session 9a introduction to the economics of pollution control: health issues
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Session 9A Introduction to the Economics of Pollution Control: Health Issues. John A. Dixon [email protected] Ashgabad, November, 2005 Adapted from materials prepared by Maureen Cropper The World Bank. What Questions Can Economic Valuation/BCA Help Answer?. - PowerPoint PPT PresentationTRANSCRIPT
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Session 9A
Introduction to the Economics of Pollution Control: Health Issues
John A. [email protected]
Ashgabad, November, 2005Adapted from materials prepared by Maureen Cropper
The World Bank
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Caspian EVE 2005/UNDP and WBI John A. Dixon, Economics of Pollution Control
What Questions Can Economic Valuation/BCA Help Answer? How stringent should environmental standards be for
Air quality? Surface water quality? Drinking water quality? What about POPs? Any other pollutant?
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Caspian EVE 2005/UNDP and WBI John A. Dixon, Economics of Pollution Control
Benefits and Costs of Pollution Control Four categories of benefits could be examined:
Human health (the focus here) Visibility (amenity values) Ecological Effects (and ecosystem
services) Agricultural Benefits (change in
production)
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Caspian EVE 2005/UNDP and WBI John A. Dixon, Economics of Pollution Control
Valuing Environmental Health Effects
Damage Function Approach Value of number of cases of illness/death avoided =
Number of Cases Avoided * Value per Case Value per Case Avoided should reflect individual’s
willingness to pay (WTP) to avoid illness or risk of death
Human Capital/Cost of Illness Approach, which focuses on lost productivity, medical costs, generally serves as a lower bound to WTP
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Caspian EVE 2005/UNDP and WBI John A. Dixon, Economics of Pollution Control
The numbers can be large! For example, in 2010 the Monetized Benefits from the US Clean Air Act are estimated as follows:
0 20 40 60 80 100 120
Agriculture
Visibility
Productivity
Other Morbidity
Chronic Bronchitis
Mortality
Cost
Billions of 1990 US$
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Caspian EVE 2005/UNDP and WBI John A. Dixon, Economics of Pollution Control
Steps in Calculating Health Benefits for Air or Water Quality Improvements
Predict change in emissions of criteria pollutants associated with air/ water quality regulations
Translate changes in emissions into population-weighted changes in ambient exposures
Calculate associated changes in health outcomes Reduced premature mortality Reduced hospital admissions Fewer cases of chronic bronchitis or diarrhea
Assign a dollar value to cases of illness, mortality avoided
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Caspian EVE 2005/UNDP and WBI John A. Dixon, Economics of Pollution Control
Air Pollution Example: Studies of the Health Impacts
Examine effects of acute air pollution exposure on Premature death Hospital admissions for heart, lung disease Emergency room visits for heart, lung disease Work-loss days
Examine effects of chronic exposure on Premature death Chronic bronchitis
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Caspian EVE 2005/UNDP and WBI John A. Dixon, Economics of Pollution Control
Interpretation of Dose-Response Function (or DRR)
Dose-response function relates health effects to air pollution concentrations and other factors affecting health
Slope of dose-response function measures the percentage change in the health outcome for a one unit change in PM10
For example, a 10 microgram reduction in PM10 reduces deaths by about 4% in studies of the impact of long-term exposure to air pollution on deaths
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Caspian EVE 2005/UNDP and WBI John A. Dixon, Economics of Pollution Control
Projected Reductions in Illness due to the US Clean Air Act, Titles I - V
Health Endpoint Pollutant 2010 Mean reduction
Mortality
Age 30+ PM et al 23,000
Chronic Illness
Chronic bronchitis
Chronic asthma
PM
Ozone
20,000
7,200
Hospitalization
Respiratory admissions
Cardiovascular admissions
Asthma-related emergency room visits
PM, CO, NO2, SO2, Ozone
PM, CO, NO2, SO2, Ozone
PM, Ozone
22,000
42,000
4,800
Minor Illness
Avoided respiratory illnesses and symptom-days, asthma attacks, work loss days, etc.
PM, NO2, SO2, Ozone Millions of cases/incidence
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Caspian EVE 2005/UNDP and WBI John A. Dixon, Economics of Pollution Control
Valuing Environmental Health EffectsThe Damage Function Approach: Value of number of cases of illness/death avoided = Number of
Cases Avoided * Value per Case
Value per Case Avoided should reflect individual’s willingness to pay (WTP) to avoid illness or risk of death
Human Capital/Cost of Illness Approach, which focuses on lost productivity, medical costs, generally serves as a lower bound to WTP
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Caspian EVE 2005/UNDP and WBI John A. Dixon, Economics of Pollution Control
Valuing Risks to Life: What Is to Be Valued?
Epidemiologic studies predict number of deaths avoided
Treat these as equivalent to reducing risk of death for each person in the exposed population
Risk reduction per person = (Number of deaths avoided)/(Size of exposed population)
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Caspian EVE 2005/UNDP and WBI John A. Dixon, Economics of Pollution Control
Key Concepts Concept of a Statistical Life
Reducing risk of death by 1 in 10,000 for each of 10,000 people saves one statistical life
Value of a Statistical Life (VSL) If each of the 10,000 people is willing to pay
$500 for the 1 in 10,000 risk reduction the Value of a Statistical Life is = 10,000 x
$500 = $5,000,000
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Caspian EVE 2005/UNDP and WBI John A. Dixon, Economics of Pollution Control
How to Measure WTP for a Reduction in Risk of Death?
Labor Market Studies Use compensating wage differentials to value risks
of death Contingent Valuation Studies
Ask people directly what they would pay for a change in risk of death
Averting Behavior Studies Use data on seatbelt use, purchase of smoke detectors,
switch to low-tar cigarettes
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Caspian EVE 2005/UNDP and WBI John A. Dixon, Economics of Pollution Control
Empirical Estimates of Value of a Statistical Life (VSL) in the US
Value of Statistical Life estimates range between $ 1 - 10 million (1990 USD); USEPA’s preferred estimate is $4.8M (1990 USD)
Problems: Average age of worker is 40—older than average age
of person whose life is extended by an environmental program
Estimates of VSL from Averting Behavior Studies almost one order of magnitude lower than in Labor Market Studies
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Caspian EVE 2005/UNDP and WBI John A. Dixon, Economics of Pollution Control
Valuing Reductions in Morbidity (sickness) Private WTP for a reduction in risk of illness
should reflect: Value of lost work time Value of lost leisure time Value of expenditures to treat illness Value of expenditures to avoid illness Discomfort (pain) of illness
Value to Society of the Risk Reduction = Individual’s WTP plus reduction in costs borne by society
Cost of Illness = Value of lost work time + Value of medical expenditures
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Caspian EVE 2005/UNDP and WBI John A. Dixon, Economics of Pollution Control
Approaches to Valuing Morbidity Ask directly WTP to avoid illness or risk of
illness
Look at rate of substitution of one risk for another (Risk-Risk Tradeoffs)
Use Cost of Illness estimates as a lower bound to WTP
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Caspian EVE 2005/UNDP and WBI John A. Dixon, Economics of Pollution Control
Health Effects in the US: Valuation per health outcome (1990 $)
Endpoint Pollutant Valuation (mean est.)
Mortality PM10 4,800,000 Per case
Chronic Bronchitis PM10 260,000 Per case
Chronic Asthma O3 25,000 Per case
Hospital Admissions
All Respiratory SO2, NO2, PM10,O3 6,900 Per case
All Cardiovascular SO2, NO2, CO, PM10,O3 9,500 Per case
Emergency Room Visits for Asthma PM10,O3 194 Per case
Respiratory Illness and Symptoms
Acute Bronchitis PM10 45 Per case
Asthma Attack or Moderate or Worse Asthma Day PM10,O3 32 Per case
Acute Respiratory Symptoms SO2, NO2, PM10,O3 18 Per case
Upper Respiratory Symptoms PM10 19 Per case
Lower Respiratory Symptoms PM10 12 Per case
Shortness of Breath, Chest Tightness, or Wheeze PM10, SO2 5.3 Per day
Work Loss Days PM10 83 Per day
Mild Restricted Activity Days PM10,O3 38 Per day
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Caspian EVE 2005/UNDP and WBI John A. Dixon, Economics of Pollution Control
Valuing Morbidity and Mortality in the Caspian region Persian Gulf Environmental Damages (air pollution
from burning oil wells) VSL calculations from Iran Other examples And don’t forget the other types of values:
Amenities Ecosystem effects Agricultural/ fisheries production