Evaluation of the Costs and Benefits of Evaluation of the Costs and Benefits of Household Energy and Health InterventionsHousehold Energy and Health Interventions
31st IAEE International Conference,Pre-Conference Workshop on Clean Cooking Fuels
Istanbul, 16-17 June 2008
Guy Hutton1, Eva Rehfuess2 and Fabrizio Tediosi3
1 World Bank, Phnom Penh, 2 World Health Organization, Geneva, 3 Università Bocconi, Milan
Economic evaluation:
• demonstrates the economic return of investments in an intervention
• compares the cost-effectiveness/ costs and benefits of one intervention against another
• helps policy-makers allocate their limited budget
Caveat:Economic pay-off is not the only criterionfor identifying sound interventions.
Why economic evaluation?
Cost-benefit versus cost-effectiveness analysis
Courtesy of Nigel Bruce/Practical Action
Cost-benefit analysis• Do all the benefits outweigh all the
costs of an intervention?• perspective: society, multiple sectors• unit: benefit-cost ratio in $
Courtesy of Dominic Sansoni/World Bank
Cost-effectiveness analysis• How can one maximize health for
available resources?• perspective: health sector• unit: cost-effectiveness ratio, e.g.
in $ per healthy life year gained
Comparison measure
Economic costs:
annual average economic benefit of intervention
annual average economic cost of intervention
Benefit-cost ratio (BCR)
• fuel costs, stove costs• programme costs (including
R&D investment, education)
• reduced healthcare costs• health-related productivity gains• time savings• environmental impacts
Economic benefits:
=
Interventions and scenarios modelled
• Basic approach:– analysis for 11 developing and middle-income WHO subregions
– separate analysis for urban and rural areas
– baseline year 2005; ten-year intervention period (2006-2015)
– 3% discount rate applied to all costs and benefits
• Baseline:current mix of dung, wood, coal, cleaner fuels, etc.
• Intervention 1: (50%, 100% coverage, pro-poor)switch to LPG (ethanol)
• Intervention 2: (50%, 100% coverage)cleaner-burning, fuel-efficient “rocket-type” stove
Important benefit assumptions:health impacts and productivity gains
• Conclusive evidence for health impact of indoor air pollution:– acute lower respiratory infections (ALRI): children under five– chronic obstructive pulmonary disease (COPD): adults above 30– lung cancer (coal use): adults above 30
• Avoided health impacts:– ALRI, COPD, lung cancer (WHO methodology for burden of disease)– LPG/ethanol: risk reduction to baseline risk– stoves: 35% risk reduction (personal exposure reduction, lag times)
• Health-related productivity gains:– number of illness-free days and deaths avoided, for type of illness and
level of severity– valued using human capital approach: daily Gross National Income
(GNI) per capita and income-earning life from 15 to 65 years
Important benefit assumptions:time savings and environmental benefits
• Time savings:– due to reduced fuel collection (survey data in selected locations) – due to time saved on cooking (laboratory data)– valued at GNI per capita
• Local environmental benefits:– avoided deforestation – valued using tree replacement cost (labour + sapling + wastage)
• Global environmental benefits:– averted CO2 + CH4 emissions (published studies)
– valued using carbon trading values (Clean Development Mechanism)
Proposed voluntary MDG target:halve, by 2015, the population cooking with solid fuels,
and make improved cookstoves widely available
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People to gain access to cleaner fuels to reach the voluntary MDG energy target
World Health Organization, Fuel for life: household energy and health. WHO, 2006.
Results (US$ per year): Providing access to LPG, by 2015,
to half of those burning solid fuels in 2005
Programme cost: 130 million
Total cost: 13 billion
Total benefit: 91 billion
Benefit-cost ratio: 7:1
Benefit-cost ratio*: 4:1
Sensitivity analysis: 2:1 – 29:1
Courtesy of Nigel Bruce/Practical Action
* Intervention cost savings included with economic benefits.
Results (US$ per year):Making improved stoves available, by 2015,to half of those burning solid fuels in 2005
Courtesy of GTZ
Programme cost: 650 millionTotal cost: -34 billion
(2 billion costs,- 36 billion fuel
savings)
Total benefit: 105 billion
Benefit-cost ratio: negative
Benefit-cost ratio*: 61:1
Sensitivity analysis: negative
* Intervention cost savings included with economic benefits.
Distribution of economic benefits
LPG Improved stoves
Health-related productivity gains and time savings due to less fuel collection and cooking constitute the greatest benefits.
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Key limitations
• Considerable variation between world regions, as well as between urban and rural settings.
• Findings based on global/regional data and assumptions do not necessarily apply to specific countries or programmes.
• Idealistic, target-based scenarios versus realistic, programme-based analyses.
• Need to refine optimistic assumptions (e.g. effectiveness of stove, programme costs, unsustainable harvesting of firewood) and pessimistic assumptions (e.g. greenhouse gases included, value of avoided emissions).
Conclusions
• Globally, both a switch to cleaner fuels and the promotion of fuel-efficient, cleaner-burning stoves appear to be highly cost-effective.
• Making the economic case remains a challenge:
– Household energy and health is an inter-sectoral issue with no clear policy lead across countries.
– Programme level versus household level: Where do costs occur? Where do benefits occur?
• There is a need for the application and refinement of current cost-benefit analysis methodology at national and programme levels.
Courtesy of Crispin Hughes/Practical Action
For more information:http://www.who.int/indoorair
Dr Eva RehfuessPublic Health and EnvironmentWorld Health Organization1211 Geneva 27SwitzerlandEmail: [email protected]