Air pollution is the cause of alarming numbers of premature deaths, as well as serious impacts on human health and the environment. This report sheds new light on the economic consequences of significant increases in outdoor air pollution that will occur if policies are not strengthened. Unless we clean up the air, by the middle of the century one person will die prematurely every 5 seconds from outdoor air pollution. The associated costs to society are rising rapidly. Urgent action is needed to prevent these projections from becoming a grim reality.

Air pollution is one of the most serious environmental risks, particularly in big cities and highly populated areas. Previous work by the World Health Organisation (WHO) and others has demonstrated the alarming consequences of outdoor and indoor air pollution for human health, especially a large number of pollution-induced premature deaths. Projections of the global economic consequences of future air pollution have however been entirely lacking.

This chapter first presents the main approaches used in the literature to assess the costs of inaction or benefits of action for air pollution. It then introduces the methodology used in this report to study the economic consequences of outdoor air pollution, using a general equilibrium model for market impacts and results of direct valuation studies for non-market impacts. The chapter also presents an overview of the main impacts of outdoor air pollution, including those related to human health and the environment. It then highlights which impacts and economic consequences are quantified in this report. The chapter ends with a description of possible policy approaches to address outdoor air pollution.

This chapter presents the methodology used in this report to analyse the economic consequences of outdoor air pollution. The methodology is based on the impact pathway approach, which requires multiple steps, from creating projections of air pollutant emissions, to calculating concentrations of key pollutants, calculating the biophysical impacts on health and crop yields, and calculating the economic costs with the ENV-Linkages model for market impacts and with results of direct valuation studies for non-market impacts. For each step the modelling framework and economic techniques used are explained.

This chapter outlines the main socioeconomic trends that are projected to emerge in absence of environmental policies other than those that are already in place. It presents the projections of the air pollutant emissions as linked to the economic projections of the ENV-Linkages model. The chapter also presents results on the concentrations of key pollutants that are the drivers of impacts on health and crop yields. Finally, it presents results on the biophysical impacts related to premature deaths, increasing cases of illnesses, and changes in crop yields.

This chapter presents the results of the numerical simulations with the ENV-Linkages model on the macroeconomic costs of outdoor air pollution. It first presents the results relative to each impact considered in the report, and then it illustrates results of the impacts as considered together. The focus of this chapter is on market impacts, and macroeconomic costs, but the chapter also investigates regional and sectoral consequences. The results include both direct market impacts, such as those related to changes in crop yields, and indirect impacts, such as those related to the changes in international trade flows due to the regional changes in crop yields.

This chapter presents the results of the analysis of the welfare costs of outdoor air pollution. It starts with an assessment of welfare costs related to the non-market impacts, including both mortality and morbidity, namely those related to the disutility caused by illness. The chapter ends with a discussion of the possibility to compare and add market and non-market costs when they are both expressed as welfare costs. While non-market costs are evaluated through the results of willingness-to-pay studies, market costs are calculated with the ENV-Linkages model and expressed in welfare terms using equivalent variation of income.