Why Reducing Air Pollution is Good for the Economy

11.19.2013 | A main argument from the deregulation crowd these last four decades or so has been that environmental laws must be loosened to lessen the regulatory burden on business and industry.

But even accepting that premise for the sake of argument runs afoul of reality.

A spate of papers reveal myriad economic reasons to reduce air pollution, from improving infants’ health and lowering children’s health care costs (which should reduce long-term health care costs), to improving worker productivity.

Moreover, there’s an equity angle—lower-income or minority neighborhoods often have higher levels of pollution. That can be actionable, as Illinois’ Attorney General Lisa Madigan proved on November 5 by suing KCBX Terminals (which, the Chicago Tribune story notes, is controlled by Charles and David Koch) accusing the company of “repeatedly violating state law by allowing lung-damaging particulate matter to swirl off piles of petroleum coke and coal along the Calumet River.”

Residents in the working class, largely Latino and black neighborhoods near the piles say the pollution problems have gotten worse since the three storage terminals began acquiring more petcoke.


Air pollution is a chronic problem in neighborhoods surrounding the petcoke piles. A monitor at Washington High School routinely registers the state’s highest levels of the toxic metals chromium and cadmium, as well as sulfates, which can trigger asthma attacks and increase the risk of heart disease.

Neighborhood groups want Illinois to adopt regulations similar to those in place in California, where piles of petcoke, coal and other raw materials must be enclosed or covered.

The National Bureau of Economic Research takes it from there with a trio of papers examining the costs of pollution. In a paper released last month, Janet Currie, Joshua S. Graff Zivin, Jamie Mullins, and Matthew J. Neidell ask “What Do We Know About Short and Long Term Effects of Early Life Exposure to Pollution?” and show “an increasing body of evidence suggests that early childhood health influences health and human capital outcomes [education, soft skills, work skills, personal networks, etc.] later in life.”

Their July 2008 paper, “Air Pollution and Infant Health: Lessons from New Jersey” looked at pollutants’ effects on infant health during the 1990s, and found

…consistently negative effects of exposure to pollution, especially carbon monoxide, both during and after birth. The effects are considerably larger for smokers than for nonsmokers as well as for older mothers. Since automobiles are the main source of carbon monoxide emissions, our results have important implications for regulation of automobile emissions.

Currie joined Reed Walker to author “Traffic Congestion and Infant Health: Evidence from E-ZPass,” a paper for the January 2011 edition of the American Economic Journal: Applied Economics. The study examines the effects of open road tolling like E-ZPass on air pollution and infant health in close proximity to toll booths—pre- and post-open road tolling—in New Jersey and Pennsylvania. The results are, frankly, astounding.

We find significant effects on infant health. …Prematurity fell by 6.7–9.16 percent among mothers within 2 km of a toll plaza, while the incidence of low birth weight fell by 8.5–11.3 percent. We argue that these are large but not implausible effects given previous studies.

In other words, open-road tolling like E-ZPass, SunPass in Florida, I-Pass in Illinois, and other regional variants pay huge public health dividends. For example, a 2003 study cited by the authors estimates 26 percent of housing units nationwide are adversely affected by traffic; “hence, nationwide roughly 1 million infants per year are potentially affected.”

This figure suggests that nationwide reductions in prenatal exposure to traffic congestion could reduce preterm births by as many as 8,600 annually, a reduction that can be valued at $444 million per year. Since we have focused on only one of the possible health effects of traffic congestion, albeit an important one, the total health benefits of reducing pollution due to traffic congestion are likely to be much greater.

In their April 2011 paper, “The Impact of Pollution on Worker Productivity,” Graff Zivin and Neidell show that environmental regulations are not always bad for business after all, at least where agricultural workers and ozone are concerned. “We find that ozone levels well below federal air quality standards have a significant impact on productivity: a 10 ppb [parts per billion] decrease in ozone concentrations increases worker productivity by 4.2 percent.”

“Since a large body of evidence links pollution with poor health, and health is an important part of human capital,” they note, “efforts to reduce pollution could plausibly be viewed as an investment in human capital and thus a tool for promoting economic growth.”

Finally, I cannot in good conscience allow this topic to conclude without invoking Tom Lehrer, whose prescience continues to amaze:


Photo / Ribarnica

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