Economics of air pollution: policy, mortality concentration-response, and increasing marginal benefits of abatement

Abstract

This dissertation examines the economics of air pollution in three essays. The first two essays consider the implications of the possibility of increasing marginal benefits to pollution abatement. The third essay integrates a new model of air dispersion with an economic model to estimate the marginal damage caused by criteria pollutants in the United States. In the first essay, the optimal abatement policy is derived for a scenario with increasing marginal benefits of abatement and uncertainty in the marginal cost of abatement. Pollution taxes are preferred over quantity restrictions when marginal benefits are increasing in abatement. The second essay uses simulations of fine particulate matter (PM2.5) dispersion and compares optimal source-specific pollution control policies with pollution concentration standards and uniform pollution taxes. Optimal policies for PM2.5 regulation yield substantial advantages over uniform policies that do not discriminate based on the location of emissions. The simulations also consider the shape of the concentration-response (C-R) relationship between PM2.5 pollution and mortality. With a log-log C-R, where marginal benefits of PM2.5 abatement are increasing, society should prefer fewer emissions and lower PM2.5 concentrations than if the C-R is log-linear, where marginal benefits of abatement are decreasing.The third essay estimates the marginal damages of criteria pollutant emissions for hundreds of the most heavily polluting sources in the U.S. Marginal damages vary substantially depending on the location of the emission source. The calculation of marginal damages is highly dependent on the choice of air dispersion modeling, the C-R relationship, and the value assigned to mortality caused by environmental risks.