MIT study shows why carbon cuts make sound economic sense

Savings on healthcare spending may at times be 10 times more than cost of implementing policies to reduce emissions

By Rajit Sengupta
Published: Tuesday 26 August 2014

Illustration: Christine Daniloff

It is widely known that low carbon emissions are a healthy option. Now a study claims carbon cuts are also more economical. The study by Massachusetts Institute of Technology (MIT) found that the savings on healthcare spending and other costs related to illness can be big—in some cases, more than 10 times the cost of policy implementation to reduce carbon emissions.

“Carbon-reduction policies significantly improve air quality,” says Noelle Selin, an assistant professor of engineering systems and atmospheric chemistry at MIT and co-author of a study published in Nature Climate Change. “In fact, policies aimed at cutting carbon emissions improve air quality by a similar amount as policies specifically targeting air pollution.”

The MIT researchers compared the health benefits to the economic costs of three climate policies: a clean-energy standard, a transportation policy, and a cap-and-trade program. The three were designed to resemble proposed US climate policies, which industry and business groups claim will lead to job losses, economic damage and inequality among states.

But the MIT study found that a clean energy standard would lead to health savings of $247 billion compared to a $208 billion cost. The savings from a cap-and-trade programme would be higher, more than 10 times the $14 billion cost, they said. Savings came in the form of avoided hospital admissions and saved sick days linked to reductions in ozone and particulate matter. The savings remained relatively constant among the policies.

The researchers found that savings from avoided health problems could recoup 26 per cent of the cost to implement a transportation policy, but up to 10.5 times the cost of implementing a cap-and-trade programme. The difference depended largely on the costs of the policies, as the savings — in the form of avoided medical care and saved sick days — remained roughly constant.
“If cost-benefit analyses of climate policies don’t include the significant health benefits from healthier air, they dramatically underestimate the benefits of these policies,” says lead author Tammy Thompson, now at Colorado State University, who conducted the post doctoral research in Selin’s group.

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