Economic solutions aren’t helping us crack an air pollution problem

livemint.com:

I have been in Delhi for a little over a week, and, as is the case at this time of the year, the city is highly polluted. The trouble is Mumbai, where I live, has also been very polluted this year. Mumbai’s problem stems from a massive increase in construction in 2023.

As a report by research firm Liases Foras points out: “The annual incremental construction in the BMC (Brihanmumbai Municipal Corporation) limit of Mumbai has grown 68% since 2022 and 142% from 2021." This has increased construction dust. Of course, like with all metropolitan cities, vehicular pollution remains an issue. A recent report in the Mumbai Mirror points out: “Mumbai has the highest density of private cars in the country—650 per km of road." And the sea breeze no longer seems as effective as it used to be.

In economics, first-order effects drive decisions. Construction has gone up because in January 2021, the Maharashtra government halved all premiums to be paid for real-estate approvals. The idea was to boost the sector, which had been negatively impacted by the pandemic.

This sector has a huge multiplier effect. When it does well, companies producing cement, steel, bricks, glass, paints, furnishings, ceramics, etc, all tend to do well. Jobs are also created.

As Iqbal Singh Chahal, the BMC’s municipal commissioner, recently told The Times of India, construction is the city’s backbone. This is a great example of a first-order effect leading to a decision. The trouble is such decisions have higher-order effects too.