The EPA has told states to 'clean-up or we'll do it for you (and you won't like it).' Here's the CNN.com version. What's it mean for you?
EPA says electric utility customers can expect their monthly electric bills to eventually rise by up to $1 to pay the projected $4 billion annual costs to meet the new standards.
So, how much are you willing to pay? Let's see what the research shows...
The new program requires 28 eastern states to submit plans to reduce nitrogen oxide emissions by 61% and SO2 emissions by 57%. If plans are not permitted, EPA will write the plans for the states. The EPA press release claims the benefits of the clean-up will exceed the costs by 20 to 1. Let's see what this means for the average household.
In the 28 affected stated, there are about 210 million people, or 84 million households. If the total clean-up costs $4 billion per year, that's about $48 per household per year. Are you willing to pay $48 per year? Apparently some people are willing to pay a lot more.
A study by Richard O'Conor and Glenn Blomquist [1] in the Journal of Health Economics showed that adults suffering from asthma are willing to pay between $1,211 and $4,483 per year (2005 dollars) to control asthma symptoms. Since asthma flare-ups are one of the big side effects of air pollution, let's see what these numbers mean.
In the affected 84 million households there are about 125 million adults. The estimates of asthma incidence in adults range from 12-30% depending on age and location. That means there are between 15 and 38 million adults suffering asthma symptoms. If I do my math right, adult asthma sufferers in the affected region would be willing to pay between $18.2 and $170.4 billion per year to control asthma symptoms.
Even if the nitrogen oxide and sulfur dioxide reductions only reduce asthma incidence by 25%, the benefits to adult asthma sufferers alone look like they outweigh the costs of the program. That doesn't even consider the asthma benefits to children, the benefits of reduced deaths, the benefits of better visibility, the benefits of...
Looks like 20 to 1 might be OK.
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[1] O'Conor, R.M and G.C. Blomquist, "Measurement of Consumer-Patient Preferences Using a Hybrid Contingent Valuation Method," Journal of Health Economics, 16(6):667-83.
