Climate Change and Local Pollution Effects – An Integrated Approach

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Abstract

Few studies on measures for mitigation of damage caused by man-made emissions to the environment have tried to consider all major effects. We illustrate the importance of an integrated approach by estimating costs and benefits of a proposed energy saving program for Hungary, originally designed to reduce CO2 emissions. The dominant benefit of implementing the program is likely to be reduced health damage from local pollutants. Also reduced costs of material damage and to a lesser extent vegetation damage contribute to make the net benefit considerable. Compared to the reduction in these local and regional effects, the benefits from reducing greenhouse gases are likely to be minor. Since local effects in general occur much earlier after measures have been implemented than effects of increased emissions of greenhouse gases, inclusion of local effects makes evaluation of climate policy less dependent on the choice of discount rate. In our opinion, similar results are likely for many measures originally designed to reduce emissions of greenhouse gases particularly in some areas in developing countries with high local pollution levels. Main uncertainties in the analysis, e.g. in the relationships between damage and pollution level, are discussed.