Inter-American Development Bank Regional Policy Dialogue III Meeting of the Environmental Network “Experiences of economic valuation applied to air quality and pollultion management : Examples of experiences, political implications and application in a regional context.” Luis A. Cifuentes Pontificia Universidad Católica de Chile March 9-10, 2004

Motivation Latin American cities have high rates of air pollution, mainly particulate matter. There is no doubt that air pollution produces high concentrations of harmful effects, but recent evidence shows that these harmful effects are produced at relatively low rates. Therefore, it seems desirable to reduce pollution levels, but to what level? What level of pollution is (or reduction of pollution) is desirable. The cost benefit analysis (CBA) can help us with this decision. Quantifying the costs as much as the benefits is required to correctly apply CBA.  The economic valuation of the impact of pollution is key for a good CBA, and for better decsision making in maintaining atmospheric quality

? How serious is the impact of pollution? Ezzati, M., A. D. Lopez, A. Rodgers, S. V. Hoorn, C. J. L. Murray and The Comparative Risk Assessment Collaborating Group (2002). “Selected major risk factors and global and regional burden of disease.” Lancet 360(9343): 1347-60

Contents Theoretical Basis Case Studies Political Implications Mexico City, Mexico Santiago, Chile Sao Paulo, Brazil Political Implications Regional Application Conclusions

Theoretical Basis The great difficulty consists in how to estimate damages. A market does not exist where individuals can compromise environmental quality, thus revealing their willingness to pay (WTP) For this reason, it is necessary to resort to valuation methods: Direct Methods Establish a WTP of people for better air quality based on bahavior of individuals in real or simulated markets Indirect Methods Use of models to evaluate the damages from pollution and its economic value Method of the function of damage

Methods

Impacts associated with air pollution Health Effects Effects in vegetation and crops Materials Damages Aesthetic effects (visibility impairment)

Damage Function Approach applied to health damages

The damage function method applied to health effects

Quantifiable and non cuantifiable effects Source: Cifuentes, L., V. H. Borja-Aburto, Nelson Gouveia, George Thurston, Devra Lee Davis (2001). “Assessing The Health Benefits of Urban Air Pollution Reductions Associated With Climate Change Mitigation 2000-2020: Santiago, São Paulo, Mexico City, and New York City.” Environmental Health Perspectives , June 2001. Adapted from EPA. The Benefits and Costs of the Clean Air Act, 1990 to 2010 EPA-410-R-99-001: U.S. Environmental Protection Agency, 1999.

Quantifiable and Suspected Health Effects Source: Cifuentes, L., V. H. Borja-Aburto, Nelson Gouveia, George Thurston, Devra Lee Davis (2001). “Assessing The Health Benefits of Urban Air Pollution Reductions Associated With Climate Change Mitigation 2000-2020: Santiago, São Paulo, Mexico City, and New York City.” Environmental Health Perspectives , June 2001. Adapted from EPA. The Benefits and Costs of the Clean Air Act, 1990 to 2010 EPA-410-R-99-001: U.S. Environmental Protection Agency, 1999.

Scope In order to correctly apply the function damage method, we need to define the scope as to: pollutants: which pollutants produce the greatest impact on the population? Affected population: which populations are most affected? Older adults? Children? The least educated? Those in the lowest income brackets? What health effects do the pollutants produce? What is the social loss that of these effects produces?

Pollutants considered Recent evidence shows that pollutants from combustion (especially from fossil fuels) are mostly responsible for the health effects. Among these, the breathable (PM10) and fine (PM2.5 ) particulate matter is the contaminant most consistantly associated with mortality and other effects. Also, the ozone (03) has been consistantly associated with health effect, as much with mortality as with morbidity. The majority of the studies consider these two (2) pollutants, which are the most frequently measured.

Concentration relationships-Answer The incidentants of health effects are related to the levels of air pollutants From epidemiological (and clinical) studies we obtain: From time series: short term effects From cohort Transversals The time series studies are easiest to do, for this reason they have been carried out in Latin America

Other required data Demographic data Socio-economic variables Population: distribución etárea, sex Base rate of the incidence of effects Socio-economic variables Income Education Activity Environmental Data: Changes in the environmental concentrations of the pollutants of interest