Power plants emit toxic air pollutants like mercury and arsenic that have been widely believed to cause cancer, birth defects, and damage to the brain and reproductive systems. Yet while other forms of harmful air pollution like sulfur and nitrogen oxides have been controlled for decades, these other toxins are only now beginning to be controlled through the U.S. Environmental Protection Agency’s Mercury and Air Toxics Standards. A new study in this month’s issue of the American Economic Review shows just how toxic these pollutants can be – not just to our health, but also to our economy.

“Policymakers need to have a clear understanding of both the costs and benefits when deciding where to site plants that emit toxic pollutants,” says Michael Greenstone, an author of the study and the director of the Energy Policy Institute at the University of Chicago (EPIC). “While an industrial plant’s opening can boost the economy by bringing jobs and potentially higher wages over a wide area, the communities that immediately surround them can be harmed. Our findings are a first step towards having a better understanding of the costs to local residents.”

Greenstone and his coauthors Janet Currie from Princeton and Lucas Davis and Reed Walker from the University of California-Berkeley studied the openings and closings of 1,600 plants in five U.S. states. The exercise required the merging of incredibly detailed information on the exact location of these plants with information on the near-universe of housing transactions in these states. They found that when a plant opened home values decreased by 11 percent within a half mile radius of the plant – a loss of about $4.25 million for the households surrounding that plant. When a plant closed, housing prices remained low. The authors suspect the values remained low due to a variety of factors, including concerns about local contamination, an expectation that the plant will reopen, or simply the visual unattraction. There was no effect on housing prices at distances greater than a half mile from the plant.

Using data on plant emissions and pollution monitors, the authors found that on average toxic pollution concentrations are elevated within one mile from the plants. However, there did not appear to be any effect on concentrations at further distances, suggesting that any health effects should be concentrated within that radius. Within that same one mile radius, the incidence of a low birth weight birth is roughly 3 percent higher. This finding was further supported by the fact that toxins traveled within the same radius. The paper additionally finds small, but detectable, adverse effects on other measures of infant health.

“These findings provide an impetus to better understand the many ways these pollutants impact our lives – from exploring the health implications borne by other age groups to gaining a tangible grasp of how these pollutants affect economic prosperity and well-being,” says Walker. “There’s so much we don’t know about the air we breathe and the many ways it impacts our day-to-day lives.”

Greenstone adds, “We are in the very early stages of learning about the effects of toxins. Likewise, we are at a similar point in regulating them. Our study suggests that most effects are likely to be localized, which is informative for designing efficient regulations. But perhaps most importantly, these findings emphasize the urgent need for future research on the air we breathe and the many ways it impacts everything we do. Knowing more about the impacts would give policymakers the information they need to decide if the standards we have now are doing enough to protect our health and well being.”

To read the study, or request an interview with one of the authors, please contact Vicki Ekstrom High at vekstrom@uchicago.edu.

Areas of Focus: Environment
Producing and using energy damages people’s health and the environment. EPIC research is quantifying the social costs of energy choices and uncovering policies that help protect health while facilitating growth.
Environmental Health
Environmental Health
Energy and industrial processes introduce toxins into the environment. EPIC research is helping to educate policymakers and consumers on the social and economic costs of this pollution, and the potential...