Economic Benefits of Interventions
One of the early examples of cost-benefit analysis for chemical pollution control is the Japan Environment Agency's (1991) study of three Japanese classical pollution diseases: Yokkaichi asthma, Minamata disease, and Itai-Itai disease (table 43.3). This analysis was intended to highlight the economic aspects of pollution control and to encourage governments in developing countries to consider both the costs and the benefits of industrial development. The calculations take into account the 20 or 30 years that have elapsed since the disease outbreaks occurred and annualize the costs and benefits over a 30-year period. The pollution damage costs are the actual payments for victims' compensation and the cost of environmental remediation. The compensation costs are based on court cases or government decisions and can be seen as a valid representation of the economic value of the health damage in each case. As table 43.3 shows, controlling the relevant pollutants would have cost far less than paying for damage caused by the pollution.
[Table .]
A few studies have analyzed cost-benefit aspects of air pollution control in specific cities. Those analyses are based mainly on modeling health impacts from exposure and relationships between doses and responses. Voorhees and others (2001) find that most studies that analyzed the situation in specific urban areas used health impact assessment to estimate impacts avoided by interventions. Investigators have used different methods for valuing the economic benefits of health improvements, including market valuation, stated preference methods, and revealed preference methods. The choice of assumptions and inputs substantially affected the resulting cost and benefit valuations.
One of the few detailed studies of the costs and benefits of air pollution control in a specific urban area (Voorhees and others 2000) used changing nitric oxide and NO2 emissions in Tokyo during 1973-94 as a basis for the calculations. The study did not use actual health improvement data but calculated likely health improvements from estimated reductions in NO2 levels and published dose-response curves. The health effects included respiratory morbidity (as determined by hospital admissions and medical expenses), and working days lost for sick adults, and maternal working days lost in the case of a child's illness. The results indicated an average cost-benefit ratio of 1 to 6, with a large range from a lower limit of 3 to 1 to an upper limit of 1 to 44. The estimated economic benefits of reductions in nitric oxide and NO2 emissions between 1973 and 1994 were considerable: US$6.78 billion for avoided medical costs, US$6.33 billion for avoided lost wages of sick adults, and US$0.83 billion for avoided lost wages of mothers with sick children.
Blackman and others' (2000) cost-benefit analysis of four practical strategies for reducing PM10 emissions from traditional brick kilns in Ciudad Juarez in Mexico suggests that, given a wide range of modeling assumptions, the benefits of three control strategies would be considerably higher than the costs. Reduced mortality was by far the largest component of benefits, accounting for more than 80 percent of the total.
Pandey and Nathwani (2003) applied cost-benefit analysis to a pollution control program in Canada. Their study proposed using the life quality index as a tool for quantifying the level of public expenditure beyond which the use of resources is not justified. The study estimated total pollution control costs at US$2.5 billion per year against a monetary benefit of US$7.5 billion per year, using 1996 as the base year for all cost and benefit estimates. The benefit estimated in terms of avoided mortality was about 1,800 deaths per year.
El-Fadel and Massoud's (2000) study of urban areas in Lebanon shows that the health benefits and economic benefits of reducing PM concentration in the air can range from US$4.53 million to US$172.50 million per year using a willingness-to-pay approach. In that study, the major monetized benefits resulted from reduced mortality costs.
Aunan and others (1998) assessed the costs and benefits of implementing an energy saving and air pollution control program in Hungary. They based their monetary evaluation of benefits on local monitoring and population data and took exposure-response functions and valuation estimates from Canadian, U.S., and European studies. The authors valued the average total benefits of the interventions at US$1.56 billion per year (with 1994 as the base year), with high and low bounds at US$7.6, billion and US$0.4 billion, respectively. They estimated the cost-benefit ratio at 1 to 3.4, given a total cost of interventions of US$0.46 billion per year. Many of the benefits resulted from reduced mortality in the elderly population and from reduced asthma morbidity costs.
Misra (2002) examined the costs and benefits of water pollution abatement for a cluster of 250 small-scale industries in Gujarat, India. Misra's assessment looked at command-and-control, market-based solutions and at effluent treatment as alternatives. In a cost-benefit analysis, Misra estimated the net present social benefits from water pollution abatement at the Nandesari Industrial Estate at Rs 0.550 billion at 1995-96 market prices using a 12 percent social discount rate. After making corrections for the prices of foreign exchange, unskilled labor, and investment, the figure rose to Rs 0.62 billion. It rose still further to about Rs 3.1 billion when distributional effects were taken into account.
