This study presents a framework to include environmental externalities into a system of national accounts. The paper estimates the air pollution damages for each industry in the United States. An integrated-assessment model quantifies the marginal damages of air pollution emissions for the US...

Fraas and Lutter raise two important points in their comment on Muller and Mendelsohn (2009): How to design policies for sources that yield negative marginal damages? How does statistical uncertainty in the marginal damages affect the trading ratios across emitters? We address both issues in...