An Economic Approach to Ozone Abatement in Europe

Abstract

Tropospheric ozone formation is one of the most widespread air pollution problems in Western societies. In the US it has been a matter of concern for 30 years. In Western Europe, public awareness of ozone problems is more recent and has received much less attention than the acidification problem. In this paper we survey the economic aspects of the ozone problem in Europe. Arguably, an economic approach to ozone is still in its infancy in Europe due to the complexity of the ozone formation itself. Ozone formation depends, in a non-linear way, on the presence of two primary pollutants (NO_x and VOC) that are transported over long distances. Therefore, we will begin with a brief introduction to the chemical and physical characteristics of tropospheric ozone before we analyse the basic economics of ozone abatement. For this purpose, we will use an abstract model with growing complexity. The simplest case we will discuss is a model with two primary pollutants without transfrontier transport. It is taken into accoun that No_x, one of the primary pollutants of ozone, also plays a role in the environmental problem of acidification. Therefore the model explicitly considers the side benefits of ozone abatement policies on acidification. The model is then extended by introducing the transfrontier dimension and a member of other features: stochastic pollution, defensive expenditures and the properties of the cost functions. Next, we will survey the European experience in using empirical economic models for the study of ozone. We will examine the estimates of two basic economic components of the ozone problem: damages to health and agriculture and the emission reduction costs for the two precursors. We will also look at the synthesis of both types of information. Finally, we will conclude that economic modelling efforts are necessary in order to develop a cost-effective and efficient ozone abatement strategy in Europe.