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VALUING THE HEALTH EFFECTSOF AIR POLLUTION:APPLICATION TO INDUSTRIAL

ENERGY EFFICIENCY PROJECTS IN CHINA

Gary J. Wells, Xiping Xu, and Todd M. Johnson

October 1994

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CHINAIssues and Options in

Greenhouse Gas Emissions Control

Valuing the Health Effects of Air Pollution:Application to Industrial Energy Efficiency Projects

in China

Report Number 8

by

Gary J. Wells, Xiping Xu and Todd M. Johnson

October 1994

Supported by the Global Environment Facility

lhe views expressed herein are those of the authors and do not necessarilyrepresent those of the World Bank.

Copyright 1994

Additional copies of this report may be obtained from

The World BankIndustry and Energy Division

China and Mongolia DepartmentEast Asian and Pacific Regional Office

1818 H Street, NWWashington, DC 20433

OTHER SUBREPORTS IN THIIS SERIES:

Estimation of Greenhouse Gas Emissions and Sinks in China, 1990. August 1994. Report 1.

Energy Demand in China. Ovcrview Report, Febnuary 1995, forthcoming. Report 2.

Energy Efficency in China. Technical and Sectoral Analysis, August 1994, Report 3.

Energy Efficiency in China. Case Studies and Economic Analysis, December 1994. Report 4.

Alternative Energy Supply Options to Substitutefor Carbon Intensive Fuels, December 1994. Report 5.

Greenhouse Gas Control in the Forestry Sector, November 1994. Report 6.

Greenhouse Control In the Agricultural Sector, September 1994. Report 8.

Potential Impacts of Climate. Change on China, September 1994. Report 9.

Residential and Commercial Energy Efficiency Opportunities: Taiyuan Case Study,September 1994, Report 10.

Pre-Feasibility Study on High Efficiency Industrial Boilers, August 1994. Report 11.

Currency Equivalents

I USS = 4.7 Chinesc Yuan (1990)

Weights and Measures

Zg/m3 = 104 grams per cubic meter

Abbreviations and Acronyms

CI - Confidence intervalCOPD - Chronic obstructive pulmonary diseaseCVD - Cardio-vascular diseaseEPB. - Environmental protection bureauGEF - Global Environrent FacilityGEMS - Global Environmental Monitoring SystemGHG - greenhouse gasNEPA - National Environmental Protection Agency of ChinaOECD - Organization of Economic Cooperation and DevelopmentPHD - Pulmonary heart diseasePPP - Purchasing power parityS02 - sulfur dioxideTSP - total suspended particulateUNDP - United Nations Development ProgrammeWHO - World Health Organization

Foreword

This report is one of eleven subreports prepared as inputs to the United NationsDevelopment Programme (UNDP) technical assistance study, 'China: Issues and Options inGreenhouse Gas Emissions Control," supported by the Global Environment Facility andexecuted by the Industry and Energy Division, China and Mongolia Deparnent, of the WorldBank.

This report was prepared by Gary J. Wells, Professor of Agricultural and AppliedEconomics, Clemson University, with Xu Xiping, Assistant Professor, Harvard School ofPublic Health, and Todd M. Johnson, Environmental Economist, The World Bank.

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I. INTRODUCTION

1. There is growing concern in China over the environmental and health effects ofextensive coal use with few controls on pollutants in the industrial, commercial and residentialsectors. According to a recent national survey of mortality in China, respiratory diseases arethe second leading cause of death in China [1]. While respiratory disease from smoking iswell known in China, recent studies have demonstrated an exposure-response relationshipbetween ambient air pollution from coal burning and several health endpoints, including lossof pulmonary function, chronic respiratory symptoms, doctor-diagnosed bronchitis, dailyhospital visits/admissions, and daily mortality (2-81.

2. This study identifies a subset of the health impacts of two primary air pollutants inChina -- sulfur dioxide (SO2 ) and total suspended particulates (TSP) -- and estimates theeconomic value of marginal changes in the emission of these air pollutants that can result fromimprovements in energy efficiency. ' To incorporate the health impacts of air poliution intocost-benefit analysis, it is necessary to calculate the associated economic losses, such as thevalue of reduced productivity, absence from work, or premature death. While recent studiesof air pollution impacts have calculated the hypothetical benefits associated with a givenpercentage decrease in ambient concentrations of air pollutants [9,10], the aim of this study isto quantify the benefits of emissions reductions that would result from specific energyconservation projects at a single industrial plant, or "point source."

3. A number of steps are needed to quantify the economic benefits associated withreductions in local air pollutants. These steps and the organization of the report are describedgraphically in Figure 1. The first task of the study is to establish the physical relationshipbetween air pollution and human health (section III). Recent health surveys conducted inBeijing and Shenyang provide the data used to estimate the exposure-response functions thatlink ambient air pollution of TSP and SO2 to mortality and various morbidity measures.Because these health studies relate impacts to ambient-level concentrations, it is necessary toconvert emissions from point sources into equivalent ambient-level concentrations (section IV).This is done using a modified Gaussian plume model. With a point source model, theconcentration varies with the distance from the smoke stack. To measure health impacts, it istherefore necessary to calculate the exposed population at varying distances from the plant

l The rather narrow focus of this paper on air pollution emission reductions from energy efficiency projects wasdictated by the focus of the larger study for which this research was conducted: an analysis of options for reducingglobal greenhouse gas emissions in China. The health analysis of health impacts from "local" pollutants such asTSP and SO 2 was conducted as part of the cost-benefit analysis of industrial energy efficiency investment projectsin China. Given the focus of the project on energy efficiency, only passive emissions reduction were considered;i.e. those associated with reduced energy consumption rather than from the introduction of specific emissionreduction technologies. When considering the economic impacts calculated in this report, the limited and"passive" nature of the emissions reductions achieved should be considered.

2

(section V). The final step in the process is to estimate the economic value of health impacts(section VI).

Figure 1. Flow Chart of Pollution Abatement Benefits

I. Exposr R_sModels

ofTSP and S02 IL. Conversion of Reduced

Emissions from Tonsfyear V. Models ofto Change in Atmospheric the Value of

Concentration Improved(ug/m3) Health

Health on c ipola c

VI. Valuation of the IatIBenefits due to a One Ton Emissions Reduction

II. AIR POLLUTION IN CHINESE CIESA. The Predominance of Coal Use

4. The abundance of coal and the lapk of other energy resources has necessitated thatChina rely on coal for its development. In 1990, rcoal accounted for approximately 75 % ofprimary energy consumption. While the majority of coal was consumed by industry (77% in1990), from a health perspective a more problematic issue is the dominance of coal forresidential heating and cooking. In 1990, households consumed some 167 million tons ofcoal. The combustion of coal is the primary source of atmospheric sulfur in China and is animportant contributor to particulate pollution.2 Currently, annual sulfur dioxide and TSPemissions from industrial coal consumption are estimated at 16.8 and 19.0 million tons,respectively. According to Chinese energy experts, coal will continue to supply the majority

2 TSP and SO2 tend to be highly correlated; a correlation coefficient of approximately 0.6 was found in theresearch undertaken for this study. This report evaluates TSP and S02 separately, which tends to overstate theimpact of these pollutants.

3

of energy for industrial and power generation use for the foreseeable future. According toprojections made by a joint international-Chinese study team for the China Greenhouse GasStudy, by the year 2000 coal consumption will increase from roughly 1 billion tons in 1990 to1.6 billion tons.3 Based on 1990 emission factors, TSP will increase to 22 million tons, andSO% will increase to 27 million tons by the year 2000.

Coal quality

5. On the whole, the quality of Chinese coal is quite good. There are large reserves ofrelatively low-ash ( < 10%) and low-sulfur ( < 0.5 %) coal in China, particularly in the coal-rich province of Shanxi, which accounts for roughly one-quarter of national production and aneven larger percentage of proven coal reserves. Despite relatively high-quality reserves, verylittle of the coal mined in China is screened or washed for impurities. In 1990, less than 18percent of the total coal produced in China was washed, and most of this was coking coal usedin the metallurgical industry. While steam coal accounts for the majority of coal used byindustry and households, less than 8% was washed in 1990. In some cities in China,briquetting of coal is common, which can improve the thermal efficiency of combustion, andwith the addition of lime or other additives, reduce the amount of sulfur released duringburning. However, even in the city of Chongqing (Sichuan), where the average sulfur contentof local coal is around 4% compared to the nationwide average of approximately 1.5%, coalbriquettes for household and commercial use currently amount to less than 20% of totalresidential and commercial coal sales. Besides lowering the efficiency of industrial boilers,and increasing the costs of transport, a high percentage of ash results in potentially largeremissions of particulates during combustion. In addition, much of the best-quality coal is usedby the industrial sector, particularly metallurgy, chemical, and fertilizer, leaving the lower-quality, high-ash and high-sulfur coals, for the residential sector.

Inefficient combustion

6. Nearly half the coal consumed in China is burned in small industral boilers andin household stoves. Small coal-fired industrial boilers consumed approximately 350million tons of coal in 1990. The majority of these boilers operate at low thermalefficiency, have little or no dust collection, no desulfurization capabilities, and lowsmokestacks. Households consumed more than 150 million tons of raw coal in 1990for cooking and heating. Not only is the thermal efficiency of the typical Chinese coalstove low, but pollutants are emitted directly into living areas, particularly in winterwhen additional coal is used for heating and when there is poor ventilation.

3 China: Issues and Options in Greenhouse Gas Ernissions Control, Summary Report, October 1994.

4

B. Air Quality Monitoring

7. Air monitoring of SO2 and TSP concentrations in five large cities (Beijing, Shenyang,Shanghai, Guangzhou, and Xian) is carried out by both the local Environmental ProtectionBureaus (EPB) and by the Global Environmental Monitoring System (GEMS). 4 In the first tenyears of joint operation in these cities (i.e. since 1981) the two systems neither compared datanor applied uniform quality control to cross validate their data. Consequently, there was agreat difference in the results reported from the two systems. For example, the average TSPconcentration measured at fifteen manual stations during five winter (January) days in 1982,1983, and 1984 was 1,550 pg/m3 compared to a similar measurement of 610 pg/m3 byGEMS. It is not clear whether this large discrepancy is due to monitoring at different sites orthe use of different methods. Beginning in 1994, the local EPB will take over the GEMSmonitoring activities from the Anti-Epidemic Stations in China. The ambient air quality dataused in this report are from GEMS because they appear to be of superior quality.

C. Air Quality

8. Annual mean concentrations of SO2 and TSP for the five cities are shown in Figure 2[11]. The eleven-year (1981-1991) mean concentration of SO2 was highest in Shenyang (154pg/m3) and lowest in Shanghai (69 pg/M3); levels in Beijing, Guangzhou and Xian were 97,89, and 88 pg/m 3, respectively. In contrast to SO2, the average annual particulateconcentration was highest in Xian (502 pg/m3) and lowest in Guangzhou (228 pg/m3);Shenyang, Beijing, and Shanghai had mean levels of 461, 421, and 248pg/m 3, respectively.There is a distinct seasonal variation in S02 and TSP, with the lowest concentration betweenJuly and September and the highest concentration between December and March (Figure 3),suggesting that the coal combustion for residential space heating is an important contributor ofair pollution.

4 The GEMS monitoring system in China is part of a worldwide air quality program sponsored by the UnitedNations Environment Progran (UNDP) and the World Health Organization (WHO). In China, the GEMSprogram has been operated by the local Anti-Epidemic Station. (Ref. 11]

Cities

* Beijing v Shenyang v Xian O Shanghai * Guanzhou

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FIGURE 4: Adjuse relat risls of total mortality between January and November, 1989 in 3ijin byqumzl af SO, and TSP in log acaeS thc nue inth boa rers=n th qunie f urx polltfThe hoe quitl is th oec grop. The nitsothe left aW wre ecrete asi logazihu ofreltve risks and the units of the nght axsa relative risks (X.X ea al. 1993).

5

m. HEALTH EFFECTS OF AIR POLLUTION s

A. Acute Effects on Mortality

Bejing study 14]

9. The association of air pollution with daily mortality was examined in two residentialareas in Beijing in 1989 in collaboration with the Chinese Ministry of Public Health. In 1989,the annual mean concentration of sulfur dioxide was 102 pg/m 3 (maximum dailyconcentration: 630 pg/m 3), and for total suspended particulates 375 pg/rm3 (maximum dailyconcentration: 1003 pg/rn3). Daily mortality was regressed against the logarithm of S02 andTSP using a Poisson linear regression method and controlling for temperature, humidity andday of the week.

10. For the Beijing study, a significant association was found between ln(SO2) and dailymortality (Figure 4). The risk of total mortality was estimated to increase by 11 percent (95 %confidence interval (CI): 5% to 16%) with each doubling in the S02 concentration. Theassociation of ln(TSP) with total daily mortality was positive but not significant at the 95percent confidence level (4 % increase in mortality with each doubling in TSP; 95 % Cl: -2 %to 11%) (Table 1).

11. When mortality was analyzed separately by underlying cause, the association with adoubling in SO2 was significant for chronic obstructive pulmonary disease (COPD)(29%),pulmonary heart disease (19%), and cardio-vascular disease (CVD) (11%), and marginalysignificant for the other non-malignant causes (8%); no statistically significant relationship wasfound for cancer (2%). A similar association held for a doubling in TSP; total, COPD andpulmonary heart disease mortality increased by 4%, 38%, and 8%, respectively, however, theresult was only statistically significant for COPD. Both S02 and TSP were found to besignificant predictors of total daily mortality during the summer months. In winter, S02 wassignificantly associated with increased mortality, but no positive association was found forTSP. For either season, the strongest effects of SO2 and TSP were consistently seen for themortality from respiratory diseases (Table 1).

Shenyang study [121

12. The relation between air pollution and daily mortality was examined in Shenyang in1992. In the residential and commercial areas, very high concentrations of sulfur dioxide

5 The epidemiological data used in this study was analyzed by Xu Xiping and colleagues; data for Beijing wascollected in previous work by the author, while data for Shenyang was collected and analyzed as part of a jointcooperative effort between the World Bank and the World Health Organization.

6

(mean 197 g/rm3, maximum 659 pIg/m 3) and total suspended particulates (mean 430 gg/m3,maximum 1140 g/rm3) were observed. Daily counts of deaths were regressed on SO2 andTSP controlling for temperature, humidity, and season (Figure 5). The previous three dayrunning averages of TSP and S02 were used as measurements of air pollution.

13. A significant association of total mortality was found for SO2 and a marginallysignificant association for TSP. The total mortality was estimated to increase by 2 percentwith each 100 pg/m3 increase in S02 concentration, and by 1 percent for TSP (Figure 6).When mortality was analyzed separately by cause, SO% was found to be a significant predictorof COPD (6 percent increase), CVD (3 percent increase), and other-cause diseases (4 percentincrease), but not for cancer (0 percent increase). TSP was only significantly associated withCVD (2 percent increase). Since TSP and S02 were highly correlated in the data set, bothTSP and SO2 were simultaneously included in the model to estimate the independent effect ofeach pollutant. Both TSP and S02 remained significant predictors for CVD and COPD. Theresults from this primary analysis suggest that increased daily mortality in Shenyang wasassociated with elevated air pollution levels.6

Table 1 Acute Effects Of S02 And TSP On Daily Mortality In BeUing And Shenyang.

Location & Period Air PoUutat (mean Daily Expomure-Response (95 % CI) Relationship(ref) level 4g/lm ) MortalityBeijing, 1989 (4) S02 (102) Total 11% (5%, 169%) increase with a doubling in S02

COPD 29 % (4%, 53 %) increase withadoubling in SOZPHD 19 % (6%, 31 %) increase with a doubling in S02CVD 11% (4%, 18 %) increase with a doubling in S02

TSP (375) Total 4 % (-2%, 11%)increase with a doubling in TSPCOPD 28% (4%, 72%)increase with a doubling in TSPPHD 8 % (-9%, 26 %) increase with a doubling n TSP

Shenyang, 1992 S02 (197) Total 2% (1%, 4%) increase for each 100 4g/m(12) increase in S02

COPD 7 % (2 %, 13 %) increase for each 100 Lg/nmincrease in SO2

CVD 2% (-1%, 4%) increase for each 100 jig/mr3increase in S02 -

TSP (430) Total 2% (1%, 3 %) increase for each 100 jig/mr3increase in TSP

COPD 3 % (-1%, 6 %) increase for each 100 Lg/m3increase in TSP

CVD 2% (1%, 4%) increase for each 100 Fig/m 3

increase in TSP

6 The chronic health resulting in mortality were also considered [111], but are not included here because they arenot used in the economic valuation of health impacts that follows.

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Air Pollution Concentrations (ug/m 3

7

B. Acute Effects on Morbidity

Beijing study of hospital outpatient visits [6]

14. Data collected from a community-based hospital in Beijing were analyzed toassess the association of air pollution with daily outpatient visits. TSP measurementswere available for 210 days (mean 395 pg/m3 , maximum 1255 pg/m'), and SO2measurements for 206 days (mean 119 pg/rn, maximum 478 pg/rn) (Table 2). Onaverage, there were 1,386 daily hospital outpatient visits. Of these, about 8.5% visitedthe surgery department; 7.9% visited the pediatrics department, and 20.6% visited theinternal medicine department.

15. A strong dose-independent increase in non-surgery outpatient visits wasobserved for both SQ2 and TSP in linear regression models with adjustments made fortemperature, humidity, seasons and weekdays (Table 2). The estimated effects(comparing the most versus the least polluted days) were 22% (standard error(SE) ==6%) and 17 % (SE = 4%) increases in non-surgery outpatient visits associatedwith SO2 and TSP, respectively.

16. In department-specific analysis, effects on pediatrics and internal medicine visitswere 2 to 3 fold greater than of other types of visits. The associations of SO2 and TSPwith internal medicine visits each remained statistically significant when including bothSO1 and TSP simultaneously and adjusting for surgery visits. These findings areconsistent with the results from three other hospitals located in Beijing's residential area[13 and 14] and industrial area [15] (Table 2).7

The Beiing study of emergency room visits [14]

17. Data collected in 1980 from the Beijing Medical University's third affiliatedhospital were used to examine the association of air pollution on daily emergency roomvisits. The percentage of daily emergency room visits was regressed against S0 2 andTSP adjusting for temperature, humidity, seasons, and weekdays. A significantassociation of total emergency room visits was found for both S0 2 and TSP. The riskof total emergency room visits was estimated to increase by 18 % (95% CI: 4%, 31 %)and 7% (-3%, 17 %) by comparing the most polluted versus least polluted days for SO2and TSP, respectively (Table 3). These findings are consistent with a similar studyfrom an industrial area of Beijing [15].

71n a season-specific analysis, both SO2 and TSP were found to be significant independent predictors ofinternal medicine visits in both winter and summer. The association between outpatient visits and airpollution was stronger in summer than in winter although the summer daily mean SO2 concentration wasonly 17 4g/ml (maximum = 51 jig/m3) which is far below the WHO recommended air quality standard.

8

Table 2 Acute Effects Of S02 And TSP On Daily Hospital Outpatient VLsits In Beijing.Location & Period Air PollutAnt(mean level g Daily Hospital Exposure-Response (95% C1) RelationshiprLe4 /M3 o!!patient Visat .

Beijing, 1990M61 SO2 (119) (range: 6-478) Total 20% (10%, 30%) incease: the worst vs. letpolluted days

Pedarics 38% (11%, 65%) increae: the worst vs. leatpolluted days.

Intenal medicine 31% (14%, 47%) increase: the wort vs. leaspolluted days

TSP (388) (range: 106-1255) Total 20% (10%, 30%) incrase: the wont vs. leatpoluted days

Pediatries 389% (11%. 65%) increase: the wont vs. eatpoluted days.

Intenal medicine 31% (14%, 47%) increase: the worst vs. leastpolluted days

Beijing, 19911151 S02 (124) (range: 6- 564) Total 8% (-6%, 23%) increase: the worst vs. leastpoUuted days

Pediatrics 34% (4%, 64%) increase: the worst vs. lcastpolluted days

Internal medicine 11% (-9%, 30%) increase: the worst vs. leastpolluted days

TSP (359) (range: 64-963) Total 17% (6%, 28%) increase: the worst vs. letpolluted days

Pediatrics 45% (22%, 68%) increase: the worst vs. lastpoUuted days

Intemnal medicine 25% (11%, 40%) increase: the worst vs. eastpolluted days

Beijing, 1990 [141 S°2 (119) (range: 6- 478) Total 11% (-2%, 23%) increase: the wont vs. leastpolluted days

Pediatrics 35% (15 %, 56%) increase: the worst vs. leastpollutcd days.

Internal medicine 20% (2%, 38%) incmase: the worst vs. leastpoUuted days

TSP (388) (range: 106-1255) Total 13% (4%, 23%) increase: the worst vs. leastpolluted days

Pediatrics 23% (6%, 40%) increase: the worst vs. leastpolluted days.

Internal medicine 14% (0%, 28 %) increase: the worst vs. leastpolluted days

Beijing, 1991 (15] S02 (79) (range: 6- 255) Total 5% (1%, 8%) increase: the worst vs. leastPediatrics 139% (71%, 206%) incrcase: the worst vs. least

poluted daysIntenal medicine 46% (20%, 72%) increase: the worst vs. Iast

poUuted daysTSP-(441) (range: 104-1095) Total 3% (0%, 6%) inecease: the worst vs. Ieast

Pediatrics 62% (13%, 110%) increase: the worst vs. leastpolluted days

Internal medicine 14% (-10%, 38%) increase: the worst vs. least_olluted days

9

Table 3 Acute Effects Of S02 And TSP On Daily Emergency Room Visits In BeUing.

Location & Period Air Pollut&nt(mcan level ,ug/m ) Daily Emergency Exposure-Response (95% Cl) Relaonship[rcn Room Visit

Bcijing, 1990(141 SO2 (119) (range: 6.478) Total 18% (4%, 31%) incrae: thewortva. easpoluted days

TSP (388) (range: 106-1255) Total 75% (-3 %, 17 %) incrcase: the worst vs. estpoluted days

Beijing, 19911151 SOz (79) (range: 6- 255) TotWl 39% (5%, 73%) increase: the wornt vs. leanpoluted days

TSP (441) (range: 104-109S) Total 11% (-26%, 49%) incra: the worgt vs. lautpollute days

Hospital adnissions [151

18. A similar analysis was conducted for the association of air pollution and hospitaladmissions. While a significant association was found for TSP, S02 was not significantat the 95 percent confidence level (Table 4). The risk of hospital admission wasestimated to increase 21% (95% CI: -1%, 47%) and 6 % (95 % CI: 2%, 9%) for each100 ~Lg/m` increase in SO2 and TSP, respectively.

Table 4 Acute Effects Of S02 And TSP On DailyHospital Admissions In Beijing

Location & Air Pollutant (mean Daily Hospital Exposure-Response (95% CI)Period Irefl Ievelpg/rn) Admissions Relainhip

............................................ Admissions . ................ _Re..lationship....._.

Beijing, 1991 S02 (79) (range: 6- Total 21% (-1%, 47%) increase for each[151 255) 100 pRg/m 3 increase in S02

TSP (441) (range: Total 6% (2%, 9%) increase for each104-1095) 100 pg/ 3 increase in SO,

C. Linear Exposure-Response Functionsa

19. The above exposure-response functions were used to generate linear functions.The Beijing and Shenyang mortality studies will be used to illustrate the procedure.

Mortality

20. For both studies the percent change in mortality resulting from changes in S02and TSP emissions was reported. This informnation coupled with the analytical method

10

outlined by Ostro (10] was used to calculate linear exposure-response functions. Thisprocess begins with:

(1) %AMORT = a *(ATSP or ASO 2)

where:

%AMORT = percent change in deaths

TSP and S0 2 are measured in gLg/m 3.

21. To operationalize these exposure-response functions the %AMORT needs to bereplaced by the change in deaths attributable to the reduced S02 or TSP emissions (AMORT). This alteration is necessary because the change in deaths (not percent change)will be valued in assessing the economic damage avoided by the pollution abatementmeasures being investigated. To make this change recall that:

(2) %AMORT = MORT x 100.MORT

By multiplying both sides of the exposure-response functions by MORT/100 thefunctions become:

1(3) AMORT = a * (ATSP or ASO 2) * MORT *__.

22. MORT is a measure of the base number of deaths. This needs to be estimatedfor the area affected by the reduced emissions. The best way to do this is to find thetypical or average number of deaths per person (the crude death rate) and multiply thisby the affected population. That is:

(4) MORT = b *POP

where

b = the crude death rate, and

POP = the affected population.

Thus, the exposure-response functions become:

(5) AMORT=a*(ATSP orASO2 )*b*POP 100

By gathering constants into one term the function can be rewritten as:

(6) AMORT = a' * (ATSP orAS0 2 ) * POP

where:

as = a*b1100

23. As reported in the 1992 World Development Report, the annual crude death rate forChina is .007. While "b" is the same for the S02 and TSP functions, the value of 'a' dependson which exposure-response function is being considered (i.e. relative to S02 or TSP and theBeijing versus Shenyang studies). Also, for each study three estimates will be provided foreach pollutant. These represent the central estimate and the 95 percent confidence levels. Theestimated values of 'a'" based on the Beijing and Shenyang studies are provided in Table 5.As can be seen, the ranges of the confidence limits are relatively large, and for SO2 the rangeof the central estimates is quite large (i.e. between Beijing and Shenyang). The central TSPestimates, on the other hand, are very close.

24. In the valuation section below the central coefficient estimates will be usedalong with emission reduction and affected population information to complete equation6. In doing this, it is assumed that reduced emissions of SO2 and TSP will result fromsource-specific projects. It is further assumed that mortality patterns around theseproject sites are similar to those in Beijing and Shenyang even though the industrialfacility is located elsewhere. Parallel assumptions will need to be made for themorbidity studies that are discussed below.

Table 5 Mortality Exposure-Response Coefficientsfor TSP and S0 2 Emission Reductions

Low Central High

TSP

Beijing 0* 2.05 x 10-9 5.75 x 10-9

Shenyang 0 1.92 x 10-9 3.84 x 10-9

S02

Beijing 9.40 x 10-9 2.07 x 10-8 3.07 x 10-8

Shenyang 1.92 x 10-9 3.84 x 10-9 7.67 x 10-9

'The lower 95 percent confidence level was negative, but was truncatedfor this table.

Morbidity

25. The procedure for formulating linear morbidity exposure-response functions isthe same as described for the mortality functions. The morbidity studies discussed

12

above allow estimation of linear exposure-response functions for physician visits andhospital admissions for both S02 and TSP.

26. The function for physician visits is a composite of two studies-emergencyroom visits and out-patient visits [14 and 6]. By assuming that each represents half ofChina's physician visits, a combined exposure-response function was estimated. Thisassumption was necessary because China's physician visit data do not distinguishbetween the two (16]. These data on per capita physician visits were used in the samemanner as the crude death rate in the previous section (i.e. the "b" coefficient inequation 6). An identical procedure was used for hospital admissions in China.Hospital admissions data [16] were used to estimate the "b' coefficient for the hospitaladmissions function.

27. These exposure-response functions based on research in China have beensupplemented with functions for adult respiratory symptoms for both pollutants and afunction for adult restricted activity days for TSP. These latter functions weredeveloped by Ostro based on previous epidemiological studies.' The resultingexposure-response "a'" coefficients are shown in Table 6.

Table 6 Morbidity Exposure-Response Coefficientsfor TSP and S0 2 Emission Reduction.

Low Central High

TSP

Phvsician Visits 1.39 x 10-7 4.68 x 10-7 7.40 x 10-7

Hospital. Admissions 1.24 x 10-8 4.93 x 10'8 9.95 x 1O-8

Adult Respiratorv Svmptom* 9.90 x 10-2 1.48 x 10-1 2.20 x 10-

Adult Restricted Activitv Davy 2.22 x 10-2 3.16 x 10-2 4.97 x 10-2

. o _ _ _ _ _ _ _ _ _ _ __ __ _ _ _ _ _ _ _ _ _

Phvsician Visits 8.36 x 10-7 2.35 x 106 3.86 x 10-6

Hospital. Admissions 0 1.49 x 10-7 3.86 x 10i7

_ Adult Respiratory Symptom' 5.30 x 103 1.02 x 10-2 1.50 x 10-2vUnless noted, Low and High values represent the 95 confidence levels.

**High and low values based on plus and minus one standard deviation

Restricted activity days = days spent in bed, missed from work, and significantly restricted due toillness.

Respiratory symptoms= minor restrictions of daily activities.

8Based on Ostro's work, a child respiratory symptom exposure-response function was also formulated forS02 emissions, but the resulting damage estimates were very small (less than a yuan for a generalpopulation exceeding 100,000). As a result, this function is omitted.

13

28. In the following sections these health effects of S02 and TSP emissions will beused to estimate the economic impacts of reducing S02 and TSP emissions by one ton.These impacts can then be scaled-up for a particular project.

IV. CONVERSION OF EMISSIONS TO ATMOSPHERICCONCENTRATIONS

29. The ton-atmospheric concentration conversion is necessary because the exposure-response functions in the previous section are framed in terms of atmospheric concentrationswhile energy efficiency projects are typically framed in terms of tons of reduced pollutionemissions.

30. Researchers dealing with policies designed to reduce region-wide emissions of apollutant have the luxury of being able to assume that a percentage reduction in emissionsresults in a like percentage reduction in area-wide atmospheric concentrations. This was thecase for a study in Indonesia (9].

31. Unfortunately, when emissions reductions from a single point-source are beingconsidered, such as an industrial plant, the problem is considerably more complex. First, apercentage reduction in a firrn's emissions (measured in tons) does not result in a likepercentage reduction in atmospheric concentrations (measured in pg/rn3). A single firm islikely to be only one of many contributors of the local atmospheric concentration of apollutant. Second, a firm's emissions will influence a limited area, and the concentrationscontributed by the firm will vary by distance and direction from the firm's smoke stack.

32. Calculation of a pollutant diffusion pattern is an extremely expensive and complexendeavor. One has to have knowledge of variables such as the temperature of flue gasemissions and their composition, wind direction and speed, cross-wind patterns, stack height,building shapes, and terrain. This information is then placed in a diffusion model to estimateatmospheric concentrations resulting from the emissions in question. The results then have tobe coupled with population dispersion data to enable use of equation (6).

33. Unfortunately, these data are expensive to gather, and they are site specific. Hence, inorder to formulate preliminary estimates of health impacts resulting from emissions reductions,a stylized model is constructed. Flat, unobstructed terrain is assumed. Further, winddirection is assumed to vary throughout the year in such a manner as to distribute the stackemissions in a circular pattern around the plant.9 The wind speed is assumed to be 2.6 metersper second. This is the average speed in Beijing [17]. This information is coupled with a

9 The formula presented below assumes sixteen wind directions.

14

variation of the Gaussian plume model designed to provide an estimate of the atmosphericconcentrations in the direction of the wind at varying distances from the smoke stack [20].

The Gaussian variant is:

(7) K =(-)" Q *EXP [(h + Ah)]ff U *X I(;r/ 8) 1a,, 2 cf2x

where:

K = atmospheric concentration of TSP or SO2 at distance X from stack (grams/m3 ),

Q = emissions of TSP or SO2 from the source (grams/second),

U = average wind speed at emission source (meters/second)

X = the distance between the emission source and the monitoring site (meters)

ox = standard deviation of vertical dilution'0 = .44 * x.94,

h + Ah= the height of the stack plus plume rise above the stack (meters),

34. The value used for a. yields a conservative concentration estimate, This was chosen toavoid, to the extent possible, overstating the health benefits of S02 and TSP emissionsreductions.

35. For illustrative purposes, two stack heights plus plume rise were chosen-50 meters and75 meters. I The atmospheric concentrations were estimated for concentric circular bandsaround the emissions source. These bands were extended for 10,500 meters. This distancewas chosen to avoid overstating the health effects. It is similar to the distance used by Meierand Munasinghe [19]. The low concentration levels predicted at the boundary provide anotherargument to choose this distance. The bands were centered on 100, 200, through 1,000 metersand then on 2,000, 3,000 etc. up to 10,000 meters.' 2 Table 7 presents the estimated averageconcentrations in micrograms per cubic meter for the two plume heights. These concentrationsrefer to the segment of the concentric circles along the wind direction. Since sixteen winddirections are assumed, one sixteenth of the area encompassed by the concentric circles isaffected by the emissions at any one time. Also, only one sixteenth of the affected populationis exposed at any one time.

10 The Gaussian plume model requires information on air stability. For this analysis, a value based onactive atmospheric mixing which leads to conservative concentration estimates was used.1 1 These figures are based on typical stack heights for industrial enterprises according to researchers at theEnergy Research Institute, Chinese State Planning Commission.12 For example, the concentric band for 100 meters ranged from 10 meters to 150 meters. The other bands up to1,000 meters ranged from 50 meters below to 50 meters above the relevant distance from the source. The 1,000meter band ranged from 950 meters to 1500. The remaining bands ranged from 500 meters below to 500 metersabove the relevant distance from the source.

15

Table 7 Atmospheric Concentration in yg/m 3

Resulg From One Ton of TSP or S0 2 Emissions

Diotance Atmosp eric Concentration -(g/m3)From souue Stack plus plume height Stack plus plure height

(metrs) =50 meters =75 meters100 0.1509 0.0371200 0.0891 0.0609300 0.0478 0.0400400 0.0290 0.0262500 0.0194 0.0181600 0.0138 0.0132700 0.0103 0.0100800 0.0080 0.0078900 0.0064 0.0063

1,000 0.0052 0.00522,000 0.0014 0.00143,000 0.0006 0.00064, 000 0.0004 0.00045,000 0.0002 0.00026,000 0.0002 0.00027 ,000 0.0001 0.00018,000 0.0001 0.00019,000 0.0001 0.0001

__10,000 _ _0.0001 0.0001

V. THE AFFECTED POPULATION

36. To estimate the population whose health is impacted by the emission reductions, ahypothetical municipality and city were constructed. This area was based on populationinformation from 15 cities in China where energy efficiency case studies were undertaken. ' 3

Table 8 lists the population, area, and population density information for these cities and theresulting hypothetical city and municipality.

37. For the current study the average of the city and municipality population densities of1,249 people per square kdlometer was used for the hypothetical situation. Since the areaassumed to be affected by the pollution emissions lies within a 10.5 kdlometer radius from thesmoke stack, it encompasses approximately 346 square kdlometers or three percent of thehypothetical municipality. At 1,249 people/km2 this amounts to an affected population of431,981.

13 See Energy Efficiency in China. Case Studies and Economic Analysis, September 1994.

16

Table 8 Population, Area, and Population Densities for fteen Cities and SurroundingMunicipalities and Resulting Hypothetical City and M icpalit.

_____________________Population ('00) *Area Density (V Munim. City Mu;. City Muni. City

Anshan, LI=ing 2743 1376 4745 622 578 2211Benxi, Lioning 1511 910 8397 1308 180 696

fDandong Liaoning 2793 638 19129 526 146 1212_Dgian,Liaoning 5134 2369 12584 2414 408 981Shiiiazhuang, Hebei 2750 1297 3255 307 845 4224Tangshan, Hebei 6442 1489 13476 1090 478 1366Xingtai, Hebei 815 395 2111 132 386 2992Weifang, Shandong 8343 1110 17308 1472 482 754Zibo, Shandong 2900 2433 3473 2960 835 822Xuzhou,Jiangsu 7618 893 11253 172 677 5190Yanuzhou, Jianesu 9169 428 12425 148 738 2891Jiujiang, Jiangxi 3986 414 18802 699 212 593Chongqig, Sichuan 14711 2959 23131 1534 636 1929Average= 5301 1285 11545 1030 508 1989HYPUTUFIICAL CITY1. Average size (km Z)= 10302. Avere density 1989(pop/km)-Population (1'2), ('000)= 2048HYPOTHETICALMUNICIPALITY3. Average size (kmZ)= A11545

4. Aven s density 508_po/km!f)=

Population (3*4), ('000)= 5862Source: City data from C7ina Urban Statistical Yearbook, 1990 (in Chinese).

38. Because the atmospheric concentration declines as the distance from the stack increases,the estimated health impact on the population also declines with distance. But, the affectedpopulation increases with distance. Table 9 contains the area of the concentration bands andthe affected population assumed to be in each band. If a health response affects only adults,the affected population will be adjusted downward by the percentage of adults in the generalpopulation.

39. The next section will use this information, the exposure-response coefficients,atmospheric concentrations, and estimates of the value of emission reductions to calculate thebenefits of reducing S02 and TSP emissions by one ton. The first part of the section willpresent the health effect values of emissions reductions; i.e., the value of an avoided mortality,physician visit, or other health-related incident. The latter part of the section will convert thesevalues to a per ton of SO2 and TSP basis.

17

Table 9 Distance from the Emissions Sourceand the Affected Area and Population

Distance From Area Percent of AffectedSouce(meters) (m2 ) AUea PoplWation

100 70,372 0.02 88200 125,664 0.04 157300 188,495 0.05 235400 251,327 0.07 313500 314,159 0.09 392600 376,991 0.11 470700 439,823 0.13 549800 502,654 0.15 627900 565,486 0.16 705

1,000 4,233,293 1.22 5.2802,000 12.566.360 3.63 15,6733,000 18,849.540 5.44 23,5094,000 25,132,720 7.26 31,3465,000 31,415,900 9.07 39,1826,000 37,699.080 10.88 47,0187,000 43,982,260 12.70 54,8558,000 50,265,440 14.51 62,6919,000 56,548,620 16.33 70,528

10,000 62,831,800 18.14 78,364Totals= 346,359,983 100.00 431,981

VI. VALUATION OF S0 2 AND TSP EMISSIONS ABATEMENT

A. Mortality

40. Cropper and Oates [20] report that, "[r]eductions in risk of death have beenvalued using three mnethods: averting behavior, hedonic analysis, and contingentvaluation [p. 713]." The most common approach to environmental pollution evaluationis based on hedonic wage analysis14 .

41. Hedonic wage models have been developed to value society's willingness toaccept varying risks of death associated with working within a given profession. Theprocess is based on the assumption that competitively determined wages will haveembodied within them valuation of the risks associated with working in differentprofessions. These models are consistent with the Hicksian utility framework of

14 Contingent value studies deal with valuation of a statistical life in situations such as reductions of jobrelated risks or reductions in the risks associated with auto accidents. Averting behavior deals withsituations like the use of seat belts or smoke detectors.

measuring changes by the income or relative price change necessary to return theindividual to their original welfare level.

42. To illustrate how this process works if implementation of a project results inreducing the probability of death by .00001 (i.e. 10-5) for each person in a populanof 200,000, two statistical lives will be saved (10-5 x 200,000).15 If wage modelsindicate that each person in the population is willing to pay $10 for this risk reduction,then the population as a whole is willing to pay $10 x 200,000 = $2,000,000 or$1,000,000 per statistical life saved [20, p. 713].

43. The .00001 is an exposure-response coefficient similar to those listed in Tables5 and 6. The $10 might be estimated via an hedonic wage model that regresses wagerates on variables that influence wages. These typically include: level of riskassociated with the particular job under consideration, location, age, race, sex,education, etc.

44. Most recent U.S. studies have found that values of a statistical life savedgenerally fall between $1.6 million and $8.5 million (1986 dollars) [21]. Of course,one would expect that the situation in China would be considerably different. A majorcontributing factor to this difference is the impact of income. As incomes rise,individuals have the luxury of increasing their willingness to pay for reductions in risk.

45. Besides a wage study, one way to estimate China's willingness to pay for riskreduction is to put the U.S. figures on a per dollar wage basis and apply thisrelationship to China. Ostro did this for Indonesia and estimated that preventing onestatistical death is worth 24,000 times the daily wage. This assumes a U.S. value forpreventing a statistical death of $3,000,000. Ostro's method did not fully take intoconsideration differing levels of purchasing abilities between wages earned in the U.S.and Indonesia. In the current study the purchasing power parity (PPP) ratio is used toadjust for these differences. Recent studies indicate that purchasing power may be asmuch as three times higher than nominal wages in China. Following the Ostro method,the value of preventing a statistical death for China is 591,552 Yuan. That is, 24,000times 8.216 Yuan-the average daily manufacturing wage for 1990 [221-times thePPP ratio of 3.

is A statistical life saved refers to saving the life of a peron who remains unidentified.

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B. Morbidity

46. Factors that are relevant in the calculation of the value of improved health dueto reduced SO2 and TSP emissions include reduced days away from work, avoidedmedical expenses, and reduced physical and mental discomfort.

47. Cropper and Oates when comparing attempts at valuing actions which avoid amortality to those aimed at avoiding morbidity state that, The valuation of morbidityhas been less successful. [20, p. 714]" Unfortunately, for the current situation anestimate of the benefits resulting from avoided morbidity is necessary. As a result,wages will be used directly as an estimate of the value of work days lost due to illness.Wages will also form the basis for the valuation of a restricted activity day andrespiratory symptom. These latter valuations are discussed below. Use of wages inthis manner ignores any value placed on the avoided physical and mental discomfort.This being the case, the valuation estimates used here are conservative.

48. Table 10 contains estimates of the value of an avoided physician visit, hospitaladmission, restricted activity day, and respiratory symptom. A physician visit isassumed to require a day of lost work and the cost of the medical treatment (9.9 Yuan)(16]. A hospital admission is assumed to last 15.9 days and cost 29.2 Yuan in medicalexpenses per day (16]. For respiratory symptoms and restricted activity days wagerelationships from Ostro [10] were used. They are: for respiratory symptoms (0.12 *

the wage) and for restricted activity days (0.464 * the wage). These were furtheradjusted by the PPP ratio.

Table 10 The Estimated Value of Avoided Health Effectsdue to TSP and S02 Emission Reductions

.___ __ __ _ __ __ _ _ Yuan per OccurrencePhysician Visit 18.11Hospital Admission 594.82Respiratory Symptom 2.96Restricted Activity Day 11.44

Benfit Vahlaton per Ton of Emission Reduction

49. By multiplying the values in Table 10 by the appropriate exposure-responsecoefficient, atmospheric concentration per ton of emissions, and the affectedpopulation, (i.e. factors in equation 6) an estimate of the health benefits per ton ofemissions reductions can be obtained. Table 11 and Table 12 present these healthbenefits for the 50 and 75 meter stack heights, respectively. The estimated number ofdeaths and illness consequences avoided are also provided in the last two columns.These later figures allow substitution of alternative valuation estimates in case onedisagrees with the monetary values used here.

50. Mortality is a major contributor to the values in Table 11 and Table 12. ForTSP, mortality accounts for 46 percent of the total. For S0 2, mortality is more than98 percent of the total. Therefore, valuation of this factor is critical. If instead ofvaluing mortality in a willingness to pay framework the discounted present value of thevictims' potential wages were used, the mortality values would be reduced by almost90 percent. ' 6 While not advocating this valuation scheme, it does provide a lowerbound to the mortality estimation. The TSP estimates would fall by about 40 percentand the S02 estimates by 88 percent.

51. This analytical framework will allow preliminary assessment of the localenvironmental impacts of projects with a significant environmental component. Toestimate the health impacts more accurately for a particular project a full non-stylizedanalysis would have to be conducted. It should be further noted that the currentanalysis considers only the acute health effects. The chronic health effects, damage tobuildings, reduced visibility and crop damage have not been addressed. The sameprocedure could be used for these impacts. It should also be emphasized that theanalysis deals only with the localized impacts of S0 2 and TSP. Trans-boundary orglobal impacts and impacts of other pollutants have not been considered. 17

1 6 is calculaion is based on a discounted present value of wages of about 60,000 Yua. This assuresa currnt wage of 2025 Yuan/year, a consumption discount rate of 5 percent and 45 year adultdood.1 7 In a costbenefit firmework transboundry and globa impacts could be tretd as reiduas after

removal of localized environmental impacts.

Table 11 Health Impacts of a One Ton Reduction of TSP and SO2

-50 Meter Stack and Plume Height.

TSP Yuan Yuan Physical PhysicalReduction Reduction

of ofMorality

Beijing study 86.22 0.00015Shenyang study 80.82 0.00014Average 83.52 0.00015

MorbidityPhysician Visits 0.60 0.033Hospital Admissions 2.09 0.0035Adult Respiratory Symptom 52.71 17.82Adult Restricted Activity Day 43.50 3.81TOTAL FOR TSP 182.42

SO,Mortality

Beijing study 871.56 0.0015Shenyang study 161.61 0.00027Average 516.60 0.00089

MorbidityPhysician Visits 3.03 0.17Hospital Admissions 6.33 0.011Adult Respiratory Symptom 3.63 1.23TOTAL FOR SO- 529.59

Table 12 Health Inpacts of a One Ton Reduction of TSP and S02-75 Meter Stack and Plume Height.

TSP Yuan Yuan Physical PhysicalReduction Reduction

of ofMortality

Beijing 77.82 0.00013Shenyang 72.93 0.00012Average 75.39 0.00013

MorbidityPhysician Visits .55 0.030Hospital Admissions 1.89 0.0032Adult Respiratory Symptom 47.58 16.08Adult Restricted Activity Day 39.42 3.43TOTAL FOR TSP 164.83

SO-,Mordality

Beijing 786.57 0.0013Shenyang 145.86 0.00025Average 466.23 0.00078

MorbidityPhysician Visits 2.74 0.1SHospital Admissions 5.71 0.0096Adult Respiraory Symptom 3.27 1.11TOTAL FOR SO., 477.95

U. CONCLUSIONS

52. One of the major economic costs to society of air pollution is its impact onhuman health. Based on the foregoing analysis, the values of reducing mortality andmorbidity by curtailing TSP and SO2 emissions in China have been estimated at 165and 530 yuan per ton (1990 prices), respectively, or US$35/ton and US$113/ton(converted at 1990 official exchange rate). If these estimates were used in cost-benefitanalysis, the outcome of project appraisal for many industry and energy projects wouldbe significantly different than the situation where only qualitative estimates of pollutionare made. Is

53. In order to bring air pollution damage costs into mainstream cost-benefitanalysis, it is necessary to convince policy-makers and the public of the validity of themethodology and the conclusions. The current analysis is an important first step in

I Industrial energy efficiency case studies in China show consistently higher rates of return when the healthbenefits of TSP and S02 reduction are included in the economic analysis. See Energy Efficiency in China: CaseStudies and Economic Analysis, September 1994

assessing the societal costs of air pollution in China. Most importantly, this study usesresearch results from China on the physical relationship between air pollution andseveral health end-points and assesses the magnitude of air pollution reduction resultingfrom typical energy efficiency projects.

54. However, the analysis in this study is partial in that only some of the costsassociated with air pollution have been considered. Examples of health impacts thathave not been included nor quantified are the psychological impact of not feelingcompletely healthy or the impact on family members or friends of being ill or dying.Second, there are many non-health related benefits from air pollution reduction, such asless corrosive damage to buildings and bridges, more productive crops and trees, or aclear skyline, that have also not been assessed. Projects that reduce S02 and TSP arealso likely to reduce transboundary pollution problems such as acid rain and globalenvironment problems such as global warming.

55. In assessing the health impacts of air pollution, improvements need to be madeon the physical damage functions and on the valuation of damages. The exposure-response functions used in this study were cross-sectional in nature. Although fewlongitudinal studies of air pollution and health are available, China's rapid economicgrowth and industrial reform offer a unique opportunity to conduct natural experimentalstudies on this issue. Prior to the adoption of stricter air pollution standards or theadoption of less-polluting technologies, baseline studies of health should be conductedand then followed up. For example, installation of a new air pollution control devicein an industry may reduce the pollution and hence have a direct health impact on localresidents and workers. Studies can be conducted to assess the health outcomes beforeand after the event.

56. The current analysis on the health effects of air pollution was based on datafrom Beijing and Shenyang. Given the large variations in geography, climate, localindustry, and socio-economic development across the country one should be cautious ingeneralizing the present findings to other areas of China. In order to broaden the -fir'dings, the World Bank is currently supporting epidemiological work in Chongqingon the relationship between air pollution and health. In contrast to northern cities,where high TSP levels, particularly in winter, are a dominant source of air pollution,Chongqing has some of the highest recorded levels of atmospheric sulfur in the world.Results from this survey should help to broaden the finding on air pollution and itsaffect on health in China.

57. Despite the critical importance of valuation, this study has made use of valueestimates (adjusted for income) from other countries, mostly developed countries,where marginal damages are likely to be quite different than for China. What isneeded is a more representative assessment of the economic damages associated withmarginal changes in health in China. Additional research for China on the value of a

statistical life or a survey measuring the willingness-to-pay to avoid various healthoutcomes would help to improve the valuation methodology.

58. Besides providing a quantitative measure of air pollution impacts that can beused to refine economic cost/benefit analysis, this study illustrates the potentialimportance of including health impacts in public policy decision-making. Specifically,policies of industrial expansion that do not take into consideration health impacts can becounterproductive from society's viewpoint. The current study demonstrates that theinclusion of health impacts can be an important factor in the decision to go ahead witha project (energy efficiency) when air pollution reduction is only a side benefit.However, the analysis presented here can be easily extended to projects such as coalcleaning or the installation of emissions reduction devices where a primary objective isthe improvement in public health. While an energy efficiency project may havesufficiently high returns to proceed without consideration of the health benefits, theinstallation of pollution reduction equipment necessitates that an explicit or implicitvalue be assigned to health or other damages. The enthusiasm with which the currentresearch and initial results have been received by public health and environmentalprotection agencies in China is an indication of the importance of this work.Refinement of the current methodology will therefore be extremely important forenvironmental and public health policy-making in China.