Cost-Benefit Analysis and Air Quality Related Health Impacts: A European

Perspective
Mike Holland, EMRC, Reading, United Kingdom
© 2019 Elsevier B.V. All rights reserved.

Introduction

Recent years have shown greatly increased application of cost-benefit analysis (CBA, though also commonly referred to, especially in
North America, as benefit-cost analysis, BCA) to inform the development of environmental legislation, starting in Europe from the
late 1980s. CBA is concerned with the efficient allocation of scarce resources. CBA methods in Europe and North America, and
increasingly elsewhere, gauge efficiency in terms of the preference of the general public, usually measured as willingness to pay
for environmental and health improvement. Older methods for valuation of health impacts were based on the human capital
approach, where health is valued in terms of the contribution of an individual to the economy, essentially in terms of GDP. The
human capital approach fails to recognize that GDP is only a partial representation of the economy as a whole, which includes
many other aspects, from the utility offered by good health to the appreciation of the natural world.
Modern applications of CBA for pollution control bring together several techniques:

• Development of accounting frameworks to identify and describe the full range of options available, and the consequences of
those options.
• Cost-effectiveness analysis, which seeks to define the most efficient route to reduce pollution to meet specified targets.
• The impact pathway approach for quantifying the impacts of pollution and their economic value.
• Uncertainty analysis, focused on the question of whether uncertainties, in combination, are likely to change the conclusion of an
initial comparison of cost and benefit.
The primary oputputs of the CBA are then the net benefit (benefits in excess of costs) and the benefit: cost ratio. The former should
be larger than zero, the latter larger than one for a measure to be evaluated as efficient. Together, these provide a first indication of
how worthwhile it is likely to be to adopt a particular course of action. It is typically necessary, at least in conditions similar to those
in most of Europe at the present time, to then consider uncertainties of any kind (statistical uncertainty, methodological sensitiv-
ities, various possible biases including omission of some benefits or costs) that may affect the outcome of analysis.
These methods have been used many times in appraisal of environmental policies. The focus here is on their use at a European
level, principally for the European Commission and the UN Economic Commission for Europe (UN/ECE) under the Convention
on Long-Range Transboundary Air Pollution.
This contribution describes the methods used, including key assumptions and strengths and weaknesses. It also considers impor-
tant examples of the application of CBA both in Europe and more widely, including North America and Asia. Whilst discussion is
focused mainly on health impacts, consideration is also given to other effects on ecosystems, crops, forests and materials used for
construction, that are linked to emissions of the same air pollutants.

Historical Perspectives

Before considering the application of CBA, it is important to recognize that major progress was made in reducing emissions of air
pollutants prior to the 1980s, to put the strengths and limitations of the approach in context. This section focuses explicitly on the
situation in London (and the United Kingdom more generally), given its long association with poor air quality and efforts made
over many years to control the problem. Of course, similar issues, linked to intensive coal burning, affected other parts of Europe
also, such as the Ruhr Valley in Germany and the Meuse Valley in Belgium. Since the 1970s and 1980s pollution in the “Black
Triangle” covering parts of East Germany, Czechoslovakia (now Tchech Republic) and Poland was also prominent in debate.
Meteorological data from London in the late 1800s show that attempts over several 100 years to improve air quality had been
ineffective, as pollution still had a major effect on the London environment. There were, for example, zero sunshine hours observed
during December 1890 and visibility in Central London was reduced to less than 1 km for several months in 1901–02. In the 1940s
visibility in the city was less than 2 km for more than 75% of the time from November to March. The lack of sunlight led to an
extremely high incidence of rickets caused by vitamin D deficiency in children, sufficiently so that it was sometimes referred to
in German as Die englische Krankheit (“the English disease”).
The Great London Smog of December 1952 provided a turning point in the history of air pollution. Over 4000 excess deaths
occurred in a single 1 week. Deaths were clearly linked to very high pollution levels that had built up over the city (Fig. 1).
An inquiry into the episode led to the United Kingdom’s 1956 Clean Air Act, initiating a number of measures:

• Establishment of smoke control areas to reduce domestic emissions

• Use of cleaner coals with a lower sulfur content, and solid “smokeless” fuel

Encyclopedia of Environmental Health, 2nd edition, Volume 1 https://doi.org/10.1016/B978-0-12-409548-9.10649-9 755

756 Cost-Benefit Analysis and Air Quality Related Health Impacts: A European Perspective

1000

75 SO2 / 100 M
MG / 100 M3
DEATHS

750

SMOKE
DEATHS / DAY
500

200
50
SO2

250

100
25
SMOKE
0

0
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
DATE DECEMBER 1952

Daily Air Pollution and Deaths

Fuel Rescearch Station, Greenwich 6.9.56 DL.5237A

Fig. 1 Mortality and pollution levels through the Great London Smog of December 1952. Units: 1 mg/100 m3 ¼ 10 mg/m3.

• Relocation of power stations to rural areas and the use of tall chimney stacks
• Encouragement of the use of cleaner (non-solid) fuels
The United Kingdom’s 1968 Clean Air Act extended the legislation to industry more generally, though again with an emphasis on
tall chimneys to aid dispersion, rather than pollution abatement. Sulfur dioxide removal was considered unaffordable, although
London’s Battersea Power Station had been the first plant in the world to be equipped with flue gas desulphurisation (FGD).
However, it did not work well and emitted pollutants directly to the River Thames.
In developing this legislation there was very limited economic analysis to support the decision making process. There was
some consideration of inefficiency, with for example an estimate of the waste of coal in the form of avoidable smoke in Great
Britain being equivalent to the production of 10,000 miners annually, illustration of the cost savings possible through improved
efficiency, and even an estimate of the cost of damage to buildings per tonne of coal burned. However, there was no quantifica-
tion or valuation of health impacts, though these were recognized qualitatively. Despite the lack of detailed CBA prior to the late
1990s, the legislation caused a major fall in emissions of both particles and sulfur over the following decades (Figs. 2 and 3). The
success of the earlier legislation raises some important questions on the role of CBA that are addressed at the end of the
contribution.

Methods
Basic Principles for Quantification
Analysis is intended to inform the policy debate, typically for a governmental organization though sometimes also for non-
governmental organizations or affected industry. To inform the policy debate it is necessary to observe the following principles:

• Clear definition of goals: air pollution policy can be designed to:

B Minimize risks to human health by setting emission controls on industry, vehicles, equipment, etc. to reduce emissions in
a way that benefits the whole population, or large parts of it.
 Cost-Benefit Analysis and Air Quality Related Health Impacts: A European Perspective 757

700

600

500

UK PM10 emission, ktonnes/year

400

300

200

100

0
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Coal Coke, petcoke Gas Oil Other Peat Waste Wood

Fig. 2 Decline in United Kingdom particle emissions (PM10) since 1970.

B Reduce inequalities by reducing peak exposures through the setting of ambient air quality limit values. These limit values are
sometimes wrongly interpreted as representing thresholds for effect. Epidemiological research, including in locations with
very low pollutant levels such as rural Canada, has not identified evidence for thresholds at the population level.
B Minimize non-health impacts, for example, to ecosystems.
Whilst there is overlap between these objectives, it is necessary to be clear about the main objective of the policy being undertaken
and the consequences of that objective. A focus on meeting air quality limit values may incur a high cost per unit benefit, relative to
measures that reduce exposure of the population more generally. Take the example of exceedance of the annual mean limit value for
NO2 close to a road. Only a limited set of control options will be available. These may have a higher cost per unit emission reduction
than measures taken on other sources, and only benefit a small number of people. Such measures can appear inefficient. However,

7000

6000
UK SO2 emission, ktonnes/year

5000

4000

3000

2000

1000

0
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Power stations Other industry Transport Domestic Other
Fig. 3 Decline in United Kingdom sulfur dioxide (SO2) since 1970.
758 Cost-Benefit Analysis and Air Quality Related Health Impacts: A European Perspective

the reverse may be true if the objective of action is defined against equity improvement, ensuring that no part of the population is
subject to a level of risk that is considered to be unreasonably higher than elsewhere. It should be added that some local measures
will be very cost-effective, especially when co-benefits are accounted for (e.g., reduction of greenhouse gases linked to boiler replace-
ment programmes, reduced congestion, noise, etc. linked to public transport improvements).

• Also on goal definition, clarity is needed on the ultimate aim of policy development: is it considered that (e.g.) new legislation
will move us to the final goal, or to an intermediate position for the short to mid term? A lack of clarity on this issue can lead to
the implementation of measures that quickly become outdated.
• Transparency: Methods must be clearly and fully described and referenced. Assumptions need to be clearly defined and justified.
A lack of transparency opens the field for competing and similarly opaque analyses that will detract from an informed debate on
policy.
• State of the art analysis: The relation of the analysis to state of the art methods should be reported, with possible variation in
practice identified and choices justified. To illustrate, European CBAs tend to use a different set of (dose or concentration)
response functions for mortality quantification to that adopted by the Global Burden of Disease study run by the World Health
Organization and the Institute of Health Metrics. This has been justified by reference to the populations studied in the epide-
miological studies on which selected response functions are based.
• Completeness: Analysis needs to be sufficiently complete to demonstrate the likelihood that benefits will exceed costs, and to give
a reasonable indication of the benefit: cost ratio. It is not necessary to quantify or even describe every type of impact that may be
linked to a policy: most air quality CBAs will focus on mortality associatd with fine particles (PM2.5) or ozone, accepting that
there are additional impacts on morbidity (hospital admissions, increased frequency of asthma attacks, etc.). In all cases,
consideration should be given to ancillary impacts of measures (additional costs or benefits beyond direct and intended
consequences), in order that possible co-benefits can be maximized and trade-offs minimized or mitigated altogether.
• Valuation: As noted above, is to be based on public preference for the allocation of resource. It should also be carried out on
a marginal basis (i.e., relative to small changes in emission), with policy justified in terms of the CBA only up to the point where
marginal costs and benefits of action are equal.
• Reporting uncertainty. Uncertainty needs to be considered in terms of the robustness of the conclusions reached, whether there are
situations under which the balance of costs and benefits would change to the extent that alternative decisions would be made.
This requires an overall synthesis of uncertainty across all elements of the analysis.

Quantification of the Costs of Emission Controls

The cost of emission controls are generally defined by cost-effectiveness analysis (CEA), proceeding through the following stages:
1. Defining emission inventories for each pollutant, identifying the sectors responsible for emissions
2. Identifying measures that will reduce emissions
3. Quantifying the costs of these measures
4. Quantifying the likely impact of measures on emissions (accounting for abatment efficiency and applicability within the targeted
sector).
In this bottom-up approach, measures can then be ranked to provide a marginal abatement cost (MAC) curve (e.g., Fig. 4), with
measures on the left hand side being most cost-efficient, and those on the right, least cost-efficient.
Whilst cost curves are an important tool for making rational decisions on pollution controls they have a number of important
limitations:
1. They tend to focus on technical controls, such as equipping vehicles with 3-way catalysts, or adding flue gas desulphurisation to
a coal fired power station.
2. Other types of measure, including fuel switching, modal switching in transport, efficiency improvements and behavioral
measures are often omitted from the cost-curves. Some measures in these categories generate cost savings without taking account
of the benefits of action, and hence are very high priority for implementation.
3. MAC curves are typically produced for individual pollutants (e.g., NOx) or groups of pollutants (e.g., greenhouse gases). They do
not integrate effects of other consequences of measures (e.g., co-abatement of GHGs and local/regional air pollutants such as PM
and NOx) and hence provide only a partial representation of benefit in terms of emissions avoided.
4. Uncertainties are very rarely reported. There are potential biases present, often in the direction of overestimation of costs and
underestimation of abatement. These may arise because the companies for which costs are likely to be highest have the greatest
incentive to respond to surveys or to become involved in research, and because widespread application of measures leads to
efficieincy improvement and lower costs especially as the number of contractors able to provide equipment and materials
increases. The omission of measures, particularly those that lead to cost savings, will also lead to some pessimism in forecasts of
potential abatement and associated costs. Assumptions for instance on the emission target according to which the MAC of
a given policy is derived, the economic development including the evolution of emissions and consideration of technological
development also add to the overall uncertainty.
 Cost-Benefit Analysis and Air Quality Related Health Impacts: A European Perspective 759

Fig. 4 Example of a marginal abatement cost (MAC) curve, addressing non-agricultural emissions of ammonia in the United Kingdom in 2010.

The existence of these limitations should not be regarded as undermining the concept behind the MAC curves: there is not an alter-
native to ranking measures in the form provided by CEA. Some issues raised here as limitations can be modeled outside of the MAC
curve, for example using sensitivity analysis to account for the effects of fuel switching or efficiency improvements, or the increase in
cost-effectiveness possible through learning over time. Wider impacts can be brought into the assessment later in the process, in the
quantification of benefits. However, it is important to appreciate that MAC curves do not provide a complete synthesis of informa-
tion on the cost side of the CBA equation, and to later consider how this affects the balance of costs and benefits.

Quantification of Impacts and Monetary Benefits

Impacts and monetary benefits are quantified using the impact pathway approach developed in the European Commission funded
Externalities of Energy (ExternE) Project series of the 1990s and 2000s. The impact pathway follows a logical sequential process
quantifying emissions, pollutant dispersion and associated chemical reactions where appropriate, population exposure, impact
quantification and finally valuation (Fig. 5).

Demand for polluting activity

Pollutant emission

Pollutant dispersion and chemistry

Exposure of people, ecosystems, etc.

Quantification of impacts

Valuation of impacts
Fig. 5 Illustration of the impact pathway approach for quantification of the impacts of pollution and benefits of additional abatement measures.
760 Cost-Benefit Analysis and Air Quality Related Health Impacts: A European Perspective

An important conclusion early in the ExternE research was that no threshold could be identified for the effects of fine particles on
health at the societal level. This meant that analysis should be extended over however far emissions may be expected to travel from
the site of release. In the context of the electricity sector this was a very important conclusion as it meant that whilst impacts could be
reduced by locating a power station outside an urban centre and by using tall chimney stacks, impacts were not eliminated. Overall,
results demonstrated that the external costs of power generation were of a similar magnitude to the internalized costs for the fossil
fuel sector, particularly for coal and oil.
Results of analysis demonstrate that by far the most important health impact in the benefits assessment for the major air pollut-
ants (fine particles, ozone, NO2) is the loss of utility associated with mortality. Depending on the approach taken to mortality valu-
ation, this accounts for between 70% and 95% of the total health impact. There is, however, a growing number of impacts being
linked to air pollution that are yet to be accounted for in the quantification of morbidity, including impacts on dementia and other
effects with a very high social value. Some estimates are available for non-health impacts, to crops, forests, ecosystems, and mate-
rials. Within Europe the impacts on ecosystems may be very significant given widespread exceedance of the “critical load” for
nitrogen. The critical load defines a pollutant loading above which ecological change is anticipated. Nitrogen stimulates the growth
of grasses and other common plants, at the expense of other species that have evolved to grow in what were previously low-N
environments.
Results for other pollutants are more varied. Much analysis for the toxic metals has focused on impacts such as IQ loss or
mortality through the development of cancer. Recent analysis for lead, mercury and arsenic suggests that a focus on a restricted
set of impacts may lead to significant underestimation of the overall benefits of control.
Important limitations of benefits assessment in the context of CBA concern the omission of impacts in whole or part. The
methods for quantification and valuation of ecosystem impacts are also limited, with a lack of detail on likely ecological change.
This leaves any attempt at valuation open to question as respondents to any valuation survey seem likely not to have a proper
understanding of what it is that they are asked to value. Adopting the paradigm of individual willingness to pay as an appropriate
metric for valuation of ecosystems is also questionable, as it raises questions of responsibility for the protection of valued natural
heritage.

Describing Uncertainty
For a full CBA of air pollution policies at a European scale there are many uncertainties present, including:
1. Future projections of energy use, transport fleets, economic development, technical progress, population, etc. leading to
emissions
2. The measures contained in the cost curve, and associated estimates of cost and effectiveness, and their applicability to each
country
3. Dispersion and chemical conversion of atmospheric pollutants, and associated exposure of sensitive receptors
4. Quantification of impacts to health, ecosystems, materials, etc. and their valuation
Fortunately, many of these uncertainties face constraints, such that they cannot vary too significantly from current expectation. With
most CBAs being carried out over periods of between 5 and 20 years, there is unlikely to be major unanticipated change in emission
sources, population, etc. Pollutant dispersion is also sufficiently characterized with existing models correlating reasonably well with
measurement.
Key to the description of uncertainty is the definition of the objective of uncertainty analysis, which is to consider the robustness
of conclusions drawn from comparison of quantified costs and benefits, first whether a net benefit is likely, and then information on
the size of the benefit: cost ratio. This is helpful for limiting the scope of the uncertainty assessment, focusing more on the likelihood
that specific actions will yield a positive result than on the full breadth of possibilities that are available.
Uncertainties can usefully be grouped as follows:
1. Statistical uncertainties, for example concerning health response functions correlating pollutant exposure with mortality and
morbidity. These can be collated and modeled using Monte Carlo techniques to define the likely spread of net benefits.
Commercially available software enables a large number of endpoints to be modeled simultaneously, accounting for the
likelihood of uncertainties canceling each other out to some extent and not being purely additive.
2. Methodological sensitivities, including model assumptions. An important example here concerns the approach taken to
mortality valuation in the benefits assessment, which can be based on loss of life expectancy through use of the “value of a life
year” (VOLY) or equivalent attributable deaths, based on use of the value of a statistical life (VSL). Sensitivities are generally
assessed through additional model runs, varying one or more variables within plausible ranges.
3. Unquantified biases, for example through the omission of measures from MAC curves or types of impact from the benefits
assessment. These may be partially modeled using sensitivity analysis. Where this is not possible a concise description can be
provided to illustrate the potential effect of bias on the conclusions of analysis.
An example of the application of these methods is provided below.
 Cost-Benefit Analysis and Air Quality Related Health Impacts: A European Perspective 761

European Examples

This section considers two examples of the use of CBA in Europe, first dealing with air quality policy through the development of
national emission ceilings that limit future total emissions from any country, and second dealing with the air quality co-benefits of
European climate policies.

National Emission Ceilings

The EU’s National Emission Ceilings Directive (NECD) sets maximum amounts of ammonia (NH3), oxides of nitrogen (NOx,
covering NO and NO2 combined, but not other oxides such as N2O), fine particles (PM2.5), sulfur dioxide (SO2) and volatile
organic compounds (VOCs). These pollutants are controlled together under a common policy framework to recognize their shared
impacts and chemistry (Table 1). Ceilings are assessed by the European Commission and Member States taking account of impacts
to human health and ecosystems, the latter via impacts of eutrophication, acidification and ozone. Emission ceilings provide a flex-
ible policy instrument that gives added scope for economic efficiency by:

• Recognizing that air pollution impacts are not controllable by action at the national level alone.
• Allowing countries to account for their own national situation, including future plans, when determining precisely how
emission reductions to meet the ceilings should be achieved.
• Recognizing that problems such as acidification and eutrophication are linked to several pollutants. Policy designed around
individual pollutants would not account for the synergies that are present, or differences in the strength of each pollutant relative
to impacts.
Analysis to inform the development of the NECD has been led by the International Institute for Applied Systems Analysis (IIASA)
initially using the RAINS, and later, GAINS models. These have been coupled with the ALPHA-Riskpoll model of EMRC since the
late 1990s to quantify the benefits of different policy scenarios and provide the comparison of costs and benefits. A number of other
models are also linked to GAINS, providing data on developments and emissions from the energy, transport, industry, agriculture
and other sectors.
Fig. 6 shows the evolution in the marginal costs and benefits for 2030 from the EU’s Clean Air Policy Package of December 2013.
It defines the trend in costs and benefits between a current legislation (CLE) scenario (i.e., all agreed legislation as of 2013 is in force)
and a scenario defining the “maximum technically feasible reduction” (MTFR), for which all technical measures contained in the
GAINS database are employed. “Gap closure” between these scenarios is defined against mortality impacts only, as it was considered
that this was the impact that could be quantified with highest confidence. Given that the gap closure is defined against mortality, the
marginal benefit curves are flat. Two are represented, one taking a lower estimate of the value of a life year, valuing mortality against
life years lost, and the other taking a higher estimate of the value of statistical life, valuing mortality against equivalent attributable
deaths. By omitting other types of benefit (reductions in morbidity or in damage to ecosystems, crops, forests, materials) the figure
provides a conservative estimate of the optimal zone for setting abatement (where benefits and costs are equal), corresponding to
a gap closure between 76% and 92%. There are several notable features of the results shown in this figure:
1. Despite the development of air quality policies over several decades, much of the available controls can be achieved with
relatively low cost measures for which benefits are estimated to be very much greater than costs (up to around 60% gap closure).
2. The large difference between the lower bound estimate of benefits and the upper bound (roughly a factor of 5) correspond to
a rather small interval in terms of gap closure (16%). This is a common conclusion for analysis that involves the use of health
response functions for which thresholds do not apply: the shape of the marginal benefit curve will tend to being flat, whilst for
any MAC curve involving more than a very small number of measures it is likely that there will be a large variation in abatement
cost per tonne leading to rapidly increasing costs at higher levels of abatement.
3. The inclusion of additional benefits (reductions in morbidity or in ecosystem damage, etc.) would, naturally, increase marginal
benefits, pushing the optimal zone for gap closure higher at the lower end, to around 83%. However, the shape of the MAC curve
is such that there would be very little change in the maximum justifiable level of control, given the very high cost per unit
emission reduction of measures included to the right hand side of the figure.

Table 1 Impacts of the pollutants covered by the EU’s National Emission Ceilings Directive

NH3 NOx PM2.5 SO2 VOCs

Human health: particles U U U U U

Human health: ozone U U
Human health: NO2 U
Ecosystems: eutrophication U U
Ecosystems: acidification U U U
Ecosystems: ozone U U
Materials damage U U U U
762 Cost-Benefit Analysis and Air Quality Related Health Impacts: A European Perspective

5.0

Marginal cost, benefits (billion EUR/% gap closure)

4.5

4.0

3.5

3.0
Mortality benefit high: medium VSL
2.5

2.0

1.5

1.0

Mortality benefit low: median VOLY

0.5

0.0
0 20 40 60 80 100
Gap closure (% between CLE and MTFR)

Cost Benefit low Benefit high

Fig. 6 Marginal costs and benefits from the review of the EU’s Thematic Strategy on Air Pollution of December 2013.

4. Uncertainties through the omission of measures (behavioral measures, fuel switching, energy efficiency) would move the MAC
curve to the right, increasing the level of gap closure that can be justified through the analysis.
The analysis continued with a more detailed assessment of policy options. Analysis focuses on three scenarios in the year 2030, CLE
and MTFR (as above) and B7, the Commission’s proposal, intended to lead to a 67% gap closure (a little lower than the level indi-
cated in Fig. 6, but based on the results shown in Fig. 6). Health impacts for these scenarios are shown in Table 2, with their mone-
tised equivalents in Table 3 and benefit: cost ratios in Table 4.
The results highlight the importance of air pollution for public health in Europe, with over 2.5 million life years lost in 2030,
230,000 cases of chronic bronchitis, 180,000 hospital admissions and many millions of days of restricted activity (including work
loss days). These translate to an economic cost, accounting for health care costs, lost productivity and lost utility (from loss of life
expectancy, pain, loss of opportunity, etc.), of between V205 and 734 109/year for the CLE scenario in 2030. The range reflects

Table 2 Annual health impacts due to air pollution (thousand cases, days, etc.), 2030, EU28, for scenarios considered in the European
Commission’s Clean Air Policy package of December 2013

Units CLE B7 MTFR

Impacts Thousands 2030 2030 2030

Acute mortality (all ages) Prem. deaths O3 17 16 14

Respiratory hospital admissions (>64) Cases O3 20 19 17
Cardiovascular hospital admissions (> 64) Cases O3 80 82 73
Minor restricted activity days (all ages) Days O3 83,557 78,394 70,211
Chronic mortality (30 year þ)a Life years lost PM 2539 2055 1817
Chronic mortality (30 year þ)a Prem. deaths PM 304 246 218
Infant mortality (0–1 year) Prem. deaths PM 0.4 0.3 0.3
Chronic Bronchitis (27 yearr þ) Cases PM 234 190 168
Bronchitis in children aged 6–12 Cases PM 732 595 526
Respiratory Hospital Admissions (all ages) Cases PM 101 82 72
Cardiac Hospital Admissions (>18 years) Cases PM 77 63 55
Restricted activity days (all ages) Days PM 320,526 259,895 229,943
Asthma symptom days (children 5–19 year) Days PM 7728 6288 5568
Lost working days (15–64 years) Days PM 76,102 61,686 54,586

a
Note: For PM effects, premature adult deaths and life years lost are alternative estimates of the same impact and are not additive.
Adapted from Holland, M. (2014). Cost-benefit analysis of final policy scenarios for the EU Clean Air Package (version 2). http://ec.europa.eu/environment/air/pdf/TSAP%20CBA.pdf.
 Cost-Benefit Analysis and Air Quality Related Health Impacts: A European Perspective 763

Table 3 Monetised equivalent of annual health impacts due to air pollution, 2030, EU28, Vmillion/year, 2005 prices for scenarios considered in the
European Commission’s Clean Air Policy package of December 2013

CLE B7 MTFR
Damage, VM/year 2030 2030 2030

Acute mortality (all ages) lowa O3 1000 930 830

Acute mortality (all ages) higha O3 2400 2200 2000
Respiratory hospital admissions (>64) O3 45 42 38
Cardiovascular hospital admissions (> 64) O3 200 180 160
Minor restricted activity days (MRADs all ages) O3 3500 3300 2900
Chronic mortality (All ages) lowa PM 150,000 120,000 100,000
Chronic mortality (30 year þ) higha PM 670,000 550,000 480,000
Infant mortality (0–1 year) lowa PM 640 520 460
Infant mortality (0–1 year) higha PM 1300 1100 940
Chronic Bronchitis (27 year þ) PM 13,000 10,000 9.000
Bronchitis in children aged 6–12 PM 430 350 310
Respiratory hospital admissions (all ages) PM 220 180 160
Cardiac Hospital admissions (>18 years) PM 170 140 120
Restricted activity days (all ages) PM 29,000 24,000 21,000
Asthma symptom days (children 5–19 year) PM 330 260 230
Lost working days (15–64 years) PM 9900 8000 7100
Total: Low 200,000 170,000 150,000
Total: High 740,000 600,000 530,000

a
Note: Analysis includes assessment of sensitivity to different positions on mortality valuation. Rows showing the same effect/pollutant combination are not additive.
Adapted from Holland, M. (2014). Cost-benefit analysis of final policy scenarios for the EU Clean Air Package (version 2). http://ec.europa.eu/environment/air/pdf/TSAP%20CBA.pdf.

alternative positions on mortality valuation. No account is taken in the tables of non-health impacts, though they were quantified,
but made only a small contribution to total damage. Table 4 demonstrates a high benefit cost ratio for the B7 scenario. However,
going further to MTFR indicates a net cost (B:C ratio < 1) for all but one of the sensitivity cases.
Interpretation of the results needs to be made with care:
1. Air pollution is recognized as one of several agents negatively affecting the circulatory and respiratory systems, along with lack of
exercise, smoking, poor diet, alcohol, etc. These factors will act in combination to a greater or lesser degree, complicating the
concept of an “air pollution death.” The United Kingdom’s Committee on the Medical Effects of Air Pollutants (COMEAP)
considered in a report from 2010 that estimates of deaths were better expressed as “equivalent attributable deaths” than simply
“deaths.” The concept “equivalent attributable deaths” recognizes that few people will die from exposure to air pollution alone.
It indicates an expectation that the number of people whose lives are shortened by air pollution to some extent (e.g., by a few
months rather than an average in the order of 10 years that can be calculated from estimates of deaths and life years lost that are
generated using the response functions) would be considerably higher than the quantified number of deaths, whilst providing
a result that can be compared with estimates of deaths from other causes.
2. Linking pollution effects to valuation requires a good understanding of the severity of impacts associated with air pollution. In
the case of chronic bronchitis, for example, it seems most likely that new cases of bronchitis attributable to air pollution at levels
typical of western Europe would be mild. There is, however, a possibility that some of those with bronchitis for other reasons
(e.g., as a consequence of smoking habit, or occupational illness) might move from mild to moderate or moderate to severe as
a consequence of exposure to ambient air pollution. Unfortuntely, the epidemiology on which the response functions are based
provides no insight on this issue, though there will be a significant difference in cost between disease at different severities.
3. It should not be implied that the health damage quantified here represents a reduction in gross domestic product (GDP) or some
other aggregate measure of national economy as this is only partly true (insofar as it relates to productivity and to some extent
health care). GDP and other such measures are an imperfect representation of the economy as they deal only with marketed

Table 4 Health benefit to abatement cost ratios for the scenarios for 2030 considered in the European Commission’s Clean Air Policy package of
December 2013

CLEdB7 B7dMTFR

Total with median VOLY 12 0.41

Total with mean VSL 42 1.44

Adapted from Holland, M. (2014). Cost-benefit analysis of final policy scenarios for the EU Clean Air Package (version 2). http://ec.europa.eu/environment/air/pdf/TSAP%20CBA.pdf.
764 Cost-Benefit Analysis and Air Quality Related Health Impacts: A European Perspective

goods. The fact that the quantification here goes beyond GDP should also not be considered as heading into a world where costs
are not real: people value their health very highly and should not be expected to have their health traded freely by others.
Consideration was given to whether uncertainties in the analysis would undermine the principal conclusion of the CBA, that
marginal benefits would exceed marginal costs at the position adopted by the European Commission. Taking account of statistical
uncertainties and methodological sensitivies concerning mortality valuation, it was concluded that there was a > 90% probability of
benefits exceeding the central estimate of costs for the B7 scenario. Bias associated with unquantified elements for benefits (e.g.,
reduced ecosystem damage) and costs (e.g., omission of cost-effective control measures) strengthened the conclusion that benefits
would significantly exceed costs.

Climate Co-Benefits
There are a number of difficulties in quantifying the benefits of climate policies in terms of their primary objective of controlling
global warming and limiting its impacts, linked to the global and long-term nature of damage. Addressing impacts on a time course
of 30 or more years leads to significant uncertainty, for example with respect to population size, economic development and the
availability of low carbon technologies.
Generally speaking, policies that reduce greenhouse gas emissions are also beneficial for air quality, given that the dominant
source of both is the use of fossil fuels. Accordingly, estimates of the benefits of air quality improvement in contrast to the long-
term build up of damage linked to climate change, co-benefits via air pollution reduction are both immediate and local to the soci-
eties that reduce emissions. However, analysis of the ancillary effects of climate policies also highlights areas where trade-offs arise.
Examples include the promotion of wood and other solid biomass as supposed low carbon fuels (for wood even this is question-
able when taking a life cycle perspective), and the use of “diesel farms” designed to provide back-up supply in the United Kingdom
and possibly elsewhere to account for the intermittency of some renewables such as wind or solar power. Both are significant sources
of fine particles.
The complementarity of climate and air quality objectives at a global level has been assessed for the Global Energy and Climate
Outlook 2017 (GECO 2017) which investigated three principal scenarios, existing trends (Reference), commitments made to green-
house gas (GHG) mitigation (INDC) and commitments necessary to ensure that a global temperature increase of > 2 C is avoided
(B2C) (Fig. 7). Analysis at a global level demonstrated that through an acceleration of decarbonisation trends via the phasing out of
coal and reductions in demand for oil and gas, together with increased electrification it would be possible to stay below an increase
of 2 C, whilst being consistent with economic growth. Co-benefits of improved air quality (principally related to health) would
largely offset the costs of climate mitigation (Fig. 8) accepting that this is dependent on the precise approach to mortality valuation,
with GECO 2017 using a higher baseline estimate of the VSL than analysis for the European Commission. However, even using
a more conservative approach would mean that a significant part of the costs of climate mitigation could be accounted for by
air quality benefits.

The Role of CBA in Policy Development

CBA provides input to the policy making process to determine whether the benefits of action, expressed using methods designed to
reflect public preference for resource allocation for risk reduction, are likely to exceed emission control costs. In recent years this
work has focused on effects on health in Europe as well as other parts of the world. This indicates a change in emphasis as earlier

Fig. 7 Scenarios considered by GECO 2017. Reference ¼ current trends. INDC ¼ Intended Nationally Determined Contributions to GHG mitigation
following the Conference of the Parties (COP21) in Paris in December 2015 under the UN Framework Convention on Climate Change.
B2 C ¼ policies in place to meet the target of not exceeding a global temperature increase of 2 C. Form Kitous, A., Keramidas, K., Vandyck, T. et al.,
(2017). Global energy and climate outlook 2017: How climate policies improve air quality. Sevilla: JRC Science for Policy Report. https://ec.europa.
eu/jrc/en/geco.
 Cost-Benefit Analysis and Air Quality Related Health Impacts: A European Perspective 765

Fig. 8 Costs and air quality benefits of climate mitigation policies. Form Kitous, A., Keramidas, K., Vandyck, T. et al., (2017). Global energy and
climate outlook 2017: How climate policies improve air quality. Sevilla: JRC Science for Policy Report. https://ec.europa.eu/jrc/en/geco.

European work on the threat of transboundary air pollution was mainly concerned with ecological damage through acid rain and
eutrophication. Given the threat of eutrophication especially across Europe, it is appropriate that checks are in place to ensure that
cost-effective options for meeting ecological as well as health goals are adopted.
Legislation introduced prior to the use of detailed CBA methods achieved very significant improvements in air quality, opening
the question of whether CBA has a useful role in the current climate. However, the early legislation was not perfect, and in some
ways generated additional problems, for example through the dilute and disperse policies that avoided very high localized
concentrations of pollution around sources, but made transboundary pollution worse. The methods developed for CBA have
highlighted that associated health impacts are serious and that options are available to resolve them. This view has been repeat-
edly challenged: there has been opposition to the improvement of air quality ever since it started to be addressed at a European
level. This is the case despite the fact that even the latest analysis identifies options that generate high benefit: cost ratios substan-
tially in excess of 1. The availability of detailed appraisal of policy proposals has facilitated the development and refinement of
legislation.
CBA methods have found increasing application in the climate debate in relation to quantification of co-benefits of climate poli-
cies. It cannot be stressed too strongly that analysis that omits consideration of co-benefits and possible trade-offs exposes policy
making to a serious risk of generating unwelcome surprises. This is demonstrated, for example, through the widespread adoption
of diesel powered buses in the latter half of the 20th century, and ongoing interest in the use of solid biomass for power generation.
Fortunately, awareness of these problems is growing, and should enable CBA to provide increasingly solid information on the desir-
ability of policy options in the coming years.

See also: Air Pollution Episodes; Air Quality Legislation; Assessing Indoor Air Quality; Assessment of Human Exposure to Air Pollution; Decision
Making Under Uncertainty: Trade-Offs Between Environmental Health and Other Risks; Economic Analysis of Health Impacts in Developing Countries;
Effects of Outdoor Air Pollution on Human Health; Estimating Environmental Health Costs: General Introduction to Valuation of Human Health Risks;
Optimal Pollution: The Welfare Economic Approach to Correct Related Market Failures; Power Generation and Human Health; Social Cost-Benefit
Analysis of Air Pollution Control Measures at Industrial Point Emission Sources: Methodological Overview and Guidance for the Assessment of Health-
Related Damage Costs.

Further Reading

Amann, M., Holland, M., Maas, R., Saveyn, B., Vandyck, T., 2017. Costs, benefits and economic impacts of the EU clean air strategy and their implications on innovation and
competitiveness. International Institute for Applied Systems Analysis, Laxenburg, Austria.
Atkinson, G., Mourato, S., Groom, B., Braathen, N.-A., 2018. Cost-benefit analysis and the environment: Further developments and policy use. Organization for Economic
Cooperation and Development, Paris.
Bachmann, T.M., 2015. Assessing air pollutant-induced, health-related external costs in the context of nonmarginal system changes: A review. Environmental Science &
Technology 49 (16), 9503–9517.
COMEAP, 2010. The mortality effects of long-term exposure to particulare air pollution in the United Kingdom. A report by the Committee on the Medical Effects of Air Pollutants.
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/304641/COMEAP_mortality_effects_of_long_term_exposure.pdf.
Holgate, S., 2016. Chair of working group Every breath we take: The lifelong impact of air pollution. Royal College of Physicians and Royal College of Paediatrics and Child Health,
London. https://www.rcplondon.ac.uk/projects/outputs/every-breath-we-take-lifelong-impact-air-pollution.
Holland, M., 2014. Cost-benefit analysis of final policy scenarios for the EU Clean Air Package. Version 2. http://ec.europa.eu/environment/air/pdf/TSAP%20CBA.pdf.
Kitous, A., Keramidas, K., Vandyck, T., et al., 2017. Global energy and climate outlook 2017: How climate policies improve air quality. JRC Science for Policy Report, Sevilla. https://
ec.europa.eu/jrc/en/geco.
Nedellec, V., Rabl, A., 2016. Costs of health damage from atmospheric emissions of toxic metals: Part 1-methods and results. Risk Analysis 36, 2081–2095.
Nedellec, V., Rabl, A., 2016. Costs of health damage from atmospheric emissions of toxic metals: Part 2-analysis for mercury and lead. Risk Analysis 36, 2096–2104.
OECD, 2016. The economic consequences of outdoor air pollution. Organization for Economic Cooperation and Development, Paris. http://www.oecd.org/environment/indicators-
modelling-outlooks/the-economic-consequences-of-outdoor-air-pollution-9789264257474-en.htm.
OECD, 2013. Mortality risk valuation in environment, health and transport policies. Organization for Economic Cooperation and Development, Paris.
Pearce, D., Atkinson, G., Mourato, S., 2006. Cost-benefit analysis and the environment: Recent developments. Organization for Economic Cooperation and Development, Paris.
766 Cost-Benefit Analysis and Air Quality Related Health Impacts: A European Perspective

Rabl, A., Spadaro, J., Holland, M., 2014. How much is clean air worth? Cambridge University Press.
Reis, S., Grennfelt, P., Klimont, Z., Amann, M., ApSimon, H., Hettelingh, J.-P., Holland, M., LeGall, A.-C., Maas, R., Posch, M., Spranger, T., Sutton, M.A., Williams, M., 2012.
From acid rain to climate change. Science 338, 1153–1154.
Smith, A.C., Holland, M., Korkeala, O., et al., 2015. Health and environmental co-benefits and conflicts of actions to meet UK carbon targets. Climate Policy 16, 253–283.
World Health Organization, 2016. Health risks of air pollution in EuropedHRAPIE project Recommendations for concentration–response functions for cost–benefit analysis of
particulate matter, ozone and nitrogen dioxide. WHO Regional Office for Europe, Bonn. http://www.euro.who.int/__data/assets/pdf_file/0006/238956/Health_risks_air_
pollution_HRAPIE_project.pdf?ua¼1.

Relevant Websites

http://www.externe.info/externe_d7/dExternEdExternalities of energy.
https://ec.europa.eu/jrc/en/gecodGlobal Energy and Climate Outlook (GECO 2017).
http://www.iiasa.ac.at/web/home/research/researchPrograms/air/Program-Overview.en.htmldIIASA, GAINS model.
https://www.gov.uk/government/groups/committee-on-the-medical-effects-of-air-pollutants-comeapdUK Committee on the Medical Effects of Air Pollutants (COMEAP).
https://www.epa.gov/clean-air-act-overview/benefits-and-costs-clean-air-actdUnited States Environmental Protection Agency, Benefits and Costs of the Clean Air Act.
http://www.who.int/airpollution/en/dWorld Health Organization.