Improving Air Quality - Benefit Cost Analysis Perspective

The question has long been not whether or not to reduce air pollution, but by how much and by what means. Since the extent of the reduced discomfort and illness is not clear—and the measurement of peoples’ willingness-to-pay (WTP) for reduced discomfort and illness is uncertain—it is not easy to know how much the pollution should be reduced. But it has always been clear that reducing automotive air pollution had to be part of the overall strategy.

The approach of the federal government has been to define threshold concentrations of the major air pollutants, with the thresholds being levels above which serious health problems are encountered. These thresholds are generally exceeded in large cities, where autos, factories, and electricity generators are concentrated. And the damage done by any given level of air pollution for environment, whatever it is and what- ever it costs, is clearly higher in places where population densities are higher.

Different policy approaches have been taken for mobile-source and stationary-source generators of air pollution, and we shall focus on the mobile-source policies. Public concern about the automotive contribution to air pollution began in California in the 1950s, and federal policy dates back to the Clean Air Act of 1970. This act required that CO, NO, and HC emissions per vehicle-mile traveled (VMT) be reduced by 1981 to a small fraction of their pre control levels. Since then the standard has been tightened and is expected to require “99% emission- free” new cars by the 1999 model year (WSJ, 1997b; EPA, 1998).

The target reductions ran around 80-90%, the actual reductions on new model cars ran around 70-80%, and the actual emissions reductions for all cars ran around 30—60%. Since, during this period, total automobile VMT rose by 24%, this means that the total automotive emissions in 1981 were reduced from 1970 levels by only 42% for CO, 11% for NO^, and 53% for HC.

The good news from these figures is that there was a sizable reduction in air pollution, at least with respect to CO and HCs, if not NOx , and this reduction was almost certainly due entirely to the Environmental Protection Agency (EPA) regulations. Individual car owners had no more incentive in 1981 than in 1970 to voluntarily reduce their emissions or to demand more emission-efficient vehicles. The bad news is that the actual reductions fell far short of the targeted reductions, and improving air quality in many parts of the United States is still below the National Ambient Air Quality Standards (NAAQS). These so-called “non attainment” regions consist roughly of the east coast from Virginia to Maine, the west coast from San Diego to San Francisco, and many of the major cities in between the coasts. The number of such areas has shown no sign of declining in recent years.

Have the air quality benefits so far been worth the costs? Probably yes. (The details of the benefit-cost analysis are sufficiently complex to be relegated to the appendix to this chapter.) While benefit-cost studies of U.S. air pollution controls have varied widely in the past—some concluding that the benefits fall short of the costs— there is now strong evidence that many tens of thousands of deaths—perhaps hundreds of thousands of deaths—are prevented each year by our air pollution policies. If only 10,000 lives are saved each year by automotive air pollution controls, overall automotive air pollution policy definitely passes its benefit—cost test.

That the policy’s overall benefits exceed overall costs does not prove that the policy has been the right one. It may have done too much or too little, and what it has done may have been achieved at too high a cost. We do not know much about the first issue—whether we have done too much or too little—but we do know that what we have done has not been cost-effective. To be cost-effective, we must make the marginal cost of pollution reduction the same for different cars, different policies, and different aspects of abatement. For the automotive part of the pro- gram, there are several ways in which improving air quality policies have imposed high costs in one direction and ignored cheaper ways to alleviate air pollution problems in another direction.