We often hear that air pollution is a byproduct of economic growth and an unavoidable cost of progress. The concept is particularly stressed in regards to emerging economies, such as India, which in the last 10 years has lifted more than 270 million people out of poverty but also exposed citizens to the highest PM 2.5 concentrations globally.
India saw 1.67 million deaths —18% of total mortality— due to air pollution in 2019. However, the impacts of air pollution are not limited to health but also on the economic front. Now, a report titled “Air pollution – the silent pandemic and its impact on business” by the Clean Air Fund (CAF) and Dalberg Advisors, shows that air pollution in India poses a huge cost to economic growth at $95 billion or 3% of its GDP in 2019.
“The study demonstrates that there is both health and economic costs to air pollution in India, and that we need to decouple the idea of economic development with unhealthy environment,” said Reecha Upadhyay, portfolio manager for India at the Clean Air Fund.
According to the report, the economic cost of air pollution manifests in six ways. The first is a decline in labour productivity, as employee absenteeism increases because people are unable to go to work, especially those in the construction and food processing industries, which cost India 0.2% of its GDP in 2019. Almost all absenteeism occurred in the northern and eastern parts of the country, where pollution frequently crosses hazardous levels.
The second impact of air pollution goes beyond people and reduces the productivity and lifespan of assets. Air pollution stifles the ability of many industries, such as solar power to perform at their highest, as it prevents sunlight from reaching solar panels, which ultimately results in a loss of revenue for companies and unreliable power for consumers. The report found that it also led to a 67% loss in the cost advantage of solar versus coal, which will also have an impact on how quickly we move towards sustainable energy.
The third impact is to retail businesses. A study found that a 10% increase in PM2.5 pollution reduced consumer spending in Spain by €20-30 million everyday. In India, the loss amounts to almost $22 bn a year.
Premature mortality is the fourth impact with 1.4 million citizens dying prematurely as a result of air pollution. Leading to the fifth impact, which is health expenditure. Public and private expenditure on healthcare to treat air pollution-induced illness stood at $21 billion globally in 2015.
Finally, air pollution prevents people from participating in volunteer activities, such as elderly or environmental care. This puts a burden on members of the workforce to act as caregivers, indirectly affecting workplace productivity.
The Indian government plans to double nationwide renewable energy capacity to 175 gigawatts by 2022, up from the current level of 86 GW, and reduce reliance on particulate-spewing coal power plants, giving incentive for Indian companies to also invest more in wind and solar power and off-set costs related to bad air.
“Every year air pollution costs Indian businesses close to 50% the cost of managing the COVID-19 pandemic,” Upadhyay said. “There are real costs of air pollution and if India truly wants to grow economically, both government and industries must decarbonize as fast as possible.”
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