The Economic

Consequences of Outdoor
Air Pollution in India

December 25

Authored by: Chiranjeev Sahoo (EPGP -11 -029)

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Contents
The Economic Consequences of Outdoor Air Pollution in India ...................................3
Abstract ..................................................................................................................3
Outline....................................................................................................................4
Modeling Economic Implications of Outdoor Air Pollution ..........................................4
The health burden of air pollution in India ..............................................................4
Significance of health costs with respect to other damages due to air emissions ....5
Health effects and the priorities for controlling pollution: a case of Delhi ...............7
The necessity for integrating health care and environmental policies .....................9
References ................................................................................................................10

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The Economic Consequences of
Outdoor Air Pollution in India
Abstract
Air pollution is one of the most severe risks to the environment. Latest Global Burden of
Disease (GBD) study estimated that air emissions – indoor and outdoor combined – has
been the cause of 5.5 million early deaths worldwide in 2018. Air pollution also has
further effects on human health, leading to a growing number of respiratory problems
and cardiovascular diseases. Moreover, it has an impact on crop yields and on the
environment, with effects on biodiversity and ecosystems, among other things. These
impacts have substantial economic consequences, which will impact economic growth
and welfare. Poor air quality is one of the more serious environmental concerns in urban
areas around the world, particularly in developing countries. Recent studies which
assess and value negative health impacts of being exposed to particulates reveal the
magnitude of the costs to the society that demands immediate actions. The paper shows
that India seems to bear a very elevated level of these costs by international comparison.
It analyses some latest discoveries in quantifying the impact of exposure to particulates
on mortality with a distinct reference to India and discusses the issues of economic
estimate of sickness and premature death owing to air pollution, with the focus on
developing countries. Further, the paper analyzes, illustrating upon the case study of
Mumbai, the relative impact of many pollution sources about exposure levels and health
outcomes, plus the health benefits of specific management measures and policies. The
final section highlights a set of issues and recommendations regarding a better
amalgamation of environmental and health considerations into pollution control
decisions.

“Air pollution already affects people's health, agriculture and

leads to a variety of other consequences. Such impacts are
projected to become far more severe over the coming decades.”

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Outline
• The health burden of pollution in India: a global comparison assessment.
• Significance of health costs with respect to other damages due to air emissions.
• Health effects and the priorities for controlling pollution: a case of Delhi.
• The necessity for integrating health care and environmental policies.

Modeling Economic Implications of Outdoor Air Pollution

Modelling economic impact of outdoor atmospheric pollution requires multiple steps
that link the economic activities to emissions, concentrations, exposure, biophysical
impacts and ultimately determining the value of economic costs.

Economic Emissions Concentrations Biophysical Economic

Activity Impacts Costs

The total cost of dithering on outdoor air pollutants include both market and non-market
costs. Market costs are those that are associated with bio-physical impacts directly
affecting economic activities as measured by national accounting and GDP. For example,
lower crop yields affect agricultural output. Non-market cost includes monetized
welfare expenses of mortality (premature deaths), as well as of the disutility of the
disease (pain and suffering).

The health burden of air pollution in India

Poor air quality has been one of the most severe environmental concerns in the urban
areas worldwide, particularly in developing countries. An assessment of health damages
from exposure to the high levels of particulates in 126 cities around the world where the
annual mean levels exceed 50 ug/m3 tells that such damages can amount to a near
130,000 premature mortality. Over 500,000 fresh cases of chronic bronchitis and many
other lesser effects on health each year. In the aggregate terms, this amounts to 2.8
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million DALYs (Disability-adjusted life years) lost for this sample of almost 300 million
people or 9 DALYs lost per 1000 residents. Highly polluted mega-cities of China and India
account for 82 percent of these DALYs, and the low- and middle-income nations together
account for 98 percent of DALYs lost in this sample. India, which is represented by 12
largest cities in the sample, ranks second behind China, bearing 30 percent of the total
DALYs lost, or 12 DALYs lost per 1000 inhabitants of these cities. By comparison,
exposure to particulate matter imposes the onus of 2 DALYs lost per 1000 residents in
the cities from the high-income group of countries in the sample, as well as a 3 DALYs
lost per 1000 urban population for middle -income nations. When denominated in
monetary values and as a proportion of the respective incomes (GDP/capita), health
damages jump from 3 percent per sample average by as much as 9 percent for India and
12 percent for China. In other words, expenses to the society, part of which is direct
efficiency loss, by air pollution in largest India cities is as high as nearly one-tenth of the
income generated in those cities from all economic activities. Notwithstanding all the
uncertainties around such estimates, this analysis clearly shows that India suffers from
a disproportionally heavy health burden of urban air pollution by international
comparison.

Significance of health costs with respect to other damages due to

air emissions
Major source of urban air pollution is burning of fuels by power plants, the industry
boilers, residential stoves and vehicle engines. Besides imposing enormous burden of ill-
health, by-products of the fuel combustion cause a diverse range of non-health damages
that ranges from local effects on visibility and the buildings to long-range acid
depositions to greenhouse emissions that may alter global climate. Meanwhile, fuel use
provides vital energy sources and transport services, the demand for which should be
considered when designing policies and actions to fight adverse environmental effects
from usage of fuels.
The World Bank conducted a study that evaluated the magnitude of the different
damages in urban areas that could be attributed to different fuels, industries and
pollutants. Such damages dealt with in the study include: the harmful effects of exposure
to air pollution in the urban areas; local non-health consequences, i.e. decrease in the
visibility, soiling and other material damages; and global climate change impacts. The
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analysis has been applied to six large cities in various parts of the world afflicted by high
levels of atmospheric pollution -- Bangkok, Krakow, Manila, Mumbai, Santiago, and
Shanghai. Such cities differ in geographic and climatic conditions; demographics; fuel
mix and consumption patterns; sectoral composition; and income levels; and thus,
together represent a span of different factors affecting the magnitude of the
environmental costs of various fuel uses. Therefore, the evidence emerging from this
exercise is likely to be representative of the typical situation in many urban areas of
developing countries. Societal costs of all environmental consequences evaluated in the
study reach US $ 3 billion, with the health consequences being the largest part of the
costs per city. Chart 1 illustrates shares of the health, ‘local’ non-health, and climate
change impacts for the sample of six cities. Effects on climate change appear to be a
significant portion of non-health costs but they are less than half of health-care costs
imposed by fuel combustion in urban areas.

28%

8% 64%

Health Costs Non - Health Costs Climate Change Costs

Chart 1 - The composition of environmental damages due to air emissions from fuel combustion in six cities.
Source: World Bank estimates. See Lvovsky, et al., forthcoming.
Given the fact that fuel combustion is not only one, even though major cause of the high
level of particulate matter in the cities (see Chart 2), the general health costs of poor air
quality will be even greater. The economic estimations of health losses are based on
certain procedural tools and are as plausible as those tools are. Following two sections
of the paper emphasize several methodological concerns expressed by the valuing of the
health effects of pollution. These problems naturally fall into two categories: (a) the
effective identification and valuation of health consequences; and (b) estimating
monetary values that apply to associated morbidity (illness) and death rate.
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 Average

Mumbai

Shanghai

Manila

Bangkok

Krakow

Santiago

0 20 40 60 80 100 120 140 160

PM10 from other sources PM10 from fuel use

Chart 2 - Contribution of fuel use into the ambient levels of PM10.

Source: World Bank estimates. See Lvovsky, et al., forthcoming.

Health effects and the priorities for controlling pollution: a case of

Delhi
Delhi is one of the 10 most contaminated cities in the world. In Delhi city the municipal
services like water supply and sanitation, drainage of storm water; the processing and
disposal of waste water; management of solid and hazardous wastes; the provision of
suitable and safe food and housing have all been unable to keep pace with the urban
growth. All these in turn lead to an increase in pollution levels. Also, an unplanned
location of industries in and near the Delhi mega city followed up by unsuitable traffic
management causes severe pollution issues. However, all factors combined not only
lead to the worsening ecological conditions but also harmful to the health of people. The
people in the environmental polluted zones are prone to contamination and infected
with pollution related illnesses. Delhi is probably one of the better examples to illustrate
pollution and the measures taken to control it.

Delhi was among the five SO2 emitting megacities the nineties and the transport
industry was the main source. In the past decade, industries and the power plants
emerged as the main sources of SO2. It was found that 68% of the emission were from
thermal power stations during 1990 to 2000. In accordance with the Auto Fuel Policy
Report, the manufacturing sector was the major contributor (between 84-92%) followed

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by the transport sector (5-12%) and household sector (0-4%) from 1994 to 1998. CNG
implementation happened between 2000 and 2003 in Delhi and has largely influenced
declining SO2 emission from the transport sector.

19% 18%

5% 10%
3%
5%

40%

Industrial Stack Agricultural Solid Dust Vehicle Hotels/Restaurants

DG Sets Construction/Demolition Domestic

Chart 3 - Contribution of PM 2.5 emission.

Source

Area Source Point Source Line Source

- Hotels/Restaurants Vehicles
- Domestic Cooking - Power Plants
- Road Dust - Industries
- Industries - 2W
- Biomass Burning - 3W
- Fly Ash - 4W
- LCV
- Buses
- Trucks

Chart 4 – Sources Categories of Air Pollutants in Delhi

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The necessity for integrating health care and environmental policies
• Urban dwellers of India bear high-burden of the health care costs from exposure
to particulates by international comparison that demands immediate measures
and targeted environmental policies.
• The healthcare costs levied by atmospheric emissions in the urban areas of India
and in many other developing countries exceed other ecological damages,
including potential impacts on the global climate change by a significant margin.
Therefore, in short-and medium-term the primary focus should be on mitigating
these costs, using synergies between the local and global issues when it is
possible.
• Evolution of the surveillance system that will provide credible and adequate
information about levels and key sources of exposure from the most damaging
toxins (such as PM10, PM2.5) is essential for understanding issues and designing
successful interventions. The pay-off will be high due to significant cost savings by
focusing on the priority areas and sources.
• Valuation of illness and premature mortality in context of India and other
developing nations is a problem that needs more attention by the international
community of economists and by supporting institutions.
• Bearing in mind that the social costs of illness by air pollution may be even more
significant than costs in the case of premature death per se, more work needs to
be done that would evaluate and value the death rate outcomes.
• An emerging trend for a greater convergence among economic and public health
approaches to evaluate the burden of diseases by air pollution causes is a positive
sign which should be further encouraged.
• In a country like India where the resources are very rare relative to a wide variety
of development objectives it is of importance to carefully set air pollution
prevention policies and the priorities in line with the health impacts and projected
benefits.

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References
https://weather.com/en-IN/india/pollution/news/2018-10-31-economic-impacts-of-
pollution
http://documents.worldbank.org/curated/en/179101468743166213/pdf/multi0pag
e.pdf
http://www.sustainabilityoutlook.in/content/green-gdp-and-india%E2%80%99s-
five-year-plan
https://www.who.int/gho/mortality_burden_disease/daly_rates/text/en/
http://documents.worldbank.org/curated/en/569631468766229873/pdf/multi0pag
e.pdf
https://sustainabledevelopment.un.org/content/documents/6494108_Singh%20and
%20Grover_Sustainable%20Urban%20Environment%20in%20Delhi.pdf
http://web.iitd.ac.in/~sagnik/AE2019a.pdf

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