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Financing Sustainable Transport through Health Credits


Kaye Patdu and May Ajero Clean Air Initiative for Asian Cities (CAI-Asia)

Financing Sustainable Transport


Existing design of carbon mechanisms, such as CDM, was inadequate Need to explore and innovate nancing mechanisms
Fuel security credits Climate nance Congestion pricing Parking levies Health credits Road safety credits Fuel levies
Number (%) of CDM projects in each category Demand-side EE 4%
Fuel switch 2%

Af f orestation & Ref orestation 0.8%

Transport 0.5% HFCs, PFCs, SF& & N2O reduction 2%

Supply-side EE 7% CH4 reduction & Cement & Coal mine/bed 16%

Renewables 69%

Source: http://www.cdmpipeline.org/

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Health insurance initiatives in preventive health measures and SUT

Transport and Health


Transport and urban air pollution
Transport contributes as high as 70% Diesel exhaust is carcinogenic 76% of Beijing and 55% of Delhi live within 500 meters of major roads and freeway 0.5 million pre-mature deaths in Asia annually Over 4 million lost years of healthy life annually 8% of lung cancer deaths, 5% of cardiopulmonary deaths and 3% of respiratory infection deaths

Road accidents risks


1.3 million deaths annually 0.65 million deaths are pedestrians, cyclists, and motorcyclists 5th leading cause of death by 2030
Source: WHO, 2009, IARC, 2012, HEI, 2010
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Exploring health credits from air quality improvement


Eective intervention measures can reduce air pollution-related illnesses Reduce expense and gain savings Health Insurers
Can benet from reduced payouts for air pollution related diseases Is there a case to use savings to co-nance incremental cost of intervention measure?
With support from the Asian Development Bank Sustainable Transport Interven8on

Reduced Emissions Reduced Air Pollu-on Levels Reduced Exposure to Air Pollu-on Reduced Health Impacts Reduced Expenses for AP related illnesses

Costs minus Costs of alterna4ve

=
Incremental Costs of Interven8on Measures

Simplified Approach

Savings
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Will this work? Model Assumptions


Possible Developments in Health Insurance Uptake and Health Impacts Health From Air Pollution insurance uptake BAU A Health payouts for air pollution If interven8on related illnesses measures are B implemented

A B
2015 Health impacts from air pollution 2020

Health Insurance uptake Health Impacts from air pollu4on Health payouts for air pollu4on related illnesses

2010 GDP growth


Source: CAI-Asia, 2011

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Health costs from Air Pollution Morbidity


Cost of Outdoor Air Pollu8on (OAP)-related Morbidity

DIRECT Costs
Cost of treatment (Medical Services) Actual Expense Paid directly by pa4ent (Out of Pocket Expense) Paid indirectly by pa4ent and rest of public through insurance premiums, taxes, etc. (Health Insurance Private and Social Security) (Government/Others)

INDIRECT Costs
Value of lost produc4ve 4me (income) Value of lost leisure 4me

Intangible Costs
Cost of pa4ents pain and suering

Pa4ent

Pa4ent Family/ Community

Air pollu8on costs California 193 million USD Actual expense of state and private health insurance in California (2005-2007)
http://green.blogs.nytimes.com/2010/03/12/health-costs-of-california-air-pollution/

Manila Case Study: reasons for selection


Air Pollu8on Levels are above WHO guidelines AP-related disease are among top burden of disease High and increasing Transport contributes as high as 70% to air pollu4on PM emissions projected to grow by 25% from 2010-2020 Health expenditure is increasing Health insurance uptake is increasing (policy target) Average price per claim is increasing
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Health Costs Transport Emissions

Health Financing and Insurance

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Optimizing sustainable transport interventions


Target vehicles with relatively high PM contributions per unit
40%
% Share in P M emissions

35% 30%
25% 20% 15% 10% 5%

Other UV

Trucks
PUJ

Bus

Trailers

SUV
3w

PC 15% 20% % Share in Vehicle Population 25% 30%

0% 0%

2w

5%

10%

35%

Source: CAI-Asia, 2011

Social/political feasibility or will (proposed electric tricycles) Investment cost (e.g. technological versus soft measures)
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Manila Case Study: Transport Interventions


Transport Intervention
Eco-driving for drivers of jeepneys, trucks and trailers Conversion of diesel jeepneys to LPG Installation of diesel oxidation catalyst (DOCs) for buses

Assumptions

Indicative Costs

Emission Reduction Potential (2011-2020)

60% of drivers of 12 USD per driver, total 0.7% PM reduction jeepneys, trucks and cost of 920 thousand (1,092 tons avoided) trailers trained by 2020 USD 30% of jeepney eet are LPG by 2020 60% of buses are equipped with DOCs by 2020 4,285 USD incremental 1.6% PM reduction cost per unit, total cost (2,535 tons avoided) of 90 million USD 1,000 USD per unit, 0.6% PM reduction total cost of 5.5 million (946 tons avoided) USD

Replacement of 240 USD incremental 50% of tricycle eet are 0.8% PM reduction combustion engine cost, total incremental electric by 2020 (1,329 tons avoided) tricycles with electric cost of 886 million USD
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Savings to Cost Ratio of Transport Interventions


Covered only acute respiratory infections Even at 10% co-nance, health insurers can gain net savings Return of investment in form of savings are highest for eco-driving
Air pollution atrribution Transport Intervention Insurers benefits: Reduction in Philhealth Payouts Contribution by insurers 50% Eco-driving LPG Jeepneys 100% DOC for Buses Electric Tricycles Eco-driving LPG Jeepneys 50% DOC for Buses Electric Tricycles Eco-driving LPG Jeepneys 10% DOC for Buses Electric Tricycles 1.20 : 1 0.04 : 1 0.18 : 1 0.14 : 1 0.60 : 1 0.02 : 1 0.08 : 1 0.08 : 1 0.10 : 1 0.00 : 1 0.02 : 1 0.01 : 1 10% 6 : 1 0.20 : 1 0.90 : 1 0.70 : 1 3 : 1 0.10 : 1 0.40 : 1 0.40 : 1 0.50 : 1 0.02 : 1 0.09 : 1 0.07 : 1 Insurers benefits: Reduction in Private Insurance Payouts Contribution by insurers 50% 0.98 : 1 0.02 : 1 0.14 : 1 0.12 : 1 0.48 : 1 0.02 : 1 0.08 : 1 0.06 : 1 0.08 : 1 0.00 : 1 0.01 : 1 0.01 : 1 10% 4.9 : 1 0.10 : 1 0.70 : 1 0.60 : 1 2.40 : 1 0.10 : 1 0.40 : 1 0.30 : 1 0.40 : 1 0.01 : 1 0.07 : 1 0.06 : 1

Source: CAI-Asia, 2011

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Key Messages
Actual expense of air pollution related illnesses are high Interest of health insurers in preventive health measures (walking, cycling, general tness) indicate that they can be partners in promoting and maybe co-nancing sustainable transport measures There is a business case for health credits but can be improved if
Costs of measures are brought down signicantly Share of health insurers in total health expenditures increases as more people take up a health insurance Include other AP-related illnesses, road injuries

Estimation of actual expenses can help engage government to support sustainable transport measures Additional studies needed to further establish health credits nancing for SUT

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For more information: www.cleanairinitiative.org


center@cai-asia.org Unit 3505 Robinsons-Equitable Tower ADB Avenue, Pasig City Metro Manila 1605 Philippines

CAI-Asia Center

cpo@cai-asia.org 901A Reignwood Building, No. 8 YongAnDongLi Jianguomenwai Avenue Beijing China

CAI-Asia C hina Oce

india@cai-asia.org Regus Elegance Elegance Tower, Mathura Road, Jasola Vihar, New Delhi India

CAI-Asia I ndia Oce

China India Indonesia Nepal Pakistan Philippines Sri Lanka Vietnam CAI-Asia Center Members

CAI-Asia Country Networks

231 CAI-Asia Partnership Members


45 Cities 19 Environment ministries 13 Other Government agencies 17 Development agencies & foundations 67 NGOs 37 Academic and research institutes 33 Private sector companies

Donors in 2012
Asian Development Bank ADF Cities Development Initiative for Asia ClimateWorks Foundation DHL/IKEA/UPS Energy Foundation Fredskorpset Norway Fu Tak Iam Foundation German International Cooperation (GIZ) Institute for Global Environmental Strategies (IGES) Institute for Transport Policy Studies Institute for Transportation and Development Policy International Union for Conservation of Nature MAHA Rockefeller Brothers Fund Shakti Foundation Shell Shell Foundation United Nations Environment Program Partnership for Clean Fuels and Vehicles (UNEP PCFV) Veolia World Bank

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