Pollution control certainly confers many benefits, but it also has costs. Do the benefits justify the costs? That was a question the U.S. Congress wanted answered, so in Section 812 of the Clean Air Act Amendments of 1990 it required the U.S. Environmental Protection Agency (EPA) to evaluate the benefits and costs of the U.S. air pollution control policy initially over the 1970 – 1990 period and subsequently over the 1990 – 2020 time period (see Example 3.2). In responding to this congressional mandate, the EPA set out to quantify and monetize the benefits and costs of achieving the emissions reductions required by U.S. policy. Benefits quantified by this study included reduced death rates and lower incidences of chronic bronchitis, lead poisoning, strokes, respiratory diseases, and heart disease as well as the benefits of better visibility, reduced structural damages, and improved agricultural productivity. Example 3.2: Does Reducing Pollution Make Economic Sense? Evidence from the Clean Air Act In its 1997 report to Congress, the EPA presented the results of its attempt to discover whether the Clean Air Act had produced positive net benefits over the period 1970 – 1990. The results suggested that the present value of benefits (using a discount rate of 5 percent) was $22.2 trillion, while the costs were $0.523 trillion. Performing the necessary subtraction reveals that the net benefits were therefore equal to $21.7 trillion. According to this study, U.S. air pollution control policy during this period made very good economic sense. Soon after the period covered by this analysis, substantive changes were made in the Clean Air Act Amendments of 1990 (the details of those changes are covered in later chapters). Did those additions also make economic sense? In August of 2010, the U.S. EPA issued a report of the benefits and costs of the Clean Air Act from 1990 to 2020. This report suggests that the costs of meeting the 1990 Clean Air Act Amendment requirements are expected to rise to approximately $65 billion per year by 2020 (2006 dollars). Almost half of the compliance costs ($28 billion) arise from pollution controls placed on cars, trucks, and buses, while another $10 billion arises from reducing air pollution from electric utilities. These actions are estimated to cause benefits (from reduced pollution damage) to rise from roughly $800 billion in 2000 to almost $1.3 trillion in 2010, ultimately reaching approximately $2 trillion per year (2006 dollars) by 2020! For persons living in the United States, a cost of approximately $200 per person by 2020 produces approximately a $6,000 gain in benefits from the improvement in air quality. Many of the estimated benefits come from reduced risk of early mortality due to exposure to fine particulate matter.
36 Despite the fact that this study did not attempt to value all pollution damage to ecosystems, the net benefits are still strongly positive. This implies that an inability to monetize everything does not necessarily jeopardize the ability to reach sound policy conclusions.
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