Economics Principles of
Air Pollution Management
C. Arden Pope III
Mary Lou Fulton Professor of Economics
Presented at:
British Columbia Lung Association
Annual Air Quality & Health Workshop
Vancouver, British Columbia, Canada
March 15, 2017
Over London by Rail, 1870
Gustave Doré
Depicts the congested and polluted
Industrial environment of 1870 London
Classical Economics
• Adam Smith (Scottish social philosopher
and political economist), author of
Wealth of Nations (1776), free markets,
competition, and the metaphor of the
“invisible hand”.
• Doctrine of “Laissez-faire”
• What about air pollution? Smells like
money to me!
Began to lose our Faith in the doctrine of Laissez-fair
Dec. 5-9, 1952: London--1000’s of excess deaths
Dec. 1-5, 1930: Meuse Valley, Belgium
60 deaths (10x expected)
Oct. 27-31, 1948: Donora, PA
20 deaths, ½ the town’s population fell ill
Respiratory and cardiovascular
disease and death
Loss of Faith in the doctrine of Laissez-faire
• No longer did air pollution “smell like money” but it
smelled like something unhealthy.
• In the UK, US, and elsewhere public policy efforts to
clean up the air and eliminate the “Killer Smog Episodes”
began (Clean air act).
• There was success at eliminating or reducing the
extreme air pollution episodes but air pollution remained
and we have learned that even moderate air pollution
had adverse health effects.
Ambient Concentrations ( g/m3)
$
CT
CM
Marginal HealthCosts of Pollution
Ambient Concentrations ( g/m3)
$
Marginal Costof Abatement
Marginal Health Costof Pollution
CT C* C
M
Ambient Concentrations ( g/m3)
$
Marginal Costof Abatement
Marginal Health Costof Pollution
CT C* C
M
Management approach 1—Do nothing
Ambient Concentrations ( g/m3)
$
Marginal Costof Abatement
Marginal Health Costof Pollution
CT C* C
M
DEAD WEIGHT LOSS
(due to over abatement)
Management approach 2—Abate pollution at or below threshold
Ambient Concentrations ( g/m3)
$
Marginal Costof Abatement
Marginal Health Costof Pollution
CT C* C
M
Re
gu
lato
ry a
ction
1 (b
an
co
al/w
ood
bu
rnin
g f
or
sp
ace
hea
ting
)
Re
gu
lato
ry a
ction
2 (
sta
ge
I a
uto
em
issio
n c
ontr
ols
)
Re
gu
lato
ry a
ctio
n 3
(co
al p
ow
er
pla
nt co
ntr
ols
)
Re
gu
lato
ry a
ctio
n 5
(sta
ge
II a
uto
em
issio
n c
on
tro
ls)
Re
gu
lato
ry a
ctio
n 4
(ste
el
mill
/sm
elter
em
issio
n c
ontr
ols
)
RA 6
(Diesel
emission
controls)
Management approach 3—Use regulatory actions and B/C criteria
Ambient Concentrations ( g/m3)
$
Marginal Costof Abatement
Marginal Health Costof Pollution
CT C* C
M
Re
gu
lato
ry a
ction
1 (b
an
co
al/w
ood
bu
rnin
g f
or
sp
ace
hea
ting
)
Re
gu
lato
ry a
ction
2 (
sta
ge
I a
uto
em
issio
n c
ontr
ols
)
Re
gu
lato
ry a
ctio
n 3
(co
al p
ow
er
pla
nt co
ntr
ols
)
Re
gu
lato
ry a
ctio
n 5
(sta
ge
II a
uto
em
issio
n c
on
tro
ls)
Re
gu
lato
ry a
ctio
n 4
(ste
el
mill
/sm
elter
em
issio
n c
ontr
ols
)
RA 6
(Diesel
emission
controls)
Assumes regulatory
management that is wise,
competent, well-enforced,
efficient, not over reaching,
politically acceptable, etc.
Ambient Concentrations ( g/m3)
$Marginal Costof Abatement
Marginal Health Costof Pollution
CT C* C
M
Piqovian Tax
rate or Price in
Cap-and-Trade
scheme.
Management approach 4 and 5—Use Pigovian Taxes or Cap-and Trade
Ambient Concentrations ( g/m3)
$Marginal Costof Abatement
Marginal Health Costof Pollution
CT C* C
M
Piqovian Tax
rate or Price in
Cap-and-Trade
scheme.
Also assumes management
and enforcement of the
Piqovian Tax or the Cap-and-
Trade scheme that is
feasible, enforceable,
politically acceptable, etc.
In Six-Cities study, adjusted relative risk of dying were
almost linearly associated with air pollution.
In ACS study, adjusted relative risk of dying were
almost linearly associated with air pollution.
Ambient Concentrations ( g/m3)
$
Marginal Costof Abatement
Marginal Health Costof Pollution
C*
Ambient Concentrations ( g/m3)
$
Marginal Costof Abatement
Marginal HealthCost of Pollution
C*
high estimate
median estimate
low estimate
CL C
H
0 60 120 180 240 300
Ad
jus
ted
Re
lati
ve
Ris
k
1.0
1.5
2.0
2.5
<3cigs/day
estimated daily dose of PM2.5
, mg
23+cigs/day
8-12cigs/day
13-17cigs/day
18-22cigs/day
4-7cigs/day
Pope, Burnett, Krewski, et al. 2009.
Figure 1. Adjusted relative
risks (and 95% CIs) of IHD
(light gray), CVD (dark
gray), and CPD (black)
mortality plotted over
estimated daily dose of
PM2.5 from different
increments of current
cigarette smoking.
Diamonds represent
comparable mortality risk
estimates for PM2.5 from air
pollution. Stars represent
comparable pooled relative
risk estimates associated
with SHS exposure from
the 2006 Surgeon
General’s report and from
the INTERHEART study.
Ambient Concentrations ( g/m3)
$
C* CH
Marginal Costsof Abatement
Marginal HealthCosts of Pollution
CNC
Pollution Abatement
Ambient Concentrations ( g/m3)
$
C* CH
Marginal Costsof Abatement
Marginal HealthCosts of Pollution
CNC
Ambient Concentrations ( g/m3)
$
C* CH
Marginal Costsof Abatement
Marginal HealthCosts of Pollution
CNC
In 2007 and 2008 OMB estimates that
the largest benefits of ALL federal
regulations were attributable to
controlling exposure to a single air
pollutant:
fine particulate matter (PM2.5).
Estimated benefits:
$18.8 to $167.4 billion/year
Estimated costs:
$7.3 billion per/year
Ambient Concentrations ( g/m3)
$
C* CH
Marginal Costsof Abatement
Marginal HealthCosts of Pollution
CNC
ER = 0.0063 * (PM2.5)
(Approximately from Hoek et al., 2013)
ER = 0.4 {1 – exp [-.03 (PM2.5)0.9 ] }
(Approximation based on functional
form of the integrated risk function,
Burnett et al. 2014).
Figure 2. Stylized analysis of
pollution abatement for linear and
supralinear C-R functions.
From:
Pope, Cropper, Coggins, Cohen.
JAWMA 2015
Fine-Particulate Air Pollution and Life Expectancy in the United States
C. Arden Pope, III, Ph.D., Majid Ezzati, Ph.D., and Douglas W. Dockery, Sc.D.
January 22, 2009
Matching PM2.5 data for
1979-1983 and 1999-2000 in
51 Metro Areas
Life Expectancy data for
1978-1982 and 1997-2001 in
211 counties in 51 Metro areas
Evaluate changes in Life
Expectancy with changes in
PM2.5 for the 2-decade period
of approximately 1980-2000.
0 2 4 6 8 10 12 14
0
5
10
15
20
Reduction in PM2.5 (mg/m3)
Incr
eas
e in
inco
me
($
10
00
s)
Br = -0.027, p = 0.71
Tradeoffs between, air
pollution and life expectancy
in the U.S., 1980-2000. Pope, Ezzati, Dockery
Environ Res. 2015
Changes in Economic Indicators and Pollutant Emissions 1970-2015. Adapted from Samet et al. NEJM March 1, 2017.
GDP
Vehicle miles
traveled
Population
Energy
consumption
CO2 emissions
Aggregate air
pollution
Emissions
(6 common pol.)
1970
CAA
&
EPA
Clean versus polluted
air is among our
economic choices.
Clean air is an economic good that contributes to human
well-being, human capital, and positive environmental
amenities.
The “production” of clean air can contribute to economic
prosperity, human well being, and improved public health.
Finally,
This stylized approach ignores various uncertainties and
complications including:
Interactive multi-pollutants,
Issues of environmental justice,
How do efforts to reduce traditional air pollutants
complement or diverge from efforts to address climate
change and is there a reasonable way to integrate these
efforts.
Thank you.