Pollution, Property, and Premiums

24 Feb 2025

I saw Knight and Frank’s Q4 2024 Global Luxury Market Rankings, and Delhi, Mumbai, and Bengaluru were among the top 15 cities in terms of rise in home price increase.

What doesn’t get nearly enough attention is the AQI of the three cities. The pricier cities in India have worse air quality, and these are averages for the city; most places have a higher AQI.

On a broader note, according to this article in Our World in Data pollution levels broadly seem to follow a U-shaped pattern. In the initial stages of a country’s development, pollution levels rise dramatically and then fall as a country develops. This pattern seems to hold across the US, the UK, and even China.

But despite this, we don’t have to accept pollution as a given because of technological advancements; we can do a lot to reduce the obvious sources of pollutants. Take the case of sulfur dioxide (SO₂) and nitrogen oxides (NOₓ). The primary source of SO₂ is burning coal, which makes up about 70% of our energy mix.

One obvious way to reduce SO₂ emissions is to install scrubbers in power plants, which helps capture sulfur, which we haven’t done in India. Even though China continues to burn record amounts of coal, its sulfur emissions have gone down because of this. In India, both coal use and SO₂ emissions are still rising.

It’s the same thing with nitrogen oxides (NOₓ). Transportation is the biggest source of the pollutants, and people in urban areas are exposed more to them because of density and congestion. A lot can be done with stricter emission standards, which have historically forced automakers to innovate with technologies like catalytic convertors. Another thing that helps is the electrification of transport fleets.

Historically, the U-shaped emissions curve took centuries. Thanks to technological advancements, this can be much faster in the case of developing countries like us.

Btw, pollution will eventually feed into prices. Higher pollution means more health issues, and insurance companies are apparently considering increasing health premiums by 10%-15% for people in Delhi. Now think about all the other channels through which pollution will interact with prices and inflation. This is scary.

Go to link →