Today’s post, marking World Environment Day, is from OECD Secretary-General Angel Gurría
Air pollution has become the biggest environmental cause of premature death, overtaking poor sanitation and a lack of clean drinking water. According to the WHO, more than 3.5 million people are being killed each year by the air that they breathe in urban areas, and the number is rising. Air pollution now kills twice as many people as HIV/AIDS. That’s the stark message from the latest OECD report, The Cost of Air Pollution: Health Impacts of Road Transport.
There is an economic price to pay too. One of the tools used to quantify the costs associated with air pollution is the Value of Statistical Life (VSL), which estimates the value people attach to avoiding premature death from pollution. VSL can thus illustrate relative benefits of different policy options in terms of their effects on people’s wellbeing. On the basis of this methodology, the report shows that the cost of deaths and illness from air pollution increased by about 10% between 2005 and 2010, reaching USD 1.7 trillion in OECD countries alone.
To put such a huge number into perspective, let’s take the case of Germany, where our report was launched. Here, the economic costs of deaths from air pollution were about USD 150 billion in 2010. That’s the equivalent of half of Germany’s general government health expenditure.
Two of the most prevalent and dangerous forms of air pollution are particulates and ozone. Fine particulate matter (PM) can enter the lungs and help to spread harmful substances through the body. Nitrogen oxides (NOx) react with sunlight to produce ozone and contribute to the formation of particulates. These air pollutants may have various health impacts including asthma, lung cancer, respiratory problems and heart disease. Older people are especially vulnerable, so population ageing increases the number of people at risk.
Road transport is responsible for roughly half the air pollution in OECD countries, and up to 90% of that is from diesels. Almost all OECD countries tax diesel less than gasoline, except the UK, US and Switzerland. There is no environmental justification for this. Diesel is responsible for more local air pollutants such as NOx and PM than gasoline, although volatile organic compound (VOC) emissions from gasoline-driven vehicles can also contribute to smog. Diesel also causes higher CO2 emissions per litre of fuel than gasoline.
True, you can drive farther on a litre of diesel than a litre of gasoline, but the benefits of the greater fuel efficiency are entirely captured by the private driver. And to the extent that higher fuel efficiency makes driving cheaper, there is an incentive to drive farther, as the evidence tends to show.
In many countries, the majority of new cars coming onto the market are diesels – which, in spite of gradually stricter vehicle emission standards, contribute to aggravate local air pollution. The data provided by car manufacturers tends to underestimate real-world emissions, especially diesel vehicles. There are important differences between the test-cycle emissions of air pollutants that vehicle emission standards regulate and real-world emissions of the same substances from the vehicles in question.
In China, India and many other countries, a shift to diesel is compounding an upward trend in emissions as vehicle growth outpaces the adoption of tighter emission limits. Some of the worst air pollution is taking place in fast-growing cities like Beijing and New Delhi. China has one fifth of the world’s population but accounts for nearly two-fifths of the global death toll linked to outdoor air pollution. India has far fewer air pollution-related mortalities, but deaths from ambient air pollution are rising quickly – around 12% from 2005 to 2010.
What can be done? The OECD has used the VSL methodology to estimate what people in different countries would be willing to pay to avoid deaths caused by air pollution. Governments can use this information to determine the stringency of the measures that should be applied to reduce pollution. The new estimates indicate that people are willing to pay more for clean air than previously thought.
Currently, drivers pay to enjoy personal mobility, but not for the damage they do to other peoples’ health. People want governments to do something about this because they are powerless to solve the problem by acting individually. Governments on the other hand know that if they take action, they will impose costs on car manufacturers and drivers. But if they do not, the “cost” of illness and premature death falls on the general population. The VSL allows governments to weigh up both sets of costs.
Estimates of VSL vary among countries: generally the richer the country, the more people will be willing to pay to avoid death, simply because they have more disposable income they can use to reduce their risk of death from air pollution. As a result, the VSL in countries like China or India is lower than in OECD countries. This does not mean that life is worth less in those countries, but rather that people are not able to pay more to reduce the risk of death.
The benefits of well-designed measures to reduce air emissions should easily outweigh the costs. One very obvious measure would be to remove any incentives that favour the purchase of diesel over gasoline cars. A further tightening of vehicle emission standards should also be considered, combined with measures that make test-cycle emissions more similar to emissions under normal use. Measures should also be identified to help mitigate the impact of air pollution on vulnerable groups, such as the young and the old.
Our report provides us all with a “wake-up call”. We have important evidence of the scale of the problem. We now need to work together to tackle it. We literally need to design better policies for better, and longer, healthier lives.
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