The one-handed economist

Patrick writes*

German society and its political narrative have changed with humans relation to the environment. Politicians are using the “green” narrative to gain votes. Good can – and has – come of this; due to increasing social pressure, since the late 90’s early 2000’s there has been a huge rise in renewable energy generation in Germany, increasing from around 3-5% of total energy production in 1998 to about 38% in 2018. It is the one of the countries at the forefront of energy sustainability. On the other hand, however, the political aspect of this genuine societal movement towards more sustainable living can warp the materialization of solutions to our pollution in such a way that they may end up doing more harm than good.

Nuclear energy in Germany is a good example of this. Following the 2011 earthquake and tsunami that caused the reactor breakdown in Fukushima, there was heightened fear around nuclear energy globally. Just two weeks later, Germany’s green political party, ‘Die Grünen’, had a sudden spike in their amount of supporters. For the first time, the party had won seats in the state parliament. With this political success in 2011, they accelerated the process of decommissioning Germany’s running nuclear reactors. They started this process themselves in the late 90’s, when the Nuclear Exit Law passed, at a time when the fear of nuclear extinction was still very much felt and reducing the perceived nuclear risk was central to their agenda. They still keep a similar agenda, and continue their fight against nuclear power even though there are much bigger environmental threats looming. Therefore, along with Merkel’s announcement of the ‘Energiewende’ (Energy transition plan) in 2011 hailing in a new era for renewables, also came the news that all 17 nuclear reactors in Germany will be closed by 2022. As people that care about climate change we might ask ourselves; is all this environmentalism really beneficial?

Even though the renewable share of energy production is rising year over year, a simultaneous switch from nuclear energy over to fossil fuels is happening. Due to the inherent variability and unpredictability of renewable energy sources (intermittency), a grid powered solely by renewables cannot follow the daily ups and downs of energy demand within the day, and a certain share of the electricity still needs to come from sources that have the capacity to dispatch electricity on demand. In order to meet the market hourly demand they would usually get this electricity from a mix of sources; nuclear, fossil fuel and natural gas. Out of all energy sources, renewables have the lowest emissions per unit of energy produced (9-46 g CO2e/kWhe), followed by nuclear (16-66 g CO2e/kWhe) and finally by fossil fuels (443 -1050 g CO2e/kWhe). In all it’s haste to pass a deal that would please their voters, the government overlooked how they would power the country in the absence of nuclear power.

Germany has now increased the share of energy it generates from coal to around 40% of the total energy output (2016 numbers). Even though they have 38% of their energy coming from renewables, they had to nearly double their reliance on locally sourced lignite (brown coal), the fuel source with the highest emission per unit of energy, so much that throughout 2013 to 2015 emission levels rose by 1.8 % while the EU’s lowered by 1.3%. This trend will continue as more and more of the nuclear generators are decommissioned until 2022, since there are no other alternatives other than coal to replace nuclear in Germany. This whole plan of going green by reducing nuclear power seems to be backfiring in a spectacular way.

So why in hell are they doing it? To please their voter base. The Green party’s ideological attack on ‘toxic’ nuclear power has undermined its potential contribution to a low-emission energy transition. 

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* Please help my Environmental Economics students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice :).

Sean writes*

 A big part of the allure of electric cars is the idea that the consumer is doing something good for the environment by opting to drive electric rather than a traditional fossil-fuel powered car. In the context of Tesla, the world’s most famous electric car the decision to go electric while remaining fashionable is enough for many to pat themselves on the back and not delve into the specifics of their new toy. I’m here to tell you that the purchase of your shiny new electric car might not be all it’s cracked up to be, if you’re an environmental warrior chances are you know this, the problem is the general population does not.

For an electric car the negative impact on the environment starts with the production of its lithium ion battery. If you’re buying a Tesla in the US chances are your battery will be produced at what’s known as the Gigafactory. According to the linked website “Tesla’s mission is to accelerate the world’s transition to sustainable energy through increasingly affordable electric vehicles”. A Tesla’s battery chemistry is a mix of nickel, cobalt, and aluminium. This combination is touted for its energy density, however the mere quest to attain the elements required to make the battery i.e. cobalt mining in the DRC leads to negative environmental consequences.

By 2021 more than 10 million battery packs for cars will be able to be made due to increased production capacity. The bulk of production coming from countries who still heavily rely on the burning of coal for electricity: China, Thailand, Germany, and Poland. Some of Tesla’s batteries are produced in the aforementioned countries using dirty power and as a result carries greater negative externalities. Knowing where the electricity that fuels production comes from is crucial because it’s what much of the carbon footprint from the car comes down to. If you plan on being an environmentally conscious consumer of any electric vehicle make sure to do a bit of research as to where your model’s battery was made, even amongst one maker battery origin can vary.

On the road, your electric car is reducing your carbon footprint, but just like with your food the big question regarding the increase in consumption of electric cars will be “Where is your electric car coming from?” Failure to inquire about the production process behind the vehicle you choose will render the goal of its purchase somewhat meaningless and see the consumer become a victim of greenwashing.

Bottomline: How your E-Car was produced holds the answer to whether or not it helps the environment.

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* Please help my Environmental Economics students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice :).

Sebastiaan writes*

With just one click, I open the Deliveroo app and start scrolling through the options, my appetite reaching an all-time high. My cravings for the Ahi Poke Bowl with mango and avocado is dissipated by a sudden desire to be drowning in Paneer Butter Masala which is, in turn, forgotten by the sight of a Pizza Margarita only half a second later. The abundance of food choices is getting the better of me.

I have become a (somewhat voluntary) victim of a Dutch trend from recent decades: an increase in the diversity of eating. As a consequence of this development and trends in population and technology, the Dutch have pushed agricultural lands to increase yield. “Can we go on like this?” I ask while continuing my digital quest for the perfect dinner. The short answer turns out to be ‘no’ because everything comes at a price.

The continuing rise in food consumption has lead to the point that humans confiscated 25% of the biomass produced on the entire planet. This so-called Human Appropriated Net Primary Production (HANPP) is expected to keep rising until 44% in 2050. So far, conventional farming practices have primarily aimed to increase the HANPP by focussing on maximum yield. This aim means more competition for non-harvested species such as soil fauna and soil microbial life. Without this type of life, future yields will plummet and so will my choice on Deliveroo.

For years soil biodiversity has been decreasing in large parts of Europe that has been linked to rising agricultural intensification. Wageningen University and Research has compiled years of studies on this topic;  regional government agencies [pdf] increasingly report the adverse effects of conventional farming practices on soil biodiversity. The Global Soil Diversity Atlas identifies a few main destructive factors of farming, which include the excessive use of fertilizers and pesticides, monocultures, and ploughing. Although the national Dutch government already subsidies farmers who follow ‘green requirements’, biodiversity above and below-ground is declining at one of the sharpest rates of all European countries.

If the diversity in my dinner choice really is at the cost of the biodiversity in the soil, would I be willing to pay for this cost? And if Deliveroo allows me to add a euro or two on top of the price of my meal, would that make actually make a difference? And if we, miraculously, all share this cost, will the benefit be greater?

I start to lose my appetite as I overthink the consequences of each and every food choice that has appeared on my screen tonight. Slowly but surely I approach my fridge, with a belly that’s empty but a head full of thoughts. Beer turns out to be my only salvation for the night. I crack open a cold one and think to myself: “Today, I saved the Earth”.

Bottom line: The pressure on agricultural lands and ecosystems has increased with consumption in recent decades. Conventional farming practices are weakening ecosystems needed for future yields. Consumers, unfortunately, will have a hard time considering these costs because it’s difficult to understand all the impacts of one’s daily choices.

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* Please help my Environmental Economics students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice :).

Yeseong writes*

What is going on in Asia?
The stomach-churning photo of god-knows-how-many plastic bags is actually a photo taken after the autopsy of a dead short-finned pilot whale was done in Southern Thailand. 8kg of plastic came out of the whale’s stomach. This has yet again attracted considerable attention to the fact that Asia is home to five of the world’s top marine plastic polluters and it is currently the largest source of plastic pollution in the ocean. In fact, five of the leading Asian countries create more than half of the world’s plastic waste: China, Indonesia, the Philippines, Vietnam, and Thailand.

One of the biggest plastic use in Southeast Asia is closely related to their food culture: incessant pad thai take-outs, late night 7-eleven snacks and ice-cold bubble teas. Before that, they were using bamboo, pots, banana leaves, and tin cans for the same purposes. This is an evolving culture that started around the 1970s and fully developed by 1996, one that unfortunately involves polluting our oceans and killing the marine animals. 

What are the possible solutions?
There are more than a dozen successful examples of the attempts to reduce plastic consumption and ocean pollution. One that has turned out to be highly effective is the example of the Netherlands; they have successfully put a price tag on the use of plastic bags at stores and turned the situation to a win-win—the shops now get paid to sell the plastic bags and there is now more than 70 percent reduction in the use of these bags. Southeast Asian countries like Thailand are only getting started in their efforts to reduce the amount of plastic used. However, the complications in solving the issue are substantial. In Thailand, the biggest plastic users are not the industry nor the government; they are the citizens. Without changing their behavior or their incentives to use less, having any real outcome is not viable.

What Thailand has implemented looks similar to what others have been doing. First of all, they have decided to ban all imports of foreign plastic scrap in 2021 this amount has grown exponentially since China decided that they are not importing the West’s garbage anymore. They have also declared war on single-use plastic bags from shops, banning all single-use plastic glasses, very thin plastic bags and plastic straws in 2022. They are also hoping to reduce the amount of thicker plastic bags by 70% over the next 20 years.

Bottom Line: Thailand, one of the world’s worst polluters of plastic going into the ocean, has decided to wage war against everyday plastic use, but I don’t see how they are going to change people’s deep-rooted behavior by using extreme measures (banning everything) rather than a structured plan.

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* Please help my Environmental Economics students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice :).

Pieter writes*

What if we could simultaneously (i) lower our environmental impact while cooling the planet; (ii) improve social equity in the food industry; and (iii) still feed the estimated 10 billion people living on planet Earth in 2050? I argue that addressing each of these challenges requires a transformation of the agricultural sector from using the green revolution approach to methods based on the principles of agroecology. Below, I will briefly compare ways that green revolution agriculture and agroecology impact the environment, social equity, and food production. I realise that in doing this in such a short piece I will inevitably make a caricature of both approaches, and I apologise for this.

In short, green revolution agriculture prioritises yield maximisation of a single monoculture through intensive land and chemical use; while agroecology [pdf] prioritises the ability of farmers to feed themselves and their community by producing a wide variety of crops making use of natural cycles rather than chemical inputs. While there are many ways in which agroecological systems contribute to the environment (e.g. creating habitats for biodiversity, carbon sequestration, and preventing soil erosion), as well as ways in which monoculture farms harm the environment (e.g. destroying natural habitats, relying on fossil fuels, and putting unsustainable pressures on land), I will focus on table 1 taken from Altieri (1999):

The table compares a sample of traditional low-input (in this context referring to old peasant agriculture), modern high-input (referring to green revolution agriculture), and agroecological systems in Bolivia for a single crop: potatoes. It shows that yield ha-1 is highest in the high-input farms, though it should be noted that the agroecological system produced multiple crops, and therefore might have a higher total yield. More importantly, table 1 expresses that agroecological systems used no fertiliser and produced substantially more (30.5 potatoes) output per unit of energy, compared to green revolution agriculture. The latter used 200 kg ha-1 of fertiliser, and produced only 4.8 potatoes per unit of energy. Thus, while green revolution farming actively contributes to harming the planet through the consequences of fertilisers and energy consumption, agroecology rejects these practices while actively contributing to the planet by, among other things, restoring habitats for biodiversity and sequestering carbon.

Besides creating a production process that has a positive impact on the environment, agroecology also tackles inequalities that are persistent in the current food system. The food industry is shaped as an hourglass: there are many peasants and farmers at one end; with monopolies in each of the three sectors – input supply (seeds, machinery, chemicals), processing and retail, in the middle; and many consumers at the other end. In consequence, power is concentrated at the food corporations, which results in situations where, for example, grain seeds for are only sold to farmers if they also purchase the associated pesticides and fertilisers (input); or, prices are set and farmers either accept or lose any chance at making a revenue (processing); or, Tesco and Walmart setting private standards that need to be complied with by suppliers shifting the cost of government regulations on these suppliers (retail). Agroecology, by promoting the production of food for local consumption, tries to bypass the food corporations in the middle of the hourglass and directly delivers food to consumers. This allows peasants to earn higher income. In addition, by replacing chemical and technical inputs with natural processes, farmers reduce their dependency on the inputs provided by corporations. Agroecology is therefore a more socially equitable form of agriculture.

Recently, scientists, politicians and industry representatives are sounding the alarm bells, warning that global food production needs to double by 2050 [pdf] to feed everyone on the planet. So, given the rejection of the green revolution technology and intensification, will agroecology be able to provide the necessary amount of food? First, Altieri & Nicholls (2012) [pdf] argue that the world today already produces the amount of food necessary to feed 10 billion people, but that currently the majority of industrially produced crops feed biofuels and animals. Second, Altieri & Nicholls note that small scale peasant agriculture already accounts for at least 50% of agricultural output for domestic human consumption. This, despite the fact that the majority of peasant production suffers from productivity declines associated with degraded land due to pesticide use, failed harvests due to high vulnerability to shocks, and more, all associated with the consequences of green revolution agriculture. In addition, their data suggest that agroecological interventions in conventional agriculture in 57 different countries in the Global South resulted in an average crop yield increase of 79%. Third, agroecological farming is less vulnerable and more resilient to shocks. Machin Sosa et al. (2010) [pdf] studied crop loss and crop recovery in Cuba following hurricane Ike in 2008 and found that agroecological farms had 50% crop loss, compared to 90-100% in monoculture farms. They also concluded that the recovery rate of vegetation in the former was substantially higher than in the latter. In a world that will increasingly experience variable and extreme weather events, agroecological farms will be better prepared and produce more food.

Bottom Line: Transforming agriculture from green revolution principles to agroecological principles can result in a positive impact on the environment and a more equitable food system, while not coming at the cost of reduced food production to feed a growing human population.

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* Please help my Environmental Economics students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice :).

Alex writes*

While reusable water bottles and soda streams are promising an end to the consumption of single-use bottles, both products fail to provide a range of liquids for which there will continue to be a demand, from juices and alcoholic beverages to milk (but most probably milk alternatives). As much as we would like to survive on tap water alone, methods of transporting liquids linearly from producers to consumers are still necessary. The current method, relying on light-weight plastic, is causing major damage to the environment, with the Indian state of (Maharshtra even going so far as to ban PET bottles)[ https://www.foodpackagingforum.org/news/india-restricts-use-of-pet-bottles] smaller than half a litre.

In the (Netherlands alone, 1.4 billion plastic bottles were consumed in 2017)[https://www.statista.com/statistics/792687/plastic-bottle-annual-consumption-netherlands/], and while bottle-specific numbers are unknown, the (recycling rate for plastic waste was only 51%)[https://ec.europa.eu/eurostat/tgm/refreshTableAction.do?tab=table&plugin=1&pcode=ten00063&language=en] the previous year. Now granted, that’s higher than the (EU average rate of 42%)[https://ec.europa.eu/eurostat/tgm/refreshTableAction.do?tab=table&plugin=1&pcode=ten00063&language=en], but while there’s been a 14-fold increase in the amount of plastic collected by waste services, the quality of that plastic is steadily decreasing, making recycling more difficult both physically and economically speaking according to the (this NOS article)[https://nos.nl/artikel/2180102-meer-plastic-ingezameld-maar-het-wordt-steeds-smeriger.html]. It goes on to say that the cause behind the quality slump may be faulty separation of plastics by households or residuals within the plastic such as food waste – but whichever it is, the national waste processing deficit of 120 million is likely to increase if this continues. (This study) [https://www.sciencedirect.com/science/article/pii/S0956053X17307808] supports that assertion, stating that besides collection response and mechanical recovery, where recycling systems fall short are their sorting processes which often allow for plastics to be contaminated with other non-suitable plastics. Brouwer et al., continue by saying that the majority of plastic-based contaminants originate from the products themselves, and therefore that designs should work towards minimising the variety of plastics that they are composed of.

But what if we were to deviate from plastics altogether? Well, an old-fashioned alternative is glass, which had a 79% recycling rate (32% higher than plastic) in the Netherlands in 2013 and is also infinitely recyclable. The dilemma is that so far, (this study)[ https://www.sciencedirect.com/science/article/pii/S0959652616311234], and (this one)[ https://posterng.netkey.at/esr/viewing/index.php?module=viewing_poster&task=viewsection&pi=128424&ti=425546&si=1477&searchkey=] AND (this one)[https://www.researchgate.net/publication/314100348_Comparison_of_Life_Cycle_Assessment_of_PET_Bottle_and_Glass_Bottle] have attributed more environmental costs to glass bottles than plastic for the same functional unit, while (this study)[ https://www.sciencedirect.com/science/article/pii/S0959652615007209] has given nuance to the argument, saying that the majority of the impacts are from transporting the heavy glass and therefore such a generalisation is risky. Additionally, recycling and circularity of the products were not fully discussed in either studies, so I believe that there’s ample reason to further investigate.

Bottom Line: What difference would it make to the environment if all our single-use bottles were glass or PET plastic? And how much does it depend on creating a closed-loop system?

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* Please help my Environmental Economics students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice :).

Fay writes*

The popularity of organic food has significantly increased over the past years. Many farmers have noticed the resulting business opportunities and shifted to organic production. With the amount of suppliers, competition has also increased, making the average organic food price drop. Nevertheless, due to lower crop yields, higher uncertainty and labour costs, the price of organically produced food is still 63% higher than that of food originating from conventional production.

Consequently, organic food is mostly consumed by citizens belonging to the higher socio-economic classes of the Dutch society, or by hipsters. Research has found that the most important factors incentivising these groups are the perceived health and environmental benefits accompanying organic consumption and production (Hughner et al., 2007). This same research finds that there are many consumers who share these concerns, but are reluctant to buy organic food because of its higher price.

 

The idea about perceived health benefits originates from the fact that organic production does not use chemical pesticides. Chemical pesticides used in conventional food production could have a long term negative impact on the health of consumers, due to the continuous intake of small proportions, or on that of farmers because of direct exposure. However, the debate about the health consequences of pesticide exposure is still ongoing. In addition, no evidence supporting the nutritional advantages or disadvantages has been found (Forman and Silverstein, 2012). Even though the perceived health benefits might not be as convincing, strong evidence has been found for the negative environmental consequences of conventional farming. For instance, the chemical pesticides that are used are harmful to biodiversity. Also, more water and energy is used during conventional food production, which significantly contributes to climate change (Forman and Silverstein, 2012). Furthermore, it has been estimated that due to soil degradation, agricultural land will only be productive for 60 more years . Organic production is not as damaging to the environment, as it does not make use of chemical pesticides, requires less energy and water and causes less soil depletion (Forman and Silverstein, 2012).

To reduce the negative environmental impacts of food production, organically produced food should be the norm rather than the exception. Because the prices of organic food are still higher than of conventionally produced food, a large group of consumers who actually want to consume responsibly refrain from doing so. In order to make organic food accessible for all, prices thus have to be driven down further. Making use of consumer preferences, increasing the supply of organic food can realize this. When more organically producing farmers enter the market, competition increases, decreasing the price. By making organic food accessible through the supply side of the market, the proportion of land that is farmed organically increases. This contributes to a transition to a less harmful food production system. All in all, it would be interesting to see which policy measures could be implemented to increase the organic food supply.

Bottom line: Organic food should be the norm rather than an exception, as it has a less harmful impact on biodiversity, soil quality and the climate. However, organic food is expensive, making people who want to consume responsibly reluctant to do so. An increase in the supply of organic food can decrease its price, which makes organic food accessible to all. It would be interesting to research what policy changes could generate such a supply increase.

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* Please help my Environmental Economics students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice :).

Mo writes*

Everyone seems to be talking about climate change nowadays, it is becoming an increasingly important topic on the political agenda of several countries. Whilst one might typically think of carbon dioxide emissions, or other greenhouse gases, when thinking about action against climate change, there are several other ways in which countries are tackling climate change and its impacts. One of which is through green roofs!

Green roofs can be defined as an area squared off on the surface of a man-made structure to allow the growth of vegetation. Vijayaraghavan (2016) identifies several components necessary for the construction of a green roof: a vegetation layer, a substrate, filter fabric, drainage material, root barrier, and insulation. But don’t think you can’t get creative with it, different types of vegetation mean different drainage benefits as well as increased biodiversity.

If you live in a city in North America, you’ve probably come across a green roof. The chances double if you live in Toronto, which in 2016 had the greatest square footage of green roofing installed amongst cities in North America [pdf]. How did Toronto achieve this? This leadership in green roofs can be attributed to its green roof bylaw. This by-law mandates the construction of a green roof on new developments of industrial, residential, institutional, and commercial buildings if the surface area of the roof exceeds 2000 square meters.

North American cities are not the only places where you’d be able to spot green roofs. Several cities around the world are introducing green roofs as a means by which to mitigate climate change impacts on a local level (Vijayaraghavan, 2016). They provide a number of social and environmental benefits, but most importantly for cities, especially undergoing rapid urbanization, its provides the reduction in the urban heat island effect as well as providing better stormwater management (Vijayaraghavan, 2016). Not only do green roofs help cities mitigate and adapt to the impacts of climate change, but also brings in more green space into a built environment. The social value of living in an aesthetically-pleasing environment shouldn’t be overlooked.

Even different municipalities in The Netherlands have started their own ventures into getting green roof construction going throughout their respective cities. Most notably, the city of Rotterdam has shown greater interest in green roofs and the benefits it would provide [pdf]. In order to increase the square footage of green roofs throughout the city of Rotterdam, the municipality offers a subsidy for those constructing one. This subsidy currently offers 15 euros per square meter of realised green roof and will be available to residents until the end of 2020 or when the money runs out. Other than this subsidy, there doesn’t seem to be other incentives pushing residents or building owners to build green roofs.

This mechanism is quite different compared to how Toronto is green roofing its city. Both mechanisms are valid means of constructing green roofs, one relies on legislation and regulation, whereas the other makes use of a market mechanism. But a question emerges, which mechanism is the most effective in order for municipalities to increase green roofs throughout the city?

Bottom Line: Green roofs are one of the ways cities can locally mitigate climate change impacts and there are different mechanisms by which municipalities can get more green roofs throughout a city. What are the costs and benefits of the two mechanisms, and which is the most effective?

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* Please help my Environmental Economics students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice :).

Rachele writes*

Most of the air pollution detected worldwide is unsurprisingly concentrated in big cities, being the result of coal consumption, gridlocked traffic, heavy industries and incremental population density, i.e., high energy demand. All these factors greatly contribute to increase air pollution and, interestingly enough, it was found that traffic and cars are the main source of a whooping 25% of total worldwide production of particulate matter which increases cities’ air pollution, where traffic jams are the norm.

Other than contributing to increase CO2 concentration and our poor earth’s fever (e.g. Climate Change), air pollution is considered as the most proliferous and silent killer currently existing, accounting for 8.8 million deaths worldwide and 800.000 deaths in Europe every year; the numbers seems destined to increase. This extremely high number makes air pollution the number one environmental cause of death worldwide. To put these results into perspective, water pollution is the second source of death from pollutants, accounting for approximately 1.8 million casualties every year. This lower data is due to the fact that polluted water affects mainly underdeveloped countries whereas air pollution affects 92% of the global population. 

Due to the rising issues generated by air pollution, many cities around the world decided to open their eyes on this issue and implemented alternatives to decrease pollution from traffic jams.

One policy that was applied in different ways, but with the same aim of reducing air pollution, is the Limited Traffic Zone (LTZ) policy.

Milan can be taken as an example of a successful implementation of such policy. Due to its precedent extremely high concentration of air pollutants, policy makers decided to introduce the LTZs policy through the installation of EcoPass [pdf] aimed at reducing the input of cars in the centre of the city. This operates through the concept of ‘congestion charging’ meaning that vehicles that are fuelled through diesel have to pay 5€ to enter the area, whereas public transportation and cleaner vehicles are exempted. This application resulted in a decrease in air pollution of approximately 18%, an increase of public transportation usage of 6.2%, a reduction of polluting vehicles of 49% and an overall increase in share of cleaner vehicles of 16.6%. Finally, traffic congestion was found to be 28% lower than the original baseline [pdf].

The operational and investment cost of EcoPass reached €21 million per year, which is usually directly funded by the revenue obtained from the project. The Ecopass is thus estimated [pdf] to have generated a yearly net benefit of approximately €15.7 million from 2008 to 2010. This net gain however, does not include the revenue made from fines, which if it was to be taken into account, would raise the net profit to about €50 million per year [pdf].

However, the total revenue generated from the EcoPass policy was found to be decreasing steadily since the first year of its implementation. This is because this project also created incentives for citizens to buy cleaner vehicles, which is indeed a good thing for the environment, but eventually reduces revenue [pdf]. That said, it’s important to remember that Milan’s main goal [pdf] was to reduce air pollution and increase liveability, which has been achieved.

The lower emissions and higher share of sustainable vehicles, demonstrates that the application of such policy is effective in environmental terms. This still raises financial concerns on sustainability of this project in the long-term, as the revenue made from EcoPass struggles to compensate for its costs. This means that such policy may require some adjustments. A potential solution could be removing the exemption from some vehicles [pdf], which would increase revenue. It’s important that Italy keeps on pursuing this policy despite its flaws. Even though this might require some precautions, LTZ seems to be on the right path to reduce air pollution in urban areas.

Bottom Line: Besides its limitations, Limited Traffic Zones Policy can be considered a good solution to reduce the level of toxicants generated by traffic jams in the air of big cities and could be potentially improved and applied in different contexts.

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* Please help my Environmental Economics students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice :).