Preventative Capital Study (Cache County)

We address the issue of optimal investment in “preventative capital” to mitigate episodic, mobile-source air pollution events. We calibrate Berry et al.'s (2015) endogenous-risk model using a unique dataset related to "red air day" episodes occurring in Northern Utah over the past decade. Our analysis demonstrates that, under a wide range of circumstances, the optimal steady-state level of preventative capital stock – raised through the issuance of a municipal “clean air bond” that funds more aggressive mitigation efforts – can meet the standard for PM2.5 concentrations with positive social net benefits. We estimate benefit-cost ratios ranging between 0.9:1 and 2.2:1, depending upon trip-count elasticity with respect to preventative capital stock. These ratios are lower than the range estimated for the 1990 Clean Air Act Amendments in general.