Bejing now is going through a war with its air which has kept a horrifying AQI (air quality index) since one month ago. Any reading exceeding index of 100 is regard as unhealthy for sensitive groups. However, Beijing even got a record of 785 which always has a steady performance of over 500.
The most obvious effects that polluted air will bring to us is the harm to citizens’ healthy. In fact, any index above AQI 400 is hazardous for all people. The unhealthy of people will bring lower product efficiency and the frequency of sick leave will be higher, etc. Also Bad air will erode facilities and buildings, and also be a obstacle for Beijing to draw investment or excellent people to settle down. Those effect on economy is uncountable.
In environmental economic, this externality is brought by excess vehicles in Beijing, the number of which is half as Tokyo but twice time the intense of use, and coal burning around Beijing area. We pay for gasoline and expensive cars but never paid for the emissions from cars. And also for the coals, they are never priced for their poisonous emissions.
So far, the cost to bring down the air pollute has not been public nor the effect has been shown. but one thing can be sure is that cost is not going to exceed benefit, because no one is taking the price of air, a precious and finite resource, into consideration. For now, air is non-rival and non exclusive, but who can say that in future?
refernces:
http://www.economist.com/blogs/analects/2013/01/beijings-air-pollution
http://www.chinadaily.com.cn/china/2012-06/11/content_15494160.htm