The Economic Costs of Air Pollution

Introduction

Air pollution remains a global problem, especially in heavily industrialized nations such as the United States. Some progress has been made in recent years, however, due in large part to the provisions of the Clean Air Act of 1970 and subsequent federal regulations. The purpose and organization of the paper are described in this section.

How Air Pollution is Measured

This section is used to provide a description concerning how air pollution is measured and which constituent elements are included in the analysis.

How expensive are damages along with specific damages?

The current estimates of the economic costs of air pollution of around $131 billion each year are explained in this section together with examples of specific damages related to diminished worker productivity, increased inpatient stays and health care costs that are associated with the premature births caused by air pollution.

How pollution represents a market failure and how it affects the economy

A definition of market failures and a discussion concerning how air pollution represents such a failure is provided in this section.
Conclusion

Finally, the conclusion is used to present a summary of the research and key findings concerning the foregoing issues.

HOW AIR POLLUTION IS A MARKET FAILURE AND HOW IT AFFECTS THE ECONOMY

Despite the progress made since the passage of the Clean Air Act of 1970, air pollution remains a global problem, especially in heavily industrialized nations including the United States. Although efforts to respond to the adverse effects of air pollution have some positive economic effects, the overall impact of air pollution is highly negative, making it a clear example of a market failure. The purpose of this paper is to provide a review of the relevant literature to explain how air pollution is measured, how expensive damages are along with specific damages, and a discussion concerning how pollution represents a market failure and how it affects the economy in terms of lost worker productivity, additional health care costs and premature deaths. Finally, the paper presents a summary of the research and key findings concerning the foregoing issues in the conclusion.

How air pollution is measured

The most common method currently in use for measuring air pollution is the pm2.5 scale and the air quality index. In this context, PM2.5 is used to refer to the amount of atmospheric particulate matter (PM) with diameters smaller than 2.5 micrometers, and which are visible only with an electron microscope (What is PM2.5 and Why You Should Care 2). In the United States, air pollution is measured by the Environmental Protection Agency (EPA) by analyzing the current concentration levels of PM2.5 together with the other major air pollutant categories covered by the Clean Air Act of 1970 (i.e., ground-level ozone, carbon monoxide, sulfur dioxide, and nitrogen dioxide) (Air Quality Index Basics 2).

To date, the EPA has established nationwide air quality standards for each of these categories of air pollutants and publishes the results of its findings for public review (Air Quality Index Basics 3) as shown in Table 1 below.

The levels of health concern that correspond to each level are defined below:

Each category corresponds to a different level of health concern. The six levels of health concern and what they mean are:

· "Good" (green): AQI is 0 to 50. Air quality is considered satisfactory, and air pollution poses little or no risk.

· "Moderate" (yellow): AQI is 51 to 100. Air quality is acceptable; however, for some pollutants there may be a moderate health concern for a very small number of people. For example, people who are unusually sensitive to ozone may experience respiratory symptoms.

· "Unhealthy for Sensitive Groups" (orange): AQI is 101 to 150. Although general public is not likely to be affected at this AQI range, people with lung disease, older adults and children are at a greater risk from exposure to ozone, whereas persons with heart and lung disease, older adults and children are at greater risk from the presence of particles in the air.

· "Unhealthy" (red): AQI is 151 to 200. Everyone may begin to experience some adverse health effects, and members of the sensitive groups may experience more serious effects.

· "Very Unhealthy" (purple): AQI is 201 to 300. This would trigger a health alert signifying that everyone may experience more serious health effects.

· "Hazardous" AQI greater than 300 (maroon): This would trigger a health warning of emergency conditions. The entire population is more likely to be affected (Air Quality Index Basics 4).

While there are some significant regional differences in the types and levels of damage caused by elevated air pollution levels, air pollution exacts an enormous toll on the country at the national level as discussed below.

How expensive are damages along with specific damages?

The estimates of how expensive the damages that are associated with air pollution vary depending on what models are used and which variables are included in the analyses (Harvey 4). Using the most recent models available, the overall costs of air pollution in the United States for health care-related problems have been estimated at about $131 billion each year in additional health care costs, premature births and premature deaths (Lupkin 1). The majority of these costs are related to losses in worker productivity and the increased incidence of various mental disabilities that are associated with premature births (Lupkin 2). Other costs include the additional monies spent on extended inpatient stays that are also related to premature births due to air pollution (Lupkin 2-3).

Notwithstanding these staggering economic costs, there has been some progress made in recent years in reducing the amount of air pollution in the United States and the corresponding economic burden it creates. For instance, in 2002, the economic costs of air pollution in the U.S. were estimated at $175 billion and further reductions are anticipated as the full range of mediation measures planned by the federal government are implemented across the country (Harvey 5). Moreover, the investments in stricter government controls over air pollution have also paid major dividends over the years. For example, McCarthy points out that, “During the EPA's 46 years, the United States experienced record growth while curtailing pollution. For every dollar spent on lifesaving regulations, we've seen up to $9 in health benefits--a boon for economic welfare” (77). Despite the current and planned initiatives to address the problem, though, it is also apparent that air pollution represents a profound market failure as discussed below.

How pollution represents a market failure and how it affects the economy

Market failures occur in those instances when free markets are unable or unwilling to develop efficient resource allocation mechanisms and air pollution therefore represents such a failure because it is a “significant negative externality [which] can result from. . . industrial pollution by sulphuric and nitric acid, as a by-product of the production process in many industries, such as smelting and refining [or] from transportation, heating and lighting, and from waste storage and disposal” (Market failures and air pollution 2). On the one hand, these market failures are expected to continue to adversely affect the economy by causing additional health care expenditures and diminished worker productivity well into the foreseeable future (The economic consequences of outdoor air pollution 2).

On the other hand, though, there are also some proven economic benefits that are associated with domestic efforts to mediate air pollution through initiative such as tax incentives for renewable sources including solar and wind energy (McCarthy 76). Indeed, these clean-air initiatives have translated into hundreds of thousands of new jobs nationwide and fueled sustained economic growth for the past several years (McCarthy 77). Nevertheless, it is clear that these industries will become obsolete as soon as the stricter controls on industrial sources of air pollution are fully implemented pursuant to the EPA’s Clean Air Interstate Rule (CAIR) and its updated replacement, the Cross-State Air Pollution Rule (CSAPR) (Harvey 6).

Conclusion

During the early 20th century, belching smokestacks were viewed as a sign of industrial development and economic progress, but the research showed that things have changed in substantive ways since that time. Indeed, a growing body of scientific evidence confirms that air pollution exacts a heavy economic toll on a country, the majority of which is related to health care costs and losses in worker productivity. The research also showed that air pollution is measured by analyzing the amount of PM2.5, ground-level ozone, carbon monoxide, sulfur dioxide, and nitrogen dioxide in the air people breath, and that the respective levels of these constituent pollutants has decreased over the past 15 years and additional reductions are anticipated as stricter air pollution policies are implemented and renewable energy sources replace existing fossil fuel energy generation plants.



Works Cited

“Air Quality Index Basics.” AirNow, 2018, https://airnow.gov/index.cfm?action=aqibasics.aqi.

Harvey, Chelsea. “The staggering economic cost of air pollution. The Washington Post, 2016, https://www.washingtonpost.com/news/energy-environment/wp/2016/01/29/the-staggering-economic-cost-of-air-pollution/?noredirect=on&utm_term=.b9b5f9e099c8.

Lupkin, Sydney. “This Hidden Price of Air Pollution Is Costing the US Billions of Dollars.” Vice News, 2016, https://news.vice.com/article/this-hidden-price-of-air-pollution-is-costing-the-us-billions-of-dollars.

“Market failures and air pollution.” Economics Online, 2018, http://www.economicsonline. co.uk/Market_failures/Introduction_to_market_failures.html.

McCarthy, Gina. “Lean in to Climate Change: To Maintain an Edge against China, America Must Continue to Be an Environmental Leader.” Foreign Policy, no. 224, pp. 76-80.

OECD, The Economic Consequences of Outdoor Air Pollution. Paris: OECD Publishing, 2016.

“Understanding Air Pollution and the Way It Is Measured.” The World Bank, 2018, http://www.worldbank.org/en/news/feature/2015/07/14/understanding-air-pollution-and-the-way-it-is-measured.

“What is PM2.5 and Why You Should Care.” Bliss Air. 2018. https://blissair.com/what-is-pm-2-5.htm.