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What Is the Cost of Air Pollution?

Have you wondered what the cost of air pollution is, or how it affects the global economy? The answer is billions, even trillions of dollars.
Last Updated on August 24, 2022

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financial cost of air pollution

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We’re all blatantly aware of air pollution’s effect on the planet and its inhabitants. But the financial cost of air pollution is not as well known. (Although one can safely assume it costs a lot of money.) There are several different ways to quantify the financial cost of air pollution. Today we’ll examine a few. Let’s get started!

How Much Does Air Pollution Cost the World? 

In 2016, the Organization for Economic Co-operation and Development (OECD) published a report regarding the economic consequences of outdoor, or ambient air pollution. Using 2015 data, researchers examined how certain macroeconomic costs would change by 2060. During which, particulate matter and ground-level ozone levels will continue to increase globally. As a result, the global economy will suffer. Here are some of their key findings.

Market Costs

The total annual market costs of air pollution are projected to increase from 0.3% in 2015 to 1.0% in 2060. Global air pollution-related healthcare costs are projected to increase from $21 billion in 2015 to $176 billion in 2060. And, the annual cost of lost working days is projected to increase from $1.2 million to $3.7 billion by 2060.

Non-Market Costs

It’s not only direct market costs that impact the world’s economy. Additionally, non-market impacts also cost the global economy billions of dollars each year. Non-market criteria include premature deaths and illness-related pain and suffering. Let’s examine the financial burden of non-market costs worldwide:

  • Total annual welfare costs related to non-market impacts worldwide will increase from $3.4 billion (2015) to $20.5-27.6 trillion (2060).
  • Annual global welfare costs associated with premature deaths are projected at $18-25 trillion (2060).
  • And, annual global welfare costs associated with pain and suffering from an illness will increase from $300 billion (2015) to roughly $2.2 trillion (2060). 

Of course, the OECD isn’t the only organization that has collected data and published projects on the issue. In 2022, the World Bank Group published a report called “The Global Health Cost of PM2.5 Air Pollution: A Case for Action Beyond 2021”. Pretty specific, if you ask us.

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According to the publication, welfare costs related to PM2.5 air pollution were $8.1 trillion in 2019 or 6.1% of global GDP. The cost of ambient PM2.5 air pollution was $6.43 trillion (4.8% of global GDP). And, the cost of particulate matter household air pollution was $1.67 trillion, or 1.3% of global GDP. 

Finally, according to the Centre for Research on Energy and Clean Air’s 2020 report titled “Quantifying the Economic Costs of Air Pollution from Fossil Fuels,” in 2018 alone, air pollution from fossil fuels cost $2.9 trillion globally or 3.3% of global GDP. 

One thing is clear. The statistics and projections regarding the cost of air pollution depict a significant spending source now and in the future.

How Much Does Air Pollution Cost the U.S.?

As of 2019, air pollution costs the United States approximately 5% of its annual GDP. According to the Center for Research on Energy and Clean Air, the economic and health costs of air pollution due to fossil fuels cost the U.S. $2.9 trillion in 2018. For the average American, that is an unfathomable amount of money. 

Unfortunately, it’s not just the government that’s directly impacted. Every year, Americans pay an average of $2,500 for additional medical bills related to air pollution as a result of fossil fuels. That’s more than $820 billion per year. 

And, as many Americans know, there has been an uptick in extreme heat and wildfire events. Both of which contribute to ambient air pollution. Each year, extreme heat alone costs the U.S. $263 million, while wildfire smoke costs $16 billion. 

Fortunately, there is good news. According to one study, every dollar spent on air pollution control methods reaps $30 worth of benefits. The U.S. has invested approximately $65 billion in air pollution control since 1970. According to calculations, this investment has resulted in roughly $1.5 trillion in benefits. 

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How Does America Compare to Foreign Economies?

China 

As of 2014, the National Air Quality Action Plan and the People’s Government of Beijing Municipality set aside a total of $390 billion to reduce air pollution. For reference, that’s more than half of the United States defense budget. As a result of this budget, China reduced air pollution by 29%, and increased GDP per capita by 45.5%! That’s an incredible return on a worthwhile investment. However, with these improvements noted, according to 2018 numbers, air pollution costs China $900 billion each year. Or, 6.6.% of the country’s total GDP.

Middle East and North Africa

The Middle East and North Africa (MENA) region spend approximately $141 billion per year as a result of air and water pollution. In some MENA countries, the human and economic cost of polluted skies and degraded seas and coastlines is more than 3% of the GDP.  

India

According to a 2021 report, air pollution cost Indian businesses approximately $95 billion in 2019. For reference, that’s approximately 3% of the country’s total GDP. This expense is equal to 150% of India’s healthcare budget. 

The Solution to Air Pollution

Evidently, market and non-market impacts have a severe effect on national economies as well as the global economy. And, unfortunately, these numbers continue to rise. In order to reduce costs, we must consider alternatives that are more cost-effective and environmentally friendly.

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