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Costs of Climate Policy when Pollution Affects Health and Labour Productivity. A general Equilibrium Analysis Applied to Sweden

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  • Östblom, Göran

    ()
    (National Institute of Economic Research)

  • Samakovlis, Eva

    ()
    (National Institute of Economic Research)

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    Abstract

    Much of the debate over global climate change involves estimates of the direct costs of global climate change mitigation. Recently this debate has included the issue of ancillary benefits. These benefits consist mainly of health improvements. Although it is generally acknowledged that air pollution affects respiratory health, and that valuations of these impacts make up a significant proportion of the damage costs of air pollution, these impacts are often neglected when evaluating the costs of climate policy. Since reducing greenhouse gases has the effect of also reducing other pollutants affecting human health and labour productivity these effects should be taken into consideration. The analysis incorporates a linkage between air pollution and health effects into a general equilibrium model for Sweden through a theoretical consistent framework. Results from recent Swedish concentration-response and contingent valuation studies are used to model direct disutility and indirect health effects that negatively affects the productivity of labour. The costs of feedback effects on health and productivity are compared in three different scenarios for attaining the Swedish carbon dioxide target with alternative projected emission levels in the baseline scenario as well as alternative harmful emission levels. Results show that not including feedback effects could mean overstating the costs of climate policy. The magnitude of these effects are, however, very sensitive to projected emission levels and to the judgement of harmful emission levels.

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    File URL: http://www.konj.se/download/18.70c52033121865b13988000100744/WP_93.pdf
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    Bibliographic Info

    Paper provided by National Institute of Economic Research in its series Working Paper with number 93.

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    Length: 24 pages
    Date of creation: 28 Dec 2004
    Date of revision:
    Handle: RePEc:hhs:nierwp:0093

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    Keywords: air pollution; ancillary benefits; climate policy; general equilibrium; health;

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    1. M. L. Weitzman, 1974. "On the Welfare Significance of National Product in Dynamic Economy," Working papers 125, Massachusetts Institute of Technology (MIT), Department of Economics.
    2. Huhtala, Anni & Samakovlis, Eva, 2003. "Green Accounting, Air Pollution and Health," Working Paper 82, National Institute of Economic Research.
    3. Nilsson, Charlotta & Huhtala, Anni, 2000. "Is CO2 Trading Always Beneficial? A CGE-Model Analysis on Secondary Environmental Benefits," Working Paper 75, National Institute of Economic Research.
    4. Roberton C. Williams, 2000. "Environmental Tax Interactions When Pollution Affects Health or Productivity," NBER Working Papers 8049, National Bureau of Economic Research, Inc.
    5. Ståle Navrud, 2001. "Valuing Health Impacts from Air Pollution in Europe," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 20(4), pages 305-329, December.
    6. Bruvoll, Annegrete & Glomsrod, Solveig & Vennemo, Haakon, 1999. "Environmental drag: evidence from Norway," Ecological Economics, Elsevier, vol. 30(2), pages 235-249, August.
    7. Burtraw, Dallas & Krupnick, Alan & Palmer, Karen & Paul, Anthony & Toman, Michael & Bloyd, Cary, 2003. "Ancillary benefits of reduced air pollution in the US from moderate greenhouse gas mitigation policies in the electricity sector," Journal of Environmental Economics and Management, Elsevier, vol. 45(3), pages 650-673, May.
    8. Robert Ayres & Jörg Walter, 1991. "The greenhouse effect: Damages, costs and abatement," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 1(3), pages 237-270, September.
    9. Samakovlis, Eva & Huhtala, Anni & Bellander, Tom & Svartengren, Magnus, 2004. "Air Quality and Morbidity: Concentration-response Relationships for Sweden," Working Paper 87, National Institute of Economic Research.
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    Cited by:
    1. Krook Riekkola, Anna & Ahlgren, Erik O. & Söderholm, Patrik, 2011. "Ancillary benefits of climate policy in a small open economy: The case of Sweden," Energy Policy, Elsevier, vol. 39(9), pages 4985-4998, September.

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