Economist Julian Reif unpacks the “Economics of Clean Air” and its profound impact on Illinois

The air we breathe, often taken for granted, holds significant implications for public health and economic well-being. This was the central theme of a recent discussion on the Illinois Policy Unpacked podcast, featuring Julian Reif, an associate professor of finance at Gies College of Business and an affiliate of the Institute of Government and Public Affairs (IGPA) at the University of Illinois. Reif, whose research explores the intricate relationship between health, pollution, and economic factors, shed light on Illinois' air pollution trends, their associated risks, and potential policy solutions.

Reif highlighted IGPA's crucial role in bridging the gap between academic insights and public discourse. "My favorite part I think of IGPA is that it's designed to get faculty engaging with the public," Reif said. "If we don't communicate our research to voters, to citizens, to the public, and to government officials, then it becomes that much more difficult to translate important academic ideas into actionable insights."

His latest IGPA policy spotlight examines air pollution trends in Illinois, a topic he approaches through the lens of an economist. Reif, a faculty scholar with Gies’ Health Care Research Initiative, analyzed multiple years of air pollution trends in Illinois. His study offered a number of interesting insights regarding the state’s air quality trends and their impact on public health. Using EPA-reported data, the study tracked air pollution trends across six distinct regions — Champaign-Urbana, Chicago-Naperville-Elgin, Decatur, Peoria, Rockford and Springfield. Fortunately for residents of the Windy City, the report shows that pollution trends are going the right way.

As a hub for air, rail and other ground transportation, Chicago has noticeably higher pollution levels than any other region in the state. That’s exacerbated by the city’s dense population and location next to a vast lake, where temperature inversions often trap air over the city. However, the study, which examines a number of pollutants, including ozone, carbon monoxide and fine particulate matter, revealed that the city has seen a 25% reduction in air pollutant levels over the past 20 years. That’s a significant improvement, which could ultimately lead to significant increases in life expectancy and quality of life.

This improvement in Chicago, he suggested, is likely due to multiple factors, including the closure of some coal power plants and the conversion of others to cleaner natural gas. The continuous replacement of older, more polluting vehicles with newer, cleaner models, especially electric vehicles, also plays a significant role.

In related work, Reif employed a clever methodology to isolate the causal effect of air pollution on health outcomes that leverages the natural variability of air pollution levels based on wind patterns.

"The level of air pollution on any given day depends greatly on which way the wind is blowing," Reif said.

By comparing days with similar conditions but different wind directions – and thus different pollution levels – researchers can effectively conduct a "natural experiment." This allows them to attribute observed health changes, such as increased mortality, directly to air pollution. This innovative approach, he noted, brings together insights from atmospheric science with robust health and weather data.

The detrimental effects of air pollution on human health are unequivocal, according to Reif. Clinical trials demonstrate direct links to respiratory problems, while epidemiologists have documented associations with cardiovascular disease, cancer, and even dementia. Reif's own work has established a direct causal link between air pollution exposure and increased mortality and medical spending, particularly among older populations. He emphasized the critical need to precisely quantify these effects.

"It's not enough just to say, ‘Well, it's bad for you.’ We need to know how bad for you is it exactly and what value should we place on that,” he said, highlighting the necessity for accurate estimates to inform policy decisions.

Economically, the primary concern remains the direct health impacts, though secondary effects like reduced work capacity or early retirement also contribute to economic costs. Reif acknowledged that complying with air pollution regulations carries a significant price tag, estimated by the EPA to be in the tens of billions of dollars annually. However, his calculations consistently show that "the health benefits are dramatically larger than these cost estimates." The costs of cleanup are borne by a broad array of entities, including both  shareholders and consumers, particularly through energy prices.

Regarding public policy, Reif detailed the federal EPA's approach, where counties exceeding allowable fine particulate matter (PM2.5) limits are required to submit State Implementation Plans. These plans outline strategies for improvement, and non-compliance can lead to sanctions, such as withheld highway funds. Reif views this enforcement mechanism as effective. The ongoing discussion, he noted, centers not so much on compliance but instead on whether current standards should be further tightened. Historically, US air pollution standards have seen continuous tightening, and Reif's recent research, analyzing data from 1990 to 2013, indicates that even at lower pollution levels, negative health effects persist.

"My research suggests it would be beneficial to further tighten those regulatory standards," he said, emphasizing that the health benefits continue to outweigh the compliance costs.

Certain demographics are more vulnerable to air pollution's detriments. Reif pointed to age as the most significant factor, with older individuals experiencing higher mortality rates. Other indicators of poor health, such as frequent hospital admissions, chronic conditions like hypertension, or being in hospice, are also significantly correlated with increased vulnerability.

For the general public seeking to stay informed, Reif recommended the "IQ Air" app, which provides real-time and forecasted air quality index (AQI) levels, broken down by pollutant type.

Reif concluded by underscoring the immense public health achievement represented by the significant reductions in air pollution over the past five decades.

"It is one of the reasons why we live much longer today than we used to," Reif said.

His current research further suggests that the long-term benefits of reduced air pollution, particularly for conditions like cardiovascular disease and cancer, continue to materialize over years and even decades, promising continued health improvements in the future.