Economic Development and Air Pollution Abatement: A State-Level Policy Simulation of the 1990 Clean Air Act

Abstract

This study simulates the economic development effects of several alternative policies for control of air pollution emissions in the state of Pennsylvania. Under the Clean Air Act Amendments of 1990, which require states to attain and maintain the ambient standard for ground-level ozone pollution, Pennsylvania and the other northeastern states must consider the possible adoption of the California standards for automobile tailpipe emissions. We simulate the economic effects of such a program for low-emission vehicles (LEV) using a regional economic model for Pennsylvania, and compare the economic impacts of the LEV program to two alternative policies that would require additional emission reductions: industrial point source controls (PSC) and mandatory use of cleaner reformulated gasoline. Although the relationship between the proposed controls and economic development is negative in each case, the magnitude of the impact is modest, and the effects of the LEV and PSC options have approximately the same magnitudes. However, larger effects occur when combined effects of programs are considered, suggesting that policy makers need to be sensitive to the simultaneous effects of policies.