COST OF POLLUTIONIN CHINAECONOMIC ESTIMATES OF PHYSICAL DAMAGES

C O N F E R E N C E E D I T I O N

THE GOVERNMENT OF THE

PEOPLE’S REPUBLIC OF CHINA

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THE WORLD BANK

The State Environmental Protection Administration

115 Xizhimen Nanxiaojie, Beijing 100035, P. R. ChinaTel: 86 (10) 6653.2331Fax: 86 (10) 6653.2424www.sepa.gov.cn

Rural Development, Natural Resources and Environment

Management Unit, East Asia and Pacific Region, The World Bank

1818 H Street, NW, Washington DC 29433, USATel: + 1 (202) 458.4073Fax: + 1 (202) 477.2733www.worldbank.org/eapenvironment

The World Bank Office, Beijing

16th Floor, China World Tower 2No. 1 Jianguomenwai AvenueBeijing 100004, P. R. ChinaTel: + 86 (10) 5861.7600.Fax: + 86 (10) 5861.7800.www.worldbank.org.cn

Environmental and Social Development UnitEast Asia & Pacific RegionPh: 202-458-5660Fax: 202-522-1666e-mail: jnygard@worldbank.org

COST OF POLLUTIONIN CHINAECONOMIC ESTIMATES OF PHYSICAL DAMAGES

The World BankState Environmental Protection Administration, P. R. China

This publication is available online at www.worldbank.org/eapenvironment.

Front cover photos: John D. Liu. From the film “A Green Call” prepared by the Environmental Edu-cation Media Project in Beijing in cooperation with the World Bank.Cover design: Circle Graphics, Jostein Nygard

Rural Development, Natural Resources and Environment Management UnitEast Asia and Pacific RegionThe World BankWashington, D.C.February, 2007

This volume is a product of an expert team from China, international experts from various countriesand the staff of the World Bank. The findings, interpretations, and conclusions expressed in this paperdo not necessarily reflect the views of the Executive Directors of the World Bank of the governmentsthey represent. The World Bank does not guarantee the accuracy of the data included in this work.The boundaries, colors, denominations, and other information shown on any map in this work donot imply any judgment on the part of The World Bank concerning the legal status of any territoryor the endorsement or acceptance of such boundaries.

The material in this publication is copyrighted. Copying and/or transmitting portions of all of thiswork without permission may be a violation of applicable law. The World Bank encourages dissem-ination of its work and will normally grant permission to reproduce portions of the work promptly.

For permission to photocopying or reprint any part of this work, please send a request with completeinformation to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923,USA, telephone 978-750-8400, fax 978-750-4470, www.copyright.com.

All other queries on rights and licenses, including subsidiary rights, should be addressed to theOffice of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA,fax 202-522-2422, e-mail pubrights@worldbank.org.

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ACKNOWLEDGMENTS v

ABBREVIATIONS AND ACRONYMS vii

FOREWORD ix

EXECUTIVE SUMMARY xi

1 Overview 1

2 Health Impacts of Ambient Air Pollution 19

3 Health Impacts of Water Pollution 33

4 Valuation of Environmental Health Risks 67

5 Non-Health Impacts of Water Pollution 79

6 Non-Health Impacts of Air Pollution 111

Table of Contents

This Report is the result of a collaborativeresearch effort by a joint Chinese and interna-tional expert team being contracted by theWorld Bank.

In Beijing, the overall team was lead by GuoXiaomin, a senior advisor to the State Environ-mental Protection Administration (SEPA). Histeam included Yu Fang from the China Acad-emy of Environmental Planning (CAEP), whohas handled the overall technical coordination,Zhou Guomei coordinated the Valuation ofEnvironmental Health Risk (VEHR) studytogether with Zhang Kai, Zhou Jun and WuYuping from the Policy Research Center forEnvironment & Economy. Pan Xiaochuan atthe Medical College of Peking University lead ateam on dose response function development,which included Wang Lihua, and Jiang Jinhua.Monitoring data was provided by the ChinaNational Monitoring Centre by Zhuo Jianping,Ling Lixin, Fu Deqing and WuHuaimin. ZhaoYaoming has participated from the Ministry ofAgriculture.

A team from the Water Resources andHydropower Planning and Design Institute ofthe Ministry of Water Resources (MWR) leadby Li Yuanyuan, which also included Zhou Zhi-wei, Cao Jianting and Zhangwei provided assis-tance on water scarcity subjects. Gao Jun andXu Ling from the Ministry of Health (MoH)

worked on statistical health data. A team fromthe Rural Water Supply Central Disease Control(CDC) lead by Fan Fucheng and Tao Yong pro-vided assistance on particularly drinking waterand partly health related data.

In Shanghai, a team lead by Prof. Peng Xizheat the Fudan University, included Chen Yan, TianWenhua and Cheng Yuan. In Chongqing, a teamlead by Ass. Prof. Chen Gangcai at the ChongqingAcademy of Environmental Science includedWang Fei, Ran Tao, Zhou Zhien, Liu Lanyu, andChen Derong in addition to Yang Xioalin, XiangXinzhi and Qin Lei from Chongqing CDC andTang Guil from Chongqing MoH.

International experts have included HaakonVennemo and Henrik Lindhjem (ECON),Kristin Aunan and Hans Martin Seip (CICERO),Alan Krupnick, Sandy Hoffmann and MichaelMcWilliams (RFF), Bjorn Larsen and RamonOrtiz (independent consultants).

At the World Bank, the project was coordi-nated by Jostein Nygard, task team leader(EASRE) under the overall supervision ofMagda Lovei (EASOP). Substantive inputs wereprovided by Maureen Cropper (DEC), TamerSamah Rabie (ECSHD), while technical sup-port was provided by Marija Kuzmanovic andAndrew Murray (EASEN/EASRE).

The current report has mainly be written byMaureen Cropper, Tamer Rabie, Haakon Ven-

C H I N A – E N V I R O N M E N T A L C O S T O F P O L L U T I O N v

Acknowledgments

nemo, Kristin Aunan, Hans Martin Seip, YuFang, Guo Xiaoming and Jostein Nygard, whilethe extensive Chinese expert team has mainlybeen writing the progress and backgroundreports that this report builds upon. The RFF,Shanghai and Chongqing teams have been writ-ing the “Willingness to Pay for Reduced Mortal-ity Risk Reduction in Shanghai and Chongqing”study, which is also being published as a sepa-rate World Bank discussion paper report.Mainly based upon work by Bjorn Larsen, aseparate discussion paper report “China HealthEffects of Indoor Air Pollution” is also beingpublished.

Peer reviewers included Chris Nielsen (Har-vard University), Hao Jiming (Tsinghua Uni-versity), Kseniya Lvovsky (World Bank,SASES), Rita Klees (World Bank, ENV), andAnil Markandy (ECSSD). Additional reviewsand comments were provided by David Dollar,Bert Hofman and Andres Liebenthal (WorldBank, Beijing), Maria Teresa Serra (EASES/EAPVP) Julien Labonne and Jian Xie (EASES/

EASRE), Anjali Acharya and Giovanni Ruta(ENV) and Charles E. Di Leva (LEGEN).

Coordination of the study within SEPA, hasbeen made by their Foreign Economic Cooper-ation Office (FECO) with Wang Xin and XieYongming. Personnel within SEPA’s Planningand Finance, Pollution Control and Science andTechnology departments in addition MoH per-sonnel have reviewed the report extensively.

The report was edited by Robert Livernash,consultant. Circle Graphics designed and man-aged desktopping. Production was supervised byJaime Alvarez. Photos provided by John Liu, theEnvironmental Education Media Project, froma World Bank-contracted film “A Green Call”.Chinese translation was provided by the transla-tion desk at SEPAs Department of InternationalCooperation.

Finally, we would like to express our gratitudeto the Government of Norway and Finland,which provided the main trust funds (TFESSD)to carry out the study. The study was also sup-ported by the World Bank’s own funding.

A C K N O W L E D G M E N T S

C H I N A – E N V I R O N M E N T A L C O S T O F P O L L U T I O Nvi

C H I N A – E N V I R O N M E N T A L C O S T O F P O L L U T I O N vii

ACS American Cancer SocietyAHC Adjusted Human CapitalBOD Biological Oxygen DemandBOH Bureau of Health (at local levels)CAEP Chinese Academy for Environmental PlanningCAES Chongqing Academy of Environmental SciencesCDC Center for Disease Control and PreventionCECM Chinese Environmental Cost ModelCEVD Cerebrovascular DiseaseCNHS China National Health SurveyCO Carbon MonoxideCOD Chemical Oxygen DemandCOI Cost of IllnessCOPD Chronic Obstructive Pulmonary DiseaseCSMI Clear Water and Sewage Mixed IrrigationCV Contingent ValuationCVD Cardiovascular DiseaseDALY Disability-Adjusted Life YearDC Dichotomous Choice MethodDSP Disease Surveillance PointECM Environmental Cost ModelEU European UnionEV Emergency VisitGDP Gross Domestic ProductGIOV Gross Industrial Output ValueHEI Health Effects InstituteHH HouseholdICD International Classification of Disease

Abbreviations and Acronyms

IWQI Integrated Water Quality IndexMoA Ministry of AgricultureMoH Ministry of HealthMWR Ministry of Water ResourcesNAPAP National Acid Precipitation Assessment ProgramNBS National Bureau of StatisticsNOx Nitrogen OxidesO3 OzoneOPV Outpatient VisitOR Odds RatioPC Payment Card MethodPM Particulate MatterPM10 Particulate Matter of Less than 10 μm in diameterPPP Purchasing Power ParityPSI Pure Sewage IrrigationQALY Quality Adjusted Life YearRD Respiratory DiseaseRFF Resources for the FutureRMB Chinese Currency, YuanRR Relative RiskSCE Standard Coal EquivalentSEPA State Environmental Protection Administration SO2 Sulphur DioxideTSP Total Suspended ParticulatesTVEs Town and Village EnterprisesUNEP United Nations Environmental ProgrammeUSEPA United States Environmental Protection AgencyVEHR Valuation of Environmental Health RiskVSL Value of Statistical LifeWHO World Health OrganizationWTP Willingness to Pay

A B B R E V I A T I O N S A N D A C R O N Y M S

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This is a draft edition of the Cost of Pollution inChina: Economic Estimates of Physical Damagesreport, which will be presented at the interna-tional conference on Sustainable Development inBeijing, China on March 2, 2007. The purposeof this conference edition is to present the findingsof the studies undertaken in China over thepast about 3 years as well as to obtain relevantcomments and feedback from the conferenceparticipants that could be included in the finaledition of the report.

This report traces its origin to 1997, when theWorld Bank published the China 2020 – ClearWater Blue Skies report. This work underscoredthe economic implications of environmentaldegradation by estimating that the cost of air andwater pollution in China is between 3.5 and 8percent of GDP. Following these findings, theChinese government requested the World Bankto collaborate with a number of Chinese andinternational research institutes to develop anenvironmental cost model (ECM) usingmethodologies specific to the China context.

This work includes an in-depth review ofinternational ECM studies, and developmentand application of new methodologies (and soft-ware) for annual estimations of water and airpollution in China at both central and local lev-els. The aim of this work is to increase awareness

of the economic impacts of air and water pollu-tion in China, to provide relevant policy infor-mation to decision makers and to enable theChinese government to make optimal resourceallocations for environmental protection.

Prior to the publication of this report, com-prehensive comments have been received byboth the Chinese Government, particularly theState Environmental Protection Administration(SEPA) and independent Chinese and Non-Chinese reviewers. Some of the subjects thathave been carefully developed during the courseof implementation, including certain physicalimpact estimations as well as economic cost cal-culations at local levels have been left out of thisconference edition due to still some uncertain-ties about calculation methods and its applica-tion. How to possibly make use of thesematerials will be continuously worked on duringand after the conference. Moreover, the com-prehensive reference material that has beendeveloped by joint Chinese and Internationalexpert team (including progress reports and var-ious background reports), is going to be attachedin a CD-ROM in the final edition.

Wish you good reading of this edition andlooking forward to receiving your comments.

Report Authors February 2007

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Foreword to the Conference Edition