Impacts of air pollution control costs: An input-output approach

Abstract

Ozone in the South Cast Air Basin, which encompasses the urbanized portions of Los Angeles, Orange, Riverside, and San Bernardino counties in California, currently exceeds the federal standard. Rules on stationary sources have been adopted to reduce emissions of two ozone precursors, reactive organic gases (ROG) and nitrogen oxides (NO_x). This paper uses an input-output framework to evaluate the distributional impacts of four of the most costly NO_x rules on the South Coast economy in terms of output, income, employment, and prices. The model allows output substitutions by making the household sector endogenous and feeding price elasticities into personal consumption coefficients. Instead of using annualized costs, it is assumed that the rate of industrial compliance to NO_x rules follows an accelerating pattern during the simulation period of 1984 to 1988; i.e., from the time a rule was adopted to the time it will be complied with. It is found that the highest price increase occurs in Petroleum Refineries in 1988 (.48 percent). The overall results indicate that price impacts are rather insignificant.