Externalities on theory, and
    monetary valuation



   Y. Matsuki
   August 7, 2009
   14:00 – 15:00
   Presented at th...
What is “externality”?


 Values that are not included in the market price
 of electricity
   Damages to Human health (dea...
Graphic expression of the
externality


  Demand curve
  Supply curve
  Price equilibrium
  Marginal externality
  How to ...
Demand curve


 Effect in change of price
 Shift in demand curve?
 Income
 Price of closely related good
 Taste, or prefer...
Supply Curve

 Sales depend on:
 Technological know-how
 Cost and productivity
 Input such as workers, energy
 Expectation...
Price and Quantity

 Demand curve – what consumers wish to purchase at
 various prices
 Supply curve – what producers wish...
Externality


 Marginal externality
 Each production generates a waste
 Greater the industry output – greater
 pollution
 ...
What happens?


 With the marginal external cost, the
 competitive out put is too large.
 Efficiency requires that output ...
How to fix the problem?


 To levy an excise tax on the product
 To reduce the production to the
 efficient level
 The pol...
How can you calculate the externalities?
How to calculate the monetary
value of the health impacts

D=          (x)·f(x,C(x,Q))·Uv(x) dx
     impact of Area
D: dam...
Factor the most responsible for the
valuation
  Quantity of emissions
  Boundary or spatial extent of analysis and
  geogr...
Significant but less important
factors
  Source parameters (e.g. stack height and
  diameter, exit velocity of emissions)
...
How much economic valuation
important?
 Step by step analysis = Impact
 Pathway Approach == Logical
 Assessing the future ...
What are difficult in economic
valuation
  Country specific cases
  Aggregated information
  Only practice can determine t...
Monetary valuation of the damages
 Damage based approach
 Control cost approach
 Contingency valuation
 Willingness to Pay
Morbidity values.
Health end-point                      Recommended central unit values,
                                 ...
Summary of morbidity values. (2)

Health end-point                Recommended central unit values,
                       ...
Unit cost Uv for
Long-term Mortality
Value of 1 YOLL = v = constant
           v      v          v
Uv = v + ---- + ----- +...
How to get v for long-term
mortality?
  Contingent Valuation
  BY asking “how much you pay for
  your one year life extens...
WTP (€ price year 2002)for one year of life at age 75 and
corresponding values for one year of life immediately.
(Source:M...
Value transfer model


                               EU                  UKRAINE
PPP GNP (1998) in US$          20, 269  ...
Value of life
  ExternE project series has been using
  a valuation in terms of LE loss since
  1996.
  With the central v...
Johannesson & Johansson [1997]
 2824 samples
 Asked if they will pay to reach 70 y.o., after
 which they will be offered h...
Morris and Hammitt study [2001]
 682 samples
 hypothetical pneumonia vaccine
 Half for benefit of LE gain, another
 reduct...
Soguel & van Griethuysen [2000]
 VOLY related to air pollution
 Lausanne, 199 samples
 Face to face interview
 Value a bun...
Krupnick, 2002, Alberini 2001
 In late ’90s, self administrated computerized CV
 questionnaire
 Benefits of air pollution ...
[DEFRA 2004]
 Englnad, 665 samples, a reduction in air pollution
 One, three, or six months of LE gain
 In normal health a...
NewExt [2003]
 Between 2001 and 2003
 A better estimate of VOLY
 To minimize the cost, decided not to
 develop a new quest...
Additional features by French team
  Open question after each set of bids
  And at the end of the questionnaire
  WTP valu...
WTP Survey EU version
Lesson 1
The study is concerned with the health consequences
that result from air pollution. It is important to take
public opinion...
What is your profession? Or if you
are not employed, what does your
spouse do?
I. THE EFFECTS OF AIR
POLLUTION ON HEALTH
 Q1 Does air pollution in your city (physically) bother
 you?
 . very often
 . s...
In your city air pollution can mainly be
attributed to:
1. public and private transportation (cars,
trucks, buses, etc)
2....
Q3 Are you aware that your consumption and lifestyle contribute to air
pollution?
. Yes
. No
Interviewer: please take note...
Q4 To become familiar with your
health status and the health status of
your family, could you tell us if the
following ind...
Q5
Age of father: ____ . if deceased at what age ?
Age of mother:_____ . if deceased at what age ?
Q6 Do you think you are...
Q8 Are you ?
. a smoker
. an occasional smoker
. a non-smoker
    non-
. a former smoker
Q9 Do you live with a smoker ?
. ...
II. THE EFFECTS OF AIR
POLLUTION ON LIFE
EXPECTANCY
 Reducing life expectancy is another
 major effect of air pollution on...
Age               Men               Women
Birth             75                80
20                55                60
30...
Your life expectancy actually depends on several
factors, which are:
1. biological (genetic)
2. social (if you live in a c...
We will only focus on environmental
factors, but remember the other
factors also play a role on your life
expectancy.
Ther...
Individuals (of all ages) who are
already more vulnerable because they
suffer from respiratory or
cardiovascular illnesses...
III. POLICIES TO DECREASE
AIR POLLUTION
 Let us consider two possible policies for the coming
 decades that the European U...
Policy II, will impose a 1,5% reduction per year in
the emission of air pollutants for 20 years:
(which means a total redu...
This gain in life expectancy comes from an
improved health status which will slow down
your ageing process and consequentl...
(“We know that many factors are
at play, including the
environmental factor. Specialists
believe that there is a genetic
p...
Individuals potentially more
vulnerable to air pollution:
 • children
 • the elderly
 • pregnant women
 • cardiac patients...
To better explain what an average gain of 6 (3)
months means, here is an illustration to give
you an example
Show the grap...
The black line represents the situation we have today with
current levels of air pollution. The blue line shows what
would...
IV. THE COST FOR SOCIETY
 If a policy for reducing air pollution is
 implemented, all polluters (industries,
 municipaliti...
This will increase the costs of industry, and as a
consequence there will be a general increase in the
cost of living. It ...
Q10 Are you willing to accept a higher cost of
living, therefore an increase in your daily
expenses, to gain an increase i...
Q11 Average gain of 6 months
Please consider only your personal gain of life
expectancy: :
What is the maximum amount you ...
Q12 Average gain of 3 months
Please only consider your personal
gain of life expectancy:
What is the maximum amount you ar...
To better understand your answers…
13. Do you think it is likely that a decrease in air
pollution will extend your life ex...
15. Did you think your personal gain of life
expectancy would be:
. close to the national average
. different from the nat...
19. If you would like to change the amount you
stated, please do so now. If not, go to the next
question.
I would like to ...
21. Did you think about the length
of time during which you will
have to pay ? (your whole life)
22. If you live in a 2 income household, when
stating your amount did you think about:
. Your own revenue
. Household reve...
25. Do you have a complementary
(private) health insurance?
. yes
. no
26. Have you donated any money to
charities in the ...
Demographics
How many people live in your
household? Including yourself:
___________
Number of children that live in your
...
Education level:
. primary
. secondary
. superior
Your net revenue (per month):
. less than 1000 Euros
. 1001 Euros to 150...
Household net revenue (per month):
. less than 1000 Euros
. 1001 Euros to 1500 Euros
. 1501 Euros to 2000Euros
. 2001 Euro...
TO BE FILLED BY THE
INTERVIEWER:
 How cooperative have you found the person
 interviewed to be?
 12345
 Not much          ...
During the interview did the person
think of another person or only of
him/herself ?
. Yes
. No
If yes did he/she mention ...
The usual effects are :
-Eye irritation, headaches
-Bronchitis, asthma, emphyzema
-Decrease in life expectancy due
to the ...
WTP Survey EU version
Lesson 2
I. THE EFFECTS OF AIR
POLLUTION ON HEALTH
 Q1 Does air pollution in your city (physically) bother
 you?
 . very often
 . s...
Q3 Are you aware that your consumption and lifestyle contribute to air
pollution?
. Yes
. No
Interviewer: please take note...
III. POLICIES TO DECREASE
AIR POLLUTION
 Let us consider two possible policies for the coming
 decades that the European U...
Policy II, will impose a 1,5% reduction per year in
the emission of air pollutants for 20 years:
(which means a total redu...
This gain in life expectancy comes from an
improved health status which will slow down
your ageing process and consequentl...
(“We know that many factors are
at play, including the
environmental factor. Specialists
believe that there is a genetic
p...
To better explain what an average gain of 6 (3)
months means, here is an illustration to give
you an example
Show the grap...
The black line represents the situation we have today with
current levels of air pollution. The blue line shows what
would...
IV. THE COST FOR SOCIETY
 If a policy for reducing air pollution is
 implemented, all polluters (industries,
 municipaliti...
This will increase the costs of industry, and as a
consequence there will be a general increase in the
cost of living. It ...
Q10 Are you willing to accept a higher cost of
living, therefore an increase in your daily
expenses, to gain an increase i...
Are you willing to accept the higher
cost of living?
Q11 Average gain of 6 months
Please consider only your personal gain of life
expectancy: :
What is the maximum amount you ...
Q12 Average gain of 3 months
Please only consider your personal
gain of life expectancy:
What is the maximum amount you ar...
To better understand your answers…
13. Do you think it is likely that a decrease in air
pollution will extend your life ex...
15. Did you think your personal gain of life
expectancy would be:
. close to the national average
. different from the nat...
19. If you would like to change the amount you
stated, please do so now. If not, go to the next
question.
I would like to ...
When you picked an amount, what
did you think about the most?
 1 only about your life expectancy
 2 cleaner air and its ov...
21. Did you think about the length
of time during which you will
have to pay ? (your whole life)
22. If you live in a 2 income household, when
stating your amount did you think about:
. Your own revenue
. Household reve...
What expenses did you think about that you would forgo
when you were thinking of an amount for your willingness
to pay?
25. Do you have a complementary
(private) health insurance?
. yes
. no
26. Have you donated any money to
charities in the ...
Distinguishing Externalities and Internalization
Distinguishing Externalities and Internalization
Distinguishing Externalities and Internalization
Distinguishing Externalities and Internalization
Distinguishing Externalities and Internalization
Distinguishing Externalities and Internalization
Distinguishing Externalities and Internalization
Distinguishing Externalities and Internalization
Distinguishing Externalities and Internalization
Distinguishing Externalities and Internalization
Distinguishing Externalities and Internalization
Distinguishing Externalities and Internalization
Distinguishing Externalities and Internalization
Distinguishing Externalities and Internalization
Distinguishing Externalities and Internalization
Distinguishing Externalities and Internalization
Distinguishing Externalities and Internalization
Distinguishing Externalities and Internalization
Distinguishing Externalities and Internalization
Distinguishing Externalities and Internalization
Distinguishing Externalities and Internalization
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Distinguishing Externalities and Internalization

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AACIMP 2009 Summer School lecture by Yoshio Matsuki. "Environmental Externalities of Energy Options - Basics and Applications" course. 2nd hour.

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Distinguishing Externalities and Internalization

  1. 1. Externalities on theory, and monetary valuation Y. Matsuki August 7, 2009 14:00 – 15:00 Presented at the NTUU “KPI”
  2. 2. What is “externality”? Values that are not included in the market price of electricity Damages to Human health (death, injury, illness) Damages to Biological resources (crops/vegetation, forests, fisheries, aquatic, terrestrial, groundwater) Climate change, visibility Policy needed to secure energy supply
  3. 3. Graphic expression of the externality Demand curve Supply curve Price equilibrium Marginal externality How to adjust the externality? External damage External benefit
  4. 4. Demand curve Effect in change of price Shift in demand curve? Income Price of closely related good Taste, or preference of consumers Negative slope? Lower price – more consumers
  5. 5. Supply Curve Sales depend on: Technological know-how Cost and productivity Input such as workers, energy Expectations Employee-management relations Produce more when price is higher
  6. 6. Price and Quantity Demand curve – what consumers wish to purchase at various prices Supply curve – what producers wish to sell The intersection – the equilibrium price and quantity in the market Disequilibrium? Excess demand, or shortage Shortage – higher price Excess supply, or surplus Excess supply – down ward pressure on price
  7. 7. Externality Marginal externality Each production generates a waste Greater the industry output – greater pollution The slope upward Summing the marginal cost of each person harmed
  8. 8. What happens? With the marginal external cost, the competitive out put is too large. Efficiency requires that output be to the point where the curves intersect. But, the competitive market pressures to an output larger than the efficient output. What should the government do?
  9. 9. How to fix the problem? To levy an excise tax on the product To reduce the production to the efficient level The pollution cannot be fully eliminated…
  10. 10. How can you calculate the externalities?
  11. 11. How to calculate the monetary value of the health impacts D= (x)·f(x,C(x,Q))·Uv(x) dx impact of Area D: damage cost (Euro, US dollars, UAH) (x): population density (person/m2) f(x,C(x,Q)): Exposure-Response Function cases/(year.person. g/m3) Uv(x): unit cost (Euro/cases) C(x,Q): Concentration of the pollution ( g/m3) Q: Emission of the pollution ( g/year) x: Distance from the emission source (m)
  12. 12. Factor the most responsible for the valuation Quantity of emissions Boundary or spatial extent of analysis and geographic distribution of population Dose-response functions, especially exposure to secondary particulates and chronic illness Estimate of global warming impacts Probabilities of severe accidents Existence of highly valued ecosystems
  13. 13. Significant but less important factors Source parameters (e.g. stack height and diameter, exit velocity of emissions) Background levels of pollutants and atmospheric chemistry Meteorology Local topography Dispersion and transformation models used to estimate concentration levels Assumptions about thresholds Economic valuation
  14. 14. How much economic valuation important? Step by step analysis = Impact Pathway Approach == Logical Assessing the future impact – discount rate…? Economic valuation is less responsible for the impact value….
  15. 15. What are difficult in economic valuation Country specific cases Aggregated information Only practice can determine the monetary values Only that are sold have monetary value ….? Assessing the future impact – discount rate…?
  16. 16. Monetary valuation of the damages Damage based approach Control cost approach Contingency valuation Willingness to Pay
  17. 17. Morbidity values. Health end-point Recommended central unit values, € price year 2000 Hospital admissions 2,000/admission Emergency Room Visit for respiratory 670/visit illness General Practicioner visits: Asthma 53/consultation Lower respiratory symptoms 75/consultation Respiratory symptoms in asthmatics: Adults 130/event Children 280/event Respiratory medication use – adults 1//day and children Restricted activity days 130/day
  18. 18. Summary of morbidity values. (2) Health end-point Recommended central unit values, € price year 2000 Cough day 38/day Symptom day 38/day Work loss day 82/day Minor restricted activity day 38/day Chronic bronchitis 190,000/case
  19. 19. Unit cost Uv for Long-term Mortality Value of 1 YOLL = v = constant v v v Uv = v + ---- + ----- + ……+ ----- 1+r (1+r)2 (1+r)N r = discount rate of one year N = years of human life
  20. 20. How to get v for long-term mortality? Contingent Valuation BY asking “how much you pay for your one year life extension”
  21. 21. WTP (€ price year 2002)for one year of life at age 75 and corresponding values for one year of life immediately. (Source:M.Johannesson and P-O Johansson (1996)) Age of Payment WTP for 1 Life WTP for 1 Life Year at 75 Year Now 18-34 1676 7176 35-51 2120 6327 52-69 2433 3733
  22. 22. Value transfer model EU UKRAINE PPP GNP (1998) in US$ 20, 269 3,130 Unit cost Unit cost EU UKRAINE Chronic mortality (YOLL) 101,000 15,600 Acute mortality (YOLL) 174,000 26,900 Chronic bronchities (adults) 177,800 27,500 RAD 116 17 Respiratory Hospital Admission 4,540 700 PPP GNP: Purchasing Power Parity Gross National Product
  23. 23. Value of life ExternE project series has been using a valuation in terms of LE loss since 1996. With the central value of the discount rate (3%) the resulting VOLY for total mortality is approximately 100,000 €.
  24. 24. Johannesson & Johansson [1997] 2824 samples Asked if they will pay to reach 70 y.o., after which they will be offered high medical care to live long. The resulting VOLY values are very low, in the range of $700 to $1,300. The average of positive WTPs is about $2,700, which is still a very low amount. A half replied zero WTP.
  25. 25. Morris and Hammitt study [2001] 682 samples hypothetical pneumonia vaccine Half for benefit of LE gain, another reduction of risk of deaths 30 % didn't take vaccine, because benefit was small or uncertain. LE gain answers, results were 52% higher than the reduction of the risk. Interviews were made by phone after respondents received a mailed packet of material.
  26. 26. Soguel & van Griethuysen [2000] VOLY related to air pollution Lausanne, 199 samples Face to face interview Value a bundle of health damages caused each year, by incinerator, 6000 days of life lost, 1200 cases of restricted activity days, 500 new cases of chronic bronchitis and asthma. a VOLY of 53,000 Swiss Francs (34,000 €)
  27. 27. Krupnick, 2002, Alberini 2001 In late ’90s, self administrated computerized CV questionnaire Benefits of air pollution reduction, Cause is not mentioned Canada, USA 1/1000 and 5/1000 risk reduction of dying during the next 10 years, and at the age of 70 y.o. Payment == medication and treatment for the next 10 years. 0.96 million USD for 5/1000 risk reduction 3.05 million for 1/1000 risk reduction
  28. 28. [DEFRA 2004] Englnad, 665 samples, a reduction in air pollution One, three, or six months of LE gain In normal health and in poor health. Avoiding hospital admission, avoiding breathing discomroft November 2002 and January 2003 Normal health 42,000 € for the one month sample, 15,000 € for the 3 months sample and 10,000 € for the 6 month sample. A VOLY in poor health is much lower (more than half of the sample gave a zero valuation), ranging between 7280. for the one month subsample, to 1290 . for the 6 month subsample.
  29. 29. NewExt [2003] Between 2001 and 2003 A better estimate of VOLY To minimize the cost, decided not to develop a new questionnaire but to apply the one of Krupnick et al. [2002] in the UK, Italy and France. a VOLY of 50,000€. Only French team – additional features….
  30. 30. Additional features by French team Open question after each set of bids And at the end of the questionnaire WTP values were recalled to give the respondents the chance to correct their values Five variants were tested on samples of about 50 each, such as variants phrased in terms of LE gain Each questionnaire was followed by detailed written debriefing To learn how the respondents interpreted the questions. The decision was made to develop a new questionnaire.
  31. 31. WTP Survey EU version Lesson 1
  32. 32. The study is concerned with the health consequences that result from air pollution. It is important to take public opinion into account. One of the main health benefits we can attribute to a reduction in air pollution is an increase in the life expectancy of individuals. The objective of this questionnaire is to find out how much you value an increase in your life expectancy if air pollution is reduced. The same questionnaire is being applied in 8 EU countries. Answers will remain anonymous. There are no right or wrong answers. Just think about yourself. Gender: __________ Age: _________
  33. 33. What is your profession? Or if you are not employed, what does your spouse do?
  34. 34. I. THE EFFECTS OF AIR POLLUTION ON HEALTH Q1 Does air pollution in your city (physically) bother you? . very often . sometimes . rarely . never When? Please describe (very often or sometimes) Q2 Are you concerned with the effects of air pollution on your health? . very much . somewhat . not so much . not at all Interviewer: please take note of any comments made here by respondent
  35. 35. In your city air pollution can mainly be attributed to: 1. public and private transportation (cars, trucks, buses, etc) 2. heating systems 3. household waste incinerators, 4. power plants and industry. (show overhead “Air pollution aggression”) In other words, through our lifestyle, transportation needs and the goods and services that we consume we are all responsible for creating air pollution.
  36. 36. Q3 Are you aware that your consumption and lifestyle contribute to air pollution? . Yes . No Interviewer: please take note of any comments made by respondent Breathing pollutants such as fine particulates and sulphur dioxide, is harmful to our health; it is known to worsen respiratory and cardiovascular problems. It increases the risk of heart disease and strokes. It also causes eye irritation and increases the number and intensity of chronic bronchitis, asthma attacks and emphysema. Did you know this? Interviewer: Take note of the individual’s level of knowledge on the subject In order for to put this information in an everyday life context understand that the level of air pollution in a big European city like Paris is like smoking 4 cigarettes a day. Also, scientists have estimated that some lung cancers (perhaps ten percent of all lung cancers) are due to air pollution. Your health status and the heath status of your close family
  37. 37. Q4 To become familiar with your health status and the health status of your family, could you tell us if the following individuals have ever had or have: YouSpouseChildrenFatherMotherBroth ers/Sisters Eye irritation Headaches/migraines AllergiesSinus problems Chronic bronchitis Asthma Cardio- Cardio-vascular diseaseEmphysema CancerOther serious chronic disease
  38. 38. Q5 Age of father: ____ . if deceased at what age ? Age of mother:_____ . if deceased at what age ? Q6 Do you think you are in: . good health for your age . average health for your age . poor health for your age Q7 Do you practice any (sports) physical activity? . several times a week . once a week . less than once a week . never
  39. 39. Q8 Are you ? . a smoker . an occasional smoker . a non-smoker non- . a former smoker Q9 Do you live with a smoker ? . yes . no
  40. 40. II. THE EFFECTS OF AIR POLLUTION ON LIFE EXPECTANCY Reducing life expectancy is another major effect of air pollution on health and this is the one that we will concentrate on for the remainder of the questionnaire. Life expectancy is the number of years you can expect to live, depending on how old you are now. For example a baby girl born today has a life expectancy of 83 years, and a baby boy has a life expectancy of 76 years. Of course it is an average calculated for the whole population.
  41. 41. Age Men Women Birth 75 80 20 55 60 30 45 50 40 36 41 50 27 31 60 19 23 70 12 15 For someone of your age, you can expect to live another ......... years
  42. 42. Your life expectancy actually depends on several factors, which are: 1. biological (genetic) 2. social (if you live in a city, in the mountains, your lifestyle, your standard of living) 3. behavioural factors ( you are a smoker, a non- non-smoker, you exercise, you eat healthy) 4. medical (you have high blood pressure, diabetes, kidney failure) 5. environmental ( you live in a highly polluted neighbourhood or not very polluted neighbourhood)
  43. 43. We will only focus on environmental factors, but remember the other factors also play a role on your life expectancy. There have been significant scientific advances in the past ten years and today we can better estimate the effects of air pollution on the health status of individuals. What are the effects of air pollution on your life expectancy? The daily inhalation of air pollutants gradually damages the body and accelerates the aging process.
  44. 44. Individuals (of all ages) who are already more vulnerable because they suffer from respiratory or cardiovascular illnesses are more sensitive to air pollution because it aggravates their symptoms. An improvement in air quality would lead to an increase in the life expectancy of the general population. To obtain this benefit all sectors of the economy will have to respect new reduced pollutant emission levels.
  45. 45. III. POLICIES TO DECREASE AIR POLLUTION Let us consider two possible policies for the coming decades that the European Union could implement and its benefits in terms of life expectancy: implement and its benefits in terms of life expectancy: Policy I, will impose a 3% reduction per year in the emission of air pollutants for 20 years: (which means a total reduction of 60% by 2025) Afterwards the emission of air pollutants will be maintained at this lower level whatever the economic growth The benefit in terms of life expectancy would be an average increase of: 6 months
  46. 46. Policy II, will impose a 1,5% reduction per year in the emission of air pollutants for 20 years: (which means a total reduction of 30% by 2025) Afterwards the emission of air pollutants will be maintained at this lower level whatever the economic growth The benefit in terms of life expectancy would be an average increase of: 3 months * These policies do not concern the emission of greenhouse gases but only the pollutants with direct health effects such as fine particulates and sulphur dioxides. Stricter limits on emissions will be imposed on all member countries of the UE and will be closely monitored and enforced by the European Commission.
  47. 47. This gain in life expectancy comes from an improved health status which will slow down your ageing process and consequently increase your life expectancy by an average of 6(3) months. This is an average gain calculated for the whole population; some individuals could gain more than the average 6(3) months predicted while other individuals less vulnerable to air pollution could gain less than the average 6(3) months predicted. The current the level of knowledge does not allow to predict more precisely what could be your individual gain in life expectancy.
  48. 48. (“We know that many factors are at play, including the environmental factor. Specialists believe that there is a genetic predisposition could significantly change the risk perhaps by a factor of three, but this is still an area of research” Doctor Aubier, Chief of Respiratory illnesses at Hopital Bichat in Paris, France)
  49. 49. Individuals potentially more vulnerable to air pollution: • children • the elderly • pregnant women • cardiac patients • those with respiratory illnesses • asthma sufferers • those with chronic bronchitis • those who through work have to be in contact with chemicals
  50. 50. To better explain what an average gain of 6 (3) months means, here is an illustration to give you an example Show the graph The graph shows very schematically the ability of the body to survive as a function of age. If air pollution is reduced, there is less damage to the body. Thus, people are more able to fight off the effects of illness and are more likely to survive longer, as shown by the blue line. They age less rapidly than with the current level of pollution. This is particularly noticeable above age 50, although it has some effect already earlier.
  51. 51. The black line represents the situation we have today with current levels of air pollution. The blue line shows what would happen if we reduce air pollution (although the gain is exaggerated to make it more clearly visible on the graph). The average LE gain is about 6 months if the air pollution is decreased by 60%. The benefit begins as soon as pollution is reduced and reaches gradually the full level, as suggested by the arrows in the graph. Note that the gain is not just a few months at the end of life when people tend to be in poor health. To emphasize this fact, the dashed horizontal line has been added to the graph corresponding to a state of “good health”. The age where the black and the blue curves intersect this line could be called “healthy life expectancy”, at this state of good health. The gain of “healthy life expectancy” is about the same as the LE gain, 3 or 6 months, respectively, that we are talking about in the questionnaire. Are the benefits of these policies clear to you? If you have any question please ask.
  52. 52. IV. THE COST FOR SOCIETY If a policy for reducing air pollution is implemented, all polluters (industries, municipalities, households) will have to respect stricter emission limits to improve air quality. All sectors of the economy will be affected and will need to increase their efforts to reduce pollution by such means as modifying production processes and producing less polluting cars, heating systems etc…
  53. 53. This will increase the costs of industry, and as a consequence there will be a general increase in the cost of living. It would mean a cutback in your daily consumption of goods and services and/or savings if you can afford to save. Show illustration on product price increase To decide what financial cost will be imposed on the economy it is necessary for you to express the value you attribute to a gain in your life expectancy. One way of communicating this value is to estimate how much money, in terms of a higher cost of living, you are willing to give up each month to obtain this benefit. In other words, what financial effort are you willing to make each month for this gain in life expectancy? Are these explications clear? Don’t hesitate to ask questions
  54. 54. Q10 Are you willing to accept a higher cost of living, therefore an increase in your daily expenses, to gain an increase in your life expectancy? . yes . no If not, why? Would you be willing to accept an increase in the cost of living for any benefits of improved air quality? If yes (Verbally give instructions of how to handle the payment cards)
  55. 55. Q11 Average gain of 6 months Please consider only your personal gain of life expectancy: : What is the maximum amount you are willing to pay in the form of higher expenses to gain an average of 6 months in your life expectancy? The largest amount of your “Yes, I would pay” cards: ____ per month (for the rest of my life) ____ per year (for the rest of my life) Please take your time to answer, it is an important question. If you have any question please ask.
  56. 56. Q12 Average gain of 3 months Please only consider your personal gain of life expectancy: What is the maximum amount you are willing to pay in the form of higher expenses to gain an average of 3 months in your life expectancy? The largest amount of your “Yes, I would pay” cards: ____ per month (for the rest of my life) ____ per year (for the rest of my life)
  57. 57. To better understand your answers… 13. Do you think it is likely that a decrease in air pollution will extend your life expectancy ? . yes . no 14. Does this questionnaire clearly illustrate that the 6 months and 3 months gain in life expectancy are averages based on the entire French (insert your country here) population and that this gain can be different for each one of us? . yes . no
  58. 58. 15. Did you think your personal gain of life expectancy would be: . close to the national average . different from the national average 16. What reasons do you have to think that your gain could be different than the national average? for those whose willingness to pay is not proportional to the gain: 17. Why did you indicate an increase in your expenditures that is not proportional to your gain in life expectancy? 18. How confident are you of the amount you stated you were willing to pay to increase your life expectancy an average of 6(3) months? . yes I am sure . no I am not sure
  59. 59. 19. If you would like to change the amount you stated, please do so now. If not, go to the next question. I would like to pay: ____ per month for an average of 5 months I would like to pay: ____ per month for an average of 2 months 20. When you picked an amount, what did you think about the most? . only about your life expectancy . cleaner air and its overall benefits on health (I will breathe better, will be in better health) . a bit of both . other __________________________________________ ___
  60. 60. 21. Did you think about the length of time during which you will have to pay ? (your whole life)
  61. 61. 22. If you live in a 2 income household, when stating your amount did you think about: . Your own revenue . Household revenue 23. If you are approaching retirement, what did you think about when stating your amount? . current income . future retirement income (what amount per month would you receive?______) 24. What expenses did you think about that you would forgo when you were thinking of an amount for your willingness to pay?
  62. 62. 25. Do you have a complementary (private) health insurance? . yes . no 26. Have you donated any money to charities in the past year? . yes . no 27. Approximately how much? ______________
  63. 63. Demographics How many people live in your household? Including yourself: ___________ Number of children that live in your household: __________ Age of the children: _______________________________ ______________ Do you rent or own your house/apartment?
  64. 64. Education level: . primary . secondary . superior Your net revenue (per month): . less than 1000 Euros . 1001 Euros to 1500 Euros . 1501 Euros to 2000Euros . 2001 Euros to 3000 Euros . 3001 Euros to 4000 Euros . 4001 Euros to 5000 Euros . 5000 Euros to 6000 Euros . more than 6000 Euros
  65. 65. Household net revenue (per month): . less than 1000 Euros . 1001 Euros to 1500 Euros . 1501 Euros to 2000Euros . 2001 Euros to 3000 Euros . 3001 Euros to 4000 Euros . 4001 Euros to 5000 Euros . 5000 Euros to 7000 Euros . more than 7000 Euros
  66. 66. TO BE FILLED BY THE INTERVIEWER: How cooperative have you found the person interviewed to be? 12345 Not much Much How much attention has the person interviewed paid? 12345 Not much Much Degree of comprehension 12345 Not much Much
  67. 67. During the interview did the person think of another person or only of him/herself ? . Yes . No If yes did he/she mention some person in particular ? Duration of the interview Address of the interview Name of the interviewer Interviewer comments
  68. 68. The usual effects are : -Eye irritation, headaches -Bronchitis, asthma, emphyzema -Decrease in life expectancy due to the body’s weakening by air pollution
  69. 69. WTP Survey EU version Lesson 2
  70. 70. I. THE EFFECTS OF AIR POLLUTION ON HEALTH Q1 Does air pollution in your city (physically) bother you? . very often . sometimes . rarely . never When? Please describe (very often or sometimes) Q2 Are you concerned with the effects of air pollution on your health? . very much . somewhat . not so much . not at all Interviewer: please take note of any comments made here by respondent
  71. 71. Q3 Are you aware that your consumption and lifestyle contribute to air pollution? . Yes . No Interviewer: please take note of any comments made by respondent Breathing pollutants such as fine particulates and sulphur dioxide, is harmful to our health; it is known to worsen respiratory and cardiovascular problems. It increases the risk of heart disease and strokes. It also causes eye irritation and increases the number and intensity of chronic bronchitis, asthma attacks and emphysema. Did you know this? Interviewer: Take note of the individual’s level of knowledge on the subject In order for to put this information in an everyday life context understand that the level of air pollution in a big European city like Paris is like smoking 4 cigarettes a day. Also, scientists have estimated that some lung cancers (perhaps ten percent of all lung cancers) are due to air pollution. Your health status and the heath status of your close family
  72. 72. III. POLICIES TO DECREASE AIR POLLUTION Let us consider two possible policies for the coming decades that the European Union could implement and its benefits in terms of life expectancy: implement and its benefits in terms of life expectancy: Policy I, will impose a 3% reduction per year in the emission of air pollutants for 20 years: (which means a total reduction of 60% by 2025) Afterwards the emission of air pollutants will be maintained at this lower level whatever the economic growth The benefit in terms of life expectancy would be an average increase of: 6 months
  73. 73. Policy II, will impose a 1,5% reduction per year in the emission of air pollutants for 20 years: (which means a total reduction of 30% by 2025) Afterwards the emission of air pollutants will be maintained at this lower level whatever the economic growth The benefit in terms of life expectancy would be an average increase of: 3 months * These policies do not concern the emission of greenhouse gases but only the pollutants with direct health effects such as fine particulates and sulphur dioxides. Stricter limits on emissions will be imposed on all member countries of the UE and will be closely monitored and enforced by the European Commission.
  74. 74. This gain in life expectancy comes from an improved health status which will slow down your ageing process and consequently increase your life expectancy by an average of 6(3) months. This is an average gain calculated for the whole population; some individuals could gain more than the average 6(3) months predicted while other individuals less vulnerable to air pollution could gain less than the average 6(3) months predicted. The current the level of knowledge does not allow to predict more precisely what could be your individual gain in life expectancy.
  75. 75. (“We know that many factors are at play, including the environmental factor. Specialists believe that there is a genetic predisposition could significantly change the risk perhaps by a factor of three, but this is still an area of research” Doctor Aubier, Chief of Respiratory illnesses at Hopital Bichat in Paris, France)
  76. 76. To better explain what an average gain of 6 (3) months means, here is an illustration to give you an example Show the graph The graph shows very schematically the ability of the body to survive as a function of age. If air pollution is reduced, there is less damage to the body. Thus, people are more able to fight off the effects of illness and are more likely to survive longer, as shown by the blue line. They age less rapidly than with the current level of pollution. This is particularly noticeable above age 50, although it has some effect already earlier.
  77. 77. The black line represents the situation we have today with current levels of air pollution. The blue line shows what would happen if we reduce air pollution (although the gain is exaggerated to make it more clearly visible on the graph). The average LE gain is about 6 months if the air pollution is decreased by 60%. The benefit begins as soon as pollution is reduced and reaches gradually the full level, as suggested by the arrows in the graph. Note that the gain is not just a few months at the end of life when people tend to be in poor health. To emphasize this fact, the dashed horizontal line has been added to the graph corresponding to a state of “good health”. The age where the black and the blue curves intersect this line could be called “healthy life expectancy”, at this state of good health. The gain of “healthy life expectancy” is about the same as the LE gain, 3 or 6 months, respectively, that we are talking about in the questionnaire. Are the benefits of these policies clear to you? If you have any question please ask.
  78. 78. IV. THE COST FOR SOCIETY If a policy for reducing air pollution is implemented, all polluters (industries, municipalities, households) will have to respect stricter emission limits to improve air quality. All sectors of the economy will be affected and will need to increase their efforts to reduce pollution by such means as modifying production processes and producing less polluting cars, heating systems etc…
  79. 79. This will increase the costs of industry, and as a consequence there will be a general increase in the cost of living. It would mean a cutback in your daily consumption of goods and services and/or savings if you can afford to save. Show illustration on product price increase To decide what financial cost will be imposed on the economy it is necessary for you to express the value you attribute to a gain in your life expectancy. One way of communicating this value is to estimate how much money, in terms of a higher cost of living, you are willing to give up each month to obtain this benefit. In other words, what financial effort are you willing to make each month for this gain in life expectancy? Are these explications clear? Don’t hesitate to ask questions
  80. 80. Q10 Are you willing to accept a higher cost of living, therefore an increase in your daily expenses, to gain an increase in your life expectancy? . yes . no If not, why? Would you be willing to accept an increase in the cost of living for any benefits of improved air quality? If yes (Verbally give instructions of how to handle the payment cards)
  81. 81. Are you willing to accept the higher cost of living?
  82. 82. Q11 Average gain of 6 months Please consider only your personal gain of life expectancy: : What is the maximum amount you are willing to pay in the form of higher expenses to gain an average of 6 months in your life expectancy? The largest amount of your “Yes, I would pay” cards: ____ per month (for the rest of my life) ____ per year (for the rest of my life) Please take your time to answer, it is an important question. If you have any question please ask.
  83. 83. Q12 Average gain of 3 months Please only consider your personal gain of life expectancy: What is the maximum amount you are willing to pay in the form of higher expenses to gain an average of 3 months in your life expectancy? The largest amount of your “Yes, I would pay” cards: ____ per month (for the rest of my life) ____ per year (for the rest of my life)
  84. 84. To better understand your answers… 13. Do you think it is likely that a decrease in air pollution will extend your life expectancy ? . yes . no 14. Does this questionnaire clearly illustrate that the 6 months and 3 months gain in life expectancy are averages based on the entire French (insert your country here) population and that this gain can be different for each one of us? . yes . no
  85. 85. 15. Did you think your personal gain of life expectancy would be: . close to the national average . different from the national average 16. What reasons do you have to think that your gain could be different than the national average? for those whose willingness to pay is not proportional to the gain: 17. Why did you indicate an increase in your expenditures that is not proportional to your gain in life expectancy? 18. How confident are you of the amount you stated you were willing to pay to increase your life expectancy an average of 6(3) months? . yes I am sure . no I am not sure
  86. 86. 19. If you would like to change the amount you stated, please do so now. If not, go to the next question. I would like to pay: ____ per month for an average of 5 months I would like to pay: ____ per month for an average of 2 months 20. When you picked an amount, what did you think about the most? . only about your life expectancy . cleaner air and its overall benefits on health (I will breathe better, will be in better health) . a bit of both . other __________________________________________ ___
  87. 87. When you picked an amount, what did you think about the most? 1 only about your life expectancy 2 cleaner air and its overall benefits on health (I will breathe better, will be in better health) 3 a bit of both 4 other
  88. 88. 21. Did you think about the length of time during which you will have to pay ? (your whole life)
  89. 89. 22. If you live in a 2 income household, when stating your amount did you think about: . Your own revenue . Household revenue 23. If you are approaching retirement, what did you think about when stating your amount? . current income . future retirement income (what amount per month would you receive?______) 24. What expenses did you think about that you would forgo when you were thinking of an amount for your willingness to pay?
  90. 90. What expenses did you think about that you would forgo when you were thinking of an amount for your willingness to pay?
  91. 91. 25. Do you have a complementary (private) health insurance? . yes . no 26. Have you donated any money to charities in the past year? . yes . no 27. Approximately how much? ______________

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