Air Pollution's Cost: A Global Health Crisis

Air pollution is a pressing global issue, causing approximately 7 million deaths annually and costing the global economy billions in lost labour income. The World Health Organization (WHO) estimates that 90% of people breathe air that exceeds their recommended guidelines, with developing countries experiencing the highest levels of air pollution. The economic, societal, and health costs of air pollution are significant, and the impact of air pollution on welfare losses and labour income losses is substantial. The health effects of air pollution exposure are well-known and include an increased risk of stroke, heart disease, lung cancer, and respiratory diseases. The costs of air pollution are not limited to healthcare but also extend to productivity losses and cognitive function impairment, resulting in a significant workforce reduction.

Morbidity and mortality

Air pollution is a major global health concern, causing significant morbidity and mortality worldwide. According to the World Health Organization (WHO), around seven million people die prematurely each year due to exposure to polluted air, both indoor and outdoor. This accounts for about 24% of all global deaths, making air pollution a leading environmental risk factor for mortality.

The health impacts of air pollution are far-reaching, contributing to various diseases and health conditions. Respiratory issues are among the most common consequences, with air pollution causing acute and chronic respiratory diseases, including chronic obstructive pulmonary disease. Additionally, air pollution has been linked to an increased risk of cardiovascular diseases, such as ischaemic heart disease, strokes, and lung cancer. Other health outcomes associated with air pollution include injuries, respiratory infections, and non-communicable diseases such as cancer and diabetes.

The impact of air pollution on morbidity and mortality varies across different regions and populations. Low- and middle-income countries often suffer from higher exposures to air pollutants, with 99% of their populations breathing air that exceeds WHO guideline limits. However, air pollution-related morbidity and mortality have shown a decreasing trend in Europe over the last three decades, with improvements in air quality contributing to a significant reduction in health risks.

To address the health impacts of air pollution, the WHO has initiated projects such as Estimating the Morbidity from Air Pollution and its Economic Costs (EMAPEC). EMAPEC aims to provide technical and advisory support on the adverse health effects of air pollution and establish methodologies for assessing the economic costs of selected morbidity outcomes within a population. Additionally, the WHO promotes interventions and initiatives for healthy sectoral policies, such as energy, transport, and housing, to mitigate the risks associated with air pollution and improve overall health outcomes.

Furthermore, implementing strong policies and initiatives at the intra- and international levels can effectively curb air pollution and its associated premature mortality and morbidity. This includes prioritizing sustainable forms of transport, such as cycling and optimized urban transport, as well as stricter vehicle emissions standards and more efficient engine technologies. Improving waste management practices, promoting environmentally sustainable food production, and implementing energy-efficient measures in homes and cities are also crucial in mitigating air pollution and reducing its impact on human health.

Labour income losses

Air pollution is a major global issue that has severe economic consequences, particularly in the form of labour income losses. The impact of air pollution on labour supply and productivity has been extensively studied, with a growing body of evidence indicating significant negative effects.

One of the key ways air pollution affects labour income is by causing premature deaths and morbidity, resulting in lost labour income for working-age individuals. A study by the World Bank and the Institute for Health Metrics and Evaluation (IHME) found that air pollution-related deaths cost the global economy about US$225 billion in lost labour income in 2013. This figure represents the economic burden of premature deaths and the reduction in economic development caused by air pollution.

The impact of air pollution on labour income losses varies across regions. In South Asia, annual labour income losses due to air pollution accounted for almost 1 percent of Gross Domestic Product (GDP), while in East Asia and the Pacific, it represented 0.25 percent of GDP. In Sub-Saharan Africa, air pollution impairs the earning potential of younger populations, resulting in labour income losses of 0.61 percent of GDP. These losses are significant and highlight the economic impact of air pollution on a regional level.

In addition to premature deaths, air pollution also affects labour income through its impact on worker productivity and output. Studies have shown that poor air quality can reduce the productivity of individual workers, leading to a decrease in the amount produced "on the job". This reduction in productivity can be monetized and included in cost-benefit analyses of air quality policies. For example, a study on the impact of air pollution on labour supply in China found that vulnerable groups, such as agricultural workers and those with susceptible family members, were more likely to be negatively affected by air pollution, reducing their working hours and labour supply.

Furthermore, air pollution has been associated with output losses in various sectors, including agriculture, the service sector, and manufacturing industries. These losses are not limited to market production but also extend to non-market production, such as household production. The total cost of these output losses due to air pollution can be substantial, impacting the economy and society as a whole.

Healthcare costs

Air pollution is a major public health concern that significantly impacts healthcare costs worldwide. It contributes to a range of adverse health outcomes, particularly respiratory and cardiovascular conditions, leading to increased healthcare utilization and costs. The impact of air pollution on healthcare costs can be attributed to both short- and long-term exposure, with fine particulate matter (PM2.5) and nitrogen dioxide (NO2) being key pollutants.

In England, it is estimated that air pollution will cost the National Health Service (NHS) and social care £5.56 billion between 2017 and 2025, corresponding to 1.15 million new cases of disease. This estimate highlights the substantial burden of air pollution on the healthcare system and the potential cost savings if pollution levels are reduced.

In the United States, air pollution from fossil fuels is responsible for approximately 107,000 premature deaths each year and costs each American an average of $2,500 in extra medical bills annually, contributing to a national price tag of over $820 billion per year. These costs include the impact of heat waves and wildfire smoke, which have significant health consequences.

Studies in China have also found a significant relationship between air pollution and healthcare expenditure. A 1% increase in industrial air pollution was associated with a 0.032% increase in healthcare expenditure in the same province and a 0.0072% increase in neighboring provinces. Additionally, a study in Beijing showed that PM2.5 levels positively impacted healthcare expenditure for respiratory diseases, drug expenditure, and antibiotic expenditure.

The Environmental Benefits Mapping and Analysis Program–Community Edition (BenMAP-CE) is a tool used by the Environmental Protection Agency (EPA) to estimate the healthcare costs associated with air pollution. It considers hospital admissions and emergency department visits, but a more comprehensive assessment should include ambulatory and other care costs. By including these additional categories, the healthcare cost estimates for respiratory and cardiovascular patients can increase by approximately 40%.

Overall, air pollution has severe economic implications for healthcare systems globally. Reducing air pollution levels can not only improve public health but also alleviate the financial burden on individuals, insurers, and governments.

Economic sectors

Air pollution has a significant economic impact, with costs incurred in various sectors. Here is a breakdown of the economic sectors affected by air pollution and the associated costs:

Agriculture

The agriculture sector is a major contributor to air pollution, particularly through ammonia emissions. Ammonia is emitted through livestock-raising and fertilizer application, which contributes to secondary particulate matter (PM2.5) formation. In 2014, the economic cost of air pollution damages in the agricultural sector was estimated at $230 billion in the US, making it the highest among the sectors studied. Globally, commercial activities such as agriculture contribute to around 40% of PM2.5 emissions.

Utilities and Manufacturing

The utilities sector, particularly coal combustion, has historically been a significant source of air pollution. Sulfur dioxide (SO2), a byproduct of coal combustion, contributes to secondary PM2.5 formation and has driven damages in this sector. However, from 2008 to 2014, damages attributable to the utilities sector decreased by more than 50%. The manufacturing sector is also a contributor to air pollution, with damages decreasing by 20% during the same period. The retirement of some heavier manufacturing industries has contributed to the decline in emissions.

Transportation

The transportation sector is another major contributor to air pollution. While emissions from this sector have decreased by 30% from 2008 to 2014, it still contributes significantly to overall air pollution damages. Commercial activities related to transportation contribute to around 40% of PM2.5 emissions.

Energy and Power Generation

The energy and power generation sector, particularly the combustion of fossil fuels, has economic implications due to air pollution. A study from the World Resources Institute (WRI) estimates that reducing U.S. greenhouse gas emissions by 80% by 2050 would require an investment of around $320 billion per year. However, it would also bring extensive benefits, including a $65 billion reduction in annual fossil fuel costs in the 2020s, increasing to $700 billion per year in the 2040s.

Tourism and Real Estate

Air pollution can also impact sectors such as tourism and real estate. Poor air quality can discourage tourists from visiting certain destinations, affecting local economies. In India, for example, air pollution led to a 1% decline in GDP and 820,000 jobs lost in tourism and related sectors. Additionally, real estate values can be influenced by air quality, as people may be less willing to live or invest in areas with poor air quality.

The economic costs of air pollution are significant, and addressing this issue through clean air initiatives and technological advancements can have substantial economic benefits, including improved productivity, reduced healthcare costs, and the creation of new jobs in clean energy sectors.

Welfare losses

Air pollution is a significant threat to human health, causing around 7 million deaths annually worldwide. It is also detrimental to the economy, with costs incurred through lost labour income and healthcare expenses.

A study by the World Bank and the Institute for Health Metrics and Evaluation (IHME) found that in 2013, the global economy lost US$225 billion in labour income due to premature deaths caused by air pollution. This figure represents the economic burden of pollution-related fatalities, which predominantly affect young children and the elderly. However, premature deaths also result in lost income for working-age individuals, hindering economic development.

The impact of air pollution on labour income varies across regions. In South Asia, annual labour income losses amounted to 0.83% of Gross Domestic Product (GDP), while in East Asia and the Pacific, they accounted for 0.25% of GDP due to the ageing population. In Sub-Saharan Africa, air pollution impairs the earning potential of younger populations, resulting in labour income losses of 0.61% of GDP.

Beyond the direct costs, there are indirect costs associated with air pollution. For example, fossil fuel PM2.5 pollution led to 1.8 billion days of work absence globally in 2018. Additionally, ground-level ozone (O3) poses a threat to crop quality and production, affecting staple crops such as soybean, wheat, rice, maize, and barley.

The welfare losses from air pollution are substantial. In 2013, global welfare losses from PM2.5 and O3 exposure totalled US$5.11 trillion. This value reflects individuals' willingness to pay to reduce their risk of dying and includes the full economic costs of premature mortality, encompassing losses in income, consumption, leisure, good health, and simply being alive.

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