Jan. 12, 2013.  In house Tribune editorial about the economic costs of our air pollution  http://www.sltrib.com/sltrib/opinion/55592596-82/energy-utah-renewable-development.html.csp

 Oct. 6, 2012.  Dr Arden Pope testifies to the Utah legislature that economic benefits of air pollution controls are ten times the cost of those controls

http://www.sltrib.com/sltrib/politics/55025904-90/company-cutting-development-economic.html.csp

Economic costs of Utah’s air pollution

By Steven Tingey

Purpose

The purpose of this report is to analyze and estimate the economic costs of air pollution within the Wasatch Front using several quantitative methods of economic valuation.  Also included is a qualitative argument for air pollutions’ impact on aesthetics.  This report has been prepared on behalf of Dr. Brian Moench and Utah Physicians for a Healthy Environment (UPHE), for which I am currently serving as an intern.  I am also attending theUniversityofUtahwhere I am majoring in Environmental Studies B.S.

Acronyms

ALA                American Lung Association

CBA                Cost-benefit analysis

COI                 Cost of illness

CV                  Contingent valuation

DALY             Disability-adjusted life year

DEQ                Department of Environmental Quality (Utah)

DRF                Dose-response function

EPA                Environmental Protection Agency

ER                   Emergency room

GOED             Governor’s Office of Economic Development (Utah)

HLY                Healthy life years

HPM               Hedonic pricing method

HRQL             Health-related quality of life

MRAD            Minor restricted activity day

NAAQS          National ambient air quality standards

PM2.5               Particulate Matter (size < 2.5 microns)

PM10               Particulate Matter (size < 10 microns)

QALY             Quality-adjusted life year

UDOH                        Utah Department of Health

VOLY             Value of a life year

VSL                Value of a statistical life

WLD               Work loss day

WTA               Willingness to accept

WTP                Willingness to pay

YLD                Years lost due to disability

YLL                Years of life lost

YPLL              Years of potential life lost

I. Air: An Economic Primer[1]

            To fully quantify the potential economic values of goods, services, entities and states, it is important to understand the “ecological foundations” (pg.15) of any economic system.  Such systems are not closed (pg.2) as they require a constant input of raw materials from the surrounding environment to continue functioning and also space wherewith to dispose of waste materials.  Such waste can be termed economic pollution, which refers to the physical effect of such waste on an environment and the subsequent human reaction to that waste (pg.4).  Efficient economic systems align with ecological principles in order to ensure the continuation of both.  The etymology is even similar between economy (Gk. oikonomia “household management”) and ecology (Gk. oikos “house, dwelling place, habitation”, logia “study of”)[2].  This requires the understanding that there are ecological limits to economic growth, namely: ecosystems have a limited capacity to assimilate the waste we generate and that the nature of exhaustible resources is finite (pg.43).  Where we decide to draw the line on public policy and environmental protection largely depends on the type and quality of life that we (and by inference, future generations) wish to enjoy, along with due respect for other animal and plant life.  For instance, there is a distinct difference between the carrying capacity and the assimilative capacity of the air (with respect to pollutants).  The carrying capacity is not the desired level; it is just the maximum level of pollution that the air can absorb that will allow us the minimum standard of living necessary for survival (pg.50).

            Within the realm of economics, free markets work most efficiently for human populations and environmental resources when they meet the conditions for perfect competition:

            “A. large numbers of buyers and sellers;

              B. perfect information;

              C. goods being exchanged can, in principle, be individually owned;

              D. the full costs of production and consumption are reflected in market prices”

              (pg.23).

With respect to condition (C), in order for all goods to be individually owned, they must be private.  A private good shares the qualities of being both exclusive and rival.  It is exclusive because the owner can exclude another from having or enjoying it.  The good is also rival since its use by the owner means that no one can do so-it is consumed.  One example could be a slice of bread.  If I have that slice I can keep others from eating it (exclusive) and once I eat it, it is gone and no one else can (rival).  Public goods are both non-exclusive and non-rival (joint consumption) (pgs.25, 78).  These concepts play out in different ways regarding property and the rights, duties and privileges that people and goods enjoy.  “Rights are protected against others’ claims by their duties to honour the right.  A privilege on the other hand, is a use unaccompanied by any right and can be exercised because others have no rights either…” (pg.216). The limits and boundaries regarding the rights, duties and privileges present depend on whether it’s state property, private property, common property or open access.  The case of open access is where there are “no defined users or owners”(pg.216), in other words, it’s a free-for-all.  This is the condition of Garrett Hardin’s “tragedy of the commons” takes place; it is really the tragedy of open access (pg.78).

            The last condition (D) means that there are no “externalities” within the market system.  For most conventional goods and services this is possible.  It becomes problematic when applied to the environmental realm,  “…free markets give firms a strong incentive to conserve rather than overexploit all those resources for which they have to pay…However, such a conclusion becomes less comforting when we move to consider those resources provided free of charge by the environment” (pg.72).  The authors also write that, “The crucial feature of externalities is that there are goods people care about (e.g. clean air and water, landscapes, etc.) that are not sold on markets” (pg.25, italics added).

II. Basic Methods of Economic Valuation

 

            “What economic valuation does is to measure human preferences for or against changes in the state of the environments.  It does not ‘value the environment’” (Bateman, Pearce, Turner, pg.38).  The worth of the environment as deemed by society must go beyond personal gratification in order to preserve it.  As was discussed earlier, protecting the environment also preserves the economy.  This is one argument for the continued existence of certain goods and services that we all value (healthy air, aesthetics, future opportunity, quality of life for future generations, etc.).  “If all value derives only from the satisfaction of individual wants, then there is nothing left over on the basis of which self-interested individualistic want satisfaction can be restrained” (Bateman, Pearce, Turner, pg. 39).

            It is important to realize that all costs are economic costs, including psychosocial aspects such as pain, suffering and other forms of emotional/physical distress.  This requires a value placed on a good, service or an ideal.  We determine values based on the choices we make and, in turn, such values applied to goods influence what we choose to buy, protect, or sell.  “Our decisions about which goods or services to buy are based on which items give the most satisfaction, or utility, relative to prices and income.  Market prices are therefore accepted as reasonable measures of the value of those items that can be purchased” (pg.68)[3].

            In general terms, the most basic form of valuation is determined by willingness to pay (WTP) and willingness to accept (WTA).  WTA is the amount of compensation that one will accept in order to forgo a good or service.  WTP is the inverse, referring to the amount one is willing to pay in order to obtain a good or service.   In an environmental context, Bateman, Pearce and Turner pose these questions: “What are you willing to pay (WTP) to receive this environmental asset?” or “What are you willing to accept (WTA) in compensation for giving up this environmental asset?” (pg.123).  Society’s WTP and WTA for certain outcomes, services and goods is an implied statement of value. It is about performing what is called a cost-benefit analysis (CBA).  The costs of a particular choice are contrasted to the supposed benefits that would result.  CBA is a common tool for public policy with a general principle that, “…one should not adopt standards, controls, technologies, or policies whose social costs exceed social benefits”[4].  WTP vs. WTA gets played out and analyzed in many different avenues[5]: total economic value (TEV), use values (consumption: direct and indirect), and non-use values (for future generations or existence value).

            Observing both consumer behavior and stated preferences can imply the value of a good.  One consumer behavior method is called the hedonic pricing method (HPM).  “The basic premise of the hedonic pricing method is that the price of a marketed good is related to its characteristics, or the services it provides”[6].  Applied to clean air this could refer to good health, aesthetic quality, agricultural benefits, well-being and so on.  In contrast, a common method of valuation relying on stated preferences is known as contingent valuation (CV).  This method is usually a survey of people’s WTA or WTP for non-market resources.  “Typically the survey asks how much money people would be willing to pay (or willing to accept) to maintain the existence of (or be compensated for the loss of) an environmental feature…”[7].

            To every choice that a person makes regarding a good or service, there is an opportunity cost associated with that choice.  For example, given the option between choice A or B means that choosing one will require the sacrifice of the other option (i.e. the opportunity cost of choice A is the lost opportunity of choice B, and vice versa).  To any choice there are also impacts and damages that may be incurred.  The damage costs of a new coal-fired power plant may be air pollution, health impacts, reduced visibility or decreased aesthetics.  Most likely, these costs are transferred to the community.  In order to prevent or limit these impacts, there are yet other costs.  These are known as avoidance costs, control costs, or mitigation costs[8].  These can be derived from preventing future damage costs by stopping a process or limiting the impacts that such a process will have (i.e. scrubbing smokestacks, new technologies to sequester carbon, more stringent production methods, etc).  In the end, “business as usual” will usually end up costing more than preventative or mitigation behaviors since both opportunity costs and scarcity costs will be incurred.  This is especially true about air pollution.  As C. Arden Pope III, professor of economics at BYU states, “Most of the estimates over the last several years suggest that the costs of controlling the air pollution are not as high as the costs or health costs of not controlling air pollution”[9].

            In our valuations, we also consider time into the equation.  We generally discount future benefits more than the possible benefits that we can have now.  This phenomenon is problematic when we realize that environmental problems are intergenerational in nature.  We may seek our own self-interests for the present but not consider those who will live after us and what type of world they would like to inherit.  For my purposes, I will not consider the ethical ramifications of such behaviors.  I only address this issue to illustrate the complex task of applying economic values to non-market goods and services.

III. Human Valuation

It may seem crass to have an economic value for a human being, but this is a concept that is often misunderstood, “Economic valuation of ‘goods’ as fundamental as human life remains controversial.  However, the valuation process seeks only to quantify society’s preference for allocation of resources, not to quantify the ‘intrinsic worth’ of a life, an ecosystem, or whatever”[10].  It is important to remember that all factors (physical, emotional, social, etc.) are integrated into costs and valuation for certain goods, services or outcomes.

The value individuals place on reducing the occurrence of specific health affects, from the most severe–risk of premature death–to relatively minor symptoms such as eye irritation, may derive from medical costs and work loss, discomfort, inconvenience, fear and impacts on others[11].

    One such way to human valuation is the human capital approach, which considers all the skills and knowledge that one brings to the economy in terms of production[12].  “In the human capital approach, a person is seen as producing a stream of output that is valued at market earnings and the value of life is the discounted future earnings stream”[13].  Many other disciplines use this method, such as insurance companies or damage awards in legal cases, as a sort of monetary compensation for damage that has already occurred[14].

            Another common economic metric is the value of a statistical life (VSL).  The VSL is obtained by looking at the WTP in order to reduce the risk of the average number of (premature) deaths by one.  It “…is not based on people’s earning capacity, or their potential contributions to society, or how much they are loved and needed by their friends and family…”[15].  Brajer and Hall give the following example:

There are 10,000 workers and the annual risk of job-related death is 1/10,000 greater than in a lower wage job.  This means that we would expect one job-related death in this group annually (10,000 x 1/10,000).  Let’s say that each worker is paid $700 per year more as a result of this risk, and workers not facing this risk are paid $700 per year less than those at risk.  The implied value of reducing risk just enough to prevent one death is $700 x 10,000 = $7,000,000.  This is what economists call the value of a statistical life (VSL) (pg.70).

 In May 2008, the Environmental Protection Agency (EPA) quantified the VSL at $6.9 million[16].   This was a complex synthesis of two competing VSL values by researchers[17] ranging from $2 million all the way to $8.8 million.  Using the VSL in CBA seems controversial to those who may not fully understand their applications, but to reiterate their proper functions, I include an excerpt from Dr. Ari Rabl:

But CBA has also been rejected by people who claim that it is immoral because (a) it assigns a monetary value to goods such as life or biodiversity and (b) it cannot deal with crucial ethical considerations such as the right to a clean environment.  In fact (a) is a misunderstanding of the unfortunate term “value if statistical life” (VSL) used by economists.  In reality VSL is merely shorthand for “willingness-to-pay (WTP) to avoid the risk of an anonymous premature death”.   WTP (including ability to pay) is limited, even if we feel that the value of life is infinite – to save an individual, no means are spared.  The same goes for the valuation of goods such as biodiversity: it is not the intrinsic value that is needed by CBA but the WTP to avoid a loss.  (b) is a misunderstanding of the proper use of CBA[18].

            The value of a life year (VOLY) is sometimes calculated by dividing VSL by the average life expectancy[19].  Recently, researchers have calculated that the average value for a year of quality human life to be $ 129,090[20]. This was calculated by analyzing dialysis outcomes and results.  “The frequent use of the cost-effectiveness of dialysis as a benchmark, as well as proposals of using it as the threshold for coverage decisions, implies the belief or perception that the cost-effectiveness of dialysis reflects society’s valuation for a statistical year of life”[21].  This provides a baseline to the effectiveness and economic feasibility of certain medical interventions so long as they at least equal the VOLY for a person.

            With the VSL and VOLY, we can then analyze other aspects of economic valuation of life, namely its duration/length and quality as enjoyed by a “statistical human being”.  A quality-adjusted life year (QALY) measures the burden of disease both in the quantity and quality of life that is lived and is based on how many more years would be added if a certain intervention took place[22].  A disability-adjusted life year (DALY) “can be thought of as one lost year of ‘healthy’ life”[23].  It is the sum of years of life lost (YLL) and years lost due to disability (YLD).  These components are calculated as follows:

YLL=N x L

Where:

            N=number of deaths

            L=standard life expectancy at age of death in years

YLD=I x DW x L

Where:

            I=number of incident cases

            DW=disability weight

            L=average duration of the case until remission or death (in years)

DALY=YLL + YLD[24].

There are also other specific statistics regarding life expectancies.  Years of potential life lost (YPLL) “is an estimate of the average years a person would have lived if he or she had not died prematurely”[25].  The rationale behind this statistic is that it allows us to give more weight to deaths among those younger in age since it is generally expected that the frequency of death will increase with age.  To calculate YPLL, you should subtract a person’s age at death from the reference age (roughly equal to life expectancy).  If a person dies at an equal or an older age than the reference age, PYLL is simply zero.  Closely related to YPLL, is the measure of healthy life years (HLY), which measures how many years a person at a certain age can expect to live without a disability.

            One last measure to discuss is that of the cost of illness (COI).  “‘Cost of illness’ estimates usually comprise direct health care costs, including hospital and nursing home care, prescription drugs, home care, and physician and other services, and indirect costs associated with lost productivity due to morbidity and premature mortality”[26].  The EPA has a COI handbook for various diseases and conditions that can be view at: http://www.epa.gov/oppt/coi/index.html.

IV. Aesthetic Valuation

            Aesthetics is one more important facet to valuation that’s mainly qualitative in nature but exerts great influence in quantitative measures of economic value.  Perceived beauty is a component of aesthetics referring to, “a characteristic of a person, animal, place, object, or idea that provides a perceptual experience of pleasure, meaning, or satisfaction”[27].  Aesthetics more fully includes the study of these experiences and is derived from the Greek aisthetikos “sensitive” and aisthanesthai “to percieve, to feel”[28].  “Judgements of beauty are sensory, emotional and intellectual all at once”[29].  For an object, place, or state to contain elements of beauty and aesthetic appeal deems it of worth and possible value.  Worth could be defined as, “the quality that renders something desireable or valuable or useful” and “deserving: worthy of being treated in a particluar way”[30].  It is easy to realize that this worth will take on economic significance.

  Value, as used in economics, “is how much a desired object or condition is worth relative to other objects or conditions”[31].  This value will be manifest in what one is WTP or WTA in relation to that object or condition depending on supply and demand.  The value may also be determined in its use (or utility) or exchange value in a market and is dependent on perceived worth,  “Value is intrinsically related to the worth derived by the consumer”[32].  Value is divided into intrinsic and extrinsic varieties.  Intrinsic (objective) perspectives hold that the value of the object, good, or service is contained within the item itself such as the process and amount of time required to produce it, while “extrinsic value is value which arises because of an agreement”[33] such as the paper upon which money is printed.

People everyday pay more for beauty and aesthetic appeal in the goods and services they purchase.  The economics of aesthetics is now being extended to natural surroundings as ways to quantify and valuate them, but the process is more abstract that other valuation methods.  As Virginia Postrel stated,  “Quantifying aesthetic value is very difficult.  It’s not like there is one thing you can measure.  Furthermore, aesthetic elements are bundled into goods and services”[34].  ToVirginia, there are three sources of value and aesthetics in an object: 1) function, 2) meaning and 3) pleasure.  Understanding these aspects of aesthetics allows us to move from the philosophical plane to quantifiable amounts on how much people are WTP or WTA for goods, services and conditions upon which aesthetics plays a role.  This can help us at least imply a financial value to certain aspects of beauty and aesthetics.

 

V. Wasatch Front Demographics

            For my purpose within this report, I define the Wasatch Front to be comprised of Davis, SaltLake, Weber and Utahcounties.  The estimated population of the state of Utahin July 2008 was 2,736,424 people.  The total population of these four counties of was 2,076,307, or approximately 75.88% of Utah’s entire population.  Of this population 203, 886 were children under 5 years old (those most susceptible to air pollution), or 9.82% of the Wasatch Front[35].

            A study by Christopher J. L. Murray et al.[36] recalculated life expectancies for the United States and The Harvard University Initiative for Global Health with the Harvard School of Public Health ranked states according to their average life expectancies.  Utah ranked third in the nation with an average life expectancy of 78.7 years[37].  This is the most recent value I’ve discovered and it coincides nicely with other previous values published by state agencies.  The other average values of life expectancy of all Utah residents included life expectancy at birth based on 1993-2000 Utah mortality data: 78.3 years[38]; and life expectancies at birth from 1998-2003: 77.9 years[39].

VI. Wasatch Front Air Pollution

Due to unique topography and weather patterns, the Wasatch Front is subject to inversions that trap air pollutants.  This usually occurs in the winter months.  A large body of scientific and medical research literature supports the fact that health that air pollution leads to and causes many health risks, illnesses and disease.  In order minimize the health risks of air pollutants, the federal government has mandated national ambient air quality standards (NAAQS).  The rationale for these standards is twofold:

Primary standards set limits to protect public health, including the health of “sensitive” populations such as asthmatics, children, and the elderly.  Secondary standards set limits to protect public welfare, including protection against decreased visibility, damage to animals, crops, vegetation, and buildings.[40]

These standards are an attempt to keep pollutants below a certain level known as the critical load.  Nilsson and Grennfelt in 1988 defined this as, “A quantitative estimate of an exposure to one or more pollutants below which significant harmful effects on specified sensitive elements of the environment do not occur according to our present knowledge[41].  To illustrate the relationships between certain amounts of pollutants and the ensuing affects, dose-response functions (DRF) are used.  “The dose response function (DRF) relates the quantity of a pollutant that affects a receptor (e.g. population) to the physical impact on this receptor (e.g. incremental number of hospitalizations)”[42].  These are also known as exposure-response or concentration-response functions and are important in quantifying damages induced by air pollution.

            The Utah Department of Air Quality constantly monitors the concentration of air pollutants.  There have been several times that certain counties in Utahare designated as non-attainment areas that have failed to meet federal standards for air quality.  Specific examples include SaltLakeCountyfailing to meet NAAQS for sulfur oxides (SO2) and OgdenCity, SaltLakeCountyand UtahCountynot meeting standards for particulate matter smaller than 10 microns (PM10)[43].  The American Lung Association (ALA) ranks the air quality in the U.S. with their State of the Air.  The 2004 rankings for “metropolitan areas most polluted by short-term particle pollution (24-hour PM2.5)” the Salt Lake City-Ogden-Clearfield area ranked #6 and the Provo-Orem area ranked #18 in the entire nation[44].  In the 2009 State of the Air statistics showed that Salt Lake County ranked #7 in a table titled “people at risk in 25 counties [in the U.S.] most polluted by short term particle pollution (24-hour PM2.5)”[45].  Cache County was also ranked #9 in this list.  This table also lists the number of people that are part of at-risk groups including: those under 18, those 65 and older, pediatric and adult asthmatics, individuals with chronic bronchitis, emphysema, cardiovascular disease or diabetes. The ALA also lists other statistics for several other counties in Utah[46].

VII. Economic Costs Due to Air Pollution

 

            Air pollution affects all of us living in the Wasatch Front andSaltLakeValleyareas, but to varying degrees based on our age, health condition and many other factors.  Dr. Douglas Dockery, head of the Environmental Health Department at Harvard School of Public Health said:

Clean or dirty air is something that is being imposed on you.  You do have a choice on whether you smoke, drink, exercise or what type of food you eat.  But you do not have a choice on what air you breathe[47].

            This section will be divided up into different areas of focus regarding the impacts and costs of air pollution along the Wasatch Front: health, business/tourism, agriculture, and other general considerations.

            A. Health

            The health affects of air pollution include many varieties and increased incidence of diseases (morbidity) [48].  For instance, every 10mcg/m^3 increase in PM2.5 corresponds with an overall mortality increase of 4% and lung cancer mortality increases 8%[49]. This amount of increase in PM2.5 also correlated with a 4.5% in the risk of unstable angina or myocardial infarction (heart attack)[50].  Specifically regarding women’s health, a 10mcg/m^3 increase in PM2.5 related to a 24% increase in the risk of cardiovascular events, a 76% increase in the risk of death from cardiovascular disease, 35% increase in the risk of stroke and an 83% increase in the risk of death from stroke[51].

 The health care related to these diseases costs everyone.  For instance, one study focusing on Medicare records of whites aged 65-84 over a three-year period average (1989-1991) estimated that every 10mcg/m^3 reduction in air pollution would save Medicare an average of $76.70 per person in inpatient care and $100.30 in outpatient care[52].  Utah had a total of 262,064 Medicare beneficiaries in 2008[53].  Although this corresponds to a particular age range, there are cost incurred by all age groups utilizing Medicare and the cost is quite high.  Another study estimated the total costs (health, missed work and school, decreased productivity) of air pollution in the San Joaquin Valley Air Basin and the South Coast Air Basin in California to be $28 billion[54].  On a large scale, it becomes apparent that air pollution is not only a health issue, but also an important economic issue as well.

            Air pollution is also correlated with increases in general mortality. According to the 2007 Utah Office of Vital Records and Statistics, the top 5 causes of death in the state of Utahare as follows: 1) diseases of the heart 2) malignant neoplasms 3) unintentional injuries 4) cerebrovascular diseases and 5) chronic lower respiratory diseases.  Four of these five (1,2,4,5) are all conditions in which, according to research, air pollution has been implicated. It is estimated that 4-8% of all the deaths in Utahare directly the result of air pollution[55].  According to one estimate, this results in approximately 550-1080 deaths in Utah each year[56].  Using this range of deaths/year and in terms of the VSL, the extra mortality cost of air pollution in Utah costs around $3.8-7.4 billion dollars a year.  Other estimates have placed health costs per year between $4-6 billion[57].  More specifically, 10,098 of the 13,988 deaths in Utah in 2007[58] occurred in one of the 4 counties of the Wasatch Front.  Citing an earlier statistic, this would mean that every 10mcg/m^3 decrease in PM2.5 levels for the Wasatch Front means saving over $2.7 billion in terms of extra deaths that would be prevented due to air pollution (rather than a 4% overall mortality increase from PM2.5 levels rising 10mcg/m^3).  This value is based on the VSL of 4% of the general mortality (all deaths) in the Wasatch Front totaling 10,098.  If 4-8% of deaths are the result of air pollution, that corresponds to around 404-808 deaths in the Wasatch Front and a cost of $2.8-5.6 billion due to premature death.  This is just the cost of premature deaths based on VSL.  There are many other health costs too.

            According to the state health facts listed by the Henry J. Kaiser Family Foundation, the total health care expenditures for Utahin 2004 was $9,618,000,000[59].  Air pollution is estimated to shorten the life span of a Wasatch Front resident about 2 years[60].  Given the VOLY to be $129,090 based on WTP and cost-effectiveness of medical intervention, this would cost the state around $1.3 billion in the conservative case of one year of life expectancy lost among residents of the Wasatch Front that are included in the general mortality figures (10,098).

            Then there is the individual COI for each ailment, disease and the direct and indirect costs associated with such.  One specific example is asthma, a chronic illness that is the most common among children.  According to the Emergency Department Encounter Database of the Utah Department of Health (UDOH), there were 2,266 ER visits (treat and release) among children ages 0-17 in 2006[61].  The average charge per visit was $559, totaling over $1.2 million.  Then, according to the Inpatient Hospital Discharge Database of the UDOH there were 639 hospitalizations in 2006 of children ages 0-17.  The average charge for these visits was $4,897 for a total cost of over $3.1 million[62].  Both of these data sets together show that just hospital visits for children 0-17 for asthma cost over $4.3 million in 2006.  That is just one specific condition for a limited age range.  It is hard to imagine the costs of all health conditions across the entire population.

 It is a daunting task to sift through all the records of illnesses and extrapolate the exact burden of responsibility of air pollution in the development of that disease.  Nevertheless, evidence from research shows that it is more than just feasible to implicate air pollution’s role in such diseases.

B. Business and Tourism

 

Utahenjoys a strong business climate as more and more companies relocate to make it their home base:

That Utahranks as one of the most business-friendly states in the nation is significant, especially at a time when business relocations have dropped off dramatically since the recession began in 2007, according to a Chicago-based consultant.  Low corporate taxes, a well-educated and productive work force, government spending on education and infrastructure and quality of life were some of the factors cited for Utah’s improved standing in the Pollina Corporate Real Estate Inc.’s 2009 list of top pro-business states[63].

Utahrecently was ranked 2nd in the “Pollina Corporate Top 10 Pro-Business States for 2009: Rebuilding America’s Economic Power” just behind Virginia.  Dr. Ron R. Pollina states, “In 2004, the first year we did the study, Utah ranked 21st.  Now it’s in second place”[64]Forbes also listed Utah as 2nd in their 2008 list of “The Best States for Business” and 3rd in CNBC’s 2008 “America’s Top States for Business”[65]. The Wasatch Front (and Back) enjoys the presence of many big names in industry as they expand: Microsoft, Goldman Sachs, eBay, Oracle, Sephora and Procter & Gamble to name a few.  There are many reasons for companies to relocate and expand to Utah.  The Utah Governor’s Office of Economic Development (GOED) is devoted to attracting new ventures and companies to the state.  One of the main attractants is the quality of life and outdoor recreation that Utahans enjoy.  Quality of life and outdoor recreation are just as much economic attractants and reasons as they are desired lifestyles for companies.  Concerning business relocation, the executive director of the GOED Jason Perry states, “These companies make very sound business decisions for very sound business reasons”[66]Business in Utah 2009 listed the top ten reasons why Utah is a great place for business among which were: 6)“Business in Utah enjoys heightened quality of life: From business opportunities to outdoor activities, Utah’s got it all” and 9) “Business in Utah means work hard, play hard: Explore Utah’s jaw-dropping outdoor splendors”[67].  It is most certainly inUtah’s best economic interest to continue providing a beautiful backdrop for businesses and their employees, including clean, healthy air.

            Sephora’s vice president of logistics, Martin Flaherty noted that some of the reasons for deciding upon a distribution center in Salt Lake Citydealt with the environment, “We also looked at quality of life-outdoor lifestyle, lots of state and national parks”[68].  Amer Sports (maker of Wilson, Precor, Salomon, Atomic, Suunto, Bonfire, Mavic and Arc’teryx brands) chose to be headquartered in Ogden due in part to the outdoors to be enjoyed.  Mike Dowse, President & General Manager of Amer Sports said in an interview that the close proximity to the mountains was a big selling point, “The biggest win has been for our employees.  Everyone came here prepared to ski and enjoy the mountains, but the summer has been just as great with all hiking, biking and kayaking”[69].  The state has also been very successful in academia and research ventures:

According to the latest data available from the Association of University Technology Managers, the Universityof Utahspun out more companies based on its research than any other university in the United States, except for MIT.  What makes this even more impressive is that the University did this with only a third of the research dollars MIT receives, making the Universityof Utahnumber one in the nation when it comes to efficiency in its research commercialization efforts.[70]

 Emphasizing the import of Utah’s natural beauty the 2007 Nobel Laureate Dr.Mario Capecchi of the Universityof Utahresponded to the question: “What has kept you in Utah”? By saying, “It’s a good environment in Utah.  The state is physically beautiful”[71]. Utah’s beauty attracts and keeps highly educated workers and high-paying, high-tech businesses.

            The natural splendor of Utahand its business incentives also keeps it a popular choice for filming locations, bringing further revenue into the state.  “In 2006-07, more than 40 feature films were filmed in the state, generating approximately $99 million for Utah’s economy”[72].  Furthermore,  “‘High School Musical’ I and II alone brought in $8 million and created 180 jobs in Utah”[73].  Utah has a vast array of landscapes to serve as backdrops from mountains and forests to canyons, deserts and red-rock country.  Bill Borden, producer of “Mission Impossible III” and “High School Musical” noted, “Utah is unique because Salt Lake City can look like any city and then 20 minutes away, you have the mountains and you have the snow”[74].  Utah has long been known as having The Greatest Snow on Earth® and this is again shown by a poll of over 7,000 people by Ski magazine ranking Deer Valley as the #1 ski resort with Park City Mountain as #5 and The Canyons in the #13 place[75].

            This proximity to outdoor recreation areas not only attracts business and improves the morale of employees; it is the perfect location for outdoor products testing. Kurt Hoefler, Alpine division manager for Rossignol, headquartered in ParkCitysays, “I can fly in a new design and have it on the snow for testing the same day – unlike the 2-3 days it used to take when we were headquartered in the east”[76].  The value of a beautiful and healthy environment in attracting new businesses and bringing in revenue cannot be underestimated.

            Air pollution affects the tourism market in Utahas well.  Utahhas the image of pristine wilderness and clean mountain air.  Many come to see the amazing features of the many national parks (Utahis only behind Californiaand Alaskafor the amount it has).  SaltLakeCountyalone accounted for 56.7% of the states tourism tax revenues[77].  “Traveler spending is estimated to have generated $631 million in state and local tax revenues (approximately $708 per Utah housing unit)”[78].  This provided an estimated 113,030 jobs in tourism-related industries (both direct and indirect)[79] within the sate of Utah.  “With the average overnight visitor spending $101 each day in Utah – for a total of more than $7 billion each year – tourism is a super fuel for Utah’s economy”[80].

Utah’s tourism climate is also highly dependent on a healthy environment.  Utahboasts a heightened quality of life, offering what the managing director of the Utah Office of Tourism Leigh von der Esch calls, “the complete package of climate, business/economy, lifestyle and culture, health/healthcare, arts, sports and recreation that add up to a compelling mosaic”[81].  This not only means that over 20 million people come to Utah every year[82] as tourists, but that many would come to live in this beautiful state as well.

C. Agriculture

 

4.1% of Utah’s land is cultivated cropland[83], and the Utah Department of Environmental Quality (DEQ) estimates that agriculture produces 1$ billion of revenue per year.  Utah’s agriculture also provides employment for approximately 340,000 people[84].  68% of Utah’s agricultural revenues comes from livestock sales (meat, milk, and eggs), with meat providing more that half of that[85].  Unfortunately, air pollution also has impacts on plants and animals as well. Many of the livestock animals that share physiological and anatomical similarities with humans are subject to health affects of air pollution as are humans.  Plant life is affected as well, “Agricultural crops can be injured when exposed to concentrations of various air pollutants.  Injury ranges from visible markings on the foliage, to reduced growth and yield, to premature death of the plant”[86].  The EPA states that even relatively low levels of ozone (O3) can cause crops to suffer a 20-40% loss in productivity, as it decreases photosynthesis, and kills leaves[87].  Smog also cause trees to prematurely lose their leaves, damages them and slows the overall growth of plants[88].  Pollution has also been shown to interfere with pollination as it destroys floral scents used for attraction[89], thereby decreasing the potential yields.

D. General Considerations

 

The economic costs of air pollution go beyond morbidity, mortality, lost business revenue and relocation, tourism and agriculture.  The state loses money as workers lose work-time due to illness in work loss days (WLDs) and become less efficient on the job with less-than-optimal health and minor restricted activity days (MRADs).  There is also the impact of school absences from sick schoolchildren.  The real estate market is affected due to air pollution too, as it affects prices and demand.  “When people pay more for a house in an area with cleaner/clearer air, what benefits do you think that they are buying?  Better health?  Reduced soiling of clothes and materials?  Or just better visibility?”[90].  The authors also cited another study to illustrate the magnitude of air quality and the housing market.

In a CV study of the benefits of pollution control in the South Coast Air Basin of California, Brookshire et al. (1979; 1982) found that, of the estimated total willingness-to-pay for improved air quality, about 34% was for improved aesthetics, which we would call visibility per se.  The remaining 66% was for improved health[91].

Finally, this is by no means an exhaustive and comprehensive analysis of economic costs of air pollution as there are also many other sectors of life and industry that are affected.  The economic costs are my best estimates based on the information and understanding of air pollution and its impacts at hand.  The following excerpt highlights the importance of attempting to valuate such complex influences of pollution on health, business, etc: “In any case, even with uncertainties it is better to at least attempt an analysis, because without it the damage cost could be anywhere between zero and infinity; such a range can only be reduced”[92]. There are psychosocial costs (pain, suffering, etc.) that must be taken into account as well, since they impact the overall health of the economy.

VIII. Conclusions

 

            My conservative and limited estimates of the economic cost of air pollution based on my analysis along the Wasatch Front based on VSL, VOLY and COI is around $9 billion.  This does not include my other general considerations and arguments that were qualitative (aesthetics, housing markets, business/tourism, psychosocial costs [pain, suffering, etc.], and other factors not addressed in this report.  Cleaning up the air will be far less expensive than what it costs to pay for all the impacts (externalities) of the status quo of our air quality.  It’s estimated that cleaning up the air will be 1/10th the cost, “most of it, a ‘one-time’ cost”[93].  This is very much in the realm of possibility. Air quality has already undergone improvements over the last 20 years as efforts have been made to clean it up. In a recent study, researchers estimate an increase in life expectancy of more than 7 months for every 10mcg/m^3 decrease of PM2.5 concentrations in the air[94]. This would mean that according to the VOLY, every 10mcg/m^3 decrease of PM2.5 would save over $75,000 per person. They also observed in their analysis an increase in average life expectancy due to air quality improvement since the 1980’s[95].  “We think about five months of that is due to the improvement of air quality”[96].  Dr. Dockery concludes,  “There is an important positive message here that the efforts to reduce particulate air pollution concentrations in the United States over the past 20 years have led to substantial and measurable improvements in life expectancy”[97].

            As a final note, there is positive evidence that shows that the tide can be changed. Utahans can enjoy healthier air, better quality of life and save billions of dollars all at the same time.  It will take time and dedication, but it is a real possibility.

 


[1] From: Environmental Economics. I. Bateman, D. Pearce, R. K. Turner.  1993.  TheJohnsHopkinsUniversity Press, Baltimore.

[2] Online Etymology Dictionary.  http://www.etymonline.com

[3] “The Benefits of Meeting Clean Air Standards in theSouthCoast andSan JoaquinValleyAirBasins”.  V. Brajer, J. V. Hall, F. W. Lurmann.  November 2008.  Institute for Economic and Environmental Studies,CaliforniaStateUniversity,Fullerton.

[4] “The Health and Visibility Cost of Air Pollution: a Comparison of Estimation Models”.  Delucchi M. A., Murphy J. J., McCubbin D. R.  Journal of Environmental Management (2002) 64, 139-152.

[5] See: Environmental Economics Bateman, Pearce, and Turner.  Chapter 8.

[6] http://www.ecosystemvaluation.org/hedonic_pricing.htm

[7] http://www.wikipedia.org/wiki/Contingent_valuation

[8] OECD Glossary of Statistical Terms- damage cost and avoidance cost definitions.  http://www.oecd.org/glossary/

[9] “Cleaning up Utah’s air will cost less than treating pollution-related illnesses”.  http://www.ksl.com, 3 April 2007.

[10] “Assessment of the Economic Costs of Damage Caused by Air-Pollution”.  Holland, M. R., Water, Air and Soil Pollution 85 2583-2588, 1995.

[11] “Valuing the Health Benefits of Clean Air”. Hall J. V., A. M. Winer, M. T. Kelinman, F. W. Lurmann, V. Brajer, S. D. Colome.  Science, New Series, Vol. 255, No. 5046, 812-817. 1992.

[12] http://www.en.wikipedia.org/wiki/Human_capital

[13] “Cost of illness studies: what is good about them?”.  D. P. Rice.  Injury Prevention (6) 177-179, 2000.

[14] “The Benefits of Meeting Clean Air Standards in theSouthCoast andSan JoaquinValleyAirBasins”. Brajer, Hall, Lurmann. Pg. 70, footnote 5.

[15] “American Life Worth Less Today: AP”.  Seth Borenstein, Associated Press, Thurs, 10 July 2008.

[16] Ibid.

[17] Laura Taylor, Kip Viscusi.

[18] Report no4: How Much to Spend for the Protection of Health and Environment.  Ari Rabl – Ecole des Mines de Paris, pg. 2.

[19] “Estimating Value of Life per Life Year”.  I. Mathur, Journal of Forensic Economics 3(3) 95-96, 1990.

[20] “An Empiric Estimate of the Value of Life: Updating the Renal Dialysis Cost-Effectiveness Standard”. C. P. Lee, G. M. Chertow, S. A. Zenios. Value in Health, (12) 1, 80-87, 2008.

[21] Ibid, pg.85.

[22] See: http://en.wikipedia.org/wiki/QALY

[23] World Health Organization (WHO) metrics: disability-adjusted life year. http://www.who.int/

[24] Ibid.

[25] http://www.en.wikipedia/wiki/Years_of_potential_life_lost

[26] “Economic Costs of Diseases and Disabilities Attributable to Environmental Contaminants inWashingtonState”.  K. Davies, D. Hauge.  Collaborative for Health and Environment-Washington Research and Information Working Group, July 2005.

[27] http://en.wikipedia.org/wiki/Beauty

[28] Online Etymology Dictionary.  http://www.etymonline.com

[29] http://en.wikipedia.org/wiki/Aesthetics

[30] http://www.wordnetweb.princeton.edu/perl/webwn

[31] http://en.wikipedia.org/wiki/Value_(economics)

[32] Ibid.

[33] http://en.wikipedia.org/wiki/Extrinsic_value

[34] “Pricing Beauty: Reflections on Aesthetics and Value, an Interview with Virginia Postrel”.  David Womack. Gain 2.0: AIGA Journal of Design for the Network Economy.  March 6, 2003.

[35] U.S. Census Bureau, Population Division, accessed at: http://www.google.com

[36] “Eight Americas: Investigating Mortality Disparities across Races, Counties, and Race-Counties in the United States”. PLoS Medicine, Vol. 3, Iss. 9, 1513-1524, 2006.

[37] http://www.businnessweek.com, Table:U.S. States Ranked by Life Expectancy. Sept 15, 2006.

[38] Utah Department of Health,Utah Behavioral Risk Factor Surveillance System (BRFSS) Brief, July 2002.

[39] Utah Department of Health, Center for Health Data,  “Demographic Context”.

[40] http://www.epa.gov/air/criteria.html

[41] http://en.wikipedia.org/wiki/Critical_load, italics added.

[42] [42] Report no4: How Much to Spend for the Protection of Health and Environment.  Ari Rabl – Ecole des Mines de Paris, pg. 6.

[43] http://www.airquality.utah.gov/images/Maps/NONATTAINMENT_MAP.pdf

[44] American Lung Association, State of the Air 2004.

[45]Brackets mine.   http://www.stateoftheair.org/2009/sota-tables/People_at_Risk_in_25_Counties_Most_Polluted_Short-term_Particle.pdf

[46] http://www.stateoftheair.org/2009/states/utah/

[47] As quoted in “Air pollution ‘shortens life’” by Humphrey Hawksley, BBC news correspondent, April 12, 2009.

[48] http://www.utahmomsforcleanair.org/air-pollution-facts/

[49] A. Pope et al. Journal of the American Medical Association, 2002.

[50] A. Pope et al. “Ischemic heart disease triggered by short-term exposure to fine particulate air pollution”.  Circulation. 2006 (114): 2443-2448.

[51] K. A. Miller et al. “Long-term exposure to air pollution and incidence of cardiovascular events in women”.  New England Journal of Medicine. Feb 1, 2007. 356:5.

[52] V. R. Fuchs, S. R. Frank (2002), “Air Pollution and Medical Care Use by Older Americans: A Cross Area Analysis”.  Health Affairs, Vol. 21, No. 6, Nov/Dec 2002, pp. 207-214.

[53] http://www.statehealthfacts.org

[54] “Dirty Air CostsCalifornia Economy $28 Billion Annually”,CaliforniaStateUniversity,Fullerton News & Information.  November 12, 2008.

[55] Brian Moench M.D., Presentation to theUtah Air Quality Board. May 23, 2007.

[56] Ibid.

[57] Ibid.

[58] Utah Office of Vital Records and Statistics, 2007 pdf summary.

[59] http://www.statehealthfacts.org

[60] http://www.utahmomsforcleanair.org/air-pollution-facts/

[61] http://health.utah.gov/asthma/pdf_files/Air_Quality/air_pollution__oct08.pdf

[62] Ibid.

[63] Daily Herald “Utah Ranked 2nd for Pro-Business Climate”, Grace Leong, June 25, 2009. Italics added.

[64] Ibid.

[65]Business in Utah 2009, Mark Dayton, pg. 24.

[66] Ibid.

[67] For the complete list see: http://business.utah.gov/GOED/about/businessutah/Business-Utah-2009/

GOED website: www.utahworksforyou.com

[68] Business in Utah 2009, Mark Dayton, pg. 26.

[69] Ibid, pg 28.

[70] Business in Utah 2009, Jeff Vanek, pg. 38.

[71] Ibid, pg 40.

[72] Business in Utah, Sarah Ryther Francom, pg. 50.

[73] Ibid.

[74] Ibid, pg. 52.

[75] Business in Utah, Mark Dayton, pg. 65.

[76] Ibid, pg. 66.

[77] State ofUtah Tourism Profile 2006.

[78] 2008Utah Tourism at a Glance. Utah Office of Tourism.

[79] Ibid.

[80] Business in Utah 2009, Heather Stewart, pg. 54.

[81] Ibid, Mark Dayton, pg. 44.

[82] Ibid, Heather Stewart, pg. 54.

[83] http://en.wikipedia.org/wiki/Economy_of_Utah

[84] Utah Agriculture in the Classroom, http://www.agclassroom.org/ut

[85] Ibid.

[86] “Effects of Air Pollution on Agricultural Crops”-Fact Sheet, June 2003, Ontario Ministry of Agriculture, Food and Rural Affairs. http://www.omafra.gov.on.ca

[87] http://www.earthjustice.org

[88] Ibid.

[89] “Pollution Destroys Floral Scents”.   Sue Cartledge, May 9, 2008.

[90] “The Health and Visibility Cost of Air Pollution: a Comparison of Estimation Models”, Delucchi, M. A.; Murphy, J. J.; McCubbin, D. R.  Journal of Environmental Management (2002) 64, 139-152.

[91] Ibid, pg. 144.

[92] Report no4: How Much to Spend for the Protection of Health and Environment, Ari Rabl – Ecole des Mines de Paris, pg. 2.

[93] Brian Moench M.D., Presentation to theUtah Air Quality Board. May 23, 2007.

[94] “Fine-Particulate Air Pollution and Life Expectancy in the United States”, C. A. Pope III, M. Ezzati, D. W. Dockery.  New England Journal of Medicine, 2009; 360:376-86.

[95] Ibid.

[96]  Dr. Douglas Dockery as quoted in: “Air pollution ‘shortens life’” by Humphrey Hawksley, BBC news correspondent, April 12, 2009.

[97] “BYU-Harvard SPH study shows that Americans owe five months of their lives to cleaner air” BYU News.  http://news.byu.edu/archive09-Jan-pope.aspx

Written on December 17th, 2011

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