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Costs and benefits of air quality improvement in Hong Kong.

I. INTRODUCTION

In 1989, a respiratory health survey of children aged eight to 11 found significant differences between children living in the heavily industrialized Kwai Tsing District of Hong Kong and children in a control group living in the non-industrial Southern District (Hedley et al., 1993). In July 1990, the government banned high sulfur (2.5 percent) fuel, forcing industry to switch to 0.5 percent sulfur diesel fuel. This substantially lowered ambient sulfur dioxide (S[O.sub.2]) levels and moderately lowered particulate levels in Kwai Tsing (EPD, 1991). A follow-up respiratory health survey in 1991 found a substantial improvement for children in Kwai Tsing compared to those in the control area (Hedley et al., 1993). This paper reviews the findings of these respiratory health survey (RHS) studies for indications of some of the near-term health benefits, outlines other likely benefits, and examines the intervention costs to assess the appropriateness of the intervention.

II. BACKGROUND

Hong Kong is relatively wealthy with 1993 per capita Gross Domestic Product (GDP) of about US$18,400 (Hong Kong Government, 1994). Annual growth between 1982 and 1992 averaged 5.5 percent, among the highest in the world (World Bank, 1993). Trade and services led this growth, but the earlier economic base was built on a manufacturing sector of tens of thousands of mostly small, low-capital establishments. Environmental standards and controls were relatively lax until the late 1980s, and highly polluting industries such as electroplating and bleaching and dyeing played a prominent role. Thus, Hong Kong's industrial sector has long accounted for major air and water pollution problems (EPD 1989 through 1994).

Usable land in Hong Kong is scarce because the terrain is mostly mountainous. Even with the history of extensive land and seashore modifications, less than 15 percent of the territory's land area is developed. This feature has important environmental implications. The limited areas of flat land become very crowded and often are hemmed in by mountains that limit air circulation. When incomes in Hong Kong were much lower and residents were less aware of the effects of pollution than they are today, housing and schools crowded in areas originally set up for industry as waves of migrants from China periodically swelled the population. Despite growing prosperity and environmental awareness in the last decade, much of the legacy of the close intermixing of highly polluting industries and residential areas remains.

As one of Hong Kong's most industrialized areas, Kwai Tsing was seriously affected by the fuel oil intervention, both in terms of the costs to locally based industrial plants and the benefits from improved air quality for its people. In contrast, the control area in Southern District was little affected either in terms of costs or benefits since it contains few industrial establishments and enjoys cleansing winds from the South China Sea for much of the year.

As measured by the Environmental Protection Department's (EPD's) air quality monitoring station in Kwai Tsing District (see table 1), monthly average ambient S[O.sub.2] concentrations ranged from 100 to 140 [[micro]gram]/[m.sup.3] for the first three months of 1990 (prior to the fuel regulations) before falling to under 20 [[micro]gram]/[m.sup.3] for the second half of the year following the fuel oil regulations. This represented a prolonged change in local air quality.

Annual average S[O.sub.2] levels were above 100 [[micro]gram]/[m.sup.3] for at least the two years prior to the intervention. (A permanent air quality monitoring station in the area began operation in 1988). Following the intervention, S[O.sub.2] concentrations remained below 40 [[micro]gram]/[m.sup.3] for the next three years (1991-1993).

The change in particulate levels was less dramatic but also underwent at least a moderate and relatively prolonged improvement. A major source of TSP and RSP emissions in Hong Kong is diesel motor vehicles, which already were operating on 0.5 percent sulfur fuel (EPD, 1991). This may explain why the fall in ambient particulate levels was relatively low even though the fuel switch lowered industrial particulate emissions. Average monthly concentrations of respirable suspended particulates (RSP) for the first half of 1990 were 51 [[micro]gram]/[m.sup.3]. These fell to 40 for the second half of the year (EPD, 1991). Annual average RSP levels fell from 90 [[micro]gram]/[m.sup.3] in 1988 to 50 in 1990 and then remained between 50 and 60 for the period 1991 to 1993. Annual average ambient concentrations of total suspended particulates (TSP) fell from 150 [[micro]gram]/[m.sup.3] in 1988 to 90 in 1990 where they remained for the next several years (EPD 1989 through 1994).

III. FINDINGS OF THE RHS

Differences between the industrial and nonindustrial area in the pre- and post-intervention situations indicate that at least some benefits of the improved air quality were near-term. Impacts identified from the RHS involve effects that show up as respiratory symptoms in children aged eight to 11 years. The survey data showed a significant change in a number of these symptoms within the one-to-two year period following the intervention compared to measurements a year before the intervention.

The baseline RHS conducted in 1989 (i.e., pre-intervention) surveyed 2,017 children between the ages of eight and 11 in Kwai Tsing and 1,504 in Southern District of the same age range, employing local versions of internationally recognized standard questionnaires. These were adapted from the Medical Research Council (MRC), United States National Heart and Lung Institute (NHLI), and the World Health Organization (WHO) questionnaires. The standard questionnaires have been extensively tested in the literature and have a high degree of validity and repeatability, even after translation to different languages (Florey and Leeder, 1982). Objective measurements of lung function problems (bronchial hyper-reactivity) on a sub-sample of the study population produced findings that were consistent with the questionnaire findings (Tam et al., 1994).

After adjusting for socio-economic and demographic factors, active and passive cigarette smoking, and exposure to other potential sources of indoor air pollution, the 1989 study showed a higher risk for reported symptoms by children aged eight to 11 living in Kwai Tsing for cough for three months, sore throat, nasal symptoms, and wheeze. The analysis also found higher risk for doctor consultation (defined as at least one doctor consultation by a child for chronic respiratory symptoms in the past three months) (Hedley et al., 1993; Liu 1994).

In Kwai Tsing as in Hong Kong generally, most children attend school close to where they live. In the survey population, 99 percent of all students attended schools in the same district as their home address. In addition, few of the schools have air conditioners, and in the sub-tropical climate, school windows typically remain open most of the day. Hence, in-class air quality is likely to be very similar to outdoor air quality, and it is reasonable to assume that overall exposure to the ambient air does not differ greatly within the sample populations. Indoor air quality was considered through survey questions about smoking in the family, the fuel used for cooking and heating, the use of mosquito coils, and incense burning. The analysis then controlled for smoking in the home, since no significant differences were found between districts for these other factors.

In the 1989 survey, the prevalence for the minimum number of doctor consultations within the previous three months was 11.2 percent for Kwai Tsing compared to 9 percent for Southern District. These differences are significant at the 5 percent level (actual value p = 0.042) (Hedley et al., 1993). The 1992 (post-intervention) follow-up survey involving 3,358 children in the same age group from the same schools found that reported doctor consultations within the previous three months for these symptoms were similar for the two districts (p[greater than]0.05), indicating that the greatly reduced differences in S[O.sub.2] levels and the moderately reduced differences in particulates between the two study areas eliminated the excess risk for these symptoms (Hedley et al., 1993).

In absolute terms, out of a sample of 2,017 for Kwai Tsing in 1989, 226 respondents reported at least one doctor consultation within the previous three months (a prevalence of 11.2 percent). Out of the sample of 1,504 in 1989 for Southern District, 136 respondents reported at least one doctor consultation within the previous three months (a prevalence of 9 percent). Hence, if the prevalence in Southern District had applied in Kwai Tsing in 1989, then within the sample itself, at least 44 fewer cases of doctor visits would have occurred in that three month period. This difference is statistically significant at the 5 percent level. Assuming the cluster sample used in this survey is representative of the entire Kwai Tsing population of 25,700 school children aged 8 to 11 years, then the minimum number of doctor visits within the past three months that would have been avoided in Kwai Tsing was about 570. By 1992, no statistically significant difference existed in the measured prevalence levels for the two districts - i.e., they were similar. These differences in reported doctor consultations between these districts in 1989 and their absence by 1992 also are reflected in the results of the histamine challenge tests carried out on a sub-group of the children participating in this respiratory health study (Tam et al., 1994; Hedley et al., 1993).

The relative significance of the reduction in S[O.sub.2] compared to that for RSP and TSP is not clear. While the symptoms of interest are likely to respond to changes in the level and type of particulates, the measured differences are much greater for S[O.sub.2], suggesting that this was an important - perhaps the most important - factor. Although not measured, it is plausible that the drop in particulates was especially pronounced for sulfated particulates, and perhaps this sulfur path, as well as that of the effects of S[O.sub.2] itself, is important.

Benefits identified in the RHS probably represent a moderate sub-set of the full range of those associated with the air quality improvements in Kwai Tsing. Effects on the health of younger and older children and on adults were not surveyed. Hence, only preliminary estimates of the scale of such benefits are possible.

While the RHS allows estimation of some of the near-term effects on children due to chronic exposure to poor ambient air quality (especially to high levels of S[O.sub.2]), the effects of short-term acute exposure to very high pollutant concentrations is beyond the scope of the RHS, except as these might be reflected in the reports of the above symptoms. Nor has the opportunity arisen to measure the mid-term or longer-term responses of children or adults in Kwai Tsing to cleaner air. In addition, the dramatic lowering of S[O.sub.2] levels and modest lowering of particulates presumably have non-health benefits (e.g., avoided corrosive damages to buildings, improved functioning of air filtration systems, and less need for defensive use of air conditioning as an air filter). The analysis here makes no attempt to develop estimates for such benefits. However, the analysis does consider the implicit minimum value such benefits must have in order to justify the fuel oil intervention strictly on economic grounds.

IV. INTERVENTION COSTS

The ban on high sulfur fuel was the subject of considerable controversy before it was implemented. Some firms lobbied for the use of high sulfur fuel in combination with flue gas desulfurization (FGD). Some economists (e.g., Kwong, 1990) and some local business groups argued for use of market-based measures. However, due to EPD's concern about its ability to monitor compliance, EPD rejected use of FGD and market-based measures (e.g., emission permits) and imposed the ban (Barron, 1992). This raised energy costs to the former users of heavy fuel oil by about 21 percent and resulted in an annual cost to affected industry of approximately US$64 million for Hong Kong as a whole. Of this, about 13 percent (US$8.3 million) fell on manufacturing establishments in Kwai Tsing District (Liu, 1994). Economic theory suggests that compliance costs potentially could be lower if EPD had allowed more flexibility in the method for reducing sulfur emissions. In practical terms, however, the net efficiency gains probably would be very modest given the costs of compliance monitoring. EPD argued that if more than about 100 firms in the whole of Hong Kong chose FGD, adequately monitoring compliance would be difficult (Barron, 1992). An independent study concluded that if the costs of monitoring by private contractors for EPD were passed back to the monitored firms, most would find fuel switching less expensive (Lau, 1990).

It appears that the costs of the intervention were limited largely to the price increase itself - i.e., without significant impacts on the competitiveness of the affected industries. While Hong Kong's increasingly stringent environmental controls in general do contribute to the relocation of industry from Hong Kong into southern China, more important factors are differences in labor and land costs.

Little controversy has occurred since the fuel regulations went into effect. This probably is due in large part to the moderate impact on overall production costs since energy costs for affected industries generally are a relatively small percentage of overall operating costs (Liu, 1994). Furthermore, the immediate impact on ambient sulfur levels in industrial areas was widely recognized and appreciated (Barron, 1992). Hence, for the purposes of this paper, the ban on fuel oil is the least-cost practical policy intervention. The analysis uses the US$8.3 million annual cost to Kwai Tsing industry as a reasonably accurate indication of the full cost of achieving the associated improvements in air quality. Indeed, over the longer term, the higher fuel costs imposed on industry almost certainly would result in some substitution (e.g., use of more energy efficient equipment or processes), and the annual cost estimate of US$8.3 million should represent an upper bound for the longer term.

V. COMPARING COSTS AND BENEFITS

Making cautious extensions of the RHS findings, one can outline estimates at several levels of certainty for a portion of the monetizable costs associated with the 1990 fuel oil regulations. One can then subtract the monetary value of these benefits from the cost of the intervention and compare the remaining net intervention cost to a descriptive non-monetized list of expected benefits. This procedure indicates the implicit minimum value that one would need to assign to these benefits in order to justify the intervention on economic grounds.

A. Quantifying Selected Measured and Estimated Benefits

Prior to the intervention, the estimated portion of children aged eight to 11 in Kwai Tsing who had at least one doctor consultation attributable to the prevailing poor air quality within the three months before the survey was about 3 percent. It is likely that such visits would not be repeated every three months during a year due to seasonal effects. On the other hand, when scaling to an annual figure, the possibility exists that parents took a child to the doctor more than once in a three month period if the symptoms were chronic (Hedley et al., 1993). The questionnaire asked only if the child had consulted a doctor at least once in this period. Hay (1992) notes that the doctor consultation rate in Hong Kong is high compared to that for other places including the United States. Finally, it is possible that some fraction of the population is not exposed to the full effects of poorer air quality (e.g., due to the way the district boundaries are defined). Kwai Tsing is bordered by other relatively industrialized districts, and it is not likely that a major portion of the population enjoys appreciably better ambient air quality than those involved in the RHS. Nonetheless, to reflect the possibility of boundary issues, the analysis here bases the avoided cost implications of the intervention on an assumed exposure level of 75 percent of the Kwai Tsing population as the lower bound and 100 percent as the upper bound.

Considering each of these factors, a range of one to nine is used when annualizing from the data on at least one doctor visit in a three month period - i.e., three is the upper bound for the maximum average number of visits within the previous three months assuming that at most this applies to three out of the four three-month-periods in a year. Additionally, the analysis reduces the lower bound in the above figure to 75 percent of its original level to reflect the possibility that some children in the district receive much less exposure to polluted air due to the way the boundaries are drawn. Clarifying the relative level of certainty in the following estimates involves breaking these into four levels from the most certain (level i) to the least certain (level iv). This approach also allows the reader to make selective use of the information from the different types of estimates.

B. Level i

The number of children aged eight to 11 in Kwai Tsing is about 25,700. Annualizing on the basis outlined above, one can estimate preventable doctor consultations for this group suffering from cough, sore throat, nasal symptoms, and wheeze to be 570 to 6,900. This is the most certain of the estimated benefits.

C. Level ii

While the RHS dealt only with children aged eight to 11, younger and older children are likely to experience similar health risks. Perhaps the risk would be higher for younger ones and lower for older ones, but available local data are inadequate to address this question. As a first approximation, one can assume the excess risk for doctor consultation for other children to be the same as that for the eight-to-11 year olds. Census data indicate that there are about 74,300 children up to age seven and from 12 to 16 living in Kwai Tsing (Census and Statistics Department, 1992). Applying the same range as above gives a total annual number of avoidable doctor consultations for the relevant symptoms for all Kwai Tsing children of 1,700 to 20,100.

D. Level iii

The adult population (17 and over) of Kwai Tsing is about 331,000 (Census and Statistics Department, 1992). Presumably the adults would be less susceptible to (or more tolerant of) the effects of poor air quality, at least with respect to seeking help from a doctor. For purposes of exploring the implications of impacts on adults, one can use a preliminary estimate of the rate of avoidable doctor consultations for adults of 0.5 percent to 1 percent (in contrast to 3 percent for children). This is annualized on the basis of one to two visits per year for adult residents of Kwai Tsing. To the extent that the above range of values is reasonable, the total annual number of avoidable doctor consultations for the above symptoms on the part of adults in Kwai Tsing is between about 1,700 and 6,700. Table 2 summarizes these estimates at certainty levels i, ii, and iii.

E. Annual Costs and Benefits

If the approximate scale of benefits and costs remain the same for at least the next several years, then one may use an average annual cost for avoided symptoms. In other words, for simplicity, assume that the scale of industrial activity, the contributions from other sources of air pollution, population levels for Kwai Tsing, and international oil prices will not change greatly within a period of several years. This assumption allows a short-term to mid-term perspective while avoiding issues of the appropriate discount rate to apply to the time-dependent valuation of health improvements.

F. Valuation of Avoided Doctor Consultations

In an area such as Kwai Tsing, many people rely on government supported clinics. However, non-subsidized private doctors also practice in the area. The analysis here uses the price typically charged by private general practitioners of US$15 per visit as the appropriate value in Hong Kong for the cost of such visits (Liu, 1994). (Of course, while the nonsubsidized cost of a doctor consultation is the relevant one from an economic perspective, it is also true that with a price elastic demand for health care, the doctor consultation levels in Kwai Tsing are likely to be higher than they otherwise would be. However, in terms of avoided costs to society given the existing distortions in health care prices, the use of private doctor consultation costs and public clinic use rates still would be appropriate. Allowing for transport costs and medical prescriptions, a rough estimate of an additional US$15 per consultation seems reasonable. Since the RHS deals with children, virtually all doctor visits probably include adult supervision. Preliminarily, assume that each visit takes one half day of an adult's time and that such time is valued at about US$15 based on the typical wage rate in this industrial area of Hong Kong (Census and Statistics Department, 1993). Hence, the total estimated monetary cost for each child's visit is US$45.
TABLE 1


Monthly Average Sulfur Dioxide Levels in Kwai Tsing District


 Month in 1990 S[O.sub.2] Levels
(* pre-intervention) (in [Mu]/[m.sup.3])


January(*) 100
February(*) 120
March(*) 140
April(*) 125
May(*) 100
June(*) 30
July 15
August 15
September 15
October 15
November 15
December 20


Source: EPD, 1991


Note: the drop beginning in April was presumably due to some firms
making the switch ahead of the scheduled July 1 introduction of the
fuel oil regulations.


Multiplying this cost against the number of avoidable consultations per year gives an annual avoidable doctor consultation cost of between US$25,700 and US$311,000 for children aged eight to 11. For younger and older children (again assuming the need for adult supervision), the range is US$276,500 to US$905,000.

For adults, the estimated cost of the doctor consultation is US$30 for direct out-of-pocket expenses plus the value of their time. Unemployment in Hong Kong is very low (under 3 percent until 1995), and households with two working parents are common. In the case of the elderly, a doctor visit may well require the assistance of a younger adult. Taking the same wage rate as above and assuming that this population faces an opportunity cost of US$15 for a half day required to visit a doctor, the cost range for avoidable doctor consultations on the part of adults in Kwai Tsing is US$72,000 to US$288,000.
TABLE 2


Estimated Annual Avoided Doctor Consultations in Kwai Tsing due to
improved air quality


 Level i Level ii Level iii
 Number for Number for Number for
 Children Children Adults
 aged 8-11 aged 0-17


Lower Bound for Estimated


# of Avoided Doctor
Consultations per year 570 1,700 1,700


Upper Bound for Estimated


# of Avoided Doctor
Consultations per year 6,900 20,100 6,700


Source: authors' estimates as outlined in the text


Note: Total Population in Kwai Tsing is 418,000; For explanations of
Levels i, ii, and iii see text.


G. Benefit Valuation When Doctor Consultation Is Not Sought

One can estimate the value that the people of Hong Kong would put on each case of avoided ill effects (morbidity) from air pollution even when such effects are not serious enough to result in a doctor visit. Such willingness to pay values are likely to be significantly influenced by culture and income levels. Unfortunately, there appear to be no relevant studies for Hong Kong.

Using information from other sources provides an additional perspective on the possible scale of monetizable near-term health benefits for Hong Kong. In keeping with the previous format for distinguishing with regard to different levels of certainty, this analysis is level iv.

H. Level iv

Hall and Brajer (1994) use a range of about US$2 to US$23 as the value in the United States of the benefits of avoiding the types of symptoms considered here. In order to justify the fuel oil intervention strictly on the grounds of near-term respiratory health impacts - i.e., for the near-term health benefits to exceed the costs of the intervention - the improvements in air quality net of the avoided costs of doctor consultations (from table 3) would have to result in symptom relief valued between US$6.8 million and US$8.1 million per year or between about US$16 and US$19 per person per incident. These monetary values are within the range noted by Hall and Brajer for the United States, but they may be too high for Hong Kong (at least with respect to its lower income areas such as Kwai Tsing). Yet even at a relatively low valuation, a large share of the intervention costs are offset simply through near-term respiratory health improvements.

Using a conservative range for willingness to pay on the part of residents of Kwai Tsing of US$2 to US$8 gives additional monetized annual benefits of US$0.8 million to US$3.3 million per year. Table 3 summarizes the estimates from these four levels of analysis.

[TABULAR DATA FOR TABLE 3 OMITTED]

VI. MARGINAL BENEFITS AND COSTS OF DATA FOR DECISION MAKING

Conceptually, one can extend the monetization much further. An important step would be to estimate the value of missed schooling and work time. In addition, estimating hedonic property price differences between the industrial and non-industrial areas of Hong Kong (and possibly even pre- and post-intervention differences in property prices in Kwai Tsing) might be possible. Contingent valuation techniques might yield estimates of willingness to pay by people in Hong Kong for the value of 'feeling better' due to living in a less polluted environment. Estimating direct costs for corrosion and other effects of S[O.sub.2] and particulates in the ambient air (or defensive measures such as increased use of air conditioning) also is possible.

Such valuation techniques have their own conceptual and practical limitations (see, for example, Dasgupta and Pearce 1978; Halvorsen and Ruby, 1981). Even for those cases in which the conceptual issues are not so serious as to undermine the credibility of the resulting estimates of monetary value, the costs of conducting adequately designed studies to quantify and put a money value on such impacts of an intervention would tend to be high. Furthermore, the value of the added precision to decision making when a certain impact is monetized may be quite modest unless such information significantly changes the level of net monetized costs. The same logic applies to steps that stop short of monetization - e.g., more precise quantification of certain health impacts. Clearly, efficiency requires comparing marginal benefits with marginal costs. This rule also must apply to the valuation and quantification process as part of assessments to support environmental policy setting.

The basic analytic issues really are (i) how small the list should be of residual non-monetized impacts and (ii) how precise their descriptions should be. Obviously, one must determine the appropriate answers for each specific case. For the impacts of concern in this paper, too few resources are available to extend the analysis further. Nonetheless, even with these limited steps, one can put the evaluation of the 1990 fuel intervention in a form in which the implicit minimum valuation of the residual non-monetized avoided costs becomes relatively straightforward. Table 4 summarizes the benefit-cost picture at the four levels of certainty and outlines the terms of the tradeoff between monetized and non-monetized values at each level of certainty.

VII. FURTHER AIR QUALITY IMPROVEMENTS

The relative contributions of the reduction in sulfur compared to the reduction in particulates are unclear with respect to the benefit findings. Certainly, the large drop in ambient S[O.sub.2] compared to particulates suggests that changes in the level of S[O.sub.2] played an important role, and perhaps the major role, with regard to changes in symptoms considered in the RHS. However, it is also plausible that the modest reduction in particles was an important contributory factor, either directly or possibly by way of reduced sulfated particulates.

Additional reductions in the allowed sulfur content of fuel are underway or planned - i.e., reducing the maximum allowable sulfur content from 0.5 percent to 0.2 percent in 1995 and to 0.05 percent in 1998. However, with S[O.sub.2] levels now relatively low in Hong Kong, the major pollutant of concern is particulates, especially RSP, since these often exceed Hong Kong's air quality objectives. Indeed, the major purpose of the additional reductions in the sulfur content of diesel fuel in Hong Kong is to reduce particulate emissions since these tend to be lower for fuels with lower levels of sulfur.

Various studies conducted over more than a decade indicate that chronic exposure to high ambient levels of RSP poses a more important health risk than does exposure to ambient S[O.sub.2] (see, for example, Dockery et al., 1989; Ware et al., 1986; Dodge et al., 1985; Forastiere et al., 1992; Jaakola et al., 1991; Love et al., 1981; Love et al., 1982; Melia et al., 1981; Ong et al., 1991).

Diesel vehicles account for the majority of road traffic and particulate emissions in Hong Kong. Thus, the next step in air pollution control in Hong Kong will focus on diesel vehicle emissions (EPD, 1994). The decision problem is to identify the most appropriate policy to achieve diesel reductions. The basic options include (i) forcing all new lighter vehicles to use unleaded gasoline with catalytic converters coupled with more stringent emission standards and inspections for heavy diesels and (ii) [TABULAR DATA FOR TABLE 4 OMITTED] using the standards and inspection approach for all diesels (Rusco and Walls, 1994). The basic tradeoff is one of potential efficiency against the risk of noncompliance (Barron, 1994). Unfortunately, disagreement about the best strategy has limited action, and pressure is mounting on government to act more forcefully on what is increasingly perceived as a major public health issue (Loh, 1994). Whatever action is taken with regard to particulates, it is likely that an additional benefit will be reduced sulfur emissions.

VIII. CONCLUSION

Since the high sulfur fuel oil ban is widely viewed as having been appropriate, one may say that Hong Kong people (or at least its decision makers) implicitly value the non-monetized benefits higher than the net costs. Even given the very wide range of estimates presented here, one may further say with some confidence that at least a moderate portion of the intervention costs have been offset simply through the near-term health impacts with respect to symptom relief. It also would appear reasonable to argue that if one measured Hong Kong people's willingness to pay for avoiding such symptoms, much of the intervention costs have been offset. Adding to this the likely longer-term health benefits and related productivity impacts as well as the reduction in defensive expenditures to combat the air pollution, a strong argument emerges that the value the people of Hong Kong would place on the benefits of the intervention far outweigh its costs.

In many practical environmental management situations, the high cost of data gathering means that the type of constrained assessment of benefits and costs as carried out here often is as far as one goes - i.e., where a significant part of the benefits remain non-monetized or monetized only very approximately. Despite such limitations, exploiting the available economic and epidemiologic tools in evaluating environmental policies clearly is important. This in turn provides policy-makers with a more rational and precise basis for decision making and hopefully encourages them to be more open in indicating the implicit minimum or maximum value they would have society place on specific environmental and health improvements even when these are not explicitly assigned a specific monetary value.

ABBREVIATIONS

EPD: Environmental Protection Department FGD: Flue Gas Desulfurization GDP: Gross Domestic Product MRC: Medical Research Council NHLI: National Heart and Lung Institute RHS: Respiratory Heath Survey RSP: Respirable Suspended Particulates TSP: Total Suspended Particulates S[O.sub.2]: Sulfur Dioxide WHO: World Health Organization

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William F. Barron is with the Centre of Urban Planning and Environmental Management of The University of Hong Kong. Joseph Liu, T. H. Lam, C. M. Wong, Jean Peters and Anthony Hedley are with the Department of Community Medicine of the University of Hong Kong. This is a revised version of a paper presented at the Western Economic Association International 69th Annual Conference, Vancouver, B.C., July 2, 1994 in a session organized by Jane V. Hall, California State University, Fullerton.
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Author:Barron, William F.; Liu, Joseph; Lam, T.H.; Wong, C.M.; Peters, Jean; Hedley, Anthony
Publication:Contemporary Economic Policy
Date:Oct 1, 1995
Words:6184
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