Hostname: page-component-848d4c4894-75dct Total loading time: 0 Render date: 2024-06-12T00:02:11.695Z Has data issue: false hasContentIssue false
  • English
  • Français

Environmental Benefit-Cost Analysis and the National Accounts

Published online by Cambridge University Press:  14 August 2017

Nicholas Z. Muller
Nicholas Z. Muller*
Affiliation:
Lester and Judith Lave Associate Professor of Economics, Engineering, and Public Policy, Carnegie Mellon University, 5000 Forbes Avenue, Pittsburgh, PA 15213, United States. Phone: (412) 268 - 8121, e-mail: nmuller@middlebury.edu
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper demonstrates a new connection between benefit-cost analysis (BCA) and the national income and product accounts. The article computes an augmented measure of output, which is defined as gross domestic product (GDP) less environmental pollution damage. Environmental policy BCA is incorporated directly into the adjusted measure of output in two ways. In a particular time period, damages from pollution emissions are deducted from market GDP in a standard with-and-without policy comparison. Second, secular changes in damages, output (GDP), and correspondingly, in the adjusted measure of output are employed to estimate augmented rates of growth. Comparison to a no-policy counterfactual then yields the effect of the policy on the augmented measure of environmentally adjusted value added (EVA) growth. The empirical results suggest that, in the 30 states that adopted flue-gas desulfurization (FGD) technology between 2005 and 2011, augmented output grew 0.12% more quickly than in a no-scrub counterfactual. Augmented output growth in four states was at least 0.20% more rapid because of the installation of scrubbers. The paper reports that benefits-per-capita from FGD were mildly progressive and that counties with relatively large African American populations incur large benefits from FGD installation.

Keywords

Q51Q52Q53Q56air pollutionclean air actenvironmentenvironmental accountingintegrated assessment
Type
Article
Information
Journal of Benefit-Cost Analysis , Volume 9 , Issue 1 , Spring 2018 , pp. 27 - 66
Copyright
© Society for Benefit-Cost Analysis 2017 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Abraham, Katherine G. & Mackie, Christopher (2006). A Framework for Nonmarket Accounting. In Jorgensen, D. W., Landefeld, J. S. & Nordhaus, W. D. (Eds.), A New Architecture for the U.S. National Accounts. NBER Studies in Income and Wealth 66. Chicago, Il, USA: The University of Chicago Press.Google Scholar
Ayres, Robert U. & Kneese, Allen V. (1969). Production, Consumption, and Externalities. American Economic Review, 59, 282–297.Google Scholar
Banzhaf, H. Spencer, Burtraw, Dallas & Palmer, Karen (2004). Efficient Emission Fees in the US Electricity Sector. Resource and Energy Economics, 26, 317–341.Google Scholar
Banzhaf, H. Spencer & Chupp, B. Andrew (2012). Fiscal Federalism and Interjurisdictional Externalities: New Results and an Application to US Air Pollution. Journal of Public Economics, 96(5), 449–464.Google Scholar
Bartelmus, Peter (2009). The Cost of Natural Capital Consumption: Accounting for a Sustainable World Economy. Ecological Economics, 68, 1850–1857.Google Scholar
Bell, Michelle L., McDermott, Aidan, Zeger, Scott L., Samet, Jonathan M. & Dominici, Francesca (2004). Ozone and mortality in 95 U.S. urban communities, 1987–2000. Journal of the American Medical Association, 292(19), 2372–2378.Google Scholar
Berman, Eli & Bui, Linda T. M. (2001). Environmental Regulation and Labor Demand: Evidence from the South Coast Air Basin. Journal of Public Economics, 79(2), 265–295.Google Scholar
Bloomberg News(2014). http://www.bloombergview.com/articles/2014-03-04/yes-regulation-can-kill-jobs.Google Scholar
Burtraw, Dallas, Alan, Krupnick, David, Austin, Deirdre, Farrell & Erin, Mansur (1998). Costs and Benefits of Reducing Air Pollutants Related to Acid Rain. Contemporary Economic Policy, 16, 379–400.Google Scholar
Congressional Budget Office (CBO)(2012). Economic Effects of Policies Contributing to Fiscal Tightening in 2013. Washington, DC, USA.Google Scholar
Cropper, Maureen, Hammitt, James K. & Robinson, Lisa A. (2011). Valuing Mortality Risk Reductions: Progress and Challenges. Annual Reviews of Resource Economics, 3, 313–336.Google Scholar
Ellerman, A. Dennis, Joskow, Paul L., Schmalensee, Richard, Montero, Jaun Pablo & Bailey, Elizabeth M. (2000). Markets for Clean Air. The U.S. Acid Rain Program. New York, NY, USA: Cambridge University Press.Google Scholar
Fann, Neal, Fulcher, Charles M. & Hubbell, Bryan J. (2009). The Influence of Location, Source and Emission Type in Estimates of the Human Health Benefits of Reducing a Ton of Air Pollution. Air Quality Atmosphere and Health, 2, 169–176.Google Scholar
Forbes(2012). Regulation Vs. Jobs: Assessing the Employment Impacts of Rules and Regulations. http://www.forbes.com/sites/waynecrews/2012/12/12/regulation-vs-jobs-assessing-the-employment-impact-of-rules-and-regulations/.Google Scholar
Greenstone, Michael, List, John A. & Syverson, Chad(2012). The effects of environmental regulation on the competitiveness of U.S. manufacturing. MIT Center for Energy & Environmental Policy Research Working Paper 2012-013.Google Scholar
Haveman, R. H. & Weimer, David L. (2015). Public Policy Induced Changes in Employment: Valuation Issues for Benefit-Cost Analysis. Journal of Benefit Cost Analysis, 6(1), 112–153.Google Scholar
Holland, Stephen P., Mansur, Erin T., Yates, Andrew J. & Muller, Nicholas Z.(2015). Environmental benefits from driving electric vehciles? NBER Working Paper 21291.Google Scholar
Jaramillo, Paulina & Muller, Nicholas Z. (2016). The Air Pollution Damage from Energy Production in the U.S.: 2002–2011. Energy Policy, 90, 202–211.Google Scholar
Leontief, Wassily (1970). Environmental Repercussions and the Economic Structure: An Input-Output Approach. Review of Economics and Statistics, 52(3), 262–271.Google Scholar
Levy, Jonathan I., Baxter, Lisa K. & Schwartz, Joel (2009). Uncertainty and Variability in Health-Related Damages from Coal-fired Power Plants in the United States. Risk Analysis, doi:10.1111/j.1539-6924.2009.01227.Google Scholar
Levy, Jonathan I., Diez, David, Dou, Yiping, Barr, Christopher D. & Dominici, Francesca (2012). A Meta-Analysis and Multisite Time-Series Analysis of the Differential Toxicity of Major Fine Particulate Matter Constituents. American Journal of Epidemiology, 175(11), 1091–1099.Google Scholar
List, John A., Millimet, Daniel L., Fredriksson, G. Per & McHone, W. Warren (2003). Effects of Environmental Regulations on Manufacturing Plant Births: Evidence from a Propensity Score Matching Estimator. Review of Economic Statistics, 85(4), 944–952.Google Scholar
Mendelsohn, Robert (1980). An Economic Analysis of Air Pollution from Coal-Fired Power Plants. Journal of Environmental Economics and Management, 7(1), 30–43.Google Scholar
Michalek, Jeremy J., Chester, Mikhail, Jaramillo, Paulina, Samaras, Constantine, Shiau, Ching Shin & Lave, Lester (2011). Valuation of plug-in vehicle life cycle air emissions and oil displacement benefits. Proceedings of the National Academy of Sciences, 108(40), 16554–16558.Google Scholar
Morgenstern, Richard D., Pizer, William A. & Shih, Jhih Shyang (2002). Jobs Versus the Environment: An Industry-Level Perspective. Journal of Environmental Economics and Management, 43(3), 412–436.Google Scholar
Mrozek, Janusz R. & Taylor, Laura O. (2002). What Determines the Value of Life? A Meta-Analysis. Journal of Policy Analysis and Manage, 21(2), 253–270.Google Scholar
Muller, Nicholas Z. (2011). Linking Policy to Statistical Uncertainty in Air Pollution Damages. The B.E. Press Journal of Economic Analysis and Policy, 11(1), Contributions, Article 32.Google Scholar
Muller, Nicholas Z. (2012). The Design of Optimal Climate Policy with Air Pollution Co-Benefits. Resource and Energy Economics, 34(4), 696–722.Google Scholar
Muller, Nicholas Z. (2013). Using Index Numbers for Deflation in Environmental Accounting. Environment and Development Economics, 19(4), 466–486.Google Scholar
Muller, Nicholas Z. (2014a). Boosting GDP Growth by Accounting for the Environment: Including Air Pollution and Greenhouse Gas Damages Increases Estimated U.S. Growth. Science, 345(6199), 873–874.Google Scholar
Muller, Nicholas Z. (2014b). Towards the Measurement of Net Economic Welfare: Air Pollution Damage in the US National Accounts – 2002, 2005, 2008. In Jorgensen, D. W., Landefeld, J.S. & Schreye, P. (Eds.), Measuring Economic Sustainability and Progress. NBER Book Series in Income and Wealth 72. Chicago, IL, USA: University of Chicago Press.Google Scholar
Muller, Nicholas Z. & Mendelsohn, Robert O. (2007). Measuring the Damages Due to Air Pollution in the United States. Journal of Environmental Economics and Management, 54, 1–14.Google Scholar
Muller, Nicholas Z. & Mendelsohn, Robert O. (2009). Efficient Pollution Regulation: Getting the Prices Right. American Economic Review, 99(5), 1714–1739.Google Scholar
Muller, Nicholas Z., Mendelsohn, Robert O. & Nordhaus, William D. (2011). Environmental Accounting for Pollution in the U.S. Economy. American Economic Review, 101(5), 1649–1675.Google Scholar
National Academy of Sciences, National Research Council (1999). Nature’s Numbers: Expanding the U.S. National Economic Accounts to Include The Environment. In Nordhaus, W. D. & Kokkelenberg, E. C. (Eds.), Washington, DC, USA: National Academy Press.Google Scholar
National Academy of Sciences, National Research Council (2010). Hidden Costs of Energy: Unpriced Consequences of Energy Production and Use. Washington, DC, USA: National Academy Press.Google Scholar
New York Times (2003) http://www.nytimes.com/2003/05/08/us/epa-drops-age-based-cost-studies.html.Google Scholar
New York Times (2011) http://www.nytimes.com/2011/09/05/business/economy/a-debate-arises-on-job-creation-vs-environmental-regulation.html.Google Scholar
Nordhaus, William D. (2006). Principles of National Accounting for Non-Market Accounts. In Jorgensen, D. W., Landefeld, J. S. & Nordhaus, W. D. (Eds.), A New Architecture for the U.S. National Accounts. NBER Studies in Income and Wealth 66. Chicago, IL, USA: The University of Chicago Press.Google Scholar
Nordhaus, William D. (2008). Issues in Non-Market Accounting: Pollution Accounting in Theory and Practice. In Measuring Capital – Beyond the Traditional Measures, (Proceedings of the Seminar Session of the 2007. Conference of European Statisticians, United Nations. New York, NY, USA and Geneva, Switzerland, 2008) (pp. 25–36).Google Scholar
Nordhaus, William D. & Tobin, J. (1972). Is Growth Obsolete? In Economic Research: Retrospect and Prospect-Economic Growth. 50th Anniversary Colloquium V. New York: Columbia University Press for National Bureau of Economic Research.Google Scholar
Peskin, Henry M. (1989). “A Proposed Environmental Accounts Framework”. Environmental Accounting for Sustainable Development. In Ahmad, Y. J., Serafy, S. E. & Lutz, E. (Eds.), Washington, DC, USA: The International Bank for Reconstruction and Development, The World Bank.Google Scholar
Pope, C. Arden, Burnett, Richard T., Thun, Michael J., Calle, Eugenia E., Krewski, Daniel, Ito, Kazuhiko & Thurston, George D. (2002). Lung Cancer, Cardiopulmonary Mortality, and Long-Term Exposure to Fine Particulate Air Pollution. Journal of the American Medical Association, 287(9), 1132–1141.Google Scholar
Rogerson, Richard (2015). A Macroeconomic Perspective on Evaluating Environmental Regulations. Review of Environmental Economics and Policy, 9(2), 219–238.Google Scholar
Roman, Henry A., Walker, Katherine D., Walsh, Tyra L., Conner, Lisa, Richmond, Harvey M., Hubbell, Bryan J. & Kinney, Patrick L. (2008). Expert Judgement Assessment of the Mortality Impact of Changes in Ambient Fine Particulate Matter in the U.S. Environmental Science and Technology, 42, 2268–2274.Google Scholar
Sargent and Lundy LLC(2007). Flue Gas Desulfurization Technology Evaluation. Dry Lime vs. Wet Limestone FGD. Project Number 11311-001. Prepared for: National Lime Association.Google Scholar
Strobel, Frederick(1974). GDP and Economic Welfare. Economic Review of the Federal Reserve Bank of Atlanta: https://fraser.stlouisfed.org/title/884#!34910.Google Scholar
Tybout, Richard A. (1981). Social Accounting for Pollution. Land Economics, 57(4), 507–525.Google Scholar
United States Bureau of Economic Analysis(2006). A Guide to the National Income and Product Accounts of the United States. http://www.bea.gov/methodologies/index.htm#national_meth.Google Scholar
United States Bureau of Economic Analysis(2014a): http://www.bea.gov/iTable/index_nipa.cfm.Google Scholar
United States Bureau of Economic Analysis(2014b) http://www.bea.gov/iTable/index_regional.cfm.Google Scholar
United States Bureau of Economic Analysis(2014c) http://www.bea.gov/iTable/index_industry.cfm.Google Scholar
United States Census Bureau(2014a). Population Estimates for 2008. http://www.census.gov/popest/data/intercensal/county/county2010.html.Google Scholar
United States Census Bureau(2014b). Population Estimates for 2011. http://www.census.gov/popest/data/historical/2010s/vintage_2011/datasets.html.Google Scholar
United States Chamber of Commerce(2013). Impacts of Regulations on Employment: Examining EPA’s Oft-Repeated Claims that Regulations Create Jobs. U.S. Chamber of Commerce. Washington, DC, USA.Google Scholar
United States Department of Energy, Energy Information Administration(2014). Form EIA-923 detailed data. http://www.eia.gov/electricity/data/eia923/.Google Scholar
United States Environmental Protection Agency(1999). The Benefits & Costs of the Clean Air Act: 1990–2010. EPA Report to Congress. EPA 410-R-99-001, Office of Air and Radiation, Office of Policy, Washington, D.C.Google Scholar
United States Environmental Protection Agency(2008). National Emissions Inventory (NEI), 2005. Washington, DC: Office of Air Quality Planning and Standards, Emissions Inventory Group; Emissions, Monitoring, and Analysis Division.Google Scholar
United States Environmental Protection Agency(2010). Regulatory Impact Analysis for the Proposed Federal Transport Rule. Docket ID No. EPA-HQ-OAR-2009-0491. Washington, DC: Office of Air and Radiation.Google Scholar
United States Environmental Protection Agency(2011a). The Benefits and Costs of the Clean Air Act: 1990– 2020. Final Report. Office of Air and Radiation, Office of Policy, Washington, DC.Google Scholar
United States Environmental Protection Agency(2011b). National Emissions Inventory (NEI), 2008. Washington, DC: Office of Air Quality Planning and Standards, Emissions Inventory Group; Emissions, Monitoring, and Analysis Division.Google Scholar
United States Environmental Protection Agency(2014a). National Emissions Inventory (NEI), 2011. Washington, DC: Office of Air Quality Planning and Standards, Emissions Inventory Group; Emissions, Monitoring, and Analysis Division.Google Scholar
United States Environmental Protection Agency(2014b). Air Pollution Control Technology Fact Sheet. EPA-452/F-03-034. Washington, DC: http://www.epa.gov/ttncatc1/dir1/ffdg.pdf.Google Scholar
United States Environmental Protection Agency(2014c). Emissions and Generation Resource Integrated Database (eGRID). 2005, 2008, 2011 data files (xls) http:// www.epa.gov/cleanenergy/energy-resources/egrid/.Google Scholar
United States Environmental Protection Agency(2014d). Clean Air Markets Division. http://www.epa.gov/airmarkets/.Google Scholar
Viscusi, W. Kip & Aldy, Joseph E. (2003). The Value of a Statistical Life: A Critical Review of Market Estimates Throughout the World. Journal of Risk and Uncertainty, 27(1), 5–76.Google Scholar
Supplementary material: File

Muller supplementary material

Muller supplementary material

Download Muller supplementary material(File)
File 682.2 KB