Buy One, Get One: Air Quality Co-Benefits of US Carbon Policies

In our everyday lives, we love a good “buy one, get one free” sale. In policymaking, however, it is often hard enough to create a policy in which the benefits outweigh the costs, let alone one that produces additional benefits. A recent article by Thompson et al. argues that policies designed to reduce carbon dioxide (CO­₂) can produce co-benefits from overall air quality improvements that can offset the policy’s costs.

In their article, “A systems approach to evaluating the air quality co-benefits of US carbon policy,” the authors examine three types of carbon policies the US could pursue. They use economic and emissions modeling to monetize the overall human health benefits associated with the parallel improvements to air quality, such as savings from reduced hospitalization for respiratory diseases and fewer premature deaths associated with polluted air. The authors find that the co-benefits of reduced ozone (O₃) and particulate matter less than 2.5 micrometers in diameter (PM_2.5) can offset between 26 percent and 1050 percent of the costs of US carbon policies, depending on baseline inputs and assumptions.

The authors note that previous co-benefits studies have lacked rigorous examination of the full range of economic and atmospheric complexities that underlie a cost-benefit analysis. In their study, the authors use a variety of models to connect the effects of carbon policies to emissions, economic repercussions, regional air quality, and human health impacts. The three carbon policies studied are: a clean energy standard, affecting the electricity generation sector; a cap on the transportation sector; and a cap-and-trade program applied across the entire economy.

Each policy is assumed to achieve a 500-million-ton reduction of CO₂ by 2030 from 2006 levels. Additionally, each policy is applied to air pollution models to determine new levels of O₃ and PM_2.5 precursors such as sulfur dioxide, mono-nitrogen oxides, and carbon monoxide. These pollutants are the result of combustion from cars and certain industrial processes. The chemicals in combustion emissions react with each other and with other air molecules to produce O₃ and small particulate matter. The latter are associated with increases in respiratory mortalities and hospitalization for specific respiratory diseases such as asthma, chronic obstructive pulmonary disease, and pneumonia.

Each carbon policy is simulated using the US Regional Energy Policy model. This model provides economic output data that can be used to estimate carbon dioxide emissions. Emission levels are then used as inputs into the Comprehensive Air Quality Model with Extensions to project ambient levels of O₃ and PM_2.5 precursors. Finally, ambient pollution levels are run through the EPA’s Environmental Benefits Mapping and Analysis program, which calculates population exposures, resultant changes to human mortality and morbidity, and finally their monetized impacts. As an added step, the authors examine the sensitivity of the models to changing policy stringency, baseline levels of air pollution precursors, and changing assumptions of economic growth, cost of renewables, and improvements to fuel efficiency.

The results of the study predict a decline in emissions of O₃ and PM_2.5 precursors for all three of the carbon policies relative to the business-as-usual case, with the largest relative reductions occurring under the transportation sector cap. While there are respiratory health improvements associated with a decrease in O₃, this study shows that 97% of the health benefits achieved are due to reductions in PM_2.5 precursors.

The costs of the three policies range from US $16–1,356 per ton of CO₂ reduced. The corresponding co-benefits from reduced morbidity and mortality range from US $170–369 per ton of CO₂ reduced. This demonstrates that depending on the policy and initial inputs, the co-benefits from improved air quality can offset some, if not all, of the near-term costs of carbon-reduction policies. For example, the median benefits from cap-and-trade exceed its costs in all analyses because the policy’s flexibility allows reductions to come from sectors with the lowest opportunity costs. However, the trade-off is that the cap-and-trade policy also produces the smallest absolute benefits for the same reasons. On the other hand, clean energy and transportation-focused policies produce greater reductions in O₃ and PM_2.5 precursors but at higher costs, thus achieving greater benefits at a lower benefit-to-cost ratio.

Thompson et al. present a first step in performing robust cost-benefit analyses for carbon policies that incorporate the complexities and uncertainties of economic and atmospheric parameters. While the authors caution that the numbers presented in their paper should only be used as a guide, their findings—based on realistic CO₂ reduction goals for the US—indicate that there are considerable gains to be made from the co-benefits of carbon policies. These gains, measured in terms of human health improvement, have the potential to offset a significant portion of carbon policy costs. In other words, if we commit to buying a US carbon policy, we will also get reduced air pollution and improved health for free.

Article Source: Thompson et al., “A systems approach to evaluating the air quality co-benefits of US carbon policies.” Nature Climate Change 4, (2014): 917-923.

Feature Photo: cc/(John Bennett)