An Analysis of the Relationship between U.S. State Level Carbon Dioxide Emissions and Health Care Expenditure

This paper is the first to provide an empirical analysis of the short run and long run effects of carbon dioxide emissions on health care spending across U.S. states. Accounting for the possibility of non-linearity in the data of the individual variables as well as in the relationship amongst the variables, the analysis estimated various statistical models to show that CO2 emissions increased health care expenditures. Using quantile regressions, the analysis displayed that the effect of CO2 emissions was stronger at the upper-end of the conditional distribution of health care expenditures. The results indicate the effect of CO2 emissions on health care was relatively stronger for states that spend higher amounts in health care expenditures. A key policy message that stems out of the empirical findings is that the health benefits associated with policies implemented to reduce CO2 emissions can more than pay for the costs of implementing these policies.