Evaluation of the Costs and Benefits of Household Energy and Health Interventions

1. Evaluation of the Costs and Benefits of Household Energy and Health Interventions 31st IAEE International Conference, Pre-Conference Workshop on Clean Cooking Fuels Istanbul, 16-17 June 2008 Guy Hutton1, Eva Rehfuess2 and Fabrizio Tediosi3 1 World Bank, Phnom Penh, 2 World Health Organization, Geneva, 3 Università Bocconi, Milan

2. Why economic evaluation? Economic evaluation: • demonstrates the economic return of investments in an intervention • compares the cost-effectiveness/ costs and benefits of one intervention against another • helps policy-makers allocate their limited budget Caveat: Economic pay-off is not the only criterion for identifying sound interventions.

3. Cost-effectiveness analysis • How can one maximize health for available resources? • perspective: health sector • unit: cost-effectiveness ratio, e.g. in $ per healthy life year gained Courtesy of Dominic Sansoni/World Bank Cost-benefit analysis • Do all the benefits outweigh all the costs of an intervention? • perspective: society, multiple sectors • unit: benefit-cost ratio in $ Courtesy of Nigel Bruce/Practical Action Cost-benefit versus cost-effectiveness analysis

4. annual average economic benefit of intervention Benefit-cost ratio (BCR) annual average economic cost of intervention Comparison measure Economic costs: = • fuel costs, stove costs • programme costs (including R&D investment, education) Economic benefits: • reduced healthcare costs • health-related productivity gains • time savings • environmental impacts

5. Interventions and scenarios modelled • Basic approach: • analysis for 11 developing and middle-income WHO subregions • separate analysis for urban and rural areas • baseline year 2005; ten-year intervention period (2006-2015) • 3% discount rate applied to all costs and benefits • Baseline:current mix of dung, wood, coal, cleaner fuels, etc. • Intervention 1: (50%, 100% coverage, pro-poor)switch to LPG (ethanol) • Intervention 2: (50%, 100% coverage)cleaner-burning, fuel-efficient “rocket-type” stove

6. Important benefit assumptions:health impacts and productivity gains • Conclusive evidence for health impact of indoor air pollution: • acute lower respiratory infections (ALRI): children under five • chronic obstructive pulmonary disease (COPD): adults above 30 • lung cancer (coal use): adults above 30 • Avoided health impacts: • ALRI, COPD, lung cancer (WHO methodology for burden of disease) • LPG/ethanol: risk reduction to baseline risk • stoves: 35% risk reduction (personal exposure reduction, lag times) • Health-related productivity gains: • number of illness-free days and deaths avoided, for type of illness and level of severity • valued using human capital approach: daily Gross National Income (GNI) per capita and income-earning life from 15 to 65 years

7. Important benefit assumptions:time savings and environmental benefits • Time savings: • due to reduced fuel collection (survey data in selected locations) • due to time saved on cooking (laboratory data) • valued at GNI per capita • Local environmental benefits: • avoided deforestation • valued using tree replacement cost (labour + sapling + wastage) • Global environmental benefits: • averted CO2 + CH4 emissions (published studies) • valued using carbon trading values (Clean Development Mechanism)

8. Proposed voluntary MDG target:halve, by 2015, the population cooking with solid fuels,and make improved cookstoves widely available World Health Organization, Fuel for life: household energy and health. WHO, 2006.

9. Results (US$ per year):Providing access to LPG, by 2015,to half of those burning solid fuels in 2005 Programme cost: 130 million Total cost: 13 billion Total benefit: 91 billion Benefit-cost ratio: 7:1 Benefit-cost ratio*: 4:1 Sensitivity analysis: 2:1 – 29:1 Courtesy of Nigel Bruce/Practical Action * Intervention cost savings included with economic benefits.

10. Results (US$ per year):Making improved stoves available, by 2015,to half of those burning solid fuels in 2005 Programme cost: 650 million Total cost: -34 billion(2 billion costs, - 36 billion fuel savings) Total benefit: 105 billion Benefit-cost ratio: negative Benefit-cost ratio*: 61:1 Sensitivity analysis: negative Courtesy of GTZ * Intervention cost savings included with economic benefits.

11. Distribution of economic benefits LPG Improved stoves Health-related productivity gains and time savings due to less fuel collection and cooking constitute the greatest benefits.

12. Key limitations • Considerable variation between world regions, as well as between urban and rural settings. • Findings based on global/regional data and assumptions do not necessarily apply to specific countries or programmes. • Idealistic, target-based scenarios versus realistic, programme-based analyses. • Need to refine optimistic assumptions (e.g. effectiveness of stove, programme costs, unsustainable harvesting of firewood) and pessimistic assumptions (e.g. greenhouse gases included, value of avoided emissions).

13. Conclusions • Globally, both a switch to cleaner fuels and the promotion of fuel-efficient, cleaner-burning stoves appear to be highly cost-effective. • Making the economic case remains a challenge: • Household energy and health is an inter-sectoral issue with no clear policy lead across countries. • Programme level versus household level: Where do costs occur? Where do benefits occur? • There is a need for the application and refinement of current cost-benefit analysis methodology at national and programme levels.

14. For more information: http://www.who.int/indoorair Dr Eva Rehfuess Public Health and Environment World Health Organization 1211 Geneva 27 Switzerland Email: rehfuesse@who.int Courtesy of Crispin Hughes/Practical Action