To evaluate the socio-economic impacts of air pollution, we develop an integrated approach based on computable general equilibrium (CGE). Applying our approach to Europe shows that even there, where air quality is relatively high compared with other parts of the world, health-related damages caused by air pollution are substantial. We estimate that in 2005, air pollution in Europe caused a consumption loss of around 220 billion Euro (year 2000 prices, around 3 percent of consumption level) and a social welfare loss of around 370 billion Euro, measured as the sum of lost consumption and leisure (around 2 percent of welfare level). In addition, we estimated that a set of 2020-targeting air quality improvement policy scenarios, which are proposed in the 2005 CAFE program, would bring 18 European countries as a whole a welfare gain of 37 to 49 billion Euro (year 2000 prices) in year 2020 alone.

This paper is an empirical investigation of the effects of climate on the use of electricity by consumers and producers in urban and rural areas within China. It takes advantage of an unusual combination of temporal and regional data sets in order to estimate temperature, as well as price and income elasticities of electricity demand. The estimated positive temperature/electric power feedback implies a continually increasing use of energy to produce electric power which, in China, is primarily based on coal. In the absence of countervailing measures, this will contribute to increased emissions, increased atmospheric concentrations of greenhouse gases, and increases in greenhouse warming. © 2007 Elsevier B.V.

This study evaluates air pollution-related health impacts on the Chinese economy by using an expanded version of the Emissions Prediction and Policy Analysis model. We estimated that marginal welfare impact to the Chinese economy of ozone and particulate-matter concentrations above background levels increased from 1997 US$22 billion in 1975 to 1997 US$112 billion in 2005, despite improvements in overall air quality. This increase is a result of the growing urban population and rising wages that thus increased the value of lost labor and leisure. In relative terms, however, welfare losses from air pollution decreased from 14% of the historical welfare level to 5% during the same period because the total size of the economy grew much faster than the absolute air pollution damages. In addition, we estimated that particulate-matter pollution alone led to a gross domestic product loss of 1997 US$64 billion in 1995. Given that the World Bank’s comparable estimate drawn from a static approach was only 1997 US$34 billion, this result suggests that conventional static methods neglecting the cumulative impact of pollution-caused welfare damage are likely to underestimate pollution-health costs substantially. However, our analysis of uncertainty involved in exposure–response functions suggests that our central estimates are susceptible to significantly large error bars of around +/- 80%.

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In China, elevated levels of urban air pollution result in significant adverse health impacts for its large and rapidly growing urban population. An expanded version of the Emissions Prediction and Policy Analysis (EPPA), EPPA Health Effects China (EPPA-HEC), was used to evaluate air pollution-related health impacts on the Chinese economy. EPPA-HEC, a computable general equilibrium model, was expanded to endogenously estimate the economy- wide impacts of air pollution. The effects of particulate matter (PM 10), sulfur dioxide (S02) and nitrogen oxides (NOx) were evaluated for 1970 to 2000, based on a set of epidemiological estimates of the effects of exposure to these pollutants. The estimated GDP impact to the Chinese economy of pollution levels above the WHO's recommended thresholds (ambient levels) increased from $15 ($23) billion in 1970 to $50 ($79) billion in 2000 (1997 $USD), despite improvements in overall air quality. This increase was caused by the growing urban population and rising wages that thus increased the value of lost labor and leisure. The benefit Damages as a percent of GDP decreased from a peak of 16% (10%) in 1975 to 7% (4%) in 2000 because the total size of the economy grew much more rapidly than the absolute air pollution damages. Forward simulations considered a cap on pollution, a greenhouse gas policy, and the two policies combined. The ancillary benefits from air pollution control resulting from the climate policy resulted in an increase in China's GDP of $2.4 billion in 2010. A scenario that caps air pollutant emissions at 2005 levels results in a $3.9 billion benefit to China's GDP in 2010, and the implementation of both policies results in a $5.8 billion benefit to China's GDP in 2010.
(cont.) The simulations extended to 2025, and the beneficial effects of these policies increased over the period to $17.1 billion, $37.4 billion and $43.8 billion respectively. Taking both the future and the historical analyses together, it is clear that the size of the urban population, as well as the increasing value of time due to rising wages are two of the major drivers of the increasing absolute costs of pollution-related health impacts to the Chinese economy. Thus, urbanization and rising incomes and wage rates over time imply a rising marginal benefit to pollution control.