Image courtesy of Climate Visuals

TL;DR — Air pollution is responsible for a vast array of economic costs, from the healthcare expenditures associated with pollution-related illnesses and death to the costs associated with environmental damage and lost ecosystem services. Poor air quality has also been linked to decreased workplace productivity and decreased tourism, which impacts economies across the globe. However, research also shows that the economic benefits associated with air pollution mitigation outweigh its costs by a factor of 30, providing significant support for cleaner technology and green industry development. 

Air pollution as a global issue

Air pollution is a well-known issue that impacts every corner of the globe, with detrimental effects on human and environmental health.

Poor air quality also has vast economic costs.

In 2018, air pollution triggered a staggering cost of USD 2.9 trillion to the global economy, corresponding to 3.3 % of the world's GDP. In the same year, unhealthy air quality caused 1.8 billion days of work absences worldwide. Other estimates suggest that air pollution accounts for USD 5 trillion, annually, in welfare costs for the global economy”

— Allianz

However, studies show that air pollution control measures are effective and can have a great return on investment. For example, research on the impacts of the Clean Air Act in the United States found a 30:1 ratio between the economic benefits and the costs of air pollution mitigation. 85% of the economic benefit that comes with mitigating air pollution is attributed to reductions in premature mortality tied to particulate matter pollution exposure.

Health-related costs of air pollution

Air pollution contributes to an array of negative health impacts, with poor air quality affecting virtually every part of the human body from head to toe. 

To learn more about these effects, read our deep dive on the health impacts of air pollution exposure here.

Research shows that pollution-related illnesses account for a significant portion of the costs associated with poor air quality.

In the United States alone, cardiovascular disease and other respiratory conditions caused by breathing in air pollution were estimated to cause 107,000 premature deaths and $820 billion in annual healthcare costs.

A study specifically examining the impacts of nitrogen dioxide exposure found that in areas with just a 5.9 parts per billion increase in pollutant concentration, there was:

  • A 22% increase in emergency room costs
  • A 5% increase in outpatient costs
  • A 7% increase in annual direct healthcare costs

The burning of fossil fuels — which contributes to both poor air quality and our changing climate — has been associated with significant costs as well. Studies estimate that air pollution exposure from fossil fuels costs each average American around $2,500 in additional medical bills

When fossil fuel emissions are coupled with higher temperatures and cause increased ozone pollution, annual health costs in the United States rise to $7.9 billion due to worsened asthma and cardiovascular, metabolic, nervous system, and reproductive outcomes.

Air pollution from wildfire smoke also comprises significant portions of the damage to human health, with the World Economic Forum estimating that wildfire smoke costs Americans $16 billion each year as associated with 6,200 respiratory hospital visits and 1,700 PM2.5-related deaths.

Fortunately, research shows significant economic gains that come with reducing air pollution levels.

A 10 mg/m3 decrease in PM2.5 would reduce annual healthcare spending by more than $9.2 billion, about 1.5% of China’s annual healthcare expenditure”

— National Bureau of Economic Research

Studies also suggest that the costs associated with air pollution tend to be underestimated, making the case that the healthcare benefits that come with decreasing air pollution may be even larger than estimated.

The image above displays the potential increase in GDP that countries in the European Union would experience as a result of the air quality objectives for PM2.5 levels outlined by the European Commission in 2008, which requires that countries reduced their ambient fine particulate matter levels by a percentage proportionate to their existing average PM concentration. The highest gains would be seen by Poland and Bulgaria as the countries with the highest ambient levels of PM and therefore the biggest reductions to be made. (Image source: OECD)

Air pollution’s impacts on the workforce and lost productivity

Air pollution has well-researched impacts on labor productivity, especially due to increased work absenteeism and diminished individual cognitive and physical capabilities that translate into productivity.

In India, reduced productivity, work absences and premature deaths caused by air pollution cost the economy an estimated $95 billion – or 3% of the country’s GDP – in 2019”

— Clean Air Fund

Similar findings appeared in research examining schools, where higher air pollution levels on a particular day were linked to higher student absences. Researchers argue that this translates into lower work productivity and lower incomes in the long run.

According to the Organisation for Economic Cooperation and Development (OECD) Working Paper, just a 1 microgram per cubic meter increase in PM2.5 concentration was linked to a 0.8% decrease in real GDP per capita the same year.

Lost workdays due to air pollution are a major component of this decrease in productivity.

Around 1.2 billion workdays are lost globally each year due to air pollution, which could reach 3.8 billion days by 2060”

— Clean Air Fund

Individuals may stay home from work due to pollution-related illnesses that they themselves are experiencing, or to take care of children or elderly family members that are more vulnerable to the impacts of dirty air.

Pollution-related damage to the environment and ecosystem health

Air pollution has serious consequences for environmental health, with a variety of air pollutants causing damage to plants and ecosystems.

Ground-level ozone, for example, decreases plant growth rates, lowers crop yields and damages agricultural crops, and negatively impacts biodiversity. Read our air quality measurements series blog on ozone pollution to learn more

Nitrogen oxides and ammonia also result in ecosystem damage. These pollutants can become deposited in bodies of water, where they contribute to eutrophication, and on land where they can contribute to ecosystem change and the loss of sensitive species.

Sulfur dioxide, nitrogen oxides, and ammonia can lead to the acidification of soils and bodies of water, which disrupts ecosystems and leads to losses in biodiversity.

Ecosystem degradation also has economic consequences. Biodiversity and ecosystem services are an essential part of the global economy and provide services such as food production, water purification, flood protection, and climate change mitigation.

Research from 2019 estimates that the economic value of these ecosystem services was between $125 trillion and $140 trillion (USD) in 2011 — a number that was over 1.5 times the global GDP that year.

Biodiversity and ecosystem services provide essential functions that not only maintain environmental health but also underpin the global economy. The damage that air pollution and climate change cause to the environment has monumental costs. (Image source: OECD)

Data from 2021 places the value of biodiversity alone at more than $150 trillion annually, about twice the global GDP, because of the services it provides such as food provisioning, carbon storage, and water and air filtration. The researchers’ analysis places the cost of the decline in ecosystem functionality at more than $5 trillion per year due to the loss of these services.

A new World Bank report estimates that the collapse of select ecosystem services provided by nature – such as wild pollination, provision of food from marine fisheries and timber from native forests – could result in a decline in global GDP of $2.7 trillion annually by 2030…The report highlights that Sub-Saharan Africa and South Asia would suffer the most relative contraction of real GDP due to a collapse of ecosystem services by 2030: 9.7 percent annually and 6.5 percent, respectively”

— World Bank

Because of these impacts, it is highly important that we prioritize policies that balance economic growth with biodiversity preservation and environmental health.

Air pollutants also have detrimental impacts on agriculture. Studies have linked ground-level ozone pollution to €6.7 billion in losses in Europe, and global losses up to USD 26 billion.

Just as air pollution damages agricultural outcomes, improvements in air quality also come with tangible economic benefits.

Previous research by Lobell and Burney estimated reductions in ozone, particulate matter, nitrogen dioxide, and sulfur dioxide between 1999 and 2019 contributed to about 20% of the increase in U.S. corn and soybean yield gains during that period – an amount worth about $5 billion per year”

— Stanford University

Agricultural practices themselves can also contribute to air pollution and climate change, with 58% of the particulate matter air pollution in Europe cities being comprised of ammonia emissions, 95% of which are produced by livestock manure and agricultural chemicals.

To learn more about the ties between air pollution, climate change, and agriculture, read our blog here.

How air pollution creates economic costs to the tourism sector

Tourism can suffer due to air pollution which places strain on local economies. Poor air quality can raise tourists’ concerns about how air pollution exposure will impact their health, may affect the overall travel experience, and may discourage them from revisiting.

One study looking at India noted that international tourists were reconsidering travel to India due to air pollution, leading to a 1% decline in GDP — equivalent to USD 2 billion — and 820,000 jobs lost in tourism and related sectors.

Many tourists consider air quality when deciding on their destinations. Therefore, clean air at a destination can improve a tourist’s experience. In contrast, travelling in a polluted environment depresses travelling experiences and negatively affects tourists’ willingness to revisit”

— Zhang & Lu, 2022

One study examining different regions of China found that travelers who experienced air pollution exposure were 92.857% less likely to revisit a specific city and 93.421% less likely to revisit China. A study focusing on Fuzhou, China found that every 0.164 percentage point increase in the air index was linked to a 11.733 million decrease in annual tourists.

To learn more about the ways that air pollution affects sometimes unexpected sectors such as tourism and real estate, read our blog here.

Air pollution mitigation’s return on investment

While air pollution does have clear economic costs, air pollution mitigation also has a significant return on investment (ROI).

Most estimates from the U.S. place this number around 30:1, meaning that for every $1 invested into air pollution control and mitigation, there is a $30 benefit in terms of reduced healthcare costs and the productivity of healthier, longer-living citizens. High benefit estimates have reached up to 90 times the cost.

In Europe, research from the European Commission shows that though reducing fine particulate matter emissions by 25% would cost €1.2 billion annually, the economic benefits would be at least two orders of magnitude greater.

Research simulations show that reaching air quality targets in the European Union would increase European GDP by 1.25%, with 3% growth experienced by the most polluted countries.

Opportunities for economic growth and innovation

Switching to cleaner technologies will help reduce air pollution as well as mitigate greenhouse gas emissions that contribute to climate change, which brings with it economic benefits.

A study from the World Resources Institute (WRI) outlines a scenario of reducing the U.S.’s greenhouse gas emissions by 80% by 2050. Though it would take an investment of around $320 billion per year from 2020 to 2050, extensive benefits would be realized, including:

  • A $65 billion reduction in annual fossil fuel costs in the 2020s, which would grow to almost $700 billion per year in the 2040s
  • Approximately one million additional jobs, especially in the construction and utility sectors
  • Dramatically reduced air pollution from fossil fuel combustion

The development of green industries and associated jobs would also hold economic gains. Another study from WRI finds that an additional 900,000 net jobs could be created by 2035 due to tax credits for low-carbon industries and infrastructure investments. 

Federal policies that would put the U.S. on the path to net-zero emissions by 2050 would create an additional 2.3 million net jobs by 2035, with domestic manufacturing of clean energy technologies bringing 5.7 million more net jobs on top of this.

Some countries and regions have already been successfully leveraging clean air initiatives for economic growth. The World Bank-supported Innovative Financing for Air Pollution Control Program in the Beijing-Tianjin-Hebei (Jing-Jin-Ji) region of China has supported 27 projects related to energy efficiency, renewable energy, and emission control, in addition to an estimated 2.5 million ton annual reduction in carbon dioxide emissions.

While there is an antiquated belief that economic growth and air pollution levels must be linked together, many countries have shown a decoupling between the two — that is, they have achieved economic growth without significant contributions to air pollution.

Some countries have begun to achieve a decoupling between their economic growth and air pollution emissions, meaning that they can continue to support their economy’s health without these actions being at the cost of the environment. (Image source: International Monetary Fund Blog)

This link between economic growth and poor air quality especially tends to be a belief when it comes to economically developing countries, but many countries have proven this does not need to be the case.

Not surprisingly, countries with high GDP also have high fossil fuel emissions, Lei and his colleagues found. But in some high-GDP countries in North America and Europe, fossil fuel emissions are falling even as economies continue to grow. A few developing countries, like Tajikistan and Uzbekistan, have high GDP growth but falling fossil fuel use, likely because their economies are based on agriculture and tourism rather than industry…One country that diverges from these trends is China, where economic growth is high and fossil fuel emissions are increasing rapidly – but air pollution is falling, likely because of tightening air quality standards since 2014”

— Anthropocene Magazine, in reference to Lei et al., 2020

A future of both cleaner air and a healthy economy

Poor air quality is linked to a vast array of economic costs, such as those from healthcare expenses, lost productivity, ecosystem damage, and decreased tourism. 

Fortunately, extensive research proves that the benefits of reducing air pollution far outweigh the costs of doing so. Leveraging the economic implications of air quality control strategies can help to build significant support for air pollution mitigation.

Interested in measuring air quality for cleaner air, improved physical and mental health, and a healthier climate? Get in touch with our team to learn more about our Sensing-as-a-Service solution for governments, businesses, and community organizations, using our Clarity Node-S monitors and modules that do not depend on infrastructure like WiFi or power — making them especially resilient during environmental disasters.