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Data Sources and Measurement Issues

A real world pollutant useful for our purposes would: (1) be a by-product of goods production; (2) be emitted in greater quantities per unit of output in some industries than others; (3) have strong local effects; (4) be subject to regulations because of its noxious effect on the population; (5) have well known abatement technologies available for implementation; and (6), for econometric purposes have data available from a mix of developed and developing and “open” and “closed” economies. An almost perfect choice for this study is sulfur dioxide.


Sulfur dioxide is a noxious gas produced by the burning of fossil fuels. Natural sources occur from volcanoes, decaying organic matter and sea spray. Anthropogenic sources are thought to be responsible for somewhere between one-half to one-third of all emissions (UNEP (1991), Kraushaar (1988)).

Emissions in developed countries accrue to a large extent from electricity generation and the smelting of non-ferrous ores; in some developing countries diesel fuel and home heating are also large contributors. SO2 is primarily emitted as either a direct or indirect product of goods production and is not strongly linked to automobile use. As a result, because energy intensive industries are also typically capital intensive, a reasonable proxy for dirty SO2 creating activities may be physical capital intensive production processes.

SO2 emissions can be controlled by altering the techniques of production in three ways. By the process of flue gas desulphurization (adding scrubbers to flue stacks), by altering the combustion process of fuels, and by a change to lower sulfur content fuels. Therefore, readily available although costly methods for the control of emissions exist and their efficacy is well established. In addition, in many countries SO2 emissions have been actively regulated for some time.