Environmental Economics and Policy Studies (2001) 4: 219-233 Article Environmental Economics and Policy Studies ©Springer-Verlag 2001 Cost benefit analysis of the sulfur dioxide emissions control policy in Japan Ikuho Kochi, Shunji Matsuoka, Mushtaq Ahmed Memon, and Hiroaki Shirakawa Graduate School for International Development and Cooperation, Hiroshima University, 1-5-1 Kagamiyama, Higashi-Hiroshima, Hiroshima 739-8529, Japan Received: January 12,2000/ Accepted: January 31, 2002 Abstract This study attempted to examine the economic efficiency of the sulfur dioxide (SOz) emissions control policy in Japan using a cost-benefit analysis (CBA). The SOz emissions control policy is divided into three stages by epochal policy decisions. Reducing the incidence of chronic bronchitis and asthma are the two main policy benefits considered in this study, and they are estimated mainly based on the cost of illness approach. Policy costs have been derived from private sector investments for pollution control to meet the pollution standards under command and control (CAC) regulations. The estimated results, using a social discount rate of 2.5%, indicate a cost-benefit ratio of 5.39 in stage 1 (1968-1973), 1.18 in stage 2 (1974-1983), and 0.41 in stage 3 (1984-1993). This result indicates that the CAC in Japan used to have strong efficiency but that this efficiency has decreased over time. Our paper suggests that it is necessary to reconsider policy approaches in light of policy efficiency and in moving from SOz to new target priority pollutants. Key words CBA· SOz emissions· Japan· Cost of illness· Willingness to pay 1 Introduction The Organization for Economic Cooperation and Development (OECD) described Japan's environmental policy during the 1970s as a dramatically successful effort to reduce pollution, especially sulfur emissions and heavy metal pollution (OECD 1977). However, the OECD also pointed out in its report that Japan's pollution abatement policy was inefficient because it relied on command and control (CAe) approaches. The CAC approach to environmental regulation is inherently inefficient according to many economists (Turner et al. 1993; Amano 1997). Most of them have criticized CAC based on the theoretical Presented at the Seminar on Economic Analysis of Environmental Management, Policy Research Center for Environment and Economy (PRCEE), State Environmental Protection Administration (SEPA), Beijing, P.R. China, December 1999