Clean identification? The effects of the Clean Air Act on air pollution, exposure disparities and house prices
Air pollution from fine particulate matter (PM2.5) has substantial negative effects on health, productivity and behaviour. This paper shows that the flagship regulation in the United States, the Clean Air Act National Ambient Air Quality Standards, substantially reduced PM2.5 ambient air concentrations in regulated regions in recent years.
However, the analysis also shows that more polluted areas have experienced air quality improvements even in the absence of regulation. Accounting for such pre-existing trends in pollution improvements is crucial when estimating the contribution of the regulation towards better air quality, as the effect is otherwise overestimated. The authors show that the regulation has helped to narrow the disparities in exposure to PM2.5 pollution between urban and rural and between Black and White populations, but that the contribution of regulation would be overestimated without accounting for pre-existing trends.
Finally, the authors show that accounting for pre-existing trends alters the estimated cost of pollution, which is calculated based on the changes induced by the regulation. For example, the benefits of cleaner air as reflected in house prices are even larger than previously estimated. Therefore, while the positive effects of the regulation on pollution are overestimated when failing to account for pre-existing trends, the benefits of pollution reduction through the regulation are underestimated.
One of the key insights from this analysis – that properly accounting for pre-existing trends creates more reliable estimates – may also apply to other regulated pollutants under the Clean Air Act, as well as other outcomes that are affected by pollution, such as health.
Key points for decision-makers
- PM2.5, fine particulate matter of diameter smaller than 2.5 micrometres, is the latest air pollutant to be regulated through the National Ambient Air Quality Standards in the United States, with regulation coming into effect in 2005.
- The authors estimate that, overall, areas that became regulated in 2005 under these standards decreased their levels of PM2.5 by 0.4µg/m-3 (micrograms per cubic metre of air) between 2001–03 and 2006–08, equivalent to 3.3% of baseline pollution.
- More polluted areas experience faster air quality improvements, even when they are not regulated, possibly due to technological trends and other factors. Failing to account for such pre-existing trends risks overstating pollution reduction benefits from regulation by a factor of three.
- The effects of the regulation are higher in more polluted areas within regulated regions, with a 0.1µg/m-3 improvement at the 10th percentile of baseline pollution levels and a 1.3µg/m-3 improvement at the 90th percentile.
- Pollution disparities between urban and rural areas and Black and White residents narrowed over the period of the study. A substantial share of this can be attributed to the effects of Clean Air Act regulation, although the contribution is overestimated when ignoring the pre-existing trends.
- After carefully accounting for pre-existing trends in pollution, the authors show that the benefits from reduced air pollution, as observed in increased house prices, are larger than previously thought.
The current version of this paper, published in September 2023, updates earlier versions published in May 2023 and December and May 2022.