are bad ideas?