Air Resources BoardAir Resources BoardResearch DivisionResearch Division

Economic Valuation of Air Economic Valuation of Air Quality BenefitsQuality Benefits

Bart Croes, Chief

Research Division

Valuation of Air Quality BenefitsValuation of Air Quality Benefits

PurposePurpose

Economic valuation of the benefits allows adding up different benefits of air pollution control for comparison with costs of control and decision making

Valuation of Air Quality BenefitsValuation of Air Quality BenefitsOverviewOverview

Air pollution damages public health and the environment

Exposure assessments determine incidence of damages

Damages cause loss of value Exposure levels are reduced through emission

reductions Expenditures to avoid the loss of value is

sound policy

Valuation of Air Quality BenefitsValuation of Air Quality BenefitsMethodologyMethodology

Develop scenarios of before and after air pollution control for subregions

Emissions Air quality

Determine the change in ambient pollutant concentration and exposure

Use health and environmental damage functions from the literature to estimate damage incidences

Multiply the incidences in all subregions by dollar values to get total benefits

Air Quality BenefitsAir Quality Benefits US EPA ModelUS EPA Model

Criteria Air Pollutant Modeling System Scenarios for years 2000 and 2010

No controls after 1990 Controls required by the 1990 Clean Air Act

Emission projections for each scenario Air quality modeling 8x8 km grid Population projections and exposure in each

grid Valuation of mortality, illnesses,

hospitalization, and welfare

US EPA Model ResultsUS EPA Model ResultsBenefits EstimatesBenefits Estimates

(in millions of dollars) Pollutant 2000 2010

Mortality PM $63,000 $100,000

Chronic Illness

Hospitalization

Minor Illnesses

Worker Productivity Loss

Visibility

Agriculture

PM, O3

All

All

O3

PM

O3

3740

279

1,035

460

2,000

450

5,780

521

1,643

710

2900

550

All = PM, CO, NO2, SO2, O3 Total $70,964 $112,104

Air Pollution Control CostsAir Pollution Control CostsEstimatesEstimates

Compliance Costs of All Programs For year 2000 estimated at $19 billion For year 2010 estimated at $27 billion

Benefit Cost Ratio For 2000 and 2010 at 4 to 1 For every $1 spent on control returns $4 of

benefits Ranged from a low of 1 to 1 to a high of 4 to 1

Air Quality Benefits Air Quality Benefits UncertaintyUncertainty

Total benefits range $16 to $160 billion Sources of Uncertainty

Emission inventory projections Air quality modeling Population exposure levels Health effects estimation

Air Quality Benefits Air Quality Benefits UncertaintyUncertainty

Economic Valuation Value of a life Value of avoiding illnesses Value of the environment Hospitalization and associated costs Value of visibility improvements

Air Quality Benefits Air Quality Benefits Suggestion on ValuationSuggestion on Valuation

Value of a life Potential for income generation Court settlements People’s willingness to pay

Value of illnesses Cost of curing People’s willingness to pay to avoid illness

Value of the Environment People’s willingness to pay

Air Quality Benefit-Cost Air Quality Benefit-Cost SummarySummary

Models can help estimated benefits Use emission exposure estimates to derive

incidence of effects Use estimates of values for the effects Add up the values of each benefits to arrive at

total benefits

Track compliance costs to compare with benefits

Calculated benefit to cost ratio

Air Quality Benefit-Cost Air Quality Benefit-Cost ConclusionsConclusions

Benefits estimation helps decide which pollutant to control first

Cost estimates assist decision making on how much to control

Although benefit-cost estimates could have a wide range, it is a useful tool to set policy and priorities