Externalities on theory, andmonetary valuation

Y. MatsukiAugust 7, 200914:00 – 15:00Presented at the NTUU “KPI”

What is “externality”?

Values that are not included in the market priceof electricity

Damages to Human health (death, injury, illness)Damages to Biological resources (crops/vegetation,forests, fisheries, aquatic, terrestrial, groundwater)Climate change, visibilityPolicy needed to secure energy supply

Graphic expression of theexternality

Demand curveSupply curvePrice equilibriumMarginal externalityHow to adjust the externality?External damageExternal benefit

Demand curve

Effect in change of priceShift in demand curve?IncomePrice of closely related goodTaste, or preference of consumersNegative slope?Lower price – more consumers

Supply Curve

Sales depend on:Technological know-howCost and productivityInput such as workers, energyExpectationsEmployee-management relationsProduce more when price is higher

Price and Quantity

Demand curve – what consumers wish to purchase atvarious pricesSupply curve – what producers wish to sellThe intersection – the equilibrium price and quantityin the marketDisequilibrium?Excess demand, or shortageShortage – higher priceExcess supply, or surplusExcess supply – down ward pressure on price

Externality

Marginal externalityEach production generates a wasteGreater the industry output – greaterpollutionThe slope upwardSumming the marginal cost of eachperson harmed

What happens?

With the marginal external cost, thecompetitive out put is too large.Efficiency requires that output be to thepoint where the curves intersect.But, the competitive market pressures toan output larger than the efficient output.What should the government do?

How to fix the problem?

To levy an excise tax on the productTo reduce the production to theefficient levelThe pollution cannot be fullyeliminated…

How can you calculate the externalities?

How to calculate the monetaryvalue of the health impacts

D= (x)·f(x,C(x,Q))·Uv(x) dximpact of Area

D: damage cost (Euro, US dollars, UAH)(x): population density (person/m2)

f(x,C(x,Q)): Exposure-Response Functioncases/(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)

Factor the most responsible for thevaluation

Quantity of emissionsBoundary or spatial extent of analysis andgeographic distribution of populationDose-response functions, especiallyexposure to secondary particulates andchronic illnessEstimate of global warming impactsProbabilities of severe accidentsExistence of highly valued ecosystems

Significant but less importantfactors

Source parameters (e.g. stack height anddiameter, exit velocity of emissions)Background levels of pollutants andatmospheric chemistryMeteorologyLocal topographyDispersion and transformation models usedto estimate concentration levelsAssumptions about thresholdsEconomic valuation

How much economic valuationimportant?

Step by step analysis = ImpactPathway Approach == LogicalAssessing the future impact –discount rate…?Economic valuation is less responsiblefor the impact value….

What are difficult in economicvaluation

Country specific casesAggregated informationOnly practice can determine themonetary valuesOnly that are sold have monetaryvalue ….?Assessing the future impact –discount rate…?

Monetary valuation of the damages

Damage based approachControl cost approachContingency valuationWillingness to Pay

Morbidity values.Health end-point Recommended central unit values,

€ price year 2000Hospital admissions 2,000/admission

Emergency Room Visit for respiratoryillness

670/visit

General Practicioner visits:AsthmaLower respiratory symptoms

53/consultation75/consultation

Respiratory symptoms in asthmatics:AdultsChildren

130/event280/event

Respiratory medication use – adultsand children

1//day

Restricted activity days 130/day

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

Unit cost Uv forLong-term Mortality

Value of 1 YOLL = v = constantv v v

Uv = v + ---- + ----- + ……+ -----1+r (1+r)2 (1+r)N

r = discount rate of one yearN = years of human life

How to get v for long-termmortality?

Contingent ValuationBY asking “how much you pay foryour one year life extension”

WTP (€ price year 2002)for one year of life at age 75 andcorresponding values for one year of life immediately.(Source:M.Johannesson and P-O Johansson (1996))

Age of Payment WTP for 1 LifeYear at 75

WTP for 1 LifeYear Now

18-34 1676 7176

35-51 2120 6327

52-69 2433 3733

Value transfer model

EU UKRAINE

PPP GNP (1998) in US$ 20, 269 3,130

Unit cost EUUnit cost

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 HospitalAdmission 4,540 700

PPP GNP: Purchasing Power Parity Gross National Product

Value of life

ExternE project series has been usinga valuation in terms of LE loss since1996.With the central value of the discountrate (3%) the resulting VOLY for totalmortality is approximately 100,000 €.

Johannesson & Johansson [1997]

2824 samplesAsked if they will pay to reach 70 y.o., afterwhich they will be offered high medical careto live long.The resulting VOLY values are very low, inthe range of $700 to $1,300. The averageof positive WTPs is about $2,700, which isstill a very low amount.A half replied zero WTP.

Morris and Hammitt study [2001]

682 sampleshypothetical pneumonia vaccineHalf for benefit of LE gain, anotherreduction of risk of deaths30 % didn't take vaccine, because benefitwas small or uncertain.LE gain answers, results were 52% higherthan the reduction of the risk.Interviews were made by phone afterrespondents received a mailed packet ofmaterial.

Soguel & van Griethuysen [2000]

VOLY related to air pollutionLausanne, 199 samplesFace to face interviewValue a bundle of health damages causedeach year, by incinerator,6000 days of life lost, 1200 cases ofrestricted activity days, 500 new cases ofchronic bronchitis and asthma.a VOLY of 53,000 Swiss Francs (34,000 €)

Krupnick, 2002, Alberini 2001In late ’90s, self administrated computerized CVquestionnaireBenefits of air pollution reduction,Cause is not mentionedCanada, USA1/1000 and 5/1000 risk reduction of dying during thenext 10 years, and at the age of 70 y.o.Payment == medication and treatment for the next10 years.0.96 million USD for 5/1000 risk reduction3.05 million for 1/1000 risk reduction

[DEFRA 2004]Englnad, 665 samples, a reduction in air pollutionOne, three, or six months of LE gainIn normal health and in poor health.Avoiding hospital admission, avoiding breathingdiscomroftNovember 2002 and January 2003Normal health 42,000 € for the one month sample,15,000 € for the 3 months sample and 10,000 € forthe 6 month sample.A VOLY in poor health is much lower (more than halfof the sample gave a zero valuation), rangingbetween 7280. for the one month subsample, to 1290. for the 6 month subsample.

NewExt [2003]

Between 2001 and 2003A better estimate of VOLYTo minimize the cost, decided not todevelop a new questionnaire but toapply the one of Krupnick et al.[2002] in the UK, Italy and France.a VOLY of 50,000€.Only French team – additionalfeatures….

Additional features by French teamOpen question after each set of bidsAnd at the end of the questionnaireWTP values were recalled to give the respondents thechance to correct their valuesFive variants were tested on samples of about 50each, such as variants phrased in terms of LE gainEach questionnaire was followed by detailed writtendebriefingTo learn how the respondents interpreted thequestions.The decision was made to develop a newquestionnaire.

WTP Survey EU versionLesson 1

The study is concerned with the health consequencesThe study is concerned with the health consequencesthat result from air pollution. It is important to takethat result from air pollution. It is important to takepublic opinion into account.public opinion into account.One of the main health benefits we can attribute to aOne of the main health benefits we can attribute to areduction in air pollution is an increase in the lifereduction in air pollution is an increase in the lifeexpectancy of individuals.expectancy of individuals.The objective of this questionnaire is to find out howThe objective of this questionnaire is to find out howmuch you value an increase in your life expectancy ifmuch you value an increase in your life expectancy ifair pollution is reduced.air pollution is reduced.The same questionnaire is being applied in 8 EUThe same questionnaire is being applied in 8 EUcountries.countries.Answers will remain anonymous.Answers will remain anonymous.There are no right or wrong answers.There are no right or wrong answers.Just think about yourself.Just think about yourself.Gender: __________Gender: __________Age: _________Age: _________

What is your profession? Or if youWhat is your profession? Or if youare not employed, what does yourare not employed, what does yourspouse do?spouse do?

I. THE EFFECTS OF AIRI. THE EFFECTS OF AIRPOLLUTION ON HEALTHPOLLUTION ON HEALTH

Q1 Does air pollution in your city (physically) botherQ1 Does air pollution in your city (physically) botheryou?you?. very often. very often. sometimes. sometimes. rarely. rarely. never. neverWhen? Please describe (very often or sometimes)When? Please describe (very often or sometimes)Q2 Are you concerned with the effects of air pollutionQ2 Are you concerned with the effects of air pollutionon your health?on your health?. very much. very much. somewhat. somewhat. not so much. not so much. not at all. not at allInterviewer: please take note of any comments madeInterviewer: please take note of any comments madehere by respondenthere by respondent

In your city air pollution can mainly beIn your city air pollution can mainly beattributed to:attributed to:1. public and private transportation (cars,1. public and private transportation (cars,trucks, buses, etc)trucks, buses, etc)2. heating systems2. heating systems3. household waste incinerators,3. household waste incinerators,4. power plants and industry.4. power plants and industry.(show overhead “Air pollution aggression”)(show overhead “Air pollution aggression”)In other words, through our lifestyle,In other words, through our lifestyle,transportation needs and the goods and servicestransportation needs and the goods and servicesthat we consume we are all responsible forthat we consume we are all responsible forcreating air pollution.creating air pollution.

Q3 Are you aware that your consumption and lifestyle contribute to airQ3 Are you aware that your consumption and lifestyle contribute to airpollution?pollution?. Yes. Yes. No. NoInterviewer: please take note of any comments made by respondentInterviewer: please take note of any comments made by respondentBreathing pollutants such as fine particulates and sulphur dioxide, is harmfulBreathing pollutants such as fine particulates and sulphur dioxide, is harmfulto our health; it is known to worsen respiratory and cardiovascular problems.to our health; it is known to worsen respiratory and cardiovascular problems.It increases the risk of heart disease and strokes.It increases the risk of heart disease and strokes.It also causes eye irritation and increases the number and intensity of chronicIt also causes eye irritation and increases the number and intensity of chronicbronchitis, asthma attacks and emphysema.bronchitis, asthma attacks and emphysema.Did you know this?Did you know this?Interviewer: Take note of the individual’s level of knowledge on the subjectInterviewer: Take note of the individual’s level of knowledge on the subjectIn order for to put this information in an everyday life context understand thatIn order for to put this information in an everyday life context understand thatthe level of air pollution in a big European city like Paris is like smoking 4the level of air pollution in a big European city like Paris is like smoking 4cigarettes a day.cigarettes a day.Also, scientists have estimated that some lung cancers (perhaps ten percentAlso, scientists have estimated that some lung cancers (perhaps ten percentof all lung cancers) are due to air pollution.of all lung cancers) are due to air pollution.

Your health status and the heath status of your close familyYour health status and the heath status of your close family

Q4 To become familiar with yourQ4 To become familiar with yourhealth status and the health status ofhealth status and the health status ofyour family, could you tell us if theyour family, could you tell us if thefollowing individuals have ever had orfollowing individuals have ever had orhave:have:YouSpouseChildrenFatherMotherBrothYouSpouseChildrenFatherMotherBrothers/Sisters Eye irritationers/Sisters Eye irritationHeadaches/migraines AllergiesSinusHeadaches/migraines AllergiesSinusproblems Chronic bronchitisproblems Chronic bronchitis AsthmaAsthmaCardioCardio--vascular diseaseEmphysemavascular diseaseEmphysemaCancerOther serious chronic diseaseCancerOther serious chronic disease

Q5Q5Age of father: ____ . if deceased at what age ?Age of father: ____ . if deceased at what age ?Age of mother:_____ . if deceased at what age ?Age of mother:_____ . if deceased at what age ?Q6 Do you think you are in:Q6 Do you think you are in:. good health for your age. good health for your age. average health for your age. average health for your age. poor health for your age. poor health for your ageQ7 Do you practice any (sports) physicalQ7 Do you practice any (sports) physicalactivity?activity?. several times a week. several times a week. once a week. once a week. less than once a week. less than once a week. never. never

Q8 Are you ?Q8 Are you ?. a smoker. a smoker. an occasional smoker. an occasional smoker. a non. a non--smokersmoker. a former smoker. a former smokerQ9 Do you live with a smoker ?Q9 Do you live with a smoker ?. yes. yes. no. no

II. THE EFFECTS OF AIRII. THE EFFECTS OF AIRPOLLUTION ON LIFEPOLLUTION ON LIFEEXPECTANCYEXPECTANCY

Reducing life expectancy is anotherReducing life expectancy is anothermajor effect of air pollution on healthmajor effect of air pollution on healthand this is the one that we willand this is the one that we willconcentrate on for the remainder ofconcentrate on for the remainder ofthe questionnaire.the questionnaire.Life expectancy is the number of yearsLife expectancy is the number of yearsyou can expect to live, depending onyou can expect to live, depending onhow old you are now. For example ahow old you are now. For example ababy girl born today has a lifebaby girl born today has a lifeexpectancy of 83 years, and a baby boyexpectancy of 83 years, and a baby boyhas a life expectancy of 76 years. Ofhas a life expectancy of 76 years. Ofcourse it is an average calculated forcourse it is an average calculated forthe whole population.the whole population.

AgeAge MenMen WomenWomenBirthBirth 7575 80802020 5555 60603030 4545 50504040 3636 41415050 2727 31316060 1919 23237070 1212 1515For someone of your age, you canFor someone of your age, you canexpect to live another ......... yearsexpect to live another ......... years

Your life expectancy actually depends on severalYour life expectancy actually depends on severalfactors, which are:factors, which are:1. biological (genetic)1. biological (genetic)2. social (if you live in a city, in the mountains,2. social (if you live in a city, in the mountains,your lifestyle, your standard of living)your lifestyle, your standard of living)3. behavioural factors ( you are a smoker, a3. behavioural factors ( you are a smoker, anonnon--smoker, you exercise, you eat healthy)smoker, you exercise, you eat healthy)4. medical (you have high blood pressure,4. medical (you have high blood pressure,diabetes, kidney failure)diabetes, kidney failure)5. environmental ( you live in a highly polluted5. environmental ( you live in a highly pollutedneighbourhood or not very pollutedneighbourhood or not very pollutedneighbourhood)neighbourhood)

We will only focus on environmentalWe will only focus on environmentalfactors, but remember the otherfactors, but remember the otherfactors also play a role on your lifefactors also play a role on your lifeexpectancy.expectancy.There have been significant scientificThere have been significant scientificadvances in the past ten years andadvances in the past ten years andtoday we can better estimate thetoday we can better estimate theeffects of air pollution on the healtheffects of air pollution on the healthstatus of individuals.status of individuals.What are the effects of air pollution onWhat are the effects of air pollution onyour life expectancy?your life expectancy?The daily inhalation of air pollutantsThe daily inhalation of air pollutantsgradually damages the body andgradually damages the body andaccelerates the aging process.accelerates the aging process.

Individuals (of all ages) who areIndividuals (of all ages) who arealready more vulnerable because theyalready more vulnerable because theysuffer from respiratory orsuffer from respiratory orcardiovascular illnesses are morecardiovascular illnesses are moresensitive to air pollution because itsensitive to air pollution because itaggravates their symptoms.aggravates their symptoms.An improvement in air quality wouldAn improvement in air quality wouldlead to an increase in the lifelead to an increase in the lifeexpectancy of the general population.expectancy of the general population.To obtain this benefit all sectors of theTo obtain this benefit all sectors of theeconomy will have to respect neweconomy will have to respect newreduced pollutant emission levels.reduced pollutant emission levels.

III. POLICIES TO DECREASEIII. POLICIES TO DECREASEAIR POLLUTIONAIR POLLUTION

Let us consider two possible policies for the comingLet us consider two possible policies for the comingdecades that the European Union could implementdecades that the European Union could implementand its benefits in terms of life expectancy:and its benefits in terms of life expectancy:implement and its benefits in terms of lifeimplement and its benefits in terms of lifeexpectancy:expectancy:Policy I, will impose a 3% reduction per year in thePolicy I, will impose a 3% reduction per year in theemission of air pollutants for 20 years:emission of air pollutants for 20 years:(which means a total reduction of 60% by 2025)(which means a total reduction of 60% by 2025)Afterwards the emission of air pollutants will beAfterwards the emission of air pollutants will bemaintained at this lower level whatever the economicmaintained at this lower level whatever the economicgrowthgrowthThe benefit in terms of life expectancy would be anThe benefit in terms of life expectancy would be anaverage increase of:average increase of:6 months6 months

Policy II, will impose a 1,5% reduction per year inPolicy II, will impose a 1,5% reduction per year inthe emission of air pollutants for 20 years:the emission of air pollutants for 20 years:(which means a total reduction of 30% by 2025)(which means a total reduction of 30% by 2025)Afterwards the emission of air pollutants will beAfterwards the emission of air pollutants will bemaintained at this lower level whatever the economicmaintained at this lower level whatever the economicgrowthgrowthThe benefit in terms of life expectancy would be anThe benefit in terms of life expectancy would be anaverage increase of:average increase of:3 months3 months* These policies do not concern the emission of* These policies do not concern the emission ofgreenhouse gases but only the pollutants with directgreenhouse gases but only the pollutants with directhealth effects such as fine particulates and sulphurhealth effects such as fine particulates and sulphurdioxides.dioxides.Stricter limits on emissions will be imposed on allStricter limits on emissions will be imposed on allmember countries of the UE and will be closelymember countries of the UE and will be closelymonitored and enforced by the Europeanmonitored and enforced by the EuropeanCommission.Commission.

This gain in life expectancy comes from anThis gain in life expectancy comes from animproved health status which will slow downimproved health status which will slow downyour ageing process and consequently increaseyour ageing process and consequently increaseyour life expectancy by an average of 6(3)your life expectancy by an average of 6(3)months.months.This is an average gain calculated for the wholeThis is an average gain calculated for the wholepopulation; some individuals could gain morepopulation; some individuals could gain morethan the average 6(3) months predicted whilethan the average 6(3) months predicted whileother individuals less vulnerable to air pollutionother individuals less vulnerable to air pollutioncould gain less than the average 6(3) monthscould gain less than the average 6(3) monthspredicted.predicted.The current the level of knowledge does notThe current the level of knowledge does notallow to predict more precisely what could beallow to predict more precisely what could beyour individual gain in life expectancy.your individual gain in life expectancy.

(“We know that many factors are(“We know that many factors areat play, including theat play, including theenvironmental factor. Specialistsenvironmental factor. Specialistsbelieve that there is a geneticbelieve that there is a geneticpredisposition could significantlypredisposition could significantlychange the risk perhaps by achange the risk perhaps by afactor of three, but this is still anfactor of three, but this is still anarea of research” Doctor Aubier,area of research” Doctor Aubier,Chief of Respiratory illnesses atChief of Respiratory illnesses atHopital Bichat in Paris, France)Hopital Bichat in Paris, France)

Individuals potentially moreIndividuals potentially morevulnerable to air pollution:vulnerable to air pollution:

• children• children• the elderly• the elderly• pregnant women• pregnant women• cardiac patients• cardiac patients• those with respiratory illnesses• those with respiratory illnesses• asthma sufferers• asthma sufferers• those with chronic bronchitis• those with chronic bronchitis• those who through work have to be• those who through work have to bein contact with chemicalsin contact with chemicals

To better explain what an average gain of 6 (3)To better explain what an average gain of 6 (3)months means, here is an illustration to givemonths means, here is an illustration to giveyou an exampleyou an exampleShow the graphShow the graphThe graph shows very schematically the abilityThe graph shows very schematically the abilityof the body to survive as a function of age. If airof the body to survive as a function of age. If airpollution is reduced, there is less damage to thepollution is reduced, there is less damage to thebody. Thus, people are more able to fight off thebody. Thus, people are more able to fight off theeffects of illness and are more likely to surviveeffects of illness and are more likely to survivelonger, as shown by the blue line. They age lesslonger, as shown by the blue line. They age lessrapidly than with the current level of pollution.rapidly than with the current level of pollution.This is particularly noticeable aboveThis is particularly noticeable aboveage 50, although it has some effect alreadyage 50, although it has some effect alreadyearlier.earlier.

The black line represents the situation we have today withThe black line represents the situation we have today withcurrent levels of air pollution. The blue line shows whatcurrent levels of air pollution. The blue line shows whatwould happen if we reduce air pollution (although the gainwould happen if we reduce air pollution (although the gainis exaggerated to make it more clearly visible on theis exaggerated to make it more clearly visible on thegraph). The average LE gain is about 6 months if the airgraph). The average LE gain is about 6 months if the airpollution is decreased by 60%.pollution is decreased by 60%.The benefit begins as soon as pollution is reduced andThe benefit begins as soon as pollution is reduced andreaches gradually the full level, as suggested by the arrowsreaches gradually the full level, as suggested by the arrowsin the graph.in the graph.Note that the gain is not just a few months at the end of lifeNote that the gain is not just a few months at the end of lifewhen people tend to be in poor health. To emphasize thiswhen people tend to be in poor health. To emphasize thisfact, the dashed horizontal line has been added to the graphfact, the dashed horizontal line has been added to the graphcorresponding to a state of “good health”. The age wherecorresponding to a state of “good health”. The age wherethe black and the blue curves intersect this line could bethe black and the blue curves intersect this line could becalled “healthy life expectancy”, at this state of goodcalled “healthy life expectancy”, at this state of goodhealth. The gain of “healthy life expectancy” is about thehealth. The gain of “healthy life expectancy” is about thesame as the LE gain, 3 or 6 months, respectively, that wesame as the LE gain, 3 or 6 months, respectively, that weare talking about in the questionnaire.are talking about in the questionnaire.Are the benefits of these policies clear to you? If you haveAre the benefits of these policies clear to you? If you haveany question please ask.any question please ask.

IV. THE COST FOR SOCIETYIV. THE COST FOR SOCIETY

If a policy for reducing air pollution isIf a policy for reducing air pollution isimplemented, all polluters (industries,implemented, all polluters (industries,municipalities, households) will havemunicipalities, households) will haveto respect stricter emission limits toto respect stricter emission limits toimprove air quality. All sectors of theimprove air quality. All sectors of theeconomy will be affected and will needeconomy will be affected and will needto increase their efforts to reduceto increase their efforts to reducepollution by such means as modifyingpollution by such means as modifyingproduction processes and producingproduction processes and producingless polluting cars, heatingless polluting cars, heatingsystems etc…systems etc…

This will increase the costs of industry, and as aThis will increase the costs of industry, and as aconsequence there will be a general increase in theconsequence there will be a general increase in thecost of living. It would mean a cutback in your dailycost of living. It would mean a cutback in your dailyconsumption of goods and services and/or savings ifconsumption of goods and services and/or savings ifyou can afford to save.you can afford to save.Show illustration on product price increaseShow illustration on product price increaseTo decide what financial cost will be imposed on theTo decide what financial cost will be imposed on theeconomy it is necessary for you to express the valueeconomy it is necessary for you to express the valueyou attribute to a gain in your life expectancy.you attribute to a gain in your life expectancy.One way of communicating this value is to estimateOne way of communicating this value is to estimatehow much money, in terms of a higher cost of living,how much money, in terms of a higher cost of living,you are willing to give up each month to obtain thisyou are willing to give up each month to obtain thisbenefit. In other words, what financial effort are youbenefit. In other words, what financial effort are youwilling to make each month for this gain in lifewilling to make each month for this gain in lifeexpectancy?expectancy?Are these explications clear?Are these explications clear?Don’t hesitate to ask questionsDon’t hesitate to ask questions

Q10 Are you willing to accept a higher cost ofQ10 Are you willing to accept a higher cost ofliving, therefore an increase in your dailyliving, therefore an increase in your dailyexpenses, to gain an increase in your lifeexpenses, to gain an increase in your lifeexpectancy?expectancy?. yes. yes. no. noIf not, why?If not, why?Would you be willing to accept an increase inWould you be willing to accept an increase inthe cost of living for any benefits of improved airthe cost of living for any benefits of improved airquality?quality?If yesIf yes(Verbally give instructions of how to handle the(Verbally give instructions of how to handle thepayment cards)payment cards)

Q11 Average gain of 6 monthsQ11 Average gain of 6 monthsPlease consider only your personal gain of lifePlease consider only your personal gain of lifeexpectancy: :expectancy: :What is the maximum amount you are willing toWhat is the maximum amount you are willing topay in the form of higher expenses to gain anpay in the form of higher expenses to gain anaverage of 6 months in your life expectancy?average of 6 months in your life expectancy?The largest amount of your “Yes, I would pay”The largest amount of your “Yes, I would pay”cards:cards:____ per month (for the rest of my life)____ per month (for the rest of my life)____ per year (for the rest of my life)____ per year (for the rest of my life)Please take your time to answer, it is anPlease take your time to answer, it is animportant question. If you have any questionimportant question. If you have any questionplease ask.please ask.

Q12 Average gain of 3 monthsQ12 Average gain of 3 monthsPlease only consider your personalPlease only consider your personalgain of life expectancy:gain of life expectancy:What is the maximum amount you areWhat is the maximum amount you arewilling to pay in the form of higherwilling to pay in the form of higherexpenses to gain an average of 3expenses to gain an average of 3months in your life expectancy?months in your life expectancy?The largest amount of your “Yes, IThe largest amount of your “Yes, Iwould pay” cards:would pay” cards:____ per month (for the rest of my____ per month (for the rest of mylife)life)____ per year (for the rest of my life)____ per year (for the rest of my life)

To better understand your answers…To better understand your answers…13. Do you think it is likely that a decrease in air13. Do you think it is likely that a decrease in airpollution will extend your life expectancy ?pollution will extend your life expectancy ?. yes. yes. no. no14. Does this questionnaire clearly illustrate14. Does this questionnaire clearly illustratethat the 6 months and 3 months gain in lifethat the 6 months and 3 months gain in lifeexpectancy are averages based on the entireexpectancy are averages based on the entireFrench (insert your country here) populationFrench (insert your country here) populationand that this gain can be different for each oneand that this gain can be different for each oneof us?of us?. yes. yes. no. no

15. Did you think your personal gain of life15. Did you think your personal gain of lifeexpectancy would be:expectancy would be:. close to the national average. close to the national average. different from the national average. different from the national average16. What reasons do you have to think that your gain16. What reasons do you have to think that your gaincould be different than the national average?could be different than the national average?for those whose willingness to pay is not proportionalfor those whose willingness to pay is not proportionalto the gain:to the gain:17. Why did you indicate an increase in your17. Why did you indicate an increase in yourexpenditures that is not proportional to your gain inexpenditures that is not proportional to your gain inlife expectancy?life expectancy?18. How confident are you of the amount you stated18. How confident are you of the amount you statedyou were willing to pay to increase your lifeyou were willing to pay to increase your lifeexpectancy an average of 6(3) months?expectancy an average of 6(3) months?. yes I am sure. yes I am sure. no I am not sure. no I am not sure

19. If you would like to change the amount you19. If you would like to change the amount youstated, please do so now. If not, go to the nextstated, please do so now. If not, go to the nextquestion.question.I would like to pay: ____ per month for an average ofI would like to pay: ____ per month for an average of5 months5 monthsI would like to pay: ____ per month for an average ofI would like to pay: ____ per month for an average of2 months2 months20. When you picked an amount, what did you think20. When you picked an amount, what did you thinkabout the most?about the most?. only about your life expectancy. only about your life expectancy. cleaner air and its overall benefits on health (I will. cleaner air and its overall benefits on health (I willbreathe better, will be in better health)breathe better, will be in better health). a bit of both. a bit of both. other. other__________________________________________________________________________________________

21. Did you think about the length21. Did you think about the lengthof time during which you willof time during which you willhave to pay ? (your whole life)have to pay ? (your whole life)

22. If you live in a 2 income household, when22. If you live in a 2 income household, whenstating your amount did you think about:stating your amount did you think about:. Your own revenue. Your own revenue. Household revenue. Household revenue23. If you are approaching retirement, what did23. If you are approaching retirement, what didyou think about when stating your amount?you think about when stating your amount?. current income. current income. future retirement income (what amount per. future retirement income (what amount permonth would you receive?______)month would you receive?______)24. What expenses did you think about that you24. What expenses did you think about that youwould forgo when you were thinking of anwould forgo when you were thinking of anamount for your willingness to pay?amount for your willingness to pay?

25. Do you have a complementary25. Do you have a complementary(private) health insurance?(private) health insurance?. yes. yes. no. no26. Have you donated any money to26. Have you donated any money tocharities in the past year?charities in the past year?. yes. yes. no. no27. Approximately how much?27. Approximately how much?____________________________

DemographicsDemographicsHow many people live in yourHow many people live in yourhousehold? Including yourself:household? Including yourself:______________________Number of children that live in yourNumber of children that live in yourhousehold: __________household: __________Age of the children:Age of the children:__________________________________________________________________________________________Do you rent or own yourDo you rent or own yourhouse/apartment?house/apartment?

Education level:Education level:. primary. primary. secondary. secondary. superior. superiorYour net revenue (per month):Your net revenue (per month):. less than 1000 Euros. less than 1000 Euros. 1001 Euros to 1500 Euros. 1001 Euros to 1500 Euros. 1501 Euros to 2000Euros. 1501 Euros to 2000Euros. 2001 Euros to 3000 Euros. 2001 Euros to 3000 Euros. 3001 Euros to 4000 Euros. 3001 Euros to 4000 Euros. 4001 Euros to 5000 Euros. 4001 Euros to 5000 Euros. 5000 Euros to 6000 Euros. 5000 Euros to 6000 Euros. more than 6000 Euros. more than 6000 Euros

Household net revenue (per month):Household net revenue (per month):. less than 1000 Euros. less than 1000 Euros. 1001 Euros to 1500 Euros. 1001 Euros to 1500 Euros. 1501 Euros to 2000Euros. 1501 Euros to 2000Euros. 2001 Euros to 3000 Euros. 2001 Euros to 3000 Euros. 3001 Euros to 4000 Euros. 3001 Euros to 4000 Euros. 4001 Euros to 5000 Euros. 4001 Euros to 5000 Euros. 5000 Euros to 7000 Euros. 5000 Euros to 7000 Euros. more than 7000 Euros. more than 7000 Euros

TO BE FILLED BY THETO BE FILLED BY THEINTERVIEWER:INTERVIEWER:

How cooperative have you found the personHow cooperative have you found the personinterviewed to be?interviewed to be?1 2 3 4 51 2 3 4 5Not muchNot much MuchMuchHow much attention has the person interviewedHow much attention has the person interviewedpaid?paid?1 2 3 4 51 2 3 4 5Not muchNot much MuchMuchDegree of comprehensionDegree of comprehension1 2 3 4 51 2 3 4 5Not muchNot much MuchMuch

During the interview did the personDuring the interview did the personthink of another person or only ofthink of another person or only ofhim/herself ?him/herself ?. Yes. Yes. No. NoIf yes did he/she mention some personIf yes did he/she mention some personin particular ?in particular ?Duration of the interviewDuration of the interviewAddress of the interviewAddress of the interviewName of the interviewerName of the interviewerInterviewer commentsInterviewer comments

The usual effects are :The usual effects are :--Eye irritation, headachesEye irritation, headaches--Bronchitis, asthma, emphyzemaBronchitis, asthma, emphyzema--Decrease in life expectancy dueDecrease in life expectancy dueto the body’s weakening byto the body’s weakening byair pollutionair pollution

WTP Survey EU versionLesson 2

I. THE EFFECTS OF AIRI. THE EFFECTS OF AIRPOLLUTION ON HEALTHPOLLUTION ON HEALTH

Q1 Does air pollution in your city (physically) botherQ1 Does air pollution in your city (physically) botheryou?you?. very often. very often. sometimes. sometimes. rarely. rarely. never. neverWhen? Please describe (very often or sometimes)When? Please describe (very often or sometimes)Q2 Are you concerned with the effects of air pollutionQ2 Are you concerned with the effects of air pollutionon your health?on your health?. very much. very much. somewhat. somewhat. not so much. not so much. not at all. not at allInterviewer: please take note of any comments madeInterviewer: please take note of any comments madehere by respondenthere by respondent

Q3 Are you aware that your consumption and lifestyle contribute to airQ3 Are you aware that your consumption and lifestyle contribute to airpollution?pollution?. Yes. Yes. No. NoInterviewer: please take note of any comments made by respondentInterviewer: please take note of any comments made by respondentBreathing pollutants such as fine particulates and sulphur dioxide, is harmfulBreathing pollutants such as fine particulates and sulphur dioxide, is harmfulto our health; it is known to worsen respiratory and cardiovascular problems.to our health; it is known to worsen respiratory and cardiovascular problems.It increases the risk of heart disease and strokes.It increases the risk of heart disease and strokes.It also causes eye irritation and increases the number and intensity of chronicIt also causes eye irritation and increases the number and intensity of chronicbronchitis, asthma attacks and emphysema.bronchitis, asthma attacks and emphysema.Did you know this?Did you know this?Interviewer: Take note of the individual’s level of knowledge on the subjectInterviewer: Take note of the individual’s level of knowledge on the subjectIn order for to put this information in an everyday life context understand thatIn order for to put this information in an everyday life context understand thatthe level of air pollution in a big European city like Paris is like smoking 4the level of air pollution in a big European city like Paris is like smoking 4cigarettes a day.cigarettes a day.Also, scientists have estimated that some lung cancers (perhaps ten percentAlso, scientists have estimated that some lung cancers (perhaps ten percentof all lung cancers) are due to air pollution.of all lung cancers) are due to air pollution.

Your health status and the heath status of your close familyYour health status and the heath status of your close family

III. POLICIES TO DECREASEIII. POLICIES TO DECREASEAIR POLLUTIONAIR POLLUTION

Let us consider two possible policies for the comingLet us consider two possible policies for the comingdecades that the European Union could implementdecades that the European Union could implementand its benefits in terms of life expectancy:and its benefits in terms of life expectancy:implement and its benefits in terms of lifeimplement and its benefits in terms of lifeexpectancy:expectancy:Policy I, will impose a 3% reduction per year in thePolicy I, will impose a 3% reduction per year in theemission of air pollutants for 20 years:emission of air pollutants for 20 years:(which means a total reduction of 60% by 2025)(which means a total reduction of 60% by 2025)Afterwards the emission of air pollutants will beAfterwards the emission of air pollutants will bemaintained at this lower level whatever the economicmaintained at this lower level whatever the economicgrowthgrowthThe benefit in terms of life expectancy would be anThe benefit in terms of life expectancy would be anaverage increase of:average increase of:6 months6 months

Policy II, will impose a 1,5% reduction per year inPolicy II, will impose a 1,5% reduction per year inthe emission of air pollutants for 20 years:the emission of air pollutants for 20 years:(which means a total reduction of 30% by 2025)(which means a total reduction of 30% by 2025)Afterwards the emission of air pollutants will beAfterwards the emission of air pollutants will bemaintained at this lower level whatever the economicmaintained at this lower level whatever the economicgrowthgrowthThe benefit in terms of life expectancy would be anThe benefit in terms of life expectancy would be anaverage increase of:average increase of:3 months3 months* These policies do not concern the emission of* These policies do not concern the emission ofgreenhouse gases but only the pollutants with directgreenhouse gases but only the pollutants with directhealth effects such as fine particulates and sulphurhealth effects such as fine particulates and sulphurdioxides.dioxides.Stricter limits on emissions will be imposed on allStricter limits on emissions will be imposed on allmember countries of the UE and will be closelymember countries of the UE and will be closelymonitored and enforced by the Europeanmonitored and enforced by the EuropeanCommission.Commission.

This gain in life expectancy comes from anThis gain in life expectancy comes from animproved health status which will slow downimproved health status which will slow downyour ageing process and consequently increaseyour ageing process and consequently increaseyour life expectancy by an average of 6(3)your life expectancy by an average of 6(3)months.months.This is an average gain calculated for the wholeThis is an average gain calculated for the wholepopulation; some individuals could gain morepopulation; some individuals could gain morethan the average 6(3) months predicted whilethan the average 6(3) months predicted whileother individuals less vulnerable to air pollutionother individuals less vulnerable to air pollutioncould gain less than the average 6(3) monthscould gain less than the average 6(3) monthspredicted.predicted.The current the level of knowledge does notThe current the level of knowledge does notallow to predict more precisely what could beallow to predict more precisely what could beyour individual gain in life expectancy.your individual gain in life expectancy.

(“We know that many factors are(“We know that many factors areat play, including theat play, including theenvironmental factor. Specialistsenvironmental factor. Specialistsbelieve that there is a geneticbelieve that there is a geneticpredisposition could significantlypredisposition could significantlychange the risk perhaps by achange the risk perhaps by afactor of three, but this is still anfactor of three, but this is still anarea of research” Doctor Aubier,area of research” Doctor Aubier,Chief of Respiratory illnesses atChief of Respiratory illnesses atHopital Bichat in Paris, France)Hopital Bichat in Paris, France)

To better explain what an average gain of 6 (3)To better explain what an average gain of 6 (3)months means, here is an illustration to givemonths means, here is an illustration to giveyou an exampleyou an exampleShow the graphShow the graphThe graph shows very schematically the abilityThe graph shows very schematically the abilityof the body to survive as a function of age. If airof the body to survive as a function of age. If airpollution is reduced, there is less damage to thepollution is reduced, there is less damage to thebody. Thus, people are more able to fight off thebody. Thus, people are more able to fight off theeffects of illness and are more likely to surviveeffects of illness and are more likely to survivelonger, as shown by the blue line. They age lesslonger, as shown by the blue line. They age lessrapidly than with the current level of pollution.rapidly than with the current level of pollution.This is particularly noticeable aboveThis is particularly noticeable aboveage 50, although it has some effect alreadyage 50, although it has some effect alreadyearlier.earlier.

The black line represents the situation we have today withThe black line represents the situation we have today withcurrent levels of air pollution. The blue line shows whatcurrent levels of air pollution. The blue line shows whatwould happen if we reduce air pollution (although the gainwould happen if we reduce air pollution (although the gainis exaggerated to make it more clearly visible on theis exaggerated to make it more clearly visible on thegraph). The average LE gain is about 6 months if the airgraph). The average LE gain is about 6 months if the airpollution is decreased by 60%.pollution is decreased by 60%.The benefit begins as soon as pollution is reduced andThe benefit begins as soon as pollution is reduced andreaches gradually the full level, as suggested by the arrowsreaches gradually the full level, as suggested by the arrowsin the graph.in the graph.Note that the gain is not just a few months at the end of lifeNote that the gain is not just a few months at the end of lifewhen people tend to be in poor health. To emphasize thiswhen people tend to be in poor health. To emphasize thisfact, the dashed horizontal line has been added to the graphfact, the dashed horizontal line has been added to the graphcorresponding to a state of “good health”. The age wherecorresponding to a state of “good health”. The age wherethe black and the blue curves intersect this line could bethe black and the blue curves intersect this line could becalled “healthy life expectancy”, at this state of goodcalled “healthy life expectancy”, at this state of goodhealth. The gain of “healthy life expectancy” is about thehealth. The gain of “healthy life expectancy” is about thesame as the LE gain, 3 or 6 months, respectively, that wesame as the LE gain, 3 or 6 months, respectively, that weare talking about in the questionnaire.are talking about in the questionnaire.Are the benefits of these policies clear to you? If you haveAre the benefits of these policies clear to you? If you haveany question please ask.any question please ask.

IV. THE COST FOR SOCIETYIV. THE COST FOR SOCIETY

If a policy for reducing air pollution isIf a policy for reducing air pollution isimplemented, all polluters (industries,implemented, all polluters (industries,municipalities, households) will havemunicipalities, households) will haveto respect stricter emission limits toto respect stricter emission limits toimprove air quality. All sectors of theimprove air quality. All sectors of theeconomy will be affected and will needeconomy will be affected and will needto increase their efforts to reduceto increase their efforts to reducepollution by such means as modifyingpollution by such means as modifyingproduction processes and producingproduction processes and producingless polluting cars, heatingless polluting cars, heatingsystems etc…systems etc…

This will increase the costs of industry, and as aThis will increase the costs of industry, and as aconsequence there will be a general increase in theconsequence there will be a general increase in thecost of living. It would mean a cutback in your dailycost of living. It would mean a cutback in your dailyconsumption of goods and services and/or savings ifconsumption of goods and services and/or savings ifyou can afford to save.you can afford to save.Show illustration on product price increaseShow illustration on product price increaseTo decide what financial cost will be imposed on theTo decide what financial cost will be imposed on theeconomy it is necessary for you to express the valueeconomy it is necessary for you to express the valueyou attribute to a gain in your life expectancy.you attribute to a gain in your life expectancy.One way of communicating this value is to estimateOne way of communicating this value is to estimatehow much money, in terms of a higher cost of living,how much money, in terms of a higher cost of living,you are willing to give up each month to obtain thisyou are willing to give up each month to obtain thisbenefit. In other words, what financial effort are youbenefit. In other words, what financial effort are youwilling to make each month for this gain in lifewilling to make each month for this gain in lifeexpectancy?expectancy?Are these explications clear?Are these explications clear?Don’t hesitate to ask questionsDon’t hesitate to ask questions

Q10 Are you willing to accept a higher cost ofQ10 Are you willing to accept a higher cost ofliving, therefore an increase in your dailyliving, therefore an increase in your dailyexpenses, to gain an increase in your lifeexpenses, to gain an increase in your lifeexpectancy?expectancy?. yes. yes. no. noIf not, why?If not, why?Would you be willing to accept an increase inWould you be willing to accept an increase inthe cost of living for any benefits of improved airthe cost of living for any benefits of improved airquality?quality?If yesIf yes(Verbally give instructions of how to handle the(Verbally give instructions of how to handle thepayment cards)payment cards)

Are you willing to accept the highercost of living?

Q11 Average gain of 6 monthsQ11 Average gain of 6 monthsPlease consider only your personal gain of lifePlease consider only your personal gain of lifeexpectancy: :expectancy: :What is the maximum amount you are willing toWhat is the maximum amount you are willing topay in the form of higher expenses to gain anpay in the form of higher expenses to gain anaverage of 6 months in your life expectancy?average of 6 months in your life expectancy?The largest amount of your “Yes, I would pay”The largest amount of your “Yes, I would pay”cards:cards:____ per month (for the rest of my life)____ per month (for the rest of my life)____ per year (for the rest of my life)____ per year (for the rest of my life)Please take your time to answer, it is anPlease take your time to answer, it is animportant question. If you have any questionimportant question. If you have any questionplease ask.please ask.

Q12 Average gain of 3 monthsQ12 Average gain of 3 monthsPlease only consider your personalPlease only consider your personalgain of life expectancy:gain of life expectancy:What is the maximum amount you areWhat is the maximum amount you arewilling to pay in the form of higherwilling to pay in the form of higherexpenses to gain an average of 3expenses to gain an average of 3months in your life expectancy?months in your life expectancy?The largest amount of your “Yes, IThe largest amount of your “Yes, Iwould pay” cards:would pay” cards:____ per month (for the rest of my____ per month (for the rest of mylife)life)____ per year (for the rest of my life)____ per year (for the rest of my life)

To better understand your answers…To better understand your answers…13. Do you think it is likely that a decrease in air13. Do you think it is likely that a decrease in airpollution will extend your life expectancy ?pollution will extend your life expectancy ?. yes. yes. no. no14. Does this questionnaire clearly illustrate14. Does this questionnaire clearly illustratethat the 6 months and 3 months gain in lifethat the 6 months and 3 months gain in lifeexpectancy are averages based on the entireexpectancy are averages based on the entireFrench (insert your country here) populationFrench (insert your country here) populationand that this gain can be different for each oneand that this gain can be different for each oneof us?of us?. yes. yes. no. no

15. Did you think your personal gain of life15. Did you think your personal gain of lifeexpectancy would be:expectancy would be:. close to the national average. close to the national average. different from the national average. different from the national average16. What reasons do you have to think that your gain16. What reasons do you have to think that your gaincould be different than the national average?could be different than the national average?for those whose willingness to pay is not proportionalfor those whose willingness to pay is not proportionalto the gain:to the gain:17. Why did you indicate an increase in your17. Why did you indicate an increase in yourexpenditures that is not proportional to your gain inexpenditures that is not proportional to your gain inlife expectancy?life expectancy?18. How confident are you of the amount you stated18. How confident are you of the amount you statedyou were willing to pay to increase your lifeyou were willing to pay to increase your lifeexpectancy an average of 6(3) months?expectancy an average of 6(3) months?. yes I am sure. yes I am sure. no I am not sure. no I am not sure

19. If you would like to change the amount you19. If you would like to change the amount youstated, please do so now. If not, go to the nextstated, please do so now. If not, go to the nextquestion.question.I would like to pay: ____ per month for an average ofI would like to pay: ____ per month for an average of5 months5 monthsI would like to pay: ____ per month for an average ofI would like to pay: ____ per month for an average of2 months2 months20. When you picked an amount, what did you think20. When you picked an amount, what did you thinkabout the most?about the most?. only about your life expectancy. only about your life expectancy. cleaner air and its overall benefits on health (I will. cleaner air and its overall benefits on health (I willbreathe better, will be in better health)breathe better, will be in better health). a bit of both. a bit of both. other. other__________________________________________________________________________________________

When you picked an amount, whatdid you think about the most?

1 only about your life expectancy2 cleaner air and its overall benefits on health (I willbreathe better, will be in better health)3 a bit of both4 other

21. Did you think about the length21. Did you think about the lengthof time during which you willof time during which you willhave to pay ? (your whole life)have to pay ? (your whole life)

22. If you live in a 2 income household, when22. If you live in a 2 income household, whenstating your amount did you think about:stating your amount did you think about:. Your own revenue. Your own revenue. Household revenue. Household revenue23. If you are approaching retirement, what did23. If you are approaching retirement, what didyou think about when stating your amount?you think about when stating your amount?. current income. current income. future retirement income (what amount per. future retirement income (what amount permonth would you receive?______)month would you receive?______)24. What expenses did you think about that you24. What expenses did you think about that youwould forgo when you were thinking of anwould forgo when you were thinking of anamount for your willingness to pay?amount for your willingness to pay?

What expenses did you think about that you would forgowhen you were thinking of an amount for your willingnessto pay?

25. Do you have a complementary25. Do you have a complementary(private) health insurance?(private) health insurance?. yes. yes. no. no26. Have you donated any money to26. Have you donated any money tocharities in the past year?charities in the past year?. yes. yes. no. no27. Approximately how much?27. Approximately how much?____________________________