Grant McDermott bio photo

Grant McDermott

Assistant Professor
Dept. of Economics
University of Oregon

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But keep it quiet.

I spent some time last week with the Dutch economist, Johannes Bollen, who was visiting my university to present his research on the "co-benefits" of climate and air pollution policies. His basic argument is that you can go a long way towards meeting (global) climate goals simply by tackling (local) air pollution. In fact, his most up-to-date model suggests that rigorously addressing air pollution \(-\) finding the optimal balance between health improvements and increased energy costs \(-\) will get us 75 percent of the way towards the "2°C target" of the Copenhagen Accord.

Those results bear repeating: No global carbon tax or binding international treaties required. Just individual countries focused on cleaning up their own air pollution and we have already solved three-quarters of the climate problem. It sounds too good to be true and, yet, there's a growing body of evidence that points towards similar conclusions.[*]

For instance, you might remember an AER paper by Muller et al. (2011) that I mentioned a few months back. Their study made a big splash because, among other things, it showed that the price of coal-fired electricity should be several times higher than it currently is, given the adverse effects that local air pollutants (small particulates, SO2, NOx) have on human health and productivity. Again, nothing to do with climate effects; just accounting for the local health damages caused by dirty air.

It almost goes without saying that this promises to be a very important research area. The climate change narrative \(-\) despite many excellent scientists and economists producing meticulous research \(-\) has become bogged down by its own press and politics. We're at such an impasse that I simply can't see the necessary political will (and public buy-in?) to move us forward in any meaningful way over the next decade.

Focusing on local pollution, however, allows us to abstract from the most problematic areas of climate change; whether that is the unjustified/misplaced skepticism about the underlying science, or the longer-term uncertainties that make cost-benefit analysis of climate change mitigation difficult. From a purely economic perspective, it also frees you from the inherent problems associated with a global commons; such as competing incentives, inter-temporal conflicts, lack of enforcement, and free-rider problems. Those kinds of issues are dramatically simplified when you move from the global scale to the national scale, and narrow your time horizon.

The thing is, and while it's obviously great to kill two birds with one stone, I actually think that we should be very careful about emphasizing the climate link. Rightly or wrongly, policy geared towards tackling climate change is an extremely touchy subject. Yes, it's absurd to think that there is some grand communist plot at hand whenever someone mentions "cap-and-trade" or "carbon tax". (Also ironic when you consider that accounting for environmental damages is about putting an end to the socialized benefits that polluters enjoy at the expense of everyone else.) However, we have to acknowledge and operate within the practical confines of our world... which, more often than not, means making allowances for the irrationalities, whims and idiocies of our fellow citizens. And, yes, I'm sure the feeling is mutual.

THOUGHT FOR THE DAY: Tackling local air pollution will bring about marked improvements in human health and economic welfare, both now and in the future. We also have good reason to believe that it will go a long way towards mitigating climate problems. Unfortunately, climate change is a subject that comes with a lot of baggage. I'd prefer to see the results without bringing up the baggage.

UPDATE: The British Medical Journal gets in on the action here.

[*] I haven't scrutinized Johannes' model in enough detail to proclaim his results as gospel truth. That being said, seeing his presentation and having talked through the underlying methodology certainly makes me confident that he has carefully covered his bases. I'll try to keep tabs on how his working paper develops or is revised over the coming months.