Estimating the benefits of pollution reduction on agricultural yields: Taiwan's air pollution emission fees program

Abstract

Taiwan's implementation of the 1997 Air Pollution Emissions Fees Program will conceivably lead to long-term reductions in pollution emissions. The purpose of this paper is to estimate the benefits to Taiwan from the expected reduction in crop losses as a direct result of such a decrease in air pollution. We employ a demand–supply framework for rice production to estimate the change in social welfare resulting from changes in the concentration of certain pollutants in the atmosphere. Our empirical results show that, in the year 1997, social welfare increments resulting from the decline in sulfur dioxide concentrations in the atmosphere ranged between US$ 946,200 and US$ 2,435,800. Meanwhile, during the same period, the increase in social welfare due to the decline in the ozone concentration in the atmosphere ranged between US$ 838,100 and US$ 1,927,000. The average benefit from the reduction in both sulfur dioxide and ozone concentrations is calculated to be between US$ 2.67 and US$ 6.86 per acre (for sulfur dioxide), and from US$ 2.36 to US$ 5.43 per acre (for ozone).