Evaluating the Health Benefits of Air Pollution Reductions: Recent Developments at the U.S. EPA

1. Evaluating the Health Benefits of Air Pollution Reductions: Recent Developments at the U.S. EPA Bryan J. Hubbell U.S. EPA, Office of Air Quality Planning and Standards Innovative Strategies and Economics Group

2. Overview • Background • Morbidity and Mortality: The Tip of the Iceberg • Age and WTP for Reduced Mortality Risk • Why It Is Difficult to Value Morbidity More Completely • The Need for Better Communication Between Economists and Epidemiologists • Concluding Remarks

3. Background • Executive Order 12866: Requires EPA to evaluate the costs and benefits of major regulations (>$100 million in costs). • Evaluations of health benefits have been a major component of the regulatory impact analyses for recent air pollution regulations • Tier 2/Gasoline Sulfur • Heavy Duty Engine/Diesel Fuel • NOx SIP Call (Ozone Transport Rule)

4. Background • There are numerous uncertainties embedded in any health benefits analysis: • Emissions baselines and changes • Air quality changes • Population projections • Epidemiology • Economic valuation • Many health and environmental effects are still not quantifiable • Changes in ecosystem function • Chronic changes in lung function • Health impacts of air toxics

5. Background • Important remaining issues in the measurement and valuation of: • Chronic health effects including mortality and respiratory diseases • Full impact of acute morbidity effects • Health effects from exposure to air toxics

6. The Tip of the Iceberg • As posed by Dr. Pearce – “Why are health benefits high?” • How high should health benefits be? Two relevant questions:

7. The Tip of the Iceberg • In our most recent analysis for the HD Engine rule, we estimated annual benefits in 2030: • $70 billion in total monetized benefits ($1999, adjusted for income growth) • 8,300 premature mortalities avoided • 5,500 incidences of chronic bronchitis avoided • 361,000 asthma attacks avoided • 1.5 million lost work days avoided • Visibility, agriculture, and other health benefits • $200 per person, less than ½ percent of 2030 per capita income. • Excludes many non-health benefits and benefits of CO and air toxic reductions.

8. The Tip of the Iceberg • Absolute size driven by • Strong concentration-response relationship • High VSL ($8 million in income adjusted 1999$) • Relative size driven by • Large absolute estimate • Low values placed on morbidity effects Health benefits are dominated by premature mortality

9. Why EPA’s Estimates Might Be Low • Selection of low C-R function for PM chronic exposure mortality • Focus on first-order morbidity effects, ignoring possible long-term “ripple” effects. • Failure to account for behavioral responses. • Lack of health effect models for air toxics.

10. Age and WTP for Reduced Mortality Risks • While there are several differences between the labor market studies EPA uses to derive a VSL and the air pollution context to which the VSL is applied, population age is among the most important. • The economics community in the U.S. has not reached consensus on the appropriateness of adjusting VSL for age differences, although they have rejected the VSLY approach.

11. Age and WTP for Reduced Mortality Risks • EPA did not adjust for age in the primary estimate of mortality benefits for the HD Engine rule. • Provided sensitivity analyses based on ratios of age-adjusted WTP derived from Jones-Lee (1989) and Jones-Lee (1993).

12. 2500 1.20 1.00 2000 0.80 # of Lives 1500 Prolonged Number of Premature Mortalities Jones-Lee (1993) 0.60 Ratios Jones-Lee (1989) 1000 Ratios 0.40 500 0.20 0 0.00 30-39 40-59 60-69 70-79 80-84 85+ Age Category Figure 1. Age-specific WTP Ratios and HD Engine Rule Mortality Benefits Data Available No Data Available

13. 14000 12000 10000 Non-Age-Specific VSL Benefits 8000 Billions of 1999$ Jones-Lee (1993) Mortality Benefits 6000 Jones-Lee (1989) Mortality Benefits 4000 2000 0 30-39 40-59 60-69 70-79 80-84 85+ Age Category Figure 2. Impact of Age-specific WTP on HD Engine Premature Mortality Reduction Monetized Benefits

14. Why It Is Difficult to Value Morbidity More Completely • Lack of suitable studies for specific endpoints • Reliance on benefits transfer • Use of cost-of-illness approach

15. Asthma Example • Asthma attacks are ill-defined health endpoints • Understood by asthmatics, but no clear clinical definition. Severity is heterogeneous over population. • Epidemiology solution is to break endpoint into component symptoms. • More difficult for economists to handle • Hard to place some symptom measures in valuation framework • Potential for double-counting • Problems with pooling dissimilar endpoints

16. Asthma Example • Other problems in measuring and valuing reductions in asthma symptoms: • Lack of WTP and cost-of-illness studies for asthma symptoms • Measurement of baseline incidence rates • Projection of baseline prevalence rates

17. The Need for Better Communication Between Economists and Epidemiologists • Economists have tended to be end-users • Early involvement in study design can improve usability of study results • Economists would like more focus on: • Controls for behavioral responses • Representativeness of the study location • The shape of the C-R function, including thresholds or non-linearities

18. 9,000 8,000 7,000 40% 6,000 5,000 Avoided Incidence (2030) 4,000 3,000 2,000 1,000 0 0 5 10 15 20 25 30 35 40 45 Assumed Effect Threshold (Annual Mean PM2.5 (ug/m3)) Figure 3. Sensitivity of HD Engine/Diesel Fuel Rule Mortality Reduction Benefits to Assumed Health Effect Thresholds

19. The Need for Better Communication Between Economists and Epidemiologists • Need to find endpoints that match well with economic valuation • Ozone and outdoor exercise performance • Economic context of clinical measures such as FEV1 or heart rate variability • Need to find linkages between clinical bioindicators and economically significant endpoints • FEV1  Asthma Attacks • HRV  Heart Attacks • Need to examine non-traditional endpoints, such as premature onset of diseases.

20. Concluding Remarks • Epidemiology is an essential tool and input into the process of analyzing the health benefits of federal regulations • We must address some of the key gaps in our understanding of health benefits of air pollution • Effects of changes in chronic exposures • Shapes of C-R functions • “Ripple” effects of acute morbidity • Behavioral responses to air pollution • Lack of health functions for air toxics

21. Concluding Remarks • Needs for Benefits Analysis • C-R functions that are applicable to changes in pollution at varying baseline levels • Integrated design of epidemiology and valuation studies • “Best Estimate” C-R functions for air toxics • Principles for extrapolation

22. Ongoing Efforts • Several analyses of EPA’s health benefits methodology are underway • General Accounting Office: Use of Precautionary Assumptions in Health Risk Assessments and Benefits Estimates and Truth in Regulating Act • National Academy of Sciences: Estimating the Health-Risk-Reduction Benefits of Proposed Air Pollution Regulations • Science Advisory Board: Valuation of Reduced Mortality Risks from Air Pollution

23. Useful Websites • The Costs and Benefits of the Clean Air Act: 1990 to 2010 • http://www.epa.gov/air/sect812/ • The Heavy Duty Engine/Diesel Fuel Regulatory Impact Analysis • http://www.epa.gov/otaq/diesel.htm • EPA Science Advisory Board • http://www.epa.gov/sab • Joint EPA/SAB Workshop on Benefits of Reductions in Exposure to Hazardous Air Pollutants: Developing Best Estimates of Dose-Response Functions • http://www.epa.gov/ttn/ecas/meetings/coverhap.html • Health Effects Institute • http://www.healtheffects.org • General Accounting Office Report on Use of Precautionary Assumptions in Health Risk Assessments and Benefits Estimates • http://www.gao.gov/docdblite/summary.php?accno=164183&rptno=GAO‑01‑55 • Harvard Center for Risk Analysis • http://www.hcra.harvard.edu/