Economics and Air Pollution

Abstract

This chapter discusses the relationship between economics and air pollution: firstǰ it presents the main characteristics of the economic growth-environmental pressure debate and introduces the concept of environmental Kuznets curve hypothesis (EKC). As an example of the EKC, the estimated relationship between CO2 emissions and economic growth, using a cross-sectional sample of 152 countries, is reported. Second, the chapter discusses air pollution as a result of a market failure and introduces the main theoretical causes of ambient degradation, acknowledging air pollution externalities as a common problem that leads to overexploitation in the absence of wellȬdefined property rights for the atmosphere. Third, the main instruments for pollution control, including traditional regulation based on standards and the more flexible incentivebased regulation, are presented. Finally, the chapter reviews the main features of cost and benefits related to air pollution emissions.