World Economy

Air Pollution Could Cost $2.6t Annually to Global Economy

Air Pollution Could Cost $2.6t Annually to Global EconomyAir Pollution Could Cost $2.6t Annually to Global Economy

Outdoor air pollution could cause six to nine million premature deaths a year by 2060 and cost 1% of global GDP—around $2.6 trillion annually—as a result of sick days, medical bills and reduced agricultural output, unless action is taken, according to a new OECD report.

The Economic Consequences of Air Pollution finds the consequent reduction in global economic output by 2060 will equate to around $330 per person, as annual healthcare costs related to air pollution rise to $176 billion from $21 billion in 2015 and the number of work days lost to air pollution-related illness jumps to 3.7 billion from 1.2 billion.

Countries like China, Russia and India, which are already wrestling with severe pollution, are expected to be hit especially hard.

Air pollution may reduce the size of the global economy by as much as 1% by 2060, and its emerging economies like China and India that will be hit the hardest, the report said. It called for governments to enact tougher environmental laws.

 “The number of lives cut short by air pollution is already terrible and the potential rise in the next few decades is terrifying. If this is not motivation enough to act, this report shows there will also be a heavy economic cost to not taking action,” said OECD Environment Director Simon Upton, presenting the report at the 8th Environment for Europe Ministerial Conference in Batumi, Georgia. “We must prevent these projections from becoming a reality.”

 GDP Losses

Projected GDP losses will be biggest in China, Russia, India, Korea and countries in Eastern Europe and the Caspian region, as health costs and lower labor productivity hit output. Poor air quality will hit China’s economy harder than India’s because differences in household savings rates and demographics mean the knock-on effects of lower productivity and increased health spending on the rest of the Chinese economy will be much larger.

A reduction in crop yields as a result of dirty air will weigh on most countries’ economies. Exceptions will include Brazil, Russia and some Latin American countries where agricultural land is set to be less affected, meaning improved export competitiveness and thus economic gains.  

The report also examines the negative impact of outdoor air pollution in terms of the price people would be willing to pay each year to not have their health impaired or their lives cut short by it. This hypothetical annual value of air pollution is seen rising from less than $500 per person in 2015 to as much as $2,800 in 2060.

Welfare costs associated with these deadly consequences are projected to rise to as much as $25 trillion over the same period. The amount associated with paying for the pain and suffering from illness—for example, hospital admissions—is estimated to hit $2.2 trillion.

“The potential economic consequences of both the market and non-market impacts of outdoor air pollution are very significant,” said the report, recommending policies to reduce polluting emissions.

The policies it suggests include incentives for cleaner technologies and tougher standards for air quality, automobile emission and fuel quality standards.

 Premature Deaths

Outdoor air pollution caused more than three million premature deaths in 2010, with elderly people and children most vulnerable. The OECD projections imply a doubling, or even tripling, of premature deaths from dirty air—or one premature death every four or five seconds—by 2060.

The biggest rises in mortality rates from air pollution are forecast in India, China, Korea and Central Asian countries like Uzbekistan, where rising populations and congested cities mean more people are exposed to power plant emissions and traffic exhaust.

Premature death rates are forecast to be up to three times higher in 2060 than in 2010 in China and up to four times higher in India. Death rates are seen stabilizing in the United States and falling in much of Western Europe thanks in part to efforts to move to cleaner energy and transport.