Environmental Economics
Acid rain

Acid rain is caused by sulphur dioxide, largely from power stations, and nitrogen oxides, half of which comes from vehicles. In Discussion Paper No. 442, Research Fellow David Newbery seeks to quantify the costs and benefits of abatement in Europe, and he concludes that the current agreement on uniform reductions from 1980 levels is inefficient and costly. The evidence suggests that the pollution caused by emissions of sulphur dioxide from power stations is costly and should be reduced and that the damage done by different polluters and the cost of its abatement vary significantly with their location.

Newbery proposes that a better solution would be for polluters to be paid by their `victims' to reduce their pollution by differing amounts from agreed bench-mark levels, although the development of a `permits market' may give rise to problems within the privatized but duopolized electricity generating industry in the UK. The emphasis on reducing emissions of nitrogen oxide from vehicles seems misplaced and costly. For both pollutants the present state of knowledge about the costs of the damage done is poor and is a major impediment to rational policy-making. These findings are reported in greater detail in the report of the lunchtime meeting addressed by Professor Newbery, in this issue of the Bulletin.

Acid Rain
David M Newbery

Discussion Paper No. 442 (AM)