Implications of incorporating air-quality co-benefits into climate change policymaking

G F Nemet^1,2, T Holloway¹ and P Meier³

¹ Nelson Institute Center for Sustainability and the Global Environment (SAGE), University of Wisconsin–Madison, Madison, WI, USA
² La Follette School of Public Affairs, University of Wisconsin–Madison, Madison, WI, USA
³ Energy Institute, University of Wisconsin–Madison, Madison, WI, USA

Received 2 October 2009
Accepted 5 January 2010
Published 22 January 2010

Contents

• 1. Introduction
• 2. The value of AQ co-benefits is large
• 3. AQ co-benefits are not included in climate policy analyses
• 4. Implications of including AQ co-benefits
• 5. Why are AQ co-benefits acknowledged but ignored?
  • 5.1. Uncertainty in climatic damages and abatement costs
  • 5.2. Measurement and valuation
  • 5.3. Institutions and epistemic communities
• 6. Conclusion
• Acknowledgments
• Appendix
• References

1. Introduction

Changing the energy system in order to stabilize the climate is likely to have a wide variety of effects that are not directly related to greenhouse gas emissions, including human health, macro-economic, geo-political, eco-system, agricultural yields, and employment patterns. Those effects that are favorable to human welfare are often termed `co-benefits'. The use of the term benefits reflects the situation that decisions related to whether, how, and how much to address climate change are typically made with some consideration of the costs and benefits associated with various policy options. These decisions however do not usually consider the full range of effects of actions to address climate change. Among the most important of known co-benefit effects are those associated with air quality and the resulting impacts on human health. Changes in the technologies used to produce and consume energy, as well as the level of energy consumption, have two effects related to air quality. First, many of the changes that would reduce greenhouse gas emissions would reduce other emissions as well, such as nitrogen oxides (NO_x), sulfur dioxide (SO₂), particulate matter, and mercury, and the resulting pollution-related disease. Second, many of these changes would obviate the need for expensive pollution-control equipment—such as flue-gas desulfurization, selective catalytic reduction, and electrostatic precipitators—in order to comply with air quality regulations. How important are air quality (AQ) co-benefits? Why are they not considered in assessments of climate policy design? A primary finding is that the focus on cost minimization—rather than comparison of benefits and costs—diminishes the role of benefits in general. As a result, well-established AQ benefits are not a central part of the climate policy discourse and probably rely on better characterization of climatic benefits in order to be fully valued.

We first review estimates of the value of air quality benefits of climate change policies and in section 3, the extent to which these co-benefits are valued in integrated assessment models. We then discuss the policy implications of including AQ co-benefit considerations in climate policy decision making and explore the reasons why economic policy models tend to ignore, even if they acknowledge, the value of co-benefits. We discuss data and modeling needs to resolve the existing impasse.

2. The value of AQ co-benefits is large

A large set of studies now makes clear that the magnitude of AQ co-benefits of climate change mitigation are non-trivial and have been observed across varied geographies, time periods, and sectors. We surveyed 37 peer-reviewed studies of AQ co-benefits (see the appendix). These studies provided 48 estimates of the economic value of air quality benefits of climate change mitigation, and span diverse geographies, time horizons, valuation techniques, and involve different mixes of economic sectors contributing to mitigation. Because the perspective of this study is on policy making amidst competing social priorities, we restricted our survey to those studies that (1) calculated an economic value of co-benefits, and (2) expressed values in terms of $/ton of CO₂ avoided. This restriction means that we do not include the results from a number of the studies we surveyed, and a larger portion of the studies of developing countries.

In figure 1, studies of developed countries are shown on left and those of developing countries on right. Within each category, data are reported from left to right by date of study (1991–2010), consistent with the studies reported in the appendix tables. Absence of values indicates a co-benefit study for which health impacts were assessed, but valuation in $/tCO₂ was not assessed. All values have been converted into constant 2008 dollars. Note that economic valuation was more frequent in developed country studies; 17 out of 24 developed country studies included $/tCO₂ estimates compared to 2 out of 13 developing country studies.

Figure 2 shows the frequency of values cited across all studies. The values for developed countries are in black and those for developing countries in white. For the 22 estimates from the 24 developed country studies the range was $2- 128/tCO₂, the median was $31/tCO₂ and the mean $44/tCO₂. For the 7 estimates from the 13 developing country studies the range was $27- 196/tCO₂, the median was $43/tCO₂ and mean was $81/tCO₂. Values are generally higher in developing countries, although the difference in means is not significant (0.10 < p < 0.05) in part due to variation in sector assessed and the dearth of developing country studies that assign economic value to co-benefits.

Heterogeneity in the distribution of study results is partially attributable to constraints on the scalability of AQ co-benefits at more stringent emissions reduction levels. At higher levels of greenhouse gas (GhG) abatement, abatement costs rise but AQ co-benefits remain constant (Burtraw et al 2003). Moreover, the apparently higher values in developing country studies result from these countries beginning with higher pollution levels, at which incremental health benefits are large. As emissions reductions become more aggressive, AQ co-benefits play a smaller role. Thus, valuation of AQ co-benefits is most important in the early stages of a long-term climate change mitigation strategy, and most important for developing countries lacking significant air quality management programs.

3. AQ co-benefits are not included in climate policy analyses

Even though the AQ co-benefits of climate change actions are well established, policy analyses typically do not account for them. We surveyed 13 major climate policy assessments based on integrated assessment models, selecting based on prominence and their intention to specifically inform policy decisions related to climate change. We drew from those used by the Intergovernmental Panel on Climate Change (IPCC), as well as government sponsored reports to model the impacts of specific policies in the UK and US. With one exception, the models reviewed are integrated assessments in that they combine assessments of both the physical and economic impacts of climate policies. Most of the models listed in table 1 (A, B, D–G, I, K–M) are partial or general equilibrium models, known as top-down models, which assess the direct and indirect economic effects of policies. Two (C, H) are systems engineering models that include technological detail and take a bottom-up approach. Model J is a benefit-cost analysis. In most cases the objective function is based on minimizing the abatement cost of meeting a climate emissions goal; climate damage costs are excluded. Only one (I) maximizes welfare by accounting for the benefits of avoided damages. The following section discusses why this final distinction is especially relevant to the treatment of AQ co-benefits.

Although 12 of the 13 models surveyed estimate emissions of greenhouse gases, only three (G, H, I) estimate the value of the resulting climate change damages. The others simply minimize the costs of achieving a specified set of annual emissions targets. Of the three that do estimate both costs and benefits of climate policy, only two (H, I) estimate air quality benefits—and only one of those (H) includes these values in the final cost estimates. The Stern review (I) does discuss AQ co-benefits and even quantifies them in dollar terms as `up to 1% of GDP' (Stern 2006). But crucially, that study excludes this value in their highly publicized final results of the impacts and costs to address climate change. Only the UK Climate Change Act 2008 Impact Assessment (H in table 1) includes a value for improved air quality (£32b) in their final estimate (DECC 2008).

Beyond these high profile studies, recent work provides examples of more comprehensive inclusion of AQ co-benefits. Ostblom and Samakovlis (2007) include co-benefits in a CGE model for Sweden and find that the costs of climate policy are overstated if they are excluded. Bollen et al (2009) adapt a version of model B above to perform a cost-benefit analysis that includes both climatic and AQ impacts; they find the AQ co-benefits twice as large as climatic benefits. Early results from models such as GAINS combine estimates as well (Amann et al 2009).

An essential problem hindering inclusion of AQ co-benefits in policy decisions is that debates are framed in terms of minimizing the costs of climate policy. Because the benefits of avoided climate change are not explicitly considered, AQ benefits must somehow be compared to abatement costs^Note4. Abatement levels are typically chosen exogenously with very little explicit justification for the specific targets adopted. For example, some targets attempt compliance with the ambiguous objective of avoiding dangerous interference with the climate system, as agreed on in the 1992 UN Framework Convention on Climate Change (Kriegler 2007). If full benefit-cost analyses were performed, the valuation of AQ co-benefits would be much simpler, as the addition of AQ co-benefits would imply a more stringent level of pollution abatement. The left panel of figure 3(a) shows that inclusion of air quality impacts would shift the marginal damages cost curve (MDC) upward so that its intersection with the marginal abatement cost curve (MAC) move to the right and as a result, the optimal level of pollution abatement would increase from q^* to q '. In practice, however, optimizing the level of emissions is not the objective of policy makers and is not the approach taken by analysis to inform them.

With exogenously specified targets, the marginal damages of climate change do not influence choices among policy options. Rather, the goal of policy design is to minimize the cost of meeting previously selected abatement levels. Inclusion of AQ co-benefits is less straightforward in this situation because policy debates are focused on the costs of pollution abatement; benefits are not a central part of the policy discourse. From this perspective, AQ co-benefits have to somehow affect the slope or position of the marginal abatement cost curve, rather than the damage curve. For example, the right panel of figure 3(b) shows that addition of AQ co-benefits could be interpreted as shifting the MAC curve downward. The marginal damage curve has been removed from that panel because it does not affect decisions. This shift requires the awkward re-interpretation of the AC as the sum of climate change abatement costs and AQ co-benefits (MAC_CC + MDC_AQ). The shift reduces the cost of climate policy such that the marginal cost, given the exogenously selected abatement level q^*, falls from p^* to p ' as a result. The cost of the policy has gotten cheaper for the same level of emissions reductions. Most co-benefits studies and their normative policy claims result from conceiving of the abatement cost curve as this hybrid of climate costs and AQ benefits, even if estimation of p ' is rarely explicit. For example, claims of `no regrets' climate policy refer to the existence of abatement opportunities to the left of q ' ' where policy costs are below zero due to positive co-benefits. Rather, we are given p^* and told it is an overestimate—even in studies as thorough and as prominent as the Stern review. Full valuation of AQ co-benefits requires a more explicit discussion of how these cost impacts are calculated.

4. Implications of including AQ co-benefits

More thorough inclusion of AQ co-benefits would have several important effects on climate policy debates—both on optimal design and on positions held by stakeholders. The first implication is that inclusion of AQ co-benefits will reduce the societal cost of climate policy, as in figure 3(b). Alternatively, co-benefits may justify more stringent climate change policy by increasing the avoided societal damages, as in figure 3(a). Second, co-benefits improve the robustness of stringent climate policy. Acknowledging uncertainty in both the damage function and the abatement cost function, inclusion of AQ co-benefits provides a hedge against lower than expected climate damages or higher than expected mitigation costs. AQ co-benefits also occur earlier than climatic ones, making the social benefits calculation less sensitive to the choice of discount rate, thereby diminishing the significance of using low (Stern and Taylor 2007) or high discount rates (Nordhaus 2007). By increasing the robustness of climate policy to uncertain damages, abatement costs, and discount rates, co-benefits support more aggressive near term climate action even in the face of large uncertainty (Manne 1995).

An extension of this set of arguments on lower costs, higher stringency, and robustness is that inclusion of co-benefits provides stronger incentives for cooperation from developing countries than do climatic benefits alone. Due to lower incomes, an earlier stage of development, and negligible historical contribution to the stock of atmospheric greenhouse gases, rapidly growing developing countries are particularly sensitive to abatement costs and have shown little enthusiasm for reducing emissions. However, reducing their emissions from the trajectory of the last decade is essential to addressing the global problem. Game theoretic models show that the nearer term and more localized AQ co-benefits of climate change mitigation might be sufficiently important to developing countries that they would participate in international agreements (Pittel and Rubbelke 2008). Indeed, in figure 2 the value of AQ co-benefits in developing countries appears higher than in developed countries, although not significantly so given the few valuation studies in developing countries.

A second main implication is that including AQ co-benefits has a distributional effect because it changes the beneficiary of climate change actions. In particular, as the geographic benefits of international offset projects in the energy sector become more local, the value of offset projects for developing countries increases because the value of AQ co-benefits are added to the value of financial transfers from developed countries. As a result, entities in developed countries should expect to pay lower prices for offset projects in developing countries, while the value of domestic mitigation in developed countries will also increase. Thus, the cost of carbon mitigation decreases for both domestic and international abatement measures. A comparison of the value of co-benefits in developed countries in section 2 above (median = $31/tCO₂) to the prices paid for offsets at present ( ~ $20/tCO₂) suggests that developed countries may prefer local mitigation, which creates AQ co-benefits, over purchasing international offsets; many international offset projects will be more expensive than domestic projects, even if international offsets would be cheaper with AQ co-benefits valued than without. The valuation of local AQ co-benefits is likely to have a diminishing effect on the flow of offset funds from developed to developing countries. This outcome suggests that the goal of financial transfer from developed to developing countries would be more effectively accomplished through direct support for activities, such as adaptation and poverty alleviation, rather than relying mainly on international offset projects as the transfer mechanism.

A related issue is that the geographic dispersion of the benefits of mitigation will become more closely tied to location of emissions. A fundamental justification behind GHG emissions trading is that the atmosphere is indifferent to the location of emissions since the six greenhouse gases regulated under the Kyoto protocol are long lived and are well mixed throughout each hemisphere (for methane) or the globe (for others, including CO₂). The broadening of scope from climate benefits to air quality benefits raises the importance of the location of emissions. Given the wide dispersion in the costs to reduce GHG emissions, it is possible that trading could concentrate emissions in locations with high abatement costs (Farrell and Lave 2004). While the development of such hotspots does not affect the geographic incidence of climatic damages, it would introduce environmental justice concerns if air pollution health effects become concentrated as a result.

Third, actions that are equivalent in radiative forcing are not equivalent in value. Inclusion of AQ co-benefits increases appeal of transforming energy production and use relative to other means of addressing climate change, which have less pronounced effects on air quality. For example, the appeal of forest preservation will diminish relative to emissions mitigation when AQ co-benefits are included—though of course valuation of other co-benefits such as biodiversity would increase the relative appeal of forests. Similarly, AQ co-benefits reduce the attractiveness of adaptation and climate engineering relative to mitigation. To be sure, adaptation is still necessary, but its role as an appealing alternative to costly mitigation is diminished. Concerns about climate engineering schemes that propose reducing radiative forcing without necessarily changing emissions have been raised due to uncertainties about efficacy and side effects (Bengtsson 2006). Indeed, some solar radiation modification schemes have the potential to reduce air quality (Crutzen 2006, Victor 2008), and even those with no adverse affect must take into account the opportunity cost of missed air quality improvements. The observed under-prioritization of adaptation and climate engineering relative to mitigation (Pielke et al 2007) may be partially attributable to concern over the loss of AQ co-benefits, even if not explicitly expressed.

Finally, it is not obvious that all climate change mitigation actions that provide AQ co-benefits will be pursued. Policy makers may simply choose to address AQ directly since it is almost certainly cheaper to reduce local air pollution directly rather than via climate policy (Johnson 2001). This possibility seems especially pertinent in developing countries where, for the reasons discussed above, climate change mitigation has to date been considered a developed country responsibility. It may also be a concern at higher levels of GhG mitigation where abatement costs become expensive and AQ co-benefits start to look relatively small. It may become reasonable for countries, especially developing ones, to consider avoided climate change damages as a co-benefit of efforts to reduce air quality. If high- CO₂-emitting developing countries were to take such a perspective, it would complicate implementation of an international climate agreement. For example, emissions trading between countries would be difficult if one country were to set a national limit on GHG emissions while the other had a national limit on SO₂, NO_x, or other pollutants. Although it may ultimately prove essential to overcoming international collective action problems, it would require a high degree of flexibility and a tolerance for heterogeneity in national implementation plans that goes well beyond what has been agreed upon so far in the international climate regime.

5. Why are AQ co-benefits acknowledged but ignored?

Given these implications, ignoring co-benefits skews policy decisions and leads to sub-optimal social outcomes. Many studies discuss the benefits of a more comprehensive assessment and policy (IPCC 2007, Haines et al 2007, Bond 2007). If AQ co-benefits are so substantial and their implications so important, why do not they play a larger role in affecting climate policy design? Several characteristics of AQ co-benefits contribute to their under-valuation.

5.1. Uncertainty in climatic damages and abatement costs

Uncertainty about both the costs and benefits of climate change mitigation reduces the role of air quality benefits in policy debates because it complicates comparisons. This is in contrast to prominent arguments that assert that AQ co-benefits make no regrets climate policy possible because the greater certainty of AQ co-benefits reduces the importance of uncertainty over climatic damages. However, the large uncertainty over the benefits of avoided climate change has shaped the policy discourse so that policy design is framed as a problem of cost minimization; benefits are not counted explicitly because estimates are not sufficiently reliable. The resulting marginalization of climatic benefits has had the effect of excluding quantitative representation of benefits in general, including AQ benefits. AQ co-benefits have so far not diminished the importance of climatic uncertainty; rather, deep and persistent climatic uncertainty has led to a policy discourse in which it is extremely difficult for AQ benefits to play a central role.

Cooperation on climate change is difficult in part because the abatement costs in climate policy are so uncertain (Swart et al 2009). Claims are made both that climate policy will cost several per cent of gross world product and that climate policy will actually stimulate economic growth (Tol 2009). Estimates reported by the IPCC alone show a range of carbon prices from $20- 100/tCO₂ for 25% emissions reduction from business as usual by 2030 (Nemet 2010). That almost every climate policy proposal involves a quantity-based target rather than price-based target sustains cost uncertainty. In practice, assumptions about base case emissions growth, the supply of loss-cost energy efficiency investments, the cost of renewables, the diffusion of nuclear, and the availability of carbon capture and sequestration technology, as well as other items, leads to large dispersion in abatement costs. In contrast, the technologies involved in air quality improvement are less dynamic, have a longer history, involve a much more limited set of options, and do not require changes to existing infrastructures.

While the overwhelming portion of the discussion on climate policy is focused on abatement costs, the more important source of uncertainty for AQ co-benefits arises from in climate damages. More specifically, estimates of the climate-related damages avoided as a result of climate policy are the central concern for policy makers. Estimation of avoided damages involves `deep uncertainty' because reliable probability distributions of possible outcomes are not available (Lempert 2002, Keller et al 2008, Gosling et al 2009). One recent survey of published estimates found a range of climate damages from $0-33 000/tCO₂, depending on assumptions related to risk aversion, equity, and time preferences (Anthoff et al 2009). Of particular concerns is the potential for positive feedbacks, irreversibility and rapid change to the climate system (Torn and Harte 2006). In contrast, estimation of AQ damages is less problematic, in part because the effects of air pollution on human health are nearer term, less geographically dispersed, and are well studied.

Even though damages are the ultimate motivation for climate policy, as shown above, they are not typically included in assessments of climate policy. One interpretation is that we simply distrust the reliability of climate impact studies. An alternative hypothesis is that since the uncertainties are so large and values hinge on choice about small changes in discount rates, that discussion quickly becomes philosophical, and not amenable to policy discourse. Another reason that damage values are infrequently discussed is that willingness to pay to avoid them appears quite low; a contingent valuation study of willingness of US residents to pay for the Kyoto Protocol estimated that households valued the benefits at just under $191 per household per year (Berrens et al 2004), which implies political support for a carbon price in the mid-single digits of $/tCO₂. More broadly, contingent valuation studies suffer from ignorance about what type of climate people actually want (Dietz and Maddison 2009). Finally, the characteristics of the risks being compared are different (Slovic 1987); the lethal aspects of the health impacts of air pollution may provide a catalyst for regulatory action that, at least at present, is missing in climate change.

5.2. Measurement and valuation

Another reason that AQ co-benefits are typically excluded is that valuation results are sensitive to choices about methodology and parameter values (Bell et al 2008). Even if the benefits are widely found to be substantial, standard metrics for economic valuation of health impacts do not exist, which is a particular problem in valuing loss of life and assessing heterogeneous sub-populations. Development of `Health Impact Assessment' provides one avenue to remedy this problem (Patz et al 2008). Valuation of health and life is made worse by disagreement over the appropriate discount rate to use (Stern and Taylor 2007, Nordhaus 2007, Anthoff et al 2009). The smaller temporal and geographical scales of AQ impacts relative to climatic impacts make comparison difficult as well. The more diverse set of pollutants that need to be taken into account to optimize the pursuit of AQ and climate benefits, combined with the nearer term impact of AQ impacts, heightens the sensitivity of valuation results to choices of global warming potentials to compare gases (West et al 2007, Smith and Haigler 2008). Finally, some have suggested that the transactions and information costs associated with AQ co-benefits are so high that they would offset incremental benefits (Elbakidze and McCarl 2007); however, the values found in section 2 imply that those costs would have to be extremely high. The paucity of studies that value co-benefits in developing countries—for example in figure 1—suggests that the challenges of valuation are even more problematic in those contexts.

5.3. Institutions and epistemic communities

Institutional barriers, in both the scientific and political domains, also discourage inclusion of co-benefits. Scientifically, the networks of institutions and individuals contributing knowledge on air quality have little overlap with those on climate change (Swart 2004). The lack of shared assumptions, methods, and data makes integration of scientific results difficult (Norgaard 2004). The international policy regime reflects a similar separation; the UN Framework Convention on Climate Change and the Convention on Long-Range Transboundary Air Pollution remain separate despite calls for better integration (Holloway et al 2003). The adverse consequences of this division of international governance are likely to heighten if countries adopt divergent priorities on climate change and air quality. For example, large developing countries might value avoided climatic damage as a co-benefit of their pursuit of air quality improvement while developed countries might focus on climate impacts directly, with AQ as an ancillary benefit. In effect, climate change may become an `impure' public good, with private gains from mitigation alleviating free-rider issues (Finus and Ruebbelke 2008). While heterogeneous pursuit of common outcomes might provide a promising context with which to resolve collective action problems, the separation of governance regimes is likely to impede progress. Finally, the implications described above may realign interest group coalitions that are affecting the political process in favor of action on mitigation. The relative decline in the attractiveness of afforestation, adaptation, and climate engineering once AQ co-benefits are taken into account, may threaten the cohesion of coalitions of support of climate policy at the national and international levels. Adding complexity to an already complex regime may reduce salience and consequent political feasibility as well (Young 1989, Rypdal et al 2005). This challenge need not be paralyzing; a US Senate committee passed a `four pollutant bill' for CO₂, SO₂, NO_x, and Hg in 2002 (S.556) and Senators were discussing introducing a similar bill in late-2009.

6. Conclusion

The full inclusion of AQ co-benefits in the design and evaluation of climate policy would almost certainly enhance social outcomes because these co-benefits are large and because policy analysis has not valued them. Moreover, that AQ co-benefits are more local, nearer term, and health related has the potential to enhance incentives for cooperation by engaging actors that are averse to the costs of climate policy or unmotivated by avoided climatic damages. Still, a variety of barriers exist to their inclusion. The framing of the climate policy discourse is likely to continue as one of cost minimization until the benefits of avoided climate change can be more reliably estimated. As a result, a risk remains that AQ co-benefits will be treated as serendipitous and tangential, rather than as driving forces for strong climate policy. Full consideration of AQ co-benefits in policy debates will require improved evaluation techniques for both the climatic benefits and the air quality benefits of climate policy. Improving valuation of AQ co-benefits alone is unlikely to promote more stringent climate policy, even if it helps justify more stringent air quality regulation. In a more general sense, the effort to fully consider the value of co-benefits with vastly different risk characterizations, as well as time and spatial scales, foreshadows challenges in considering other co-benefits of actions to reduce climatic damages. Additional benefits may include effects on crop yields, acid deposition, macro-economic shocks, and geo-political conflict.

Acknowledgments

We thank the Wisconsin Focus on Energy program for financial support and Martin Broyles for research assistance.

Appendix 

References

Alfsen K H, Brendemoen A and Glomsrod S 1992 Benefits of climate policies: some tentative calculations Discussion Paper 69 Central Bureau of Statistics, Oslo 

Amann M et al 2009 Potentials and Costs for Greenhouse Gas Mitigation in Annex 1 Countries: Initial Results (Laxenburg: International Institute for Applied Systems Analysis) 

Anthoff D, Tol R S J and Yohe G W 2009 Risk aversion, time preference, and the social cost of carbon Environ. Res. Lett. 4 024002 
IOPscience

Aunan K, Fang J H, Vennemo H, Oye K and Seip H M 2004 Co-benefits of climate policy—lessons learned from a study in Shanxi, China Energy Policy 32 567–81 
CrossRef

Ayres R U and Walter J 1991 The greenhouse effect: damages, costs and abatement Environ. Res. Econ. 1 237–70 
CrossRef

Barker T 1993 Secondary Benefits of Greenhouse Gas Abatement: The Effects of a UK Carbon/Energy Tax on Air Pollution (Cambridge: Department of Applied Economics, University of Cambridge) 

Bell M, Davis D, Cifuentes L, Krupnick A, Morgenstern R and Thurston G 2008 Ancillary human health benefits of improved air quality resulting from climate change mitigation Environ. Health 7 41 
CrossRefPubMed

Bengtsson L 2006 Geo-engineering to confine climate change: is it at all feasible? Clim. Change 77 229–34 
CrossRef

Berrens R P, Bohara A K, Jenkins-Smith H C, Silva C L and Weimer D L 2004 Information and effort in contingent valuation surveys: application to global climate change using national internet samples J. Environ. Econ. Manage. 47 331–63 
CrossRef

Bollen J, van der Zwaan B, Brink C and Eerens H 2009 Local air pollution and global climate change: a combined cost-benefit analysis Res. Energy Econ. 31 161–81 
CrossRef

Bond T C 2007 Can warming particles enter global climate discussions? Environ. Res. Lett. 2 045030 
IOPscience

Boyd R, Krutilla K and Viscusi W K 1995 Energy taxation as a policy instrument to reduce CO₂ emissions—a net benefit analysis J. Environ. Econ. Manag. 29 1–24 
CrossRef

Burtraw D, Krupnick A, Palmer K, Paul A, Toman M and Bloyd C 2003 Ancillary benefits of reduced air pollution in the US from moderate greenhouse gas mitigation policies in the electricity sector J. Environ. Econ. Manag. 45 650–73 
CrossRef

Bussolo M and O'Connor D 2001 Clearing the Air in India: The Economics of Climate Policy With Ancillary Benefits (Paris: OECD) 
CrossRef

Bye B, Kverndokk S and Rosendahl K E 2002 Mitigation costs, distributional effects, and ancillary benefits of carbon policies in the Nordic countries, the UK, and Ireland Mitig. Adapt. Strateg. Glob. Change 7 339–66 
CrossRef

Caton R and Constable S 2000 Clearing the Air: A Preliminary Analysis of Air Quality Co-Benefits from Reduced Greenhouse Gas Emissions in Canada The David Suzuki Foundation) 

CBO 2009 Congressional Budget Office Cost Estimate of H.R. 2454, American Clean Energy and Security Act of 2009 (Washington DC: Congressional Budget Office) 

Cifuentes L, Borja-Aburto V H, Gouveia N, Thurston G and Davis D L 2001 Assessing the health benefits of urban air pollution reductions associated with climate change mitigation (2000–2020): Santiago, Sao Paulo, Mexico City, and New York City Environ. Health Perspect. 109 419–25 
CrossRefPubMed

Crutzen P 2006 Albedo enhancement by stratospheric sulfur injections: a contribution to resolve a policy dilemma? Clim. Change 77 211–20 
CrossRef

DECC 2008 Climate Change Act 2008 Impact Assessment (London: UK Department of Energy and Climate Change) 

Dessus S and O'Connor D 2003 Climate policy without tears: CGE-based ancillary benefits estimates for Chile Environ. Res. Econ. 25 287–317 
CrossRef

Dietz S and Maddison D 2009 New frontiers in the economics of climate change Environ. Res. Econ. 43 295–306 
CrossRef

Dowlatabadi H, Tschang F and Siegel S 1993 Estimating the Ancillary Benefits of Selected Carbon Dioxide Mitigation Strategies: Electicity Sector Climate Change Division, US Environmental Protection Agency) 

EIA 2008 Energy Market and Economic Impacts of S.1766, the Low Carbon Economy Act of 2007 (Washington DC: Energy Information Administration) 

Ekins P 1996 The secondary benefits of CO₂ abatement: how much emission reduction do they justify? Ecol. Econ. 16 13–24 
CrossRef

Elbakidze L and McCarl B A 2007 Sequestration offsets versus direct emission reductions: consideration of environmental co-effects Ecol. Econ. 60 564–71 
CrossRef

EPA 1997 Regulatory Impact Analysis for the Particulate Matter and Ozone National Ambient Air Quality Standards and Proposed Regional Haze Rule (Washington, DC: US Environmental Protection Agency Office of Air Quality and Planning) 

EPA 2008 EPA's Economic Analysis of the Low Carbon Economy Act of 2007 (S.1766) (Washington, DC: Environmental Protection Agency) 

Farrell A E and Lave L B 2004 Emission trading and public health Ann. Rev. Public Health 25 119 
CrossRef

Finus M and Ruebbelke D T G 2008 Coalition Formation and the Ancillary Benefits of Climate Policy (Milan: Fondazione Eni Enrico Mattei) 

Gosling S, Lowe J, McGregor G, Pelling M and Malamud B 2009 Associations between elevated atmospheric temperature and human mortality: a critical review of the literature Clim. Change 92 299–341 
CrossRef

Goulder L 1993 Economy-Wide Emissions Impacts of Alternative Energy Tax Proposals Climate Change Division, US Environmental Protection Agency) 

Haines A, Smith K R, Anderson D, Epstein P R, McMichael A J, Roberts I, Wilkinson P, Woodcock J and Woods J 2007 Energy and health 6—policies for accelerating access to clean energy, improving health, advancing development, and mitigating climate change Lancet 370 1264–81 
CrossRefPubMed

Han H 2001 Analysis of the Environmental Benefits of Reductions in Greenhouse Gas Emissions (Seoul: Korean Environmental Institute) 

Holloway T, Fiore A and Hastings M G 2003 Intercontinental transport of air pollution: will emerging science lead to a new hemispheric treaty? Environ. Sci. Technol. 37 4535–42 
CrossRefPubMed

Holmes R, Keinath D and Sussman F 1993 Ancillary Benefits of Mitigating Climate Change: Selected Actions from the Climate Change Action Plan Climate Change Division, US Environmental Protection Agency) 

IPCC 2007 Climate change 2007: Mitigation. Contribution of Working group III to the 4th Assessment Report of the Intergovernmental Panel on Climate Change (Cambridge: Cambridge University Press) 

Jaffe A B, Newell R G and Stavins R N 2005 A tale of two market failures: technology and environmental policy Ecol. Econ. 54 164–74 
CrossRef

Joh S, Nam Y-M, Shim S, Sung J and Shin Y 2003 Empirical study of environmental ancillary benefits due to greenhouse gas mitigation in Korea Int. J. Sustain. Dev. 6 311–27 
CrossRef

Johnson M 2001 `Hidden Health Benefits of Greenhouse Gas Mitigation' offers nothing to policy-makers (eLetter response) Science www.sciencemag.org/cgi/eletters/293/5533/1257 

Kan H D, Chen B H, Chen C H, Fu Q Y and Chen M 2004 An evaluation of public health impact of ambient air pollution under various energy scenarios in Shanghai, China Atmos. Environ. 38 95–102 
CrossRef

Keller K, Yohe G and Schlesinger M 2008 Managing the risks of climate thresholds: uncertainties and information needs Clim. Change 91 5–10 
CrossRef

Kriegler E 2007 On the verge of dangerous anthropogenic interference with the climate system? Environ. Res. Lett. 2 5 

Lempert R J 2002 A new decision sciences for complex systems Proc. Natl Acad. Sci. USA 99 7309–13 
CrossRefPubMed

Li J C 2006 A multi-period analysis of a carbon tax including local health feedback: an application to Thailand Environ. Dev. Econ. 11 317–42 
CrossRef

Manne A S 1995 The rate of time preference—implications for the greenhouse debate Energy Policy 23 391–4 
CrossRef

Mccubbin D 1999 Co-Control Benefits of Greenhouse Gas Control Policies US Environmental Protection Agency, Office of Policy) 

McKinley G et al 2005 Quantification of local and global benefits from air pollution control in Mexico City Environ. Sci. Technol. 39 1954–61 
CrossRefPubMed

Morgenstern R, Krupnick A and Zhang X 2004 The ancillary carbon benefits of SO₂ reductions from a small-boiler policy in Taiyuan, PRC J. Environ. Dev. 13 140–55 
CrossRef

Nemet G 2010 Cost containment in climate policy and incentives for technology development Clim. Change in press (doi:10.1007/s10584-009-9779-8) 

Nordhaus W 2007 Critical assumptions in the Stern review on climate change Science 317 201–2 
CrossRefPubMed

Nordhaus W 2008 A Question of Balance: Weighing the Options on Global Warming Policies (New Haven, CT: Yale University Press) 

Norgaard R B 2004 Learning and knowing collectively Ecol. Econ. 49 231–41 
CrossRef

O'Connor D, Zhai F, Aunan K, Berntsen T and Vennemo H 2003 Agricultural and Human Health Impacts of Climate Policy in China: A General Equilibrium Analysis with Special Reference to Guangdong (Paris: OECD, Development Centre) 
CrossRef

Ostblom G and Samakovlis E 2007 Linking health and productivity impacts to climate policy costs: a general equilibrium analysis Clim. Policy 7 379–91 
CrossRef

Palmer K and Burtraw D 1997 Electricity restructuring and regional air pollution Res. Energy Econ. 19 139–74 
CrossRef

Patz J, Campbell-Lendrum D, Gibbs H and Woodruff R 2008 Health impact assessment of global climate change: expanding on comparative risk assessment approaches for policy making Ann. Rev. Public Health 29 27 
CrossRef

Pearce D W 1992 The Secondary Benefits of Greenhouse Gas Control (Norwich: The Centre for Social and Economic Research on the Global Environment (CSERGE)) 

Pielke R, Prins G, Rayner S and Sarewitz D 2007 Lifting the taboo on adaptation Nature 445 597–8 
CrossRefPubMed

Pittel K and Rubbelke D T G 2008 Climate policy and ancillary benefits: a survey and integration into the modelling of international negotiations on climate change Ecol. Econ. 68 210–20 
CrossRef

Proost S and Regemorter D V 2003 Interaction between local air pollution and global warming and its policy implications for Belgium Int. J. Glob. Environ. Issues 3 266–86 

Rowe R 1995 The New York State Externalities Cost Study (Dobbs Ferry, NY: Hagler Bailly Consulting) 

Rypdal K, Berntsen T, Fuglestvedt J S, Aunan K, Torvanger A, Stordal F, Pacyna J M and Nygaard L P 2005 Tropospheric ozone and aerosols in climate agreements: scientific and political challenges Environ. Sci. Policy 8 29–43 
CrossRef

Slovic P 1987 Perception of risk Science 236 280–5 
CrossRefPubMed

Smith K R and Haigler E 2008 Co-benefits of climate mitigation and health protection in energy systems: scoping methods Ann. Rev. Public Health 29 11 
CrossRef

Stern N 2006 Stern Review on the Economics of Climate Change (Cambridge: Cambridge University Press) 

Stern N and Taylor C 2007 Climate change: risk, ethics, and the Stern review Science 317 203–4 
CrossRefPubMed

Swart R 2004 A good climate for clean air: linkages between climate change and air pollution—an editorial essay Clim. Change 66 263–9 
CrossRef

Swart R, Bernstein L, Ha-Duong M and Petersen A 2009 Agreeing to disagree: uncertainty management in assessing climate change, impacts and responses by the IPCC Clim. Change 92 1–29 
CrossRef

Syri S, Amann M, Capros P, Mantzos L, Cofala J and Klimont Z 2001 Low-CO₂ energy pathways and regional air pollution in Europe Energy Policy 29 871–84 
CrossRef

Syri S, Karvosenoja N, Lehtila A, Laurila T, Lindfors V and Tuovinen J P 2002 Modeling the impacts of the Finnish climate strategy on air pollution Atmos. Environ. 36 3059–69 
CrossRef

Tol R S J 2009 The economic effects of climate change J. Econ. Perspect. 23 29–51 
CrossRef

Tollefsen P, Rypdal K, Torvanger A and Rive N 2009 Air pollution policies in Europe: efficiency gains from integrating climate effects with damage costs to health and crops Environ. Sci. Policy 12 870–81 
CrossRef

Torn M S and Harte J 2006 Missing feedbacks, asymmetric uncertainties, and the underestimation of future warming Geophys. Res. Lett. 33 L10703 
CrossRef

van Vuuren D P, Cofala J, Eerens H E, Oostenrijk R, Heyes C, Klimont Z, den Elzen M G J and Amann M 2006 Exploring the ancillary benefits of the Kyoto Protocol for air pollution in Europe Energy Policy 34 444–60 
CrossRef

Vennemo H, Aunan K, Fang J H, Holtedahl P, Tao H and Seip H M 2006 Domestic environmental benefits of China's energy-related CDM potential Clim. Change 75 215–39 
CrossRef

Victor D G 2008 On the regulation of geoengineering Oxford Rev. Econ. Policy 24 322–36 
CrossRef

Viscusi W K, Magat W A, Carlin A and Dreyfus M K 1994 Environmentally responsible energy pricing Energy J. 15 23–42 

Wang X D and Smith K R 1999 Secondary benefits of greenhouse gs control: health impacts in China Environ. Sci. Technol. 33 3056–61 
CrossRef

West J J, Fiore A M, Naik V, Horowitz L W, Schwarzkopf M D and Mauzerall D L 2007 Ozone air quality and radiative forcing consequences of changes in ozone precursor emissions Geophys. Res. Lett. 34 L06806 
CrossRef

West J J, Osnaya P, Laguna I, Martinez J and Fernandez A 2004 Co-control of urban air pollutants and greenhouse gases in Mexico City Environ. Sci. Technol. 38 3474–81 
CrossRefPubMed

Young O R 1989 The politics of international regime formation—managing natural-resources and the environment Int. Org. 43 349–75 
CrossRef

Zhang D, Aunan K, Martin Seip H, Larssen S, Liu J and Zhang D 2010 The assessment of health damage caused by air pollution and its implication for policy making in Taiyuan, Shanxi, China Energy Policy 38 491–502 
CrossRef

Notes

Note4  While it is optimal to use one policy instrument for each source of market failure, in reality the climate policies in discussion today include dozens of policy instruments within each piece of legislation. In part this is due to the presence of multiple market failures (Jaffe et al 2005).