Long-Run Environmental Accounting in the U.S. Economy
This chapter is a preliminary draft unless otherwise noted. It may not have been subjected to the formal review process of the NBER. This page will be updated as the chapter is revised.
Chapter in forthcoming NBER book Environmental and Energy Policy and the Economy, Matthew Kotchen, James H. Stock, and Catherine Wolfram, editors
This paper estimates an augmented measure of national output inclusive of environmental pollution damage in the United States economy over a 60-year period. The paper reports two primary findings. First, air pollution intensity declined precipitously from the 1950s to the modern era. Air pollution damage comprised roughly 30 percent of output in the post WWII economy, declining to under 10 percent in 2016. Second, accounting for pollution damage significantly affects growth rates. Prior to the passage of the Clean Air Act in 1970, GDP outpaced Environmentally-Adjusted Value Added (EVA), defined as GDP less air pollution damage. Following passage of the Act, EVA grew more rapidly than GDP. Macroeconomic and environmental policies, as well as the business cycle, appreciably affect damages and EVA growth.
Long-Run Environmental Accounting in the U.S. Economy, Nicholas Z. Muller