ECONOMIC IMPACT OF AIR POLLUTION ON HUMAN HEALTH Shreekant Gupta National Institute of Urban Affairs, New Delhi and 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

obtainable (does value (Hicksian) Demand Curves Methods for the Monetary Evaluation of the Environment Monetary Evaluation Methods Demand Curve Approaches Non-Demand Curve Approaches Expressed Preference Methods Revealed Preference Methods Dose-Response Methods Replacement Costs Mitigation Behaviour Contingent Valuation Method Travel Cost Method Hedonic Pricing Method Demand Curves not obtainable (does value estimates only) Income Compensated (Hicksian) Demand Curves Uncompensated (Marshallian) Demand Curve No true welfare measures Compensating Variation Welfare Measure Equivalent Variation welfare measure Consumer Surplus welfare measure

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