environmental accounts. It also presents issues for environmental accounting similar to those encountered with other environmental assets, such as water quality and climate change. Severely degraded air quality in many cities of the United States in the 1960s generated a number of federal regulations during the early 1970s designed to reduce emissions of pollutants that contributed to this degradation. Air quality has many dimensions, and early regulations focused on some of the more obvious and easily addressed problems. As scientific research further illuminated the less immediately obvious impacts of degraded air quality, such as chronic effects on health, these earlier controls were tightened, and new regulations addressed a wider range of pollutants.

The first subsection below examines the various market and nonmarket impacts of air quality. The second reviews some major pollutants that result in degradation of air quality and their primary physical effects. This is followed by review of a recent attempt to estimate comprehensively the benefits associated with improvements in air quality. The fourth subsection addresses the relevance of these damage estimates to environmental accounting. The section ends with the panel's conclusions on accounting for air quality.

Air Quality Impacts on Market and Nonmarket Activities

Degraded air quality can have a harmful effect on both market activities (e.g., reduced crop yields or lost work-days) and nonmarket activities (e.g., losses due to illness beyond those related to paid labor, such as those to retired persons, and reduced amenities in recreational facilities). These air quality effects belong in the production accounts of environmental accounts. Moreover, degraded air quality can affect the value of natural-resource assets (e.g., acid deposition damage to forests), can cause deterioration of physical capital (e.g., damage to the exterior of buildings), and has long-term health impacts that affect human capital (e.g., premature death and effects of lead on measured IQ of children). Such effects might be included in the asset component of environmental accounts. With assets as with production, there are both market and nonmarket effects: market impacts include capital asset deterioration and forest timber loss, while nonmarket impacts include lost value due to damaged landmarks or degradation of forests for recreational purposes.

Major Air Pollutants and Their Health and Ecological Effects

Table 4-5 lists some important health and ecological effects of exposure to six air pollutants for which the U.S. Environmental Protection Agency (EPA) has established National Air Quality Standards—carbon

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