Overview

Much attention has been directed of late to developing the ability, tools, and methodology to conduct a so-called "full-cost" accounting in order to more thoroughly analyze and evaluate the broad spectrum of costs and benefits (direct and indirect) associated with the extraction and/or use of natural resources. Although this ability to do a "full-cost" accounting is largely incomplete and still very much in its infancy, significant progress is being made. Two such examples of this progress, relating to climate change and air pollution, are presented here. Both analyses are focused on assessing the indirect costs associated with the use of fossil fuels for the U.S. The first explores the environmental costs and benefits associated with reducing air pollution resulting from the use of fossil fuels, and generating an ancillary benefit of reducing the potential impact of global warming on human health as well as reducing any potential impacts on the physical setting that we occupy along with ecosystems. Dr. Loucks' analysis further suggests that the human-health impacts associated with air pollution may, in fact, be even greater than early estimates of the combined physical and health impacts associated with increases in the concentration of greenhouse gases, at least in the short term.

The second of these analyses explores the costs and benefits associated with reducing greenhouse gas emissions and explores the ancillary health benefits that would likely result from the lower levels of air pollution. In this analysis, ancillary health-related benefits from reducing greenhouse gas emissions (abating global warming) could be about 30% of the cost per ton of reduced carbon emissions.

Getting at a More Realistic Estimate of the Cost of Fossil Fuel Emissions

Effects of Air Pollution on Ecosystems and Human Health

High, positive correlations have been known for years between elevated levels of sulfate particulate matter and high levels of bronchial or pulmonary illness, including increased human mortality rates. The mechanisms are not completely clear, partly because atmospheric particles are quite complex and not simply "sulfate" (or nitrate) particles, or sulfuric or nitric acid. Aerosols typically occur as salts, such as ammonium sulfates, which become saturated with water (often creating a pH that can be highly acidic), but with other substances present such as metals and uncombusted carbon particles. These constituents contribute, in combination, to irritation of the bronchial passages in sensitive children and older adults. Associated concentrations of ozone (O₃), a reactive form of oxygen, are known to stimulate unusually rapid respiration in the lungs and blood-stream, causing asthma, asthma-like symptoms, and some hospitalizations at concentrations permitted by the present ozone standard.

Not only human health is affected. The effects on ecosystems from acidic substances in rain are also quite diverse: 1) Leaching of essential cations (positively charged elements such as calcium, magnesium and others) out of the surface soil and down into the shallow groundwater, streams, and lakes; 2) killing of small soil organisms (essential for nutrient cycling) by altering the ionic balance in the tissues of sensitive species; 3) inducing aluminum toxicity in plants and animals at the new low pH levels (high acidity); and 4) through nitrogen enrichment, lowering the carbon available for insect and disease defense mechanisms (secondary metabolites) in plants, thereby inducing conditions that slow growth and increase tree mortality rates.

The effects of ozone pollution are understood best in agricultural ecosystems where the rapid rate of respiration caused by O₃ (compared with O₂) leads to loss of the carbohydrate produced in the leaves. Observed reductions in soybean yields, for example, can be as much as 35% for some varieties, averaging 15% overall. Effects on forest species vary widely, from negligible to very significant reductions in growth. Effects on the sensitive species tend to be expressed as reduced root growth, increasing the sensitivity of trees to a modest drought and/or insect or disease infestations during and following drought.

Costs Associated with the Impacts of Air Pollutants on the Health of Humans and Ecosystems

The estimated damages [or externalities (a term used here for the estimated monetary value of the effects of ill health, premature mortality, and reduced productivity of agricultural, forestry, and aquatic ecosystems, associated with the use of fossil fuels)] from acidic substances in rain and aerosols range from about $10B annually, if one disregards any health effects, to $100B or more annually, with a "best estimate" of about $90B/year. The main effect on ecosystems is probably through nitrogen deposition. The record of public health damages evident from the medical and environmental literature of the past 20 years suggests that the current regulatory approaches for acid aerosols are not making the progress initially anticipated. In addition, damages from ground-level ozone (another class of atmospheric pollutant) over the past 15 years have been estimated as, minimally, $30B annually to more than $70B/year, with a "best estimate" of about $47B/year. Forestry and agriculture sectors account for about $40B/year of this figure, with the remainder being attributed to human health effects.

By comparison, early estimates of the annual "externality" due to climate change, expressed here as the discounted present value of annual damages projected by several authors (estimated to be in the range of $12-100B/year in 2050), yielding a "best estimate" of $12B today. In other words, for the U.S., the health-related impacts associated with air pollution may be greater than early (and likely incomplete) estimates of both the physical and health-related impacts associated with rising greenhouse gas concentrations, at least in the short term.

Greenhouse Gases and Ancillary Air Quality Benefits

Dallas Burtraw, Resources for the Future, Washington, DC

To a large extent, approaches to limiting emissions of greenhouse gases (GHGs) have been analyzed in terms of their costs and potential for reducing the rate of increase in atmospheric concentrations of these gases. However, slowing atmospheric GHG accumulation could also reduce "conventional" environmental pollutants. The benefits that result would be "ancillary" to GHG abatement and could be manifested in several ways. Moreover, these benefits would tend to accrue in the near term, while any benefits from reduced climate change mostly accrue over a time frame of several decades or longer. In addition, ancillary benefits accrue largely to those countries undertaking mitigation action, in contrast to the benefits of reduced climate change risks that accrue at a global level.

A failure to adequately consider these ancillary benefits could lead to an incorrect assessment of the "net costs" of mitigation options and an incorrect identification of "no regrets" levels of GHG mitigation. It also could lead to the choice of unnecessarily expensive options because of its failure to fully exploit potential ancillary benefits. To illustrate these issues, Burtraw, along with collaborator Michael Toman, have considered how lower GHG levels resulting from reduced fossil-fuel use could reduce various "criteria" air pollutants (as defined in the Clean Air Act). The pollutants of interest include sulfur dioxide (SO₂), nitrogen oxides (NO_x), carbon monoxide (CO), particulates (PM), and tropospheric ozone (O₃). Lead (Pb) also is an important criteria pollutant and is included in ancillary benefits calculations but, given the stringency of existing control measures, the additional lead reduction benefits from GHG policies probably are small.

Burtraw and Toman find that the average ancillary benefits derived from modest shrinkage in GHG emissions themselves are likely to be modest. For example, modest reductions in greenhouse gases, with an average cost per ton of carbon abated in the range of $10-20, could yield benefits that average $3-7 per ton, when measured in terms of benefits per ton of carbon reduction. Larger than average benefits would occur in locations with greater population density and higher levels of exposure to damages from criteria air pollutants.

Larger ancillary benefits on average for the nation could be obtained with more aggressive GHG controls, although these benefits themselves are not enough to offset the costs of abatement. Burtraw and Toman identify a rough rule of thumb that applies across the range of options being considered that suggests ancillary benefits could be about 30% of the cost per ton of carbon reduced. In every case, however, considerable uncertainty about the size of ancillary benefits precludes identification of a single "best estimate" of their magnitude.