Optimal Point Source Abatement Technology Adoption: The Impact of Uncertainty in the Benefits of Abatement

Reducing emissions from point sources may be justified by the large expected benefits of improved health. However, the optimal reduction in emissions is complicated by the large uncertainty regarding the magnitude of these benefits. In particular, there is uncertainty in the size of the impact of pollution on increased premature mortality, and in the monetary valuation of reducing risks of mortality. We calculate the optimal emission reductions from abatement technology adoption at most point sources of SO₂, NO_X, and primary PM_2.5 in the United States across a wide range of uncertainty in the parameters used to estimate benefits of reductions. The results demonstrate that although the range of uncertainty in benefits is very wide, as long as the benefits are not at the low end of the distribution, the optimal abatement from sources is in a relatively narrow range. It is when benefits of reducing pollution are well below their mean estimates that the optimal reduction in emissions varies substantially. Resolving the likelihood of very low benefits of abatement could potentially reduce the uncertainty regarding optimal abatement policy.