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Konjunkturinstitutet - National Institute of Economic Research Working Papers, Konjunkturinstitutet - National Institute of Economic Research

No 73:
Correcting Net Domestic Product for Sulphur Dioxide and Nitrogen Oxide Emissions: Implementation of a Theoretical Model in Practice

Sofia Ahlroth

Abstract: The theoretical and the practical studies in the field of environmental accounting are often two separate lines of work. In this study, we develop an optimal control theory model for adjusting NDP for the effects of SO2 and NOx emissions, and subsequently insert empirically estimated values. The model includes correction entries for the effects on welfare, real capital, health and the quality and quantity of renewable natural resources. In the empirical valuation study, production losses were estimated with dose-response functions. Recreational and other welfare values were estimated by the contingent valuation (CV) method. Effects on capital depreciation are also included. For comparison, abatement costs and environmental protection expenditures for reducing sulfur and nitrogen emissions were estimated. The theoretical model was then utilized to calculate the adjustment to NDP in a consistent manner. The estimated damage value of sulfur is twice as large as the Swedish sulfur tax if all costs are taken into account.

30 pages, May 1, 2000

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