Improving Policy Responses to the Risk of Air Pollution

This paper offers a brief review of the need for cost-benefit analysis (CBA) and the available policy instruments for air pollution. To prioritize different possible actions, one needs to know which source of pollution causes how much damage. This requires an impact pathway analysis, that is, an analysis of the chain emission --> dispersion --> dose-response function --> monetary valuation. The methodology for this is described and illustrated with the results of the ExternE (External Costs of Energy) project series of the European Commission. Two examples of an application to CBA are shown: one where a proposed reduction of emission limits is justified, and one where it is not. It is advisable to subject any proposed regulation to a CBA, including an analysis of the uncertainties. Even if the uncertainties are large and a policy decision may have to take other considerations into account, a well-documented CBA clarifies the issues and provides a basis for rational discussion. One of the main sources of uncertainty lies in the monetary valuation of premature mortality, the dominant contribution to the damage cost of air pollution. As an alternative, an innovative policy tool is described, the Life Quality Index (LQI), a compound indicator comprising societal wealth and life expectancy. It is applied to the Canada-wide standards for particulate matter and ozone. Regardless of monetary valuation, a 50% reduction of PM10 concentrations in Europe and North America has been shown to yield a population-average life expectancy increase on the order of 4 to 5 mo.