Air Resources Board Research Division Economic Valuation of Air Quality Benefits

1. Air Resources BoardResearch Division Economic Valuation of Air Quality Benefits Bart Croes, Chief Research Division

2. Valuation of Air Quality BenefitsPurpose • Economic valuation of the benefits allows adding up different benefits of air pollution control for comparison with costs of control and decision making

3. Valuation of Air Quality BenefitsOverview • Air pollution damages public health and the environment • Exposure assessments determine incidence of damages • Damages cause loss of value • Exposure levels are reduced through emission reductions • Expenditures to avoid the loss of value is sound policy

4. Valuation of Air Quality BenefitsMethodology • Develop scenarios of before and after air pollution control for subregions • Emissions • Air quality • Determine the change in ambient pollutant concentration and exposure • Use health and environmental damage functions from the literature to estimate damage incidences • Multiply the incidences in all subregions by dollar values to get total benefits

5. Air Quality BenefitsUS EPA Model • Criteria Air Pollutant Modeling System • Scenarios for years 2000 and 2010 • No controls after 1990 • Controls required by the 1990 Clean Air Act • Emission projections for each scenario • Air quality modeling 8x8 km grid • Population projections and exposure in each grid • Valuation of mortality, illnesses, hospitalization, and welfare

6. US EPA Model ResultsBenefits Estimates

7. Air Pollution Control CostsEstimates • Compliance Costs of All Programs • For year 2000 estimated at $19 billion • For year 2010 estimated at $27 billion • Benefit Cost Ratio • For 2000 and 2010 at 4 to 1 • For every $1 spent on control returns $4 of benefits • Ranged from a low of 1 to 1 to a high of 4 to 1

8. Air Quality Benefits Uncertainty • Total benefits range $16 to $160 billion • Sources of Uncertainty • Emission inventory projections • Air quality modeling • Population exposure levels • Health effects estimation

9. Air Quality Benefits Uncertainty • Economic Valuation • Value of a life • Value of avoiding illnesses • Value of the environment • Hospitalization and associated costs • Value of visibility improvements

10. Air Quality Benefits Suggestion on Valuation • Value of a life • Potential for income generation • Court settlements • People’s willingness to pay • Value of illnesses • Cost of curing • People’s willingness to pay to avoid illness • Value of the Environment • People’s willingness to pay

11. Air Quality Benefit-Cost Summary • Models can help estimated benefits • Use emission exposure estimates to derive incidence of effects • Use estimates of values for the effects • Add up the values of each benefits to arrive at total benefits • Track compliance costs to compare with benefits • Calculated benefit to cost ratio

12. Air Quality Benefit-Cost Conclusions • Benefits estimation helps decide which pollutant to control first • Cost estimates assist decision making on how much to control • Although benefit-cost estimates could have a wide range, it is a useful tool to set policy and priorities