Ecological Economics 35 2000 191 – 202
METHODS
Measuring environmental quality: an index of pollution
Neha Khanna
Department of Economics and En6ironmental Studies Program, Binghamton Uni6ersity, Library Tower
1004
, P.O. Box
6000
, Binghamton, NY
13902
-
6000
, USA Received 14 January 2000; received in revised form 1 May 2000; accepted 9 May 2000
Abstract
This paper develops an index of pollution based on the epidemiological dose-response function associated with each pollutant, and the welfare losses due to exposure to pollution. The probability of damage is translated into welfare
losses, which provides the common metric required for aggregation. Isopollution surfaces may then be used to compare environmental quality over time and space. An Air Pollution Index API is computed using 1997 data for
the criteria pollutants under the Clean Air Act CAA. The results are compared with the EPA’s Pollutant Standards Index PSI. Two significant differences emerge: unlike the PSI, the API facilitates a detailed ranking of regions by
air quality and API values may contradict PSI results. Some regions with PSI values of 100 – 200 are considered less polluted under the proposed methodology than those with PSI values between 50 and 100. The key reason for the
difference is that PSI values are determined entirely by the gas with the highest relative concentration whereas the API value is based on the ambient concentrations of all pollutants. © 2000 Elsevier Science B.V. All rights reserved.
Keywords
:
Dose-response functions; Epidemiology; Welfare; Isopollution lines; Pollutant Standards Index; Environmental quality; Air pollution
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1. Introduction
In the past decade or so, there has been a fundamental shift in the approach to pollution
control. More and more, there seems to be an emphasis on the use of voluntary pollution reduc-
tion programs rather than the traditional com- mand and control approach, or even the use of
market-based instruments such as taxes and trad- able permits. While there is some debate about
whether the voluntary approach complements or substitutes the more traditional approaches, it is
clear that the availability of reliable environmen- tal information is crucial Tietenberg, 1998;
Kennedy et al., 1994.
The correct measure of pollution has important and direct policy ramifications. Whether a region
is polluted or not, or how high the pollution level is, determines the political and the economic re-
Tel.: + 1-607-7772689; fax: + 1-607-7772681. E-mail address
:
nkhannabinghamton.edu N. Khanna. 0921-800900 - see front matter © 2000 Elsevier Science B.V. All rights reserved.
PII: S 0 9 2 1 - 8 0 0 9 0 0 0 0 1 9 7 - X
sources devoted to pollution alleviation and the efficacy of environmental regulations. Further-
more, voluntary pollution reduction programs take the availability of such information as their
starting point. Yet measuring environmental qual- ity remains a difficult task as it lies at the interface
of epidemiology, public health, and economics. Providing emissions or concentration information
alone is insufficient. Not only is it meaningless to the non-expert, it does not facilitate an easy com-
parison of different pollutants which might have very
different impacts
on populations
and materials.
A seminal study on the economic consequences of controlling environmental quality was the
EPA’s Costs and Benefits of Reducing Lead in Gasoline EPA, 1984. This study clearly demon-
strated the link between the lead content in gaso- line, blood lead, and several pathophysiological
effects including anemia, mental retardation, severe kidney disease, and even death at very high
exposure. In doing so, the study established the concept of a society-wide dose response function.
EPA 1997 further built upon this study by deter- mining the aggregate dose-response functions for
all six criteria pollutants under the Clean Air Act CAA.
However, economic and policy analysis is con- cerned with the impacts of actions or states on
human welfare. Thus, when measuring environ- mental quality, the physical impacts of pollution
must be translated into their welfare impacts. Some recent literature on the economic impacts of
environmental change attempts to make this link. For instance, the integrated assessment and other
economic models of climate change link increases in temperature to welfare through the loss in
economic output for example, Mendelsohn and Nordhaus, 1994; Nordhaus, 1994. However,
these studies are purely economic in their ap- proach. The relation between environmental
change and the loss in economic output is empiri- cal, without incorporating the underlying epi-
demiological or physical basis. While EPA 1997 estimates both the dose-response functions and
the welfare benefits of reduced exposure to the CAA gases, it stops short of providing a rule for
measuring overall air quality. Two recent indices deserve special mention in
this context. These are the Virginia Environmen- tal Quality Index VCUCES, 1999 and the Envi-
ronmental Sustainability Index YCELP, 2000. Both indices propose a very broad based index of
environmental quality which is defined as the weighted sum of a set of sub-indices. In the case
of the VEQI, the sub-indices are formulated as the weighted sum of ambient concentrations of vari-
ous pollutants, where the weights are determined empirically through a survey of environmental
experts using the Delphi technique. The ESI is defined as the average value of 21 environmental
factor scores. The scores are, in turn, the average of a scaled value for several environmental fac-
tors. The great advantage of both indices is their ability to easily encompass a wide range of envi-
ronmental factors and pollutants. However, both indices suffer from the same drawback: in neither
case is the link between the pollutants, their phys- ical impacts, and the final index value clearly
established.
This paper defines and empirically illustrates an index of pollution that has its foundations in
epidemiology as well as in micro-economics. It builds upon EPA 1997 and the Pollutant Stan-
dards Index PSI, the index used by the EPA to track air quality, and hence the effectiveness of
the CAA. The PSI provides a good starting point as it attempts to aggregate pollutants in terms of
their physical impacts on human health. However, as the paper will show, there remains room for
substantial improvement. In some cases, the pro- posed index yields results in contradiction to the
PSI. In this sense, the PSI might not be a reliable measure of air quality in the US.
For ease of presentation, this paper distin- guishes between environmental indicators and en-
vironmental attributes. Environmental indicators are the individual sources of pollution – ambient
concentrations of SO
2
, fecal coliform, biological oxygen demand, and so on. Environmental at-
tributes refer to a class of indicators that define some intermediate measure of environmental
quality, such as air or water quality. Without loss of generality, the focus of the paper remains the
human health benefits of reduced air and other pollution. This is easily extended to other impacts
Table 1 PSI values and health descriptors
Pollutant concentrations Index value
Health effects descriptor
d
Air quality level
NO
2
1 h O
3
1 h PM
10
24 h SO
2
24 h CO 8 h
ppm ppm
mgm
3
mgm
3
ppm 2.0
Hazardous 500
Significant 0.6
50 600
2620 harm
1.6 400
Emergency 500
2100 40
0.5 1.2
300 Warning
420 1600
30 0.4
Very unhealthy 0.6
200 Unhealthy
Alert 0.2
350 800
15 0.12
a
Moderate 100
NAAQS
b
150 365
9 Good
a
50 50 of
4.5 0.06
50
c
80
c
NAAQS
b a
a
No index values reported at concentrations below ‘Alert’ levels. The applicable short term NAAQS for NO
2
is 0.053 ppm EPA 1998, table 2.1, p. 7.
b
National Ambient Air Quality Standards.
c
Annual primary NAAQS.
d
Refers to human health only. For more details, see EPA 1994. Source: EPA 1998, p. 62.
of pollution on all populations and materials. The limited current focus helps keep the empirical
analysis tractable. The paper is organized as follows. Following
Section 1, Section 2 critically reviews the method- ology underlying the PSI. Section 3 presents an
improved index of environmental pollution. Sec- tion 4 illustrates the index with data on air quality
indicators for 135 counties and Metropolitan Statistical Areas in the United States and com-
pares the results with the PSI. Section 5 concludes with suggestions for further research.
2. The PSI
