Air Resources Board Research Division Economic Valuation of Air Quality Benefits Bart Croes, Chief Research Division

Valuation of Air Quality Benefits Purpose u Economic valuation of the benefits allows adding up different benefits of air pollution control for comparison with costs of control and decision making

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

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

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

US EPA Model Results Benefits Estimates

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

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

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

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

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

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