THE ECONOMIC CONSEQUENCES OF OUTDOOR AIR POLLUTION

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1 THE ECONOMIC CONSEQUENCES OF OUTDOOR AIR POLLUTION Global Assessment and Some Implications for the Arctic Shardul Agrawala Head, Environment and Economy Integration Division OECD Environment Directorate Northern Dimension Future Forum on Environment Brussels, 19 November 2018

2 I. Context Focus on Black Carbon in the Arctic motivated primarily by impacts on climate (potentially 20-25% warming of the Arctic) Black Carbon is also a significant share of fine particulates, particularly PM2.5, which have major impacts on human health and productivity. These costs of inaction, provide further motivation for reduction of BC and other particulates. 2

II. The OECD Study on Economic consequences of Outdoor Air Pollution Quantify how changes in outdoor air quality affect the economy, and prospects for

3 II. The OECD Study on Economic consequences of Outdoor Air Pollution Quantify how changes in outdoor air quality affect the economy, and prospects for long-term growth Regional and sectoral quantitative approach where possible, coupled with general insights where needed Global assessment, 2060 time horizon 3

4 II.2 Methodological steps Economic activity ENV-Linkages model Emissions ENV-Linkages model (GHGs) Emission coefficients of air pollutants from IIASA s GAINS model Projections for SO2, NOx, BC, OC, CO, VOCs, NH3 Concentrations EC-JRC s TM5-FASST model for PM2.5 and O3 Biophysical impacts Impacts on crop yields with TM5-FASST model Health impacts using functions based on Global Burden of Disease Economic costs Economic feedbacks using ENV-Linkages model Non-market costs calculated based on results of valuation studies 4

5 II.3 From biophysical to Economic Impacts Health impacts Mortality Morbidity: illness (especially respiratory and cardiovascular diseases) Economic consequences General equilibrium framework + Market costs Other impacts Agriculture Biodiversity and ecosystems Buildings and cultural heritage Visibility Willingness to pay approaches Non market costs 5

6 III. Results: Projections of air pollutant emissions Index with respect to BC CO NH3 NOx OC SO2 VOCs CH4 1,8 1,6 1,4 1,2 1 0,8 0, Source: ENV-Linkages model, based on projections of emission factors from the GAINS model. 6

7 Focus on black carbon emissions (megatonnes) Source: OECD (2016), The economic consequences of outdoor air pollution 7

8 Concentrations of air pollutants Annual average total anthropogenic PM2.5 (µg/m3) Source: OECD (2016), The economic consequences of outdoor air pollution 8

9 Regional market costs Interaction effects Agriculture Labour productivity Health Expenditures 1.0% (GDP percentage change wrt no-feedback baseline) 0.5% 0.0% -0.5% -1.0% -1.5% -2.0% -2.5% -3.0% -3.5% Canada Chile Mexico USA EU large 4 Other OECD EU Other OECD Aus. & NewZ. Japan Korea China Non-OECD EU Russia OECD America OECD Europe OECD Pacific Rest of Europe & Asia Latin America Middle East & North Africa South and South-East Asia Sub Saharan Africa Source: OECD (2016), The economic consequences of outdoor air pollution Caspian region Other Europe Brazil Other Lat.Am. Middle East North Africa ASEAN 9 Indonesia India Other Asia South Africa Other Africa World 9

10 Non Market Impacts: Premature deaths caused by outdoor air pollution in Arctic countries, 2010 Thousands Thousands Russia United States Source: ENV-Linkages model. 10

11 Non Market Impacts: Projections of premature deaths caused by outdoor air pollution, Thousands Thousands Canada Denmark Finland Iceland Norway 3120 Russia United States Source: ENV-Linkages model. 11

12 Global welfare costs of outdoor air pollution: evolution over time Billions of USD, 2010 PPP exchange rates Non-market costs Non-market costs (higher estimate) Non-market costs (lower estimate) Source: OECD (2016), The Economic Consequences of Outdoor Air Pollution Market costs (indirect) Market costs (direct) 12

13 Final remarks The public health and economic consequences of air pollution are a significant additional motivation for Black Carbon reduction (beyond climate). The health impacts and costs of inaction are significant in Arctic countries, and even more so if we include Arctic Council observers. The most dangerous consequences are premature deaths, but there are significant market costs as well. The OECD is initiating a project to assess the economic consequences of the Arctic Council Black Carbon reduction target 13

14 Thank You 14

THE ECONOMIC CONSEQUENCES OF OUTDOOR AIR POLLUTION

THE ECONOMIC CONSEQUENCES OF OUTDOOR AIR POLLUTION Elisa Lanzi OECD Environment Directorate FEEM Venice, September 1 2016 Structure of the presentation OECD s CIRCLE project Overview of the air pollution