Benefit-Cost Analysis

In my Environmental Economic class, we have learned the model of benefit-cost analysis; we compare the social benefit and cost due to an environmental regulation by net benefit or benefit-cost ratio. We often focuses on how much it will cost us to implement a certain type of emission control technology and claim that it costs us too much than it benefit the environment. However, when examining some specific programs, we should also take the benefit on human health into consideration. A research accomplished by MIT indicates that the pollution in air may damage human health, which leads to a short expectation of lives. As a result, the productivity of labor would also decreases. Consequently, it reduces social wealth since there is not such sufficient human resource to produce the potential GDP. Different from common understanding, the regulation of emission will leads to an economic gain rather than an economic loss. According to the study, social welfare has increased by $350 billion from 1975 to 2000 in the United States correlated toward environmental regulations (shows in the graph above). The research also estimates that by the year of 2025, China would benefit $25 billion for the country as a whole if it implements some emission control policies.