Environmental externalities caused by SO2 and ozone pollution in the metropolitan area of Madrid

Abstract The work performs an assessment of the environmental externalities of SO 2 and ozone pollution in an area 270 km ×200  km surrounding the city of Madrid. The study analyses two situations corresponding to different and extreme cases of atmospheric pollution in the area produced in years 1992 and 1995, respectively. Concentrations fields in these years for these pollutants were estimated in the framework of a project financed by the R+D National Programme and reported elsewhere. Aggregated environmental externalities produced in the area were estimated using these concentration fields and applying the ExternE methodology. Environmental effects analysed were those produced in the health of the people living in the area, effects on agricultural crops, and effects on construction materials. Results obtained for SO 2 show that environmental externalities produced are very high, especially, those related to the effects on health and materials. Results for ozone show also that important damages are produced, specially those related to public health. Total environmental externalities due to SO 2 and ozone amount to 9675 million € in year 1992 and 7664 million € in year 1995 representing 7% of the GDP of the area in 1995. These results are very useful for policy-making since they could be used to assess the cost-effectiveness of policies intended to reduce environmental pollution in the area.