PAPERS ~~~~~~~~~~~PAPERNO.78 Public Disclosure Authorized 41VP ~~TOWARD ENVIRONMENTALLY AND SOCIALLY SUSTAINABLE DEVELOPMENT POLLUTION MA-NAGEMENT S E RIES. Eviron-menta Costs Public Disclosure Authorized <of FoSil Fuel s' AARaidAs'se ssment -Meto with -Applicationto Six Citiles Public Disclosure Authorized Kseniya Lvovsky Gordon Hughes' David Maddisonl. * ~~~~~~~BartOstro- - P~avid-Pearce Octobe'r 2000 Public Disclosure Authorized -The'World Bacnk'FL C P THE WORLD BANK ENVIRONMENT DEPARTMENT Environmental Costs of Fossil Fuels A Rapid Assessment Method with Application to Six Cities Kseniya Lvovsky Gordon Hughes David Maddison Bart Ostro David Pearce October 2000 Papers in this series are not formal publications of the World Bank. They are circulated to encourage thought and discussion. The use and citation of this paper should take this into account. The views expressed are those of the authors and should not be attributed to the World Bank. Copies are available from the Environment Department, The World Bank, Room MC-5-126. Contents CONTENTS iii ABSTRACT Vii ACKNOWLEDGMENTS ix EXECUTIVE SUMMARY Xi Introduction 1 Chapter 1 Overview of the Method and the Main Findings 5 Rapid Damage Assessment Model 5 The Magnitude and Composition of Environmental Damage 9 The Roles of Different Sectors, Pollutants, and Fuels 10 Environmental Costs and Fuel Prices 15 Summary of Findings 22 Chapter 2 From Fuel Use to Exposure Levels 23 Emissions Inventory 23 Modeling Atmospheric Dispersion 23 Secondary particulates 24 From concentration to exposure 25 Results for the Six Cities 25 Chapter3 The Health Effects of Air Pollution 29 Fuel Combustion and Health 29 Coarse and fine particulates 30 Exposure to sulfur dioxide 31 Aerosol acidity 31 Air Pollution Dose-Response Studies 31 Application to Developing Countries 33 Estimates for Mortality 36 Time-series studies 36 Long-term exposure studies 37 Pollution Management Series Environmental Costs of Fossil Fuels - A Rapid Assessment Method with Application to Six Cities The chosen valuefor mortality risk 38 Estimates for Morbidity 39 Summary of Health Impacts 40 Quantificationof health effects for a particulararea 40 Resultsfor the six cities 41 Chapter 4 Valuation of Health Effects 43 Mortality 43 Valuation of a statisticallife 43 Age effects, underlying health conditions, and the VOSL 45 Disability-adjustedlife years (DALYs) 46 Contextual effects, latency effects, and the valuation of changes in life expectancy 47 Morbidity 49 Valuation of chronic bronchitis 49 Valuation of acute morbidity effects 50 The private and the social costs of illness 51 Income Effects 51 International Comparisons of Health Costs and DALYs 53 Summary of Valuation Parameters and Results for the Six Cities 54 Chapter 5 Valuation of Nonhealth and Climate Change Effects 57 Local Nonhealth Effects 57 Visibility 57 Soiling 57 Materials damage 58 Transboundary and Ecosystem Effects 58 Global Climate Change 59 Chapter 6 Summary of Methodological Issues 63 Shortcuts for Rapid Damage Assessment 63 Robustness of the Health Cost Estimates 65 Major Areas for Further Research and Development 68 Annexes A Base Emissions Factors for Local Pollutants 71 B The Dispersion Model 73 C Estimating Predicted Willingness to Pay (WTP) to Avoid Morbidity 77 D Values for Visibility, Soiling, and Corrosion 79 E City Data on Fuel Use 87 Notes 91 References 95 iv Environment Department Papers Abstract Among the key external effects of fossil fuel greatest share of the total damage is that to combustion are urban air pollution and changes human health from exposure to ambient in global climate. A study of six cities in particulates, caused mainly by small pollution developing countries and transition economies sources such as vehicles and household stoves. estimates the magnitude of these effects and Large industries and power plants account for a examines how various fuels and pollution smaller proportion of health damage but are the sources contribute to health damages and other major contributors to carbon dioxide emissions, environmental costs. The study develops a which have an impact on global climate. The simple but robust method for rapid assessment complex relationships between pollution of these damages. By linking the damage to a sources and environmental effects highlight the particular fuel use or pollution source, the need for a skillful mix of policy instruments method makes possible cost-benefit analysis of built on rigorous analysis. The damage pollution abatement measures. The findings assessment method proposed in this study show very high levels of environmental damage provides a useful analytical tool that can be and reveal large sectoral differences. By far the easily applied to other urban areas. Pollution Management Series vii Acknowledgments The authors of this report are Kseniya Lvovsky, Kojima, and Bjorn Larsen, all of the World Bank. World Bank (task leader and principal author); Sadaf Alam provided technical support at Gordon Hughes, World Bank (health impacts, various stages of report preparation, Nancy valuation, and general guidance); David Levine edited the report, and Jim Cantrell Maddison, Centre for Social and Economic published the report. Research on the Global Environment, University College London (valuation of health and The study on which this report is based was nonhealth impacts); Bart Ostro, U.S. initiated while the first two authors were Environmental Protection Agency, California attached to the Environrnent Department of the Office (assessment of health impacts); and World Bank and continued after they moved to David Pearce, Centre for Social and Economic the South Asia Environment Unit. Both the Research on the Global Environment, University Environment Department and the South Asia College London (valuation and general Environment Unit have provided support for guidance). The authors are deeply grateful to the study. The authors are particularly grateful the following reviewers, who provided valuable to Richard Ackermann, David Hanrahan, and comments: Alan Krupnick, Resources for the Magda Lovei for their contributions to and Future, and Robert Bacon, Maureen Cropper, support of this work. Gunnar Eskeland, Charles Feinstein, Masami Pollution Management Series ix Executive Summary Worldwide, exposure to the high levels of method synthesizes the available evidence on particulates in urban air causes hundreds of the adverse effects associated with high levels of thousands of cases of premature death and air pollution with evidence of willingness to pay respiratory illness. The levels of exposure and to avoid these adverse outcomes, drawing on an the associated health burdens are much higher extensive review of a large body of air pollution in low- and middle-income countries than in valuation literature. Damage assessment rich countries. These country-specific problems techniques based on levels of exposure to interact with a growing concern about global certain air pollutants are linked to technical climate change, which has no boundaries. information showing how the combustion of Designing policies and measures to combat the fossil fuels in various sectors leads to elevated adverse environmental effects of fossil fuels is concentrations of those pollutants in the urban becoming an urgent challenge. air and to human exposure. Modeling of the linkages makes possible a cost-benefit analysis In addressing this challenge, it is essential to of pollution abatement options, including a take account of the magnitude of the damages choice of cleaner fuels or fuel switching, across attributable to different fuels, sectors, and different sources and sectors. The paper pollutants. This paper reports on a study of six explains the method, discusses its underlying large cities around the world that suffer from assumptions and uncertainties, and presents a high levels of air pollution: Bangkok, Krakow, summary of recommended techniques and Manila, Mumbai, Santiago, and Shanghai. The values for assessing damages in future study adopts a simple but robust method for applications. rapid assessment of environmental damages from various fuel uses. The method is The purpose of the study is twofold: to develop implemented as a simple spreadsheet model a rapid assessment model that can be quickly that can be easily replicated for other cities and applied to a city on the basis of limited local countries and can be further developed or data while taking account of the key factors refined as the need arises. affecting the environmental costs of fuels, and to estimate the magnitude of environmental The model covers three categories of damages damages and the contributions of various from fuel combustion: (a) the adverse health pollution sources to each type of damage for a effects of exposure to ambient air pollution in sample of cities. The cities selected for the cross- urban areas (for example, increased respiratory country analysis differ in geographic and illness and premature deaths), (b) local climate conditions, demographic characteristics, nonhealth effects (reduction in visibility; soiling fuel mix and fuel use patterns, the sectoral and material damages), and (c) effects on global composition of the economy, and income level. climate change. The damage assessment Together, they have a total population of nearly Pollution Management Series xi Environmental Costs of Fossil Fuels - A Rapid Assessment Method with Application to Six Cities 50 million and represent a span of variables that * Marginal damage costs per