Assessments of the benefits of improvements in environmental quality in Central and Eastern Europe are needed to determine priorities for pollution abatement activities in the region. A recent study conducted by researchers at Resources for the Future suggests that the human health benefits attributable to reductions in emissions of three air pollutants in five of the region's countries are potentially large. However, the study also highlights the uncertainties surrounding measurements of decreases in adverse health effects and economic valuations of improved air quality. Attempts to account for these uncertainties yield findings that strengthen the researchers' assertion that air pollution control should be a target of environmental and economic policies in Central and Eastern Europe.
Central and Eastern European countries are simultaneously attempting to address environmental problems and rebuild their economies. Given that substantial financial investment will be needed to accomplish the latter goal, it is important that resources used to attain the former goal be spent on pollution abatement efforts that will garner the greatest benefits to society. Assessments of the benefits that can be obtained through improved environmental quality help policymakers to set rational priorities for environmental cleanups. If such assessments indicate that the benefits are potentially large, they would highlight the importance of not ignoring the environment in pursuing economic restructuring.
It appears that reductions in air pollution in the five Central and Eastern European countries under consideration have the potential to yield health benefits equal to at least 1 percent to 3 percent of each country's gross domestic product and possibly equal to an even greater percentage of GDP.
We recently conducted a preliminary assessment of one category of benefits that can be obtained from improvements in environmental quality: the health benefits of reduced air pollution. Specifically, we examined the effects on human health of reductions in ambient concentrations of particulates, sulfur dioxide (SO2), and lead in each of five countries—Bulgaria, the Czech Republic, Hungary, Poland, and Ukraine.
We consider the assessment to be preliminary because it has several limitations. One limitation is the small number of pollutants considered. Data availability largely dictated the scope of the assessment. For example, the lack of data on ground-level ozone, which is known to have adverse health effects, meant that the benefits of reducing this air pollutant could not be examined. Another limitation of the assessment is that only one kind of benefit from air quality improvement is analyzed. Scientific uncertainties and lack of data precluded a systematic assessment of benefits other than improved human health that are attained by reducing air pollution. In particular, these uncertainties made it impossible to assess reductions in ecological damages that could result from improvements in air quality. Yet another limitation is that no comparisons are made among the benefits of ameliorating different kinds of environmental hazards. For example, lack of data on the extent and nature of water contamination precluded a comparison of the benefits of improved water quality with those of improved air quality.
Despite these limitations, some important conclusions emerge from our analysis. It appears that reductions in air pollution do have the potential to yield substantial health benefits in Central and Eastern European countries—benefits that are at least 1 percent to 3 percent of gross domestic product (GDP) in these countries, and quite possibly equal to an even greater percentage of GDP. While we do not have the information on air pollution abatement costs that would be needed for a full-scale benefit-cost analysis, we believe the size of the potential benefits of reduced air pollution should make air pollution control an important target of environmental and economic policies in Central and Eastern Europe. Control of particulate emissions should be a particularly important target, given that this air pollutant contributes significantly to health damages and is often fairly cheap to abate.
Methodology of assessment
Our analysis focuses on the potential benefits of air quality improvements sufficient to meet current European Community (EC) standards for the three pollutants under consideration. Therefore, the first step in the analysis was to establish baseline ambient concentrations of particulates, SO2, and lead in Bulgaria, the Czech Republic, Hungary, Poland, and Ukraine. From the World Bank and sources in the region we obtained data on ambient conditions in more than 200 cities and towns, as well as in subdivisions of some large cities (such as Budapest and Prague) within these countries. The percentages of total national population that are represented by data on particulates in our sample range from 17 percent (Poland) to 34 percent (Hungary and Ukraine). The percentages of total national population that are represented by SO2 data in our sample generally range from 19 percent (Poland) to 34 percent (Ukraine) but rise as high as 72 percent (Hungary). Data on ambient lead concentrations were unavailable for the Czech Republic and Ukraine, and were available for only a few urban areas in Hungary and Poland. Therefore, the percentages of total national population that are represented by lead data in our sample range from less than 5 percent (Hungary and Poland) to 23 percent (Bulgaria).
All the data on ambient concentrations of the three pollutants date from the late 1980s, and thus do not reflect changes in these concentrations that have resulted from current economic downturns in the five Central and Eastern European countries. Because we do not possess detailed information about the dispersion of pollutants in specific locations, we assume that all people in a particular sample area have the same pollutant exposures—that is, they all live with the same ambient conditions as those measured at the pollution monitoring stations from which our data are derived.
After collecting ambient pollutant concentration data, we calculated the degree to which ambient concentrations of each pollutant would have to be reduced in each sample area in order to meet EC standards. EC standards for particulates and for SO2 limit both average annual exposures and maximum daily exposures. Therefore we calculated reductions in average exposures sufficient to meet both limits (see table, p. 9). The percentage reductions we estimated are quite substantial. Those for particulates generally range from 40 percent to 49 percent, although in the Czech Republic the reduction needed to meet EC standards is only 5 percent. Percentage reductions needed to meet EC standards for SO2 range from 12 percent in Hungary to 70 percent in Bulgaria. Those needed to meet EC standards for lead range from 23 percent in Bulgaria and Poland to 43 percent in Hungary.
The adverse health effects of poor air quality range from asthma attacks and so-called restricted activity days to heart disease and premature mortality. The benefits of reducing these effects appear to be significant
The particulate reduction figure for the Czech Republic is puzzling, given the frequent references in both popular reports and scholarly studies to the poor air quality of northern Bohemia. The only explanation we can offer is that the sample areas in this country seem to have relatively little pollution.
Our next step was to estimate the reductions in adverse health-related effects that would result if ambient pollutant concentrations declined enough to meet EC standards. We calculated these reductions using a dose-response model that accounts for a variety of health effects, ranging from asthma attacks and so-called restricted activity days to heart disease and premature mortality. The model, which was prepared by researchers at Resources for the Future and elsewhere for a study of the social costs of energy in the United States, reflects a balancing of expert opinions distilled from the clinical and epidemiological literatures on the health effects of air pollution. Two assumptions of the model are noteworthy. The first assumption is that the relationships between doses (exposures) and responses (health effects) are largely linear—that is, the rates of health effects do not grow as exposures increase. The second assumption is that there are benefits from improving air quality even when ambient pollution concentrations are already low.
It should also be noted that the dose-response relationships assumed by the model are based on those documented in the United States and Western Europe. Thus they do not reflect differences in the basic health status of residents of Central and Eastern Europe. We suspect that our model underestimates the reduction in adverse health effects that would occur if pollution declined in the countries included in our analysis. This suspicion is based on the assumptions that individuals living in Central and Eastern Europe are not as healthy as individuals living in the West and that the less healthy an individual is, the more sensitive he or she will be to pollution exposures. Given all the uncertainties and sources of controversy surrounding dose-response relationships, our dose-response model does not attempt to calculate a single response for each health effect. Instead, it calculates a low, a middle, and a high response.
Once we calculated reductions in adverse health effects, we proceeded to calculate a per-unit economic value for the health improvements. Like the preceding step, this step is controversial on both philosophical and practical grounds. Some people are troubled by the notion of assigning monetary values to human health generally and especially to risks of premature mortality. While we recognize these concerns, we believe that it is possible—in principle—to obtain useful information about what trade-offs people are willing to make between health and other social goods.
Even if one accepts the principle of imputing monetary values to health, the practical problem of assessing willingness-to-pay (WTP) for reductions in exposure to health threats must be addressed. Our model for valuing such reductions includes estimates of both direct health damage costs—such as medical expenses and wage rates that reflect the value of workers' restricted activity days—and estimates of WTP for reduced exposure to health threats. The latter estimates are derived from contingent valuation studies in which individuals are asked to reveal their WTP for reduced exposure to health threats. Like our dose-response model, our valuation model attempts to reflect the preponderance of expert opinion in the literature concerning monetary valuations of health effects. To reflect the uncertainties in existing estimates of WTP, the model calculates low, middle, and high valuations.
Average Percentage Reductions in Total Suspended Particulates, Sulfur Dioxide, and Lead Needed to Meet European Community Standards for Ambient Concentrations of These Air Pollutants
All of the WTP and medical cost valuations used in our analysis are derived from analyses of such valuations in the United States and Western Europe. Because we could not develop independent estimates of medical costs and WTP for reduced exposures to health risks for Central and Eastern European countries in the course of our analysis, we adjusted the valuations made in the West to a scale relevant to Central and Eastern Europe. We took two approaches in making this adjustment. The first approach was to scale all values by the ratio of average income in Central and Eastern Europe to average income in the United States—a ratio of about 0.08. This approach may understate valuations of health risks, and particularly valuations of reduced mortality risks, in Central and Eastern Europe. Some evidence suggests that mortality valuations in this region do not fall in strict proportion to declines in income; this evidence suggests that they fall less than declines in income. To account for this possibility, our second approach to adjusting valuations was to set the income elasticity for the mortality valuation at 0.35, rather than at an elasticity of 1.0—the elasticity assumed in the relative wage approach.
The final step in our analysis was to estimate aggregate health-benefit values for the countries under consideration. This involved multiplying together the estimated air quality improvement figures—which were derived from ambient particulate, SO2, and lead concentrations reductions sufficient to meet EC standards—and the values of improved health conditions indicated by the dose-response and valuation models. This calculation provides measures of benefits to populations in the sample areas. To obtain benefit figures for the entire population of each country considered, we made assumptions about the pollution to which people not in our sample areas are exposed. We considered two different cases to account for our uncertainty about the pollution exposures of these people. In the first case, the assumption is that the areas not in the sample have air quality that meets EC standards, and thus there is no need to calculate any health benefits for them. This case represents a lower bound for the national benefit figures. In the second case, the assumption is that air quality in the areas outside the sample is equal to the average air quality in the sample areas of each country.
Direct health damage costs and willingness-to-pay (WTP) for reduced exposure to health risks may not be the same in Central and Eastern Europe as they are in the West; therefore estimates of such costs and WTP in the West must be adjusted to a scale relevant to Central and Eastern Europe.
We also considered a case in which all areas in each of the countries under consideration must make the same percentage reductions in ambient concentrations of particulates, SO2, and lead, whether or not the sample data indicate that the areas meet EC standards for the concentrations. The percentage reductions we set for each country correspond to the average reductions in the sample areas when EC standards are met. Analysis of this case allowed us to calculate the additional health benefits that could be reaped from making air quality improvements beyond those that would be required to meet EC standards.
Results of analysis
Our estimates of the health benefits obtained by meeting EC standards for particulates, SO2, and lead in Bulgaria, the Czech Republic, Hungary, Poland, and Ukraine indicate that these benefits are potentially large (see table, p. 11). These benefits are expressed as a percentage of a country's GDP in 1988. As noted above, we calculated low, middle, and high estimates for both reductions in health effects and valuations of these reductions under two different assumptions about how benefits in the sample areas are scaled to the national level. An examination of the middle-range estimates indicates that the health benefits of meeting the EC standards generally range from 1 percent to 3 percent of GDP, even if we assume that areas not in the sample already meet EC air pollution standards. The notable exception is that no such benefits are attained by meeting EC standards in the sample areas in the Czech Republic. This finding reflects the fact that in these areas only an average 5 percent reduction in particulate emissions is needed to meet the EC standard for ambient concentrations of particulates.
If we assume that the air quality of the areas not included in the sample is the same as the average air quality of areas in the sample, the national benefit range would shift to about 4 percent to 12 percent of GDP, given middle-range estimates of health effects and valuations. Low estimates of health effects and valuations shift this benefit range downward, but not as much as high estimates shift it upwards. With low estimates, the national benefit range is about 1 percent to 4 percent of GDP; with high estimates, it is 14 percent to 34 percent of GDP.
Almost all of the estimated benefits are attributable to reductions in ambient concentrations of particulates. Two factors may account for this finding. One is that our data on the percentage of a country's population that is exposed to lead are not as comprehensive as our data on the percentage of a country's population that is exposed to particulates and SO2. If we had lead exposure data for Ukraine and the Czech Republic, and more such data for the other three countries under consideration, we expect the benefits of reducing ambient lead concentrations would increase.
Estimates of the Economic Benefits Obtained by Meeting European Community Standards for Ambient Concentrations of Total Suspended Particulates, Sulfur Dioxide, and Lead (Expressed as a Percentage of a Country's GDP in 1988)
Another factor that may account for our finding that the majority of estimated benefits are attributable to reductions in ambient concentrations of particulates is the fact that our dose-response model assigns greater health effects to particulates than to SO2. Most of the medical literature suggests that particulates are much more harmful to human health than airborne SO2, which primarily affects materials and ecosystems. However, a portion of SO2 in the atmosphere converts to sulfate aerosols (SO4), which are known to be a health hazard but which are measured in the particulate data. Thus our estimates of benefits resulting from the reduction of ambient concentrations of total suspended particulates include benefits ultimately attributable to the reduction of ambient concentrations of SO2 emissions. It is not possible on the basis of currently available information to determine how much of measured particulates is sulfate aerosols.
Our sensitivity analysis of the valuation of premature mortality risk indicates that assumptions about this valuation significantly affect the outcomes of the valuation. For example, when an income elasticity of 0.35 is used to scale the value of reduced mortality risk in Central and Eastern Europe, middle-range estimates of total health benefits rise to a level comparable to that when calculations are based on high estimates of health effects and valuations of reduced health risks. The outcomes of assuming uniform pollution reductions are more mixed. When uniform reductions in ambient concentrations are required across the sample areas, some of which already meet EC air pollution standards, the resulting benefits are greatest in Poland. This country has the largest share of sample locations that meet EC standards, yet it still stands to gain health benefits from additional reductions in air pollution.
Research needs
Our findings support the assertion that air pollution control should be a target of economic and environmental policies in Central and Eastern Europe. Clean air is not a luxury that only rich countries can afford to pursue. Our findings also underscore the importance of controlling particulates—one of the most socially beneficial pollution abatement options.
However, our analysis highlights the large uncertainties we face in putting an economic value on improved air quality. Some of this uncertainty is due to gaps in the basic knowledge of medical science—gaps that might not lessen substantially in the short term. Nevertheless, there are activities that could considerably reduce our uncertainties about valuations of air quality improvement in Central and Eastern Europe. One such activity is to conduct research that will augment knowledge about air quality in the region and the effects of air quality on human health and the environment. Such research will require intensive data collection efforts and cooperative air chemistry, environmental monitoring, and medical science research by experts in Central and Eastern Europe and in the West.
An equally important activity is the effort to better understand the values that residents of Central and Eastern Europe actually place on improved air quality. Here again, collection of relevant information about direct damage costs and measurement of willingness-to-pay for improved air quality offers a significant opportunity for cooperation between experts in Central and Eastern Europe and those in the West. Although they will be neither easy nor cheap, such efforts could set the stage for a wide assessment of pollution damages and priorities. Given the continuing economic and environmental difficulties facing Central and Eastern Europe, these efforts are an important component in determining responsible environmental policies in the region.
Alan J. Krupnick is a senior fellow and Kenneth W. Harrison is a research assistant in the Quality of the Environment Division at Resources for the Future (RFF). Michael A. Toman is a senior fellow and Eric J. Nickell is a research assistant in the Energy and Natural Resources Division at RFF. A more detailed account of the issues addressed in this article can be found in discussion paper ENR93-19, "The Benefits of Ambient Air Quality Improvements in Central and Eastern Europe: A Preliminary Assessment," by Krupnick, Harrison, Nickell, and Toman.
A version of this article appeared in print in the October 1993 issue of Resources magazine.
A version of this article appeared in print in the October 1993 issue of Resources magazine.
