Benefit transfer in valuing the costs of air pollution

Gordon HughesThe 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 forall ages

Prop for> 40 yrs

Prop forall ages

Prop for> 40 yrs

Prop forall ages

Prop for> 40 yrs

Prop forall ages

Prop for> 40 yrs

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

No of premature deathsavoided

440.7 421.3 272.6 221.4 319.3 155.1 523.9 468.9

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 prematuredeath avoided

6.6 5.4 11.2 6.2 21.1 8.2 10.8 8.3

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 prematuredeath avoided

5.0 3.8 10.1 4.8 21.5 7.0 8.0 5.4

C. Baseline data

Crude mortality rate 10.8 6.7 7.8 12.9

Estimated no of YLLs perwork accident

24.3 24.9 25.4 24.5

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 RussiaGNP per capita ($ 1995) 27,350 620 350 2,290VOSL based on work risks ($ 1995) 4,500,000YLLs for work risks 24.3VOSL per YLL 185,200Multiple of GNP per capita per YLL 6.8

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

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

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

VOSL estimates for non-proportional hazard with odds ratio of 1.0200YLLs lost per premature death 5.6 6.4 8.4 8.5Implied 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

0 5 10 15 20 25

Age in months

0.88

0.90

0.92

0.94

0.96

0.98

1.00

Probability of survival

Actual Clean cooking fuel All household environment

Improvements in the household environment and the burden of

diseaseScenario Total number of deaths (000s)

All India Urban RuralA. Infant deaths ( < 12 months old)Model baseline estimates 1,605 181 1,4241. All households use a clean cooking fuel 1,184 174 1,0112. All households with private water & sanitation 1,200 160 1,0403. All households with clean cooking fuel + privatewater & sanitation

910 154 757

B. Deaths of children < 5 years oldModel baseline estimates 2,051 223 1,8271. All households use a clean cooking fuel 1,442 213 1,2302. All households with private water & sanitation 1,515 196 1,3193. All households with clean cooking fuel + privatewater & sanitation

1,094 187 907

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 control strategies

Cost of urban air pollution in Asia(under a business as usual scenario)

1995 2000 2005 2010 2015 2020Year

0

10

20

30

40

50Cost of air pollution as % of urban GDP

China citiesJakartaManilaBangkokSeoul

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

CEE/NIS CEE NIS0

10

20

30

40

50

Excess deaths per year in 000s

19901995

Source : World Bank estimates using data for 57 cities with comparable data for 1990 & 1995

Valuation of air pollution damages in CEE/NIS countries, 1990-95

CEE/NIS CEE NIS0

1

2

3

4

5

6

7

Total cost in $ billion per year at 1995 incomes

19901995

Source : World Bank estimates using data for 57 cities with comparable data for 1990 & 1995

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(‘000s p.a.)

Burden of disease(million DALYs p.a.)

Direct Local Total Direct Local Total

China 150 590 740 4.5 14.0 18.5East Asia and Pacific 100 150 250 3.5 3.8 7.3Established Market Economies 0 20 20 0 0.5 0.5Former Socialist Economies 10 200 210 0.2 3.8 4.0India 490 460 950 17.0 10.1 27.1Latin America & Caribbean 10 130 140 0.3 3.7 4.0Middle East Crescent 70 90 160 2.4 2.5 4.9South Asia 220 120 340 7.6 2.6 10.2Sub-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 pollutionin $ billion at 1995 prices

Direct Local Regional Global Total

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

World excl EME countries 1,701 4,878 402 1,346 8,327World 1,701 5,909 1,763 2,497 11,870

Long run damage due to air pollutionper capita and relative to GNP

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

Direct+Local Global Direct+Local Global

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

World 1,347 442 27 9

Cumulative costs of local and global damage by income

100 1000 10000 100000

GNP per person in 1995 $ (log scale)

0

2

4

6

8

Present values of damages in $ trillion

0

5

10

15

20

Ratio of local to global costs

Cumulative local damage Cumulative global damage Ratio of cumulative local damage tocumulative global damage

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 associated

with different environmental/social factors

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