Assessing the costs of ozone pollution in India for wheat producers, consumers, and government food welfare policies

Peer Reviewed
31 July 2023

This article assess the economic burden of air pollution on India’s wheat production, quantifying the cost of ozone pollution for producers, consumers, and the government in three policy scenarios. Previous studies overlooked the economic dynamics of supply changes and food security policies that are crucial in India’s regulated grain markets. Ozone mitigation would cause a net loss of USD 0.24 to a gain of 4.2 billion in total social welfare. The minimum support price policy protects the farmers’ welfare, but increases government costs, causing a net welfare loss. Both alternative policies allow prices to fall, resulting in overall increases in net social welfare but causing losses to producers. Therefore, farmer support policies need re-examination to maximize the social welfare of pollution mitigation for all stakeholders.

Ramaswami, Bharat , Pandey Divya, Sharps Katrina, et al.

We evaluate the impact of ozone pollution on wheat yields in India and its economic consequences for producers, consumers, and the government. Using an ozone flux–based risk assessment, we find that ambient ozone levels led to a 14.18% average reduction in wheat yields from 2008 to 2012. Irrigated wheat was particularly susceptible to ozone-induced losses, highlighting a potential threat to climate-change adaptation through irrigation expansion. Employing an economic model, we analyze the effects of a "pollution-free" scenario on various factors. In a pollution-free setting, a fixed-price scenario increases producer welfare by USD 2.7 billion, but total welfare decreases by USD 0.24 billion due to increased government costs (USD 2.9 billion). In fixed-procurement and fixed-expenditure scenarios, ozone mitigation lowers wheat prices by 38.19 to 42.96%. While producers incur losses (USD 5.10 to 6.01 billion), gains to consumers and governments (USD 8.7 to 10.2 billion) outweigh these losses. Our results highlight that the government and consumers primarily bear the costs of ozone pollution. To optimize wheat production and enhance social welfare, alternative approaches to support producers beyond fixed-price procurement may be necessary. We emphasize the importance of including air pollution considerations in programs aimed at bolstering agricultural resilience to climate change.

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Publication | 18 December 2023