AIR QUALITY POLICY IN DEVELOPING COUNTRIES
Authors: HALL JANE VISE 
Published: January 2010

Seventy percent of the world's urban population breathes unsafe air. From 300,000 to 700,000 people die each year as a result, many in developing countries. Expenditures to improve air quality compete with demands for other social needs, such as housing, education, medical care, nutrition, sanitation, and safe drinking water. Programs to provide these needs are viewed as producing goods while air quality policies are seen as ameliorating a bad. However, it is more appropriate to think about air quality as another good that must be produced as a joint product of other processes. From this perspective, policies to improve air quality have a broader scope than do either traditional regulations and standards or incentive based programs. This paper places air quality policy choices in the context of healthier air as a product, explicitly recognizing its public good characteristics and the lack of close private substitutes.

Improved air quality can result from complex regulatory programs, comprehensive national policies, and technology‐based standards. In the United States, gains have been real but costly in terms of direct expenditures for controls and agency costs. In other cases, where long‐term commitment to the objective may be unsure, relying primarily on installation of state‐of‐the‐art technology makes less sense because a flow of funds to maintain and operate the control devices is not guaranteed and the institutional costs may be large.

In such circumstances, one cannot carry out the economic analysis necessary to justify pollution reduction on traditional grounds (MB=MC or TB>TC), or the analysis is likely to indicate that the investment is not worthwhile. Conversely, an analysis that leads policymakers to direct capital to newly installed control equipment may be based on the faulty assumption that the equipment will operate effectively. In the absence of a long‐term institutional capacity to support use of technology in place, traditional assessment tools may lead to wrong and wasteful conclusions.

Commitment to air quality improvements is necessary to justify paying for control equipment or modifying other policies. Commitment and success are complements. Policymakers would be more likely to commit if they had a clearer conception of the role that air quality plays in the economy and that the economy plays in air quality.

Policies that economists traditionally do not view as environmental programs can produce large gains. Specifically, changing energy pricing policies will lead directly to cleaner air, at large savings to national governments. Investment in energy efficiency, including transit, will produce better air quality as a by‐product. Implementing such straight‐forward policies does not require extensive knowledge about pollution levels or sources or significant enforcement expenditures. Many regions eventually will need more direct regulation, either via economic incentives or control requirements, in order to achieve really healthy air. In the interim, worthwhile gains can be had inexpensively while long‐term priorities and policies are developed.

The analysis here advocates viewing air quality in a new way as a good or a service to be produced. Air quality is one of many basic needs. It increases productivity as well as directly enhancing human welfare through better health and an improved environment.