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Local air pollution and global climate change: A combined cost-benefit analysis

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  • Bollen, Johannes
  • van der Zwaan, Bob
  • Brink, Corjan
  • Eerens, Hans

Abstract

This article presents the findings of a combined cost-benefit analysis of local air pollution and global climate change, two subjects that are usually studied separately. Yet these distinct environmental problems are closely related, since they are both driven by the nature of present energy production and consumption patterns. Our study demonstrates the mutual relevance of, and interaction between, policies designed to address these two environmental challenges individually. Given the many dimensions air pollution control and climate change management have in common, it is surprising that they have only little been analyzed in combination so far. We attempt to cover at least part of the existing gap in the literature by assessing how costs and benefits of technologies and strategies that jointly tackle these two environmental problems can best be balanced. By using specific technological options that cut down local air pollution, e.g. related to particulate emissions, one may concurrently reduce CO2 emissions and thus contribute to diminishing global climate change. Inversely, some of the long-term climate change strategies simultaneously improve the quality of air in the short run. We have extended the well-established MERGE model by including emissions of particulate matter, and show that integrated environmental policies generate net global welfare benefits. We also demonstrate that the discounted benefits of local air pollution reduction significantly outweigh those of global climate change mitigation, at least by a factor of 2, but in most cases of our sensitivity analysis much more. Still, we do not argue to only restrict energy policy today to what should be our first priority, local air pollution control, and wait with the reduction of greenhouse gas emissions. Instead, we propose to design policies that simultaneously address these issues, as their combination creates an additional climate change bonus. As such, climate change mitigation proves an ancillary benefit of air pollution reduction, rather than the other way around.

Suggested Citation

  • Bollen, Johannes & van der Zwaan, Bob & Brink, Corjan & Eerens, Hans, 2009. "Local air pollution and global climate change: A combined cost-benefit analysis," Resource and Energy Economics, Elsevier, vol. 31(3), pages 161-181, August.
  • Handle: RePEc:eee:resene:v:31:y:2009:i:3:p:161-181
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    References listed on IDEAS

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    1. van der Zwaan, Bob & Gerlagh, Reyer, 2006. "Climate sensitivity uncertainty and the necessity to transform global energy supply," Energy, Elsevier, vol. 31(14), pages 2571-2587.
    2. Manne, Alan & Mendelsohn, Robert & Richels, Richard, 1995. "MERGE : A model for evaluating regional and global effects of GHG reduction policies," Energy Policy, Elsevier, vol. 23(1), pages 17-34, January.
    3. Reyer Gerlagh & Bob van der Zwaan, 2006. "Options and Instruments for a Deep Cut in CO2 Emissions: Carbon Dioxide Capture or Renewables, Taxes or Subsidies?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 25-48.
    4. 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.
    5. Nordhaus, William, 1982. "How Fast Should We Graze the Global Commons?," American Economic Review, American Economic Association, vol. 72(2), pages 242-246, May.
    6. Manne, Alan S, 1995. "The rate of time preference : Implications for the greenhouse debate," Energy Policy, Elsevier, vol. 23(4-5), pages 391-394.
    7. van Vuuren, D.P. & Cofala, J. & Eerens, H.E. & Oostenrijk, R. & Heyes, C. & Klimont, Z. & den Elzen, M.G.J. & Amann, M., 2006. "Exploring the ancillary benefits of the Kyoto Protocol for air pollution in Europe," Energy Policy, Elsevier, vol. 34(4), pages 444-460, March.
    8. van der Zwaan, B. C. C. & Gerlagh, R. & G. & Klaassen & Schrattenholzer, L., 2002. "Endogenous technological change in climate change modelling," Energy Economics, Elsevier, vol. 24(1), pages 1-19, January.
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