CONSUMO DE ENERGÍA PRMARIA

Traditionally, the monetary values of premature mortality or the risk of mortality is based on the concept of value of statistical life (VOSL) estimated using WTP or COI approaches, which attempts to capture the trade-offs between wealth and risk (Lanoie et al. 1995, Viscusi et al. 1997, Chilton et al. 1999, Mrozel and Taylor 2002, Dionne and Lanoie 2002, Bellavance et al. 2007). WTP estimates the VOSL for a reduction in fatality risk in terms of the dollar value that individuals are prepared to pay to reduce risks to their lives. The concept of VOSL is used extensively in the valuation of economic losses associated with transport accident victims (USEPA 2004, BTRE 2000 and 2003, Sommer et al. 1999). Furthermore, a good number of studies have quantified the monetised cost associated with the effect of vehicle pollution incorporating VOSL approaches (OECD 2014 and 2012, Beer 2002, AEA Technology 2002, Segal 1999). Appendix A provides a review of VOSL estimates in detail.

In contrast, the COI or human capital approach seeks to measure the VOSL in terms of economic impacts through the loss of output or productivity of victims. Essentially, this method calculates and values the ‘years of life lost’ (YLL) due to mortality. The inclusion of lost quality of life is done in such a way that double counting is avoided (Rosen 1977, Sommer et al. 1999, BTRE 2000 and 2005).

However, both the COI and WTP approaches are criticised for being imperfect in estimating the VOSL on the grounds of assumptions used (Bickel 2003, Johansson 2002). A review of the literature by a European expert group (ECMT 2001) could not settle firmly on either method. A review by Trawen et al.(2002) found that the application of these two methods was fairly even, although there was a shift towards the willingness to pay approach due to relatively more sophisticated techniques being used.

In spite of existing criticisms, VOSL still remains a popular practice – for example, a recent OECD study estimated the mortality cost of air pollution related to motor vehicle emission using the VOSL method (OECD 2014). Some studies have used the VOSL approach while reducing the total VOSL by an acceptable percentage. For example, BTRE (2005) used a VOSL reduced by 30% to reflect the difference of age patterns between traffic accident fatalities and emission mortalities. Similarly, OECD recommended a set of VOSL values for both researchers and policy makers based on comprehensive research (OECD 2012, Biausque 2010, Braathen 2012, Hunt 2011, Hunt & Ferguson 2010) and a meta-analysis of VOSL studies (OECD, 2012) using 1095 values from 92 published studies (OECD 2014). For average adult VOSL, the recommended range for OECD countries is USD 1.5 million – 4.5 million (in units of 2005 USD) and the recommended base value is USD 3 million.

Another popular method to estimate the monetary values of premature mortality is to calculate a value that accounts for length of life in the case of premature mortality, known as the value of a life year (VOLY) approach. In this approach, the value that an individual or a group of individuals puts on a change in life expectancy (i.e. a gain or loss in life years) is measured. This approach was applied in the ExternE projects, where the estimate of VOSL was used to obtain an estimate of the VOLY using annuity calculations However, the VOLY approach was also criticised on the ground of its inability to capture the differentiation between valuing premature deaths for the young and that of old individuals (Mellin and Nerhagen 2011). This is particularly crucial in a policy situation where the policy maker often has to use the benefit estimates directly from other studies. Consequently, an update of the ExternE methodology (Bickel and Friedrich, 2005)

has recommended using median and mean estimates for both VOSL and VOLY based on a study by Alberini et al. (2004), regarding values to be used for premature mortality.

Quality adjusted life years (QALYs) is another method used to assess the value placed by an individual or a community to a change (gain or loss) in life years. In this approach, the life expectancy of an individual is weighted with a perceived health status. A year of perfect health is worth 1 and a year of less than perfect health is worth less than 1, while death is considered to be equivalent to 0; however, some health states may be considered worse than death and have negative scores. The main advantage of the QALY approach is that it provides one combined measure of the benefits of a program that both extends life and maintains quality of life (NSW 2005). An analysis conducted by the U.S. Environmental Protection Agency (USEPA) provides examples of the use of QALYs to assess the cost-effectiveness of air pollution regulations. (USEPA 2006).

Both VOLY and QALY approaches, however, are reliant on a VOSL estimate. The debate on the valuation of saving lives initiated a number of review studies discussing these valuation methods - for example, Remoundou & Koundouri 2009, Andersson & Treich 2008, Nerhagen et al. 2005 and Bickel & Friedrich 2005.

Table 2.10presents a summary of the valuation methods used to estimate the morbidity and mortality costs discussed in this section - WTP, COI, VOSL, VOLY and QALY. This table summarises the strengths and weaknesses of a range of valuation methodologies used in assessing health costs arising out of transport emissions. In general, WTP estimates are observed to be preferred by the studies reviewed, for the valuation of both mortality and morbidity effects. The popularity of the WTP approach is likely to be driven by the following factors:

• the ability to provide a direct estimate of impacts on individual welfare when individual health status changes;

• better coverage of the range of health costs associated with air pollution.

Table 2.10: A Summary of Valuation Methods Used

Source: Table 5.1, page 32, NSW 2005