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Measuring welfare loss caused by air pollution in Europe: A CGE analysis

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  • Nam, Kyung-Min
  • Selin, Noelle E.
  • Reilly, John M.
  • Paltsev, Sergey

Abstract

To evaluate the socio-economic impacts of air pollution, we develop an integrated approach based on computable general equilibrium (CGE). Applying our approach to 18 western European countries shows that even there, where air quality is relatively high compared with other parts of the world, health-related damages caused by air pollution may be substantial. We estimate that as of 2005, Europe experienced an annual loss in consumption of about 220 billion Euro in year 2000 prices (about 3% of total consumption) with a range based on 95% high and low epidemiological response functions of 107-335 billion Euro and a total welfare loss of about 370 billion Euro (range of 209-550) including both consumption and broader welfare losses (around 2% of welfare level) due to the accumulated effects of three decades of air pollution in Europe. In addition, we estimate that a set of air quality improvement policy scenarios as proposed in the 2005 CAFE program would bring 18 European countries as a whole a welfare gain of 37-49 billion Euro (year 2000 prices) in year 2020 alone.

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  • Nam, Kyung-Min & Selin, Noelle E. & Reilly, John M. & Paltsev, Sergey, 2010. "Measuring welfare loss caused by air pollution in Europe: A CGE analysis," Energy Policy, Elsevier, vol. 38(9), pages 5059-5071, September.
    • Handle: RePEc:eee:enepol:v:38:y:2010:i:9:p:5059-5071
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    2. Sumei Chen & Ling‐Yun He, 2019. "Taxation and the Environment–Health–Poverty Trap: A Policy Experiment Perspective," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 27(1), pages 72-92, January.
    3. John Reilly, 2015. "Energy and Development in Emerging Countries," Revue d’économie du développement, De Boeck Université, vol. 23(HS), pages 19-38.
    4. Reilly, John M., 2012. "Green growth and the efficient use of natural resources," Energy Economics, Elsevier, vol. 34(S1), pages 85-93.
    5. John Reilly & Sergey Paltsev & Ken Strzepek & Noelle Selin & Yongxia Cai & Kyung-Min Nam & Erwan Monier & Stephanie Dutkiewicz & Jeffery Scott & Mort Webster & Andrei Sokolov, 2013. "Valuing climate impacts in integrated assessment models: the MIT IGSM," Climatic Change, Springer, vol. 117(3), pages 561-573, April.
    6. Carbone, Jared C. & Kerry Smith, V., 2013. "Valuing nature in a general equilibrium," Journal of Environmental Economics and Management, Elsevier, vol. 66(1), pages 72-89.
    7. Omolo, Miriam W.O., 2014. "Construction of Social Accounting Matrix for Kenya 2009," Conference papers 332512, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    8. Li, Na & Zhang, Xiaoling & Shi, Minjun & Hewings, Geoffrey J.D., 2019. "Does China's air pollution abatement policy matter? An assessment of the Beijing-Tianjin-Hebei region based on a multi-regional CGE model," Energy Policy, Elsevier, vol. 127(C), pages 213-227.
    9. Zhiqiao Xiong & Dandan Li & Hongwei Yu, 2023. "Does PM2.5 (Pollutant) Reduce Firms’ Innovation Output?," IJERPH, MDPI, vol. 20(2), pages 1-19, January.
    10. Mathias Mier & Jacqueline Adelowo & Christoph Weissbart, 2022. "Complementary Taxation of Carbon Emissions and Local Air Pollution," ifo Working Paper Series 375, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    11. CISCAR MARTINEZ Juan Carlos & FEYEN Luc & SORIA RAMIREZ Antonio & LAVALLE Carlo & PERRY Miles & RAES Frank & NEMRY Francoise & DEMIREL Hande & RÓZSAI Máté & DOSIO Alessandro & DONATELLI Marcello & SRI, 2014. "Climate Impacts in Europe. The JRC PESETA II Project," JRC Research Reports JRC87011, Joint Research Centre.
      • Ciscar, Juan-Carlos & Feyen, Luc & Soria, Antonio & Lavalle, Carlo & Raes, Frank & Perry, Miles & Nemry, Françoise & Demirel, Hande & Rozsai, Máté & Dosio, Alessandro & Donatelli, Marcello & Srivastav, 2014. "Climate Impacts in Europe - The JRC PESETA II Project," MPRA Paper 55725, University Library of Munich, Germany.
    12. HE Ling-Yun & OU Jia-Jia, 2016. "Taxing sulphur dioxide emissions: A policy evaluation from public health perspective in China," Energy & Environment, , vol. 27(6-7), pages 755-764, November.
    13. Ma, Xin & Fan, Di & Zhou, Yi & Yang, Cheng-Hu, 2021. "The impact of inspection on the sustainable production strategy: Environmental violation and abatement in emerging markets," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 150(C).
    14. Jacqueline Adelowo & Mathias Mier & Christoph Weissbart, 2021. "Taxation of Carbon Emissions and Air Pollution in Intertemporal Optimization Frameworks with Social and Private Discount Rates," ifo Working Paper Series 360, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    15. Zhang, Xu & Ou, Xunmin & Yang, Xi & Qi, Tianyu & Nam, Kyung-Min & Zhang, Da & Zhang, Xiliang, 2017. "Socioeconomic burden of air pollution in China: Province-level analysis based on energy economic model," Energy Economics, Elsevier, vol. 68(C), pages 478-489.
    16. Kyung-Min Nam & Xu Zhang & Min Zhong & Eri Saikawa & Xiliang Zhang, 2019. "Health effects of ozone and particulate matter pollution in China: a province-level CGE analysis," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 63(2), pages 269-293, October.
    17. Chang, Shiyan & Yang, Xi & Zheng, Haotian & Wang, Shuxiao & Zhang, Xiliang, 2020. "Air quality and health co-benefits of China's national emission trading system," Applied Energy, Elsevier, vol. 261(C).
    18. Amy J. Schulz & Graciela B. Mentz & Natalie Sampson & Melanie Ward & J. Timothy Dvonch & Ricardo De Majo & Barbara A. Israel & Angela G. Reyes & Donele Wilkins, 2018. "Independent and Joint Contributions of Fine Particulate Matter Exposure and Population Vulnerability to Mortality in the Detroit Metropolitan Area," IJERPH, MDPI, vol. 15(6), pages 1-15, June.
    19. Zhang, Shaohui & Worrell, Ernst & Crijns-Graus, Wina & Krol, Maarten & de Bruine, Marco & Geng, Guangpo & Wagner, Fabian & Cofala, Janusz, 2016. "Modeling energy efficiency to improve air quality and health effects of China’s cement industry," Applied Energy, Elsevier, vol. 184(C), pages 574-593.
    20. Bangzhu Zhu & Runzhi Pang & Julien Chevallier & Yi-Ming Wei & Dinh-Tri Vo, 2019. "Including intangible costs into the cost-of-illness approach: a method refinement illustrated based on the PM2.5 economic burden in China," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 20(4), pages 501-511, June.
    21. Chen, Su-Mei & He, Ling-Yun, 2014. "Welfare loss of China's air pollution: How to make personal vehicle transportation policy," China Economic Review, Elsevier, vol. 31(C), pages 106-118.
    22. Euijune Kim & Seung-Woon Moon & Shigemi Kagawa, 2019. "Spatial economic linkages of economic growth and air pollution: developing an air pollution-multinational CGE model of China, Japan, and Korea," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 63(2), pages 255-268, October.
    23. Jared C.Carbone & Yuzhou Shen, 2019. "Assessing the Benefits of Air-Quality Improvements in General Equilibrium: A Review," Working Papers 2019-05, Colorado School of Mines, Division of Economics and Business.

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