SOCIAL COSTS AND PRICING AMBIENT AIR POLLUTION. Case of Kankoyo Township (Mufulira), Zambia

Abstract

Context and background Air pollution and its effects on residential property values is well elucidated in real estate economics literature but compensation and local property tax implications arguably remain unsettled. Goal and Objectives: This paper examined the relationship between sulphur dioxide emissions from a mining smelter in Mufulira, Zambia and its effects on residential property values on a neighbouring township of Kankoyo. Methodology: The study uses Hedonic-pricing and the Contingent Valuation Method in empirically understanding the air pollution effects and property values. Results: The study found that Kankoyo residents pay 13.2% less rent than their counterparts in a comparable township of Chibolya (control- which is not affected by SO2 fumes). Despite evidence from the rental market, Kankoyo residents pay the same property tax as Chibolya residents- based on a rateable value assessed by the relevant authority. By implication, property tax valuations do not capture environmental infringements on property rights of Kankoyo residents. The study thus argues that a mechanism should be devised to tax the polluters and compensate the affected through some property tax rebate.

Keywords

• residential rental values
• rateable value
• kankoyo-zambia
• property tax
• ambient air pollution
• hedonic pricing