Glen Hodgson is senior fellow at the Conference Board of Canada. Brent Dowdall is senior manager at the Conference Board of Canada.
Economists measure the performance of the overall economy through the level of and changes to gross domestic product (GDP), which is the sum of all spending and output generated. However, GDP doesn't adequately measure all the impacts of economic activity, notably things that erode our nation's long-term wealth – such as pollution.
The United Nations Environment Assembly is meeting Dec. 4-6 in Nairobi for discussions on the overarching theme of pollution amid new evidence that pollution has severe health and economic consequences. Pollution damages the environment, erodes physical assets and harms people, yet we do not have an adequate measure of how much it costs the economy and society. If we really want to understand the sustainability of economic activity in Canada, we ought to know how much our long-term wealth and prosperity is being diminished by pollution.
Thanks to work by the International Institute for Sustainable Development (IISD), we now have a much better estimate of the costs of pollution to Canada. In a report released earlier this year, IISD found that pollution costs Canadians many billions a year in lost health and well-being. The report, The Costs of Pollution in Canada: Measuring the impacts on families, businesses and governments, found that pollution of all types cost Canadians at least $39-billion in 2015. For a Canadian family of four, that is the equivalent of $4,300 annually.
IISD defines pollution as materials and energy that are released into the environment by humans or through human actions. Pollution's impact extends beyond health and wellness, to include loss of income, and higher requisite levels of spending to mitigate its effects. There are three types of effects from pollution.
- Reduced human welfare – premature death (mortality) and increased illness (morbidity), as well as lost activities (e.g. recreation). Urban air pollution has a significant impact on people with respiratory problems, worsening their illness and even shortening their lifespan.
- Lost production and consumption of market goods and services. These come in the form of reduced revenue for businesses, increased costs for producers and increased costs for consumers – or all three.
- Impaired produced and natural capital – buildings, bridges, homes, water bodies, agricultural land, forests, the atmosphere, and other ecosystems can all be degraded by pollution.
Most of the costs that IISD was able to measure were incurred as a result of urban smog, which has been widely studied. The most damaging component of urban smog is fine particulate matter (PM2.5), which is small enough to get into the human respiratory system – causing illness and even death. In fact, the latest analysis shows that more than 7,700 deaths in Canada in 2015 can be attributed to PM2.5 and the other components of smog. In total, the cost of smog to Canada and Canadians is estimated to be $36-billion in 2015.
Perhaps the most important finding from this research is the revelation how little we actually know about the overall costs of pollution. Another $3-billion in well-documented pollution costs was identified in the IISD research, but that number was surprisingly low, given the number of known sources of pollution. Aside from urban smog and ground-level ozone, there is very little quantitative research on the damage to property, persons and infrastructure. It is reasonable to expect that the more sources of pollution are studied, the greater their effects will be found to be. Ignorance is not very comforting in this case.
There are a number of pollutants that need to be analyzed further for their effects on our economy, livelihoods and even lives. Persistent organic pollutants (POPs) include pesticides, plastic additives and flame retardants, things that people use in their everyday lives. Scientists believe that POPs are contributing to numerous diseases, although it is not yet clear how many people are affected or how much harm POPs cause.
Greenhouse gas emissions are well known to be pollutants, but we don't know that much about their costs in terms of human welfare, loss of productivity, and damage to assets.
Furthermore, there are many specific local impacts. Thousands of contaminated industrial sites can be identified across Canada, each of which requires investment in remediation and rehabilitation. Rural and remote communities, many of them First Nations, have recurring challenges with unusable drinking water. Lake Erie has lost an estimated $4-billion in value because of phosphorous pollution.
Pollution has an economic cost. If we are to treat it as a higher social priority and develop better practices and processes for mitigating its negative impacts, a better understanding of what pollution is costing us would be a critical input.