Evaluation of the Costs and Benefits of Evaluation of the Costs and Benefits of Household Energy and Health InterventionsHousehold Energy and Health Interventions

31st IAEE International Conference,Pre-Conference Workshop on Clean Cooking Fuels

Istanbul, 16-17 June 2008

Guy Hutton1, Eva Rehfuess2 and Fabrizio Tediosi3

1 World Bank, Phnom Penh, 2 World Health Organization, Geneva, 3 Università Bocconi, Milan

Economic evaluation:

• demonstrates the economic return of investments in an intervention

• compares the cost-effectiveness/ costs and benefits of one intervention against another

• helps policy-makers allocate their limited budget

Caveat:Economic pay-off is not the only criterionfor identifying sound interventions.

Why economic evaluation?

Cost-benefit versus cost-effectiveness analysis

Courtesy of Nigel Bruce/Practical Action

Cost-benefit analysis• Do all the benefits outweigh all the

costs of an intervention?• perspective: society, multiple sectors• unit: benefit-cost ratio in $

Courtesy of Dominic Sansoni/World Bank

Cost-effectiveness analysis• How can one maximize health for

available resources?• perspective: health sector• unit: cost-effectiveness ratio, e.g.

in $ per healthy life year gained

Comparison measure

Economic costs:

annual average economic benefit of intervention

annual average economic cost of intervention

Benefit-cost ratio (BCR)

• fuel costs, stove costs• programme costs (including

R&D investment, education)

• reduced healthcare costs• health-related productivity gains• time savings• environmental impacts

Economic benefits:

=

Interventions and scenarios modelled

• Basic approach:– analysis for 11 developing and middle-income WHO subregions

– separate analysis for urban and rural areas

– baseline year 2005; ten-year intervention period (2006-2015)

– 3% discount rate applied to all costs and benefits

• Baseline:current mix of dung, wood, coal, cleaner fuels, etc.

• Intervention 1: (50%, 100% coverage, pro-poor)switch to LPG (ethanol)

• Intervention 2: (50%, 100% coverage)cleaner-burning, fuel-efficient “rocket-type” stove

Important benefit assumptions:health impacts and productivity gains

• Conclusive evidence for health impact of indoor air pollution:– acute lower respiratory infections (ALRI): children under five– chronic obstructive pulmonary disease (COPD): adults above 30– lung cancer (coal use): adults above 30

• Avoided health impacts:– ALRI, COPD, lung cancer (WHO methodology for burden of disease)– LPG/ethanol: risk reduction to baseline risk– stoves: 35% risk reduction (personal exposure reduction, lag times)

• Health-related productivity gains:– number of illness-free days and deaths avoided, for type of illness and

level of severity– valued using human capital approach: daily Gross National Income

(GNI) per capita and income-earning life from 15 to 65 years

Important benefit assumptions:time savings and environmental benefits

• Time savings:– due to reduced fuel collection (survey data in selected locations) – due to time saved on cooking (laboratory data)– valued at GNI per capita

• Local environmental benefits:– avoided deforestation – valued using tree replacement cost (labour + sapling + wastage)

• Global environmental benefits:– averted CO2 + CH4 emissions (published studies)

– valued using carbon trading values (Clean Development Mechanism)

Proposed voluntary MDG target:halve, by 2015, the population cooking with solid fuels,

and make improved cookstoves widely available

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World Health Organization, Fuel for life: household energy and health. WHO, 2006.

Results (US$ per year): Providing access to LPG, by 2015,

to half of those burning solid fuels in 2005

Programme cost: 130 million

Total cost: 13 billion

Total benefit: 91 billion

Benefit-cost ratio: 7:1

Benefit-cost ratio*: 4:1

Sensitivity analysis: 2:1 – 29:1

Courtesy of Nigel Bruce/Practical Action

* Intervention cost savings included with economic benefits.

Results (US$ per year):Making improved stoves available, by 2015,to half of those burning solid fuels in 2005

Courtesy of GTZ

Programme cost: 650 millionTotal cost: -34 billion

(2 billion costs,- 36 billion fuel

savings)

Total benefit: 105 billion

Benefit-cost ratio: negative

Benefit-cost ratio*: 61:1

Sensitivity analysis: negative

* Intervention cost savings included with economic benefits.

Distribution of economic benefits

LPG Improved stoves

Health-related productivity gains and time savings due to less fuel collection and cooking constitute the greatest benefits.

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Key limitations

• Considerable variation between world regions, as well as between urban and rural settings.

• Findings based on global/regional data and assumptions do not necessarily apply to specific countries or programmes.

• Idealistic, target-based scenarios versus realistic, programme-based analyses.

• Need to refine optimistic assumptions (e.g. effectiveness of stove, programme costs, unsustainable harvesting of firewood) and pessimistic assumptions (e.g. greenhouse gases included, value of avoided emissions).

Conclusions

• Globally, both a switch to cleaner fuels and the promotion of fuel-efficient, cleaner-burning stoves appear to be highly cost-effective.

• Making the economic case remains a challenge:

– Household energy and health is an inter-sectoral issue with no clear policy lead across countries.

– Programme level versus household level: Where do costs occur? Where do benefits occur?

• There is a need for the application and refinement of current cost-benefit analysis methodology at national and programme levels.

Courtesy of Crispin Hughes/Practical Action

For more information:http://www.who.int/indoorair

Dr Eva RehfuessPublic Health and EnvironmentWorld Health Organization1211 Geneva 27SwitzerlandEmail: rehfuesse@who.int