Does environmental policy affect scaling laws between population and pollution? Evidence from American metropolitan areas

Modern cities are engines of production, innovation, and growth. However, urbanization also increases both local and global pollution from household consumption and firms’ production. Do emissions change proportionately to city size or does pollution tend to outpace or lag urbanization? Do emissions scale differently with population versus economic growth or are emissions, population, and economic growth inextricably linked? How are the scaling relationships between emissions, population, and economic growth affected by environmental regulation? This paper examines the link between urbanization, economic growth and pollution using data from Metropolitan Statistical Areas (MSAs) in the United States between 1999 and 2011. We find that the emissions of local air pollution in these MSAs scale according to a ¾ power law with both population size and gross domestic product (GDP). However, the monetary damages from these local emissions scale linearly with both population and GDP. Counties that have previously been out of attainment with the local air quality standards set by the Clean Air Act show an entirely different relationship: local emissions scale according to the square root of population, while the monetary damages from local air pollution follow a 2/3(rds) power law with population. Counties out of attainment are subject to more stringent emission controls; we argue based on this that enforcement of the Clean Air Act induces sublinear scaling between emissions, damages, and city size. In contrast, we find that metropolitan GDP scales super-linearly with population in all MSAs regardless of attainment status. Summarizing, our findings suggest that environmental policy limits the adverse effects of urbanization without interfering with the productivity benefits that manifest in cities.