Using economic valuation methods for environment and health assessment


Optimizing use of limited resources is one of the biggest challenges facing any decision-maker. Economic assessment is therefore a vital tool. It can enumerate the potential costs and value the anticipated benefits of a proposed programme, policy or regulatory initiative, and reflect trade-offs inherent in alternatives.

There is increasing recognition that environment and health impacts often require valuation in economic terms in order to receive adequate consideration in policy. An integrated economic analysis of such impacts can capture the hidden costs and benefits of policy options, as well as the synergies and institutional economies of scale that may be achieved through complementary policies that support sustainable development.

For instance, the economic benefits to be derived from sustainable forestry practices may be considerable when impacts are analysed as part of a comprehensive policy package; this would relate not only to issues of employment and poverty reduction, but also to the long-term environmental and economic impacts of forest maintenance or depletion, as well as to the health costs of diseases associated with deforestation.

valuing costs of environmental degradation
Rob Barnes 2004
Based upon data in: Hutton, G., & Haller, L. (2004). Evaluation of the costs and benefits of water and sanitation improvements at the global level. WHO Report WHO/DSE/WSH/04.04. WHO, Geneva, 2004.

A key element of the HELI tool kit, therefore, is a review of methods for economic valuation of linked environment and health impacts, as well as guidance for conducting economic valuation of such impacts. The HELI exercise builds upon UNEP and WHO’s ongoing work on methods for quantifying the environmental impacts of a particular policy, on the one hand, and population health impacts (burden of disease) on the other. Guidance for estimating the burden of disease from environmental risks such as air pollution, poor water and sanitation, etc. is available through the scientific assessment tools section of this web portal.

The review of economic approaches is the product of a joint effort between a number of leading international experts in health economics and environmental economics.

It describes how the evaluation and valuation of ecosystem integrity or degradation can be linked to the quantification and valuation of specific health outcomes, and describes the steps normally required to carry out systematic economic analysis. The review discusses issues to be considered in the choice of tools such as cost-benefit and cost-effectiveness analysis. In addition, the review underlines the importance of analysing the distribution of costs and benefits of any intervention strategy across different socio-economic groups.

The ways in which economic analysis of environment and health may be integrated into broader plans or programmes, such as poverty reduction strategies, is another topic covered.

The review is not prescriptive in its recommendations. Rather it outlines the range of options and methods that may be used in the conduct of a linked economic analysis of environment and health impacts in various policy contexts.

Economic instruments also are important in financing and supporting successful environment and health policy implementation; the use of instruments such as taxes, subsidies, user fees and market-based instruments (e.g. emission taxes), is thus examined. Case-study examples illustrate some of the successes and failures of their application in real country situations.

“The lack of quantification and valuation of EH hazards prevent any dialogue on the issue. It’s when you put a figure on the environmental health burden of disease that you can talk with decision-makers especially the Ministry of Finance. In addition, in the countries where we are working, EIAs are mainly used for donor-funded development projects with little attention to economic valuation. CEA and CBA are not used for health and environment-related projects. Both tools are complementary, and should be internalised in development work.”

– Economist, consultant to the World Bank; From the HELI review of environment and health decision-making in a developing country context