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Article
Optimal Investment to Control “Red Air Day” Episodes: Lessons from Northern Utah, USA
Journal of Environmental Economics and Policy (2020)
  • Arthur Caplan
  • Ramjee Acharya
Abstract
We address the issue of optimal investment in “preventative capital” to mitigate episodic, mobile-source air pollution events by calibrating an endogenous-risk model with parameter estimates obtained from a unique dataset related to "red air day" episodes occurring during the winter months in Northern Utah. Our analysis demonstrates that, under a wide range of circumstances, the optimal steady-state level of preventative capital stock – raised through the issuance of a municipal “clean air bond” that provides foundational funding for more aggressive mitigation efforts – can meet the standard for PM2.5 concentrations with positive social net benefits. We estimate benefit-cost ratios ranging between 3.1:1 and 11.3:1, depending upon the assumed trip-count elasticity with respect to preventative capital stock. These ratios are clustered in the lower end of the range estimated for the 1990 Clean Air Act Amendments in general.
Keywords
  • preventative capital,
  • endogenous risk,
  • PM2.5 concentrations,
  • episodic air pollution
Publication Date
Winter February 1, 2020
Citation Information
Arthur Caplan and Ramjee Acharya. "Optimal Investment to Control “Red Air Day” Episodes: Lessons from Northern Utah, USA" Journal of Environmental Economics and Policy (2020)
Available at: http://works.bepress.com/arthur_caplan/130/