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

No 93:
Costs of Climate Policy when Pollution Affects Health and Labour Productivity. A general Equilibrium Analysis Applied to Sweden

Göran Östblom () and Eva Samakovlis ()

Abstract: Much of the debate over global climate change involves estimates of the direct costs of global climate change mitigation. Recently this debate has included the issue of

ancillary benefits. These benefits consist mainly of health improvements. Although it is

generally acknowledged that air pollution affects respiratory health, and that valuations

of these impacts make up a significant proportion of the damage costs of air pollution,

these impacts are often neglected when evaluating the costs of climate policy. Since

reducing greenhouse gases has the effect of also reducing other pollutants affecting

human health and labour productivity these effects should be taken into consideration.

The analysis incorporates a linkage between air pollution and health effects into a

general equilibrium model for Sweden through a theoretical consistent framework.

Results from recent Swedish concentration-response and contingent valuation studies

are used to model direct disutility and indirect health effects that negatively affects the

productivity of labour. The costs of feedback effects on health and productivity are

compared in three different scenarios for attaining the Swedish carbon dioxide target

with alternative projected emission levels in the baseline scenario as well as alternative

harmful emission levels. Results show that not including feedback effects could mean

overstating the costs of climate policy. The magnitude of these effects are, however,

very sensitive to projected emission levels and to the judgement of harmful emission

levels.

Keywords: air pollution; ancillary benefits; climate policy; general equilibrium; health; (follow links to similar papers)

JEL-Codes: D58; I10; Q52; Q53; (follow links to similar papers)

24 pages, December 28, 2004

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