Evaluation of the costs and benefits of household energy and health interventions
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Evaluation of the Costs and Benefits of Household Energy and Health Interventions. 31 st IAEE International Conference, Pre-Conference Workshop on Clean Cooking Fuels Istanbul, 16-17 June 2008 Guy Hutton 1 , Eva Rehfuess 2 and Fabrizio Tediosi 3

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Evaluation of the Costs and Benefits of Household Energy and Health Interventions

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Evaluation of the Costs and Benefits of Household Energy and Health Interventions

31st IAEE International Conference,

Pre-Conference Workshop on Clean Cooking Fuels

Istanbul, 16-17 June 2008

Guy Hutton1, Eva Rehfuess2 and Fabrizio Tediosi3

1 World Bank, Phnom Penh, 2 World Health Organization, Geneva, 3 Università Bocconi, Milan


Why economic evaluation?

Economic evaluation:

  • demonstrates the economic return of investments in an intervention

  • compares the cost-effectiveness/ costs and benefits of one intervention against another

  • helps policy-makers allocate their limited budget

Caveat:

Economic pay-off is not the only criterion

for identifying sound interventions.


Cost-effectiveness analysis

  • How can one maximize health for available resources?

  • perspective: health sector

  • unit: cost-effectiveness ratio, e.g. in $ per healthy life year gained

Courtesy of Dominic Sansoni/World Bank

Cost-benefit analysis

  • Do all the benefits outweigh all the costs of an intervention?

  • perspective: society, multiple sectors

  • unit: benefit-cost ratio in $

Courtesy of Nigel Bruce/Practical Action

Cost-benefit versus cost-effectiveness analysis


annual average economic benefit of intervention

Benefit-cost ratio (BCR)

annual average economic cost of intervention

Comparison measure

Economic costs:

=

  • fuel costs, stove costs

  • programme costs (including R&D investment, education)

Economic benefits:

  • reduced healthcare costs

  • health-related productivity gains

  • time savings

  • environmental impacts


Interventions and scenarios modelled

  • Basic approach:

    • analysis for 11 developing and middle-income WHO subregions

    • separate analysis for urban and rural areas

    • baseline year 2005; ten-year intervention period (2006-2015)

    • 3% discount rate applied to all costs and benefits

  • Baseline:current mix of dung, wood, coal, cleaner fuels, etc.

  • Intervention 1: (50%, 100% coverage, pro-poor)switch to LPG (ethanol)

  • Intervention 2: (50%, 100% coverage)cleaner-burning, fuel-efficient “rocket-type” stove


Important benefit assumptions:health impacts and productivity gains

  • Conclusive evidence for health impact of indoor air pollution:

    • acute lower respiratory infections (ALRI): children under five

    • chronic obstructive pulmonary disease (COPD): adults above 30

    • lung cancer (coal use): adults above 30

  • Avoided health impacts:

    • ALRI, COPD, lung cancer (WHO methodology for burden of disease)

    • LPG/ethanol: risk reduction to baseline risk

    • stoves: 35% risk reduction (personal exposure reduction, lag times)

  • Health-related productivity gains:

    • number of illness-free days and deaths avoided, for type of illness and level of severity

    • valued using human capital approach: daily Gross National Income (GNI) per capita and income-earning life from 15 to 65 years


Important benefit assumptions:time savings and environmental benefits

  • Time savings:

    • due to reduced fuel collection (survey data in selected locations)

    • due to time saved on cooking (laboratory data)

    • valued at GNI per capita

  • Local environmental benefits:

    • avoided deforestation

    • valued using tree replacement cost (labour + sapling + wastage)

  • Global environmental benefits:

    • averted CO2 + CH4 emissions (published studies)

    • valued using carbon trading values (Clean Development Mechanism)


Proposed voluntary MDG target:halve, by 2015, the population cooking with solid fuels,and make improved cookstoves widely available

World Health Organization, Fuel for life: household energy and health. WHO, 2006.


Results (US$ per year):Providing access to LPG, by 2015,to half of those burning solid fuels in 2005

Programme cost: 130 million

Total cost:13 billion

Total benefit: 91 billion

Benefit-cost ratio: 7:1

Benefit-cost ratio*: 4:1

Sensitivity analysis: 2:1 – 29:1

Courtesy of Nigel Bruce/Practical Action

* Intervention cost savings included with economic benefits.


Results (US$ per year):Making improved stoves available, by 2015,to half of those burning solid fuels in 2005

Programme cost:650 million

Total cost: -34 billion(2 billion costs,- 36 billion fuel savings)

Total benefit: 105 billion

Benefit-cost ratio: negative

Benefit-cost ratio*: 61:1

Sensitivity analysis: negative

Courtesy of GTZ

* Intervention cost savings included with economic benefits.


Distribution of economic benefits

LPG

Improved stoves

Health-related productivity gains and time savings due to less fuel collection and cooking constitute the greatest benefits.


Key limitations

  • Considerable variation between world regions, as well as between urban and rural settings.

  • Findings based on global/regional data and assumptions do not necessarily apply to specific countries or programmes.

  • Idealistic, target-based scenarios versus realistic, programme-based analyses.

  • Need to refine optimistic assumptions (e.g. effectiveness of stove, programme costs, unsustainable harvesting of firewood) and pessimistic assumptions (e.g. greenhouse gases included, value of avoided emissions).


Conclusions

  • Globally, both a switch to cleaner fuels and the promotion of fuel-efficient, cleaner-burning stoves appear to be highly cost-effective.

  • Making the economic case remains a challenge:

    • Household energy and health is an inter-sectoral issue with no clear policy lead across countries.

    • Programme level versus household level: Where do costs occur? Where do benefits occur?

  • There is a need for the application and refinement of current cost-benefit analysis methodology at national and programme levels.


For more information:

http://www.who.int/indoorair

Dr Eva Rehfuess

Public Health and Environment

World Health Organization

1211 Geneva 27

Switzerland

Email: [email protected]

Courtesy of Crispin Hughes/Practical Action


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