ECONOMIC IMPACT OF AIR POLLUTION ON HUMAN

HEALTHShreekant Gupta

National Institute of Urban Affairs, New Delhiand

Delhi School of Economics, University of Delhi

NATIONAL WORKSHOP ON URBAN AIR QUALITY & INTEGRATED TRAFFIC MANAGEMENT, Karachi

September 13, 2006

sgupta@niua.org

Overview

• The context

• Physical impact-quantification

• Valuation of physical impact-methodologies

• Empirical evidence

• Next steps

The context (macro view)• Growing economies and populations of South

Asia and the environmental impact• Urbanisation and its attendant challenges• 5 of 10 world’s biggest cities in South Asia by

2015• Increasing dependence on personalised

(motorised) modes of transport• Commonality of urban problems across major

South Asian cities• Focus on air quality (esp. particulates, but

others as well—NOx, SO2 )

Steps in quantification of physical impacts

(Dose)

• Identify pollutant and measure ambient concentrations

• Calculate exposure(Response)

• Calculate health impacts based on epidemiological research

Once health impacts quantified the monetary value of this damage can be estimated

Quantification of physical impacts

• Measurement issues (particulates, fine particulates)

• Extrapolation issues (can we simply extrapolate from ‘other’ dose-response studies?

• Mortality/morbidity data issues

• Long way to go…

Valuation of health impacts (mortality/morbidity)

• Health costs of ‘dirty’ air / benefits of ‘clean’ air

• Value of statistical life (VSL) – what / why?

• Willingness-to-pay (WTP) estimates (mostly western data – range US$3.6 million – US$4.8 million

• Human capital approach – lower bound to WTP

Methods for the Monetary Evaluation of the Environment

Monetary Evaluation Methods

Demand CurveApproaches

Non-Demand CurveApproaches

ExpressedPreference Methods

Revealed PreferenceMethods

Contingent ValuationMethod

Travel Cost

Method

HedonicPricing Method

Income Compensated(Hicksian) Demand Curves

Uncompensated(Marshallian)

Demand Curve

Compensating

VariationWelfareMeasure

EquivalentVariationwelfaremeasure

ConsumerSurplus welfare

measure

Dose-ResponseMethods

ReplacementCosts

MitigationBehaviour

Demand Curves notobtainable (does value

estimates only)

No true welfaremeasures

Empirical evidence

• Dose response extrapolations may overestimate health impacts (Cropper et al. 1997)

• VSL extrapolations may underestimate monetary values

• Net effect unclear

Next steps • Importance of better research and analysis

• Move away from comfort zone of guess-estimates

• Guide more cost-effective policy interventions