Balancing mitigation policies during pandemics: economic, health, and environmental implications

The strategies implemented to contain the spread of COVID-19 have clearly shown the existence of a nontrivial relation between epidemiological and environmental outcomes. On the one hand, mitigation policy generates unclear pollution effects, since social distancing measures favor a reduction in industrial emissions while health regulations and recommendations contribute to increase it. On the other hand, increased pollution exposes individuals to a higher chance of severe symptoms increasing their probability of death due to respiratory diseases. In order to understand how balancing the different goals in the design of effective containment policies we develop a normative approach to account for their consequences on the economy, health and the environment by analyzing the working mechanisms of social distancing in a pollution-extended macroeconomic-epidemiological framework with health-environment feedback effects. By limiting social contacts and thus disease incidence, social distancing favors health and environmental outcomes at the cost of a deterioration in macroeconomic conditions. We show that social distancing alone is not enough to reverse the growth pattern of both disease prevalence and pollution and thus it is optimal to reduce the disease spread even if this generates a deterioration in environmental conditions. We also extend our baseline model to account for the role of strategic interactions between neighbor economies in which both pollution and disease prevalence are transboundary. In this context we show that free-riding induces sizeable efficiency losses, quantifiable in about 5% excess disease prevalence and 10% excess pollution at the end of the epidemic management program in the case of only two interacting economies.