Locally motivated air quality programs have only minor collateral benefits for the global climate. If agencies with global and local agendas did business together, then individuals and firms—and even cities—would act globally when thinking locally, and one would see greater synergy.
Eskeland and Xie find that locally motivated air quality programs for urban transport have limited collateral benefits in terms of protecting the global climate. This could puzzle some, since these two public goods—one global, one local—seem to be jointly produced. However, air quality in Mexico City, Santiago, and elsewhere is predominantly pursued by technical improvements (making cars and fuels cleaner), and not by reducing demand for polluting goods and services (though in Europe high fuel taxes help reduce demand).
Control programs developed under joint stimulus to protect the global and local environment have not yet been seen, and they may surprise us when they come. However, they will likely rely more on reducing demand, using instruments such as corrective (Pigovian) taxes on fuels. The authors show how, if locally and globally charged agencies can do business together, consumers, producers, and cities will act globally when thinking locally. Only then will we know the extent to which local and global benefits are produced jointly.
This paper—a joint product of Public Economics, Development Research Group, and the Global Environment Unit, Environment Department—is part of a larger effort in the Bank to analyze environmental problems and policies in developing countries. Copies of the paper are available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact Cynthia Bernardo, room MC2-501, telephone 202-473-1148, fax 202-522-1154, Internet address cbernardo@worldbank.org. The authors may be contacted at geskeland@worldbank.org or jxie@worldbank.org. (19 pages)
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