What role should cost benefit analysis play in air quality management in asia
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What Role Should Cost-Benefit Analysis Play in Air Quality Management in Asia?. Maureen L. Cropper University of Maryland and World Bank December 8, 2004. Outline of Talk. What Do We Mean By a Cost-Benefit Analysis (CBA)? By a Cost-Effectiveness Analysis (CEA)?

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What Role Should Cost-Benefit Analysis Play in Air Quality Management in Asia?

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What Role Should Cost-Benefit Analysis Play in Air Quality Management in Asia?

Maureen L. Cropper

University of Maryland and World Bank

December 8, 2004


Outline of Talk

  • What Do We Mean By a Cost-Benefit Analysis (CBA)? By a Cost-Effectiveness Analysis (CEA)?

  • Why Is It Important to Conduct Cost-Benefit Analyses of Air Quality Control Strategies?

    • What difference has it made in the United States?

    • What role could it play in Asian cities?

  • What Information Is Required to Conduct a CBA?

  • What Is the Potential for Using CBA in Asian Cities?


Cost-Benefit and Cost-Effectiveness Analyses

  • Cost-Benefit Analysis: Monetizes the costs and benefits of an air pollution control strategy, which requires placing a dollar value on health benefits

    • Can be used to determine if costs of a given control strategy exceed the benefits

    • Can be used to rank control strategies—or alternate ambient standards—according to net benefits

  • Cost-Effectiveness Analysis: Divides the cost of an air pollution control strategy by the number of disability-adjusted life years saved (DALYs)

    • DALYs aggregate health benefits in terms of healthy time lost; this avoids monetization

    • Can compare the cost per DALY of air pollution control with the cost per DALY of other health programs


Why Is Cost-Benefit Analysis Useful?

  • It indicates which pollution control measures give the biggest “bang for the buck”

    • In the United States, benefit-cost analyses of air pollution regulations by the USEPA have demonstrated large net benefits from reducing fine particles

      • Title IV of the 1990 Clean Air Act which has reduced SO2 from power plants costs only $2 bil. per year but yields over $60 bil. per year in health benefits

    • Measures to reduce ground-level ozone produce lower net benefits:

      • Costs of ozone control, 1970-1990, constituted 42% of total air pollution control costs but produced less than 42% of benefits

      • Full implementation of the 1997 8-hour ozone standard doesn’t pass the benefit-cost test


How Has Cost-Benefit Analysis Been Used in the U.S.?

  • In the U.S., at the federal level, it has focused air pollution control on the control of fine particles

    • Following the 1990 Clean Air Act, 4 major regulations have been enacted to control fine particles:

      • Tier II emissions standards for passenger vehicles, reduction in sulfur content of gasoline

      • Emission regulations for heavy duty diesel engines, reduction in sulfur content of diesel

      • Control of off-road diesel emissions

      • Additional controls on power plants

  • At the state and local levels, CBA is increasingly being used to craft strategies to comply with ambient standards within an airshed

    • ASAP is a tool for performing cost-benefit analysis at the local level that the USEPA will make available in 2005


How Could Cost-Benefit Analysis Be Used in Asia?

  • To determine the relative effectiveness (net benefits) of stationary source v. mobile source controls

    • This will depend on:

      • The size of emissions reductions achieved by each policy

      • Where within a metropolitan area emissions are reduced

      • The size of the exposed population in each area

      • The costs of the control measures

  • To help select among alternate mobile source controls:

    • Some mobile source options with high cost per ton of PM reduced (e.g., CNG buses) may pass the benefit-cost test

    • Looking only at the cost per ton removed ignores:

      • Where spatially emissions are reduced (how many people are affected)

      • The value of the health benefits (a high cost per ton strategy can dominate a low cost per ton strategy that affects fewer people)


What Information Is Required for a Cost Benefit Analysis?

  • An emissions inventory

    • Must describe emissions, by location (grid square), with and without the control strategy

  • An air quality model, calibrated for the city

    • Need to simulate ambient concentrations of key pollutants (e.g., PM10, PM2.5) with and without the control strategy

    • Inputs to the model include an emissions inventory, meteorological data and other information (e.g., ammonia concentrations)

    • Outputs = Ambient pollution concentration for each location

  • Information to calculate health effects

    • Size of the population in each location (grid square)

    • Baseline incidence of each health endpoint to be evaluated (death rate by cause, incidence of chronic bronchitis)

    • Slope of concentration-response function for each endpoint

  • Value of each health endpoint

  • Costs of the control strategy


What Information Is Easiest to Acquire for Asian Cities?

  • Information to calculate health effects

    • Geo-referenced population data may be obtainable from national census

    • Baseline incidence of each health endpoint:

      • Obtain death rates from vital statistics data

      • Morbidity incidence may be available at from national health surveys

    • Slope of concentration-response function:

      • Epidemiological literature in Asian countries is growing

      • Concentration-response transfer possible if done with care

  • Value of each health endpoint

    • Conservative approach to estimating value of avoided illness and death requires data on earnings and medical costs

    • Asian studies of willingness to pay to avoid illness and reduce risk of dying are growing; benefits transfer is possible

  • Costs of the control strategy


What Information Is Hardest to Acquire for Asian Cities?

  • An Emissions Inventory

    • Requires geo-referenced data on location of sources

    • Requires emissions factors and activity levels for each source

    • Software to facilitate construction of an emissions inventory is available, but must be careful to use local emissions factors

  • An Air Quality Model, Calibrated for the City

    • Simple air quality model for directly emitted PM (e.g., Box model) may be adequate if PM is main pollutant of interest and secondary particle formation is not a consideration

    • Modeling of ground-level ozone, secondary particle formation is more difficult

    • Once a model has been calibrated, it can be approximated by a response surface to simplify further calculations


What Is the Potential for Using CBA in Asian Cities?

  • Cost-Benefit Analyses Have Been Conducted in Several Asian Cities

    • CBAs of stationary source control measures in Shanghai (Li et al. 2004; Chen et al. 2002)

    • IES study of co-benefits of measures to reduce CO2 in Hyderabad

    • IDEAS Model (World Bank) has analyzed strategies for Bangkok; databases assembled for Hanoi, Jakarta, Shanghai and Manila

  • Emissions Inventories and Air Quality Models Are Available in Other Asian Cities

    • Haq et al. (2004) summarize air quality management capacity in 23 Asian cities.


What Is the Potential for Using CEA in Asian Cities?

  • If a CBA has been conducted for air pollution control measures, their cost-effectiveness can be calculated

    • If most benefits are avoided premature mortality, can calculate cost per life-year saved of the control option

    • Alternately, life years saved can be combined with avoided illness using DALYs to compute a cost per DALY avoided

    • DALY = fraction of a year of healthy time lost because of illness (e.g., if living one year with chronic bronchitis is equivalent to living 2/3 year in good health, chronic bronchitis = 1/3 of a DALY)

  • Advantages of calculating cost per DALY:

    • Avoids monetization of health effects

    • Encourages comparison of air pollution control with other health measures


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