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					Benefit transfer in valuing
 the costs of air pollution

     Gordon Hughes
The World Bank & NERA UK
               The issues

 How much does air pollution contribute to
  the total burden of disease ?
 Links between valuation-based
  approaches and those using a health
  metric (DALYs)
 Differences in impacts across countries or
  regions of the world
 Role of different types of air pollution :
  indoor air pollution, urban air pollution,
  etc
      Benefit transfer : DALYs vs
                 dollars
   Global burden of disease approach
    – includes discounting and age weighting
    – widely applied to assessing health
      interventions
 Valuation for cost-benefit analysis across
  health / non-health concerns and policies
 Sensitivity to demographic characteristics
  of the exposed populations
 Are hazards proportional ?
        A DALY-based approach

   Wide range of YLLs lost per air pollution
    death
    – with proportional hazard the range is from 6.6
      for developed countries to 21.1 in India
    – with hazard after age 40 only, the range is
      from 5.4 for developed countries to 8.3 for
      Russia/Ukraine
   In most cases the long run saving in YLLs
    is significantly lower because of the links
    between mortality rates and population
    age structure
Years of life lost due to air pollution deaths

  Survival table                       Western                  China                  India            Russia/Ukraine

  Type of hazard                  Prop for   Prop for   Prop for    Prop for   Prop for    Prop for    Prop for   Prop for
                                  all ages   > 40 yrs   all ages    > 40 yrs   all ages    > 40 yrs    all ages   > 40 yrs


  A. Impact effect of 50 ug/m3 reduction in air pollution (for population of 1 million)

  No of     premature    deaths   440.7      421.3      272.6       221.4      319.3           155.1   523.9      468.9
  avoided

  No of YLLs avoided              2,900.3    2,287.0    3,058.5     1,383.4    6,725.2     1,279.2     5,641.0    3,884.7

  No of YLLs per premature          6.6        5.4       11.2           6.2     21.1            8.2     10.8        8.3
  death avoided

  B. Long run effect of 50 ug/m3 reduction in air pollution (for population of 1 million)

  No of YLLs avoided              2,184.8    1,594.5    2,755.4     1,054.1    6,871.2     1,082.3     4,197.9    2,533.8

  No of YLLs per premature          5.0        3.8       10.1           4.8     21.5            7.0      8.0        5.4
  death avoided

  C. Baseline data

  Crude mortality rate             10.8                   6.7                    7.8                    12.9

  Estimated no of YLLs per         24.3                  24.9                   25.4                    24.5
  work accident
Using DALYs for VOSL transfers

   VOSLs derived from wage differential
    studies
    – an average loss of about 24 YLLs per death
    – typical VOSLs are 6-8 times GNP per capita
      per YLL
   For air pollution deaths, range of VOSLs
    as multiple of GNP per capita :
    – proportional hazard : 45 for the US, about 75
      for China & Russia/Ukraine,140 for India
    – non-proportional hazard : 37 for the US, 43
      for China, 57 for India & Russia/Ukraine
       Values of a statistical life based on
            DALY / YLL calculations
Baseline data                                 USA          China       India    Russia
    GNP per capita ($ 1995)                  27,350         620         350      2,290
    VOSL based on work risks ($ 1995)      4,500,000
    YLLs for work risks                       24.3
    VOSL per YLL                            185,200
    Multiple of GNP per capita per YLL         6.8

VOSL estimates for proportional hazard with odds ratio of 1.0085
    YLLs lost per premature death             6.6            11.2       21.1      10.8
    Implied YLL-based VOSL                 1,220,000        47,000     50,000   167,000

VOSL estimates for proportional hazard with odds ratio of 1.0200
    YLLs lost per premature death             6.8            11.5       21.4      11.1
    Implied YLL-based VOSL                 1,260,000        48,000     51,000   172,000

VOSL estimates for non-proportional hazard with odds ratio of 1.0085
    YLLs lost per premature death             5.4            6.2         8.2      8.3
    Implied YLL-based VOSL                1,010,000        26,000      20,000   128,000

VOSL estimates for non-proportional hazard with odds ratio of 1.0200
    YLLs lost per premature death             5.6            6.4         8.4      8.5
    Implied YLL-based VOSL                1,030,000        27,000      20,000   132,000
      Indoor air pollution in India

 What is the role of environmental factors
  in the total burden of disease ?
 Studies show large impact of indoor air
  pollution on infant mortality & morbidity
 Environmental factors account for 18-
  21% of total burden of disease
    – indoor air pollution is largest component
    – urban air pollution relatively small but
      growing
      Indoor air pollution and
    rural infant/child mortality
 r
P obability          of s ur v iv a
1 .0 0

0 .9 8

0 .9 6

0 .9 4

0 .9 2

0 .9 0

0 .8 8
 0     5      1 0     1 5     2 0   2 5
               Age       in   month
           C l el n co o
         A ctu aa A l l h ki n
                        o u   gh oe
                             se fu l d
           Improvements in the household
           environment and the burden of
                     disease
Scenario                                                   Total number of deaths (000s)
                                                      All India      Urban           Rural
A. Infant deaths ( < 12 months old)
Model baseline estimates                               1,605           181          1,424
1. All households use a clean cooking fuel             1,184           174          1,011
2. All households with private water & sanitation      1,200           160          1,040
3. All households with clean cooking fuel + private     910            154           757
water & sanitation

B. Deaths of children < 5 years old
Model baseline estimates                               2,051           223          1,827
1. All households use a clean cooking fuel             1,442           213          1,230
2. All households with private water & sanitation      1,515           196          1,319
3. All households with clean cooking fuel + private    1,094           187           907
water & sanitation
    Urban air pollution in China &
                Asia
 Costs of urban air pollution projected
  from 1995 to 2020 under various
  scenarios
 Already large in 1995, but would get
  much worse under a business as usual
  scenario
 Provided the basis for cost-benefit
  analyses of alternative environmental
  strategies
 Analysis had significant role in efforts to
  persuade countries to adopt low/medium
         Cost of urban air pollution in Asia
               (under a business as usual scenario)
     Cost of air pollution as % of urban GDP
50


40
                                                        
                                                           China cities
30                                                         Jakarta
                 
                                                          Manila
                                                          Bangkok
20                                                      
                                                  
                                                  
                                                         Seoul
                                           
                             
                                                 
10               
                                          
     
                            
                                                    
0
1995           2000         2005          2010   2015   2020
                                   Year
       The transition in CEE/NIS
               countries
 Did the transition in the CEE/NIS
  countries reduce environmental damage ?
 Yes, in Central & Eastern Europe
    – significant fall in exposure levels + stable or
      declining mortality rates
   No, in Russia, Ukraine & the NIS
    – small fall in exposure levels offset by
      significant deterioration in general health
      conditions and mortality rates
  Premature mortality due to air
            pollution
 in CEE/NIS countries, 1990-95
Ex c e s s        d e a th s       p e
50



40



30
                               1 9 9
                               1 9 9
20



10



0
         C EE
     C EE/N IS N IS
S o r
   u ce     :   W o ld
                   r     B ank     est
Valuation of air pollution damages
 in CEE/NIS countries, 1990-95
To ta l    c o s t in      $   b illio
7


6

5


4
                                1990
                                1995
3


2


1

0
        C EE
    C EE/N IS N IS
S o r
   u ce     :   W o ld
                   r     B ank       est
    Local, regional & global air
             pollution
 Damage estimation & benefit transfer
  methods used to assess the relative
  importance of different categories of air
  pollution
 Many technical questions but broad
  results are fairly robust
 Highlights large health burden due to
  indoor & urban air pollution over next 2
  decades
 Very different regional priorities in
  addressing air pollution concerns
         Premature mortality and burden of
            disease due to air pollution
                 (projected averages 2000-2020)


Region                              Premature deaths             Burden of disease
                                       (‘000s p.a.)            (million DALYs p.a.)
                               Direct     Local     Total   Direct     Local     Total

China                           150       590       740     4.5        14.0      18.5
East Asia and Pacific           100       150       250     3.5        3.8       7.3
Established Market Economies     0        20        20       0         0.5       0.5
Former Socialist Economies      10        200       210     0.2        3.8       4.0
India                           490       460       950     17.0       10.1      27.1
Latin America & Caribbean       10        130       140     0.3        3.7       4.0
Middle East Crescent            70        90        160     2.4        2.5       4.9
South Asia                      220       120       340     7.6        2.6       10.2
Sub-Saharan Africa              530       60        590     18.1       1.2       19.3

World                          1570      1810       3480    53.4       42.2      95.6
         Present value of damage due to air
             pollution for 21st century

Region                                    Present value of damage due to air pollution
                                                   in $ billion at 1995 prices
                                     Direct      Local       Regional     Global      Total

China                                 245        1,328        121          22        1,715
East Asia and Pacific                 200         512          62         286        1,061
Established Market Economies (EME)     0         1,031       1,361       1,151       3,543
Former Socialist Economies             0          641          73          27         742
India                                 481         605          23         252        1,360
Latin America & Caribbean              39        1,074         56         357        1,527
Middle East Crescent                  100         483          43         168         794
South Asia                            247         164          3           50         464
Sub-Saharan Africa                    389          71          21         184         665

World excl EME countries             1,701       4,878        402        1,346       8,327
World                                1,701       5,909       1,763       2,497      11,870
    Long run damage due to air pollution
       per capita and relative to GNP

Region                                Present value of damage due to air pollution
                                  Per person in $ 1995           as % of 1995 GNP

                               Direct+Local    Global      Direct+Local      Global

China                             1,307           18            211            3
East Asia and Pacific             1,291          519             71            29
Established Market Economies      1,199         1,338            5             5
Former Socialist Economies        1,552           65             78            3
India                             1,168          271            365            85
Latin America & Caribbean         2,347          754             70            22
Middle East Crescent              1,641          474             77            22
South Asia                        1,457          176            352            42
Sub-Saharan Africa                 794           317            162            65

World                             1,347          442            27              9
     Cumulative costs of local and
      global damage by income

 r            R atio of
P es ent v alues of da
8                                    2 0



6                                    1 5



4                                    1 0



2                                    5



0                                0
1 0 0       1 0 0 0             1
                        1 0 0 0 0 0 0
          GN P per            per s o
    Cum lati ve ll a a
       u Cu  m     R
               uo ti ve gm
                    catid o
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                                 ae
                           l f bgml
                   cu m  l
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                Conclusions 1

   Simple methods of benefit transfer are
    not robust
    – must adjust for the type of air pollution hazard
      and differences in age structures & mortality
      rates
    – impact of air pollution on infant/child mortality
      is especially important
   Use of DALYs or YLLs as measure of
    damage caused by air pollution may be
    sufficient for many types of policy
    analysis
    – e.g. comparing the burden of disease
               Conclusions 2

   Doubts about using VOSLs to value the
    costs of air pollution in developing
    countries
    – the resulting estimates are extremely high
      relative to the income of those affected
    – problems of adding-up and consistency are
      more severe for low income / high mortality
      countries
   But, benefit transfer methods can be
    useful for comparisons of the relative
    damages from different types of air
    pollution or other environmental factors