Economic impact assessment of environmental contamination: A damage function approach

Abstract

Motivation: Environmental exposure to pollution can generate a significant burden to public health. In the Campine region (Belgium) the metallurgic industry has dispersed heavy metals – particularly cadmium (Cd) – into the environment. Epidemiologic research has pointed out that the contamination has caused an increased incidence of osteoporotic fractures (Staessen et al, 1999) and lung cancer (Nawrot et al, 2006). Objective: In this research the health damages attributable to environmental pollution will be determined on a population level. The cost of these health effects will be analyzed in order to estimate the economic impact of the pollution. Data & methods: A damage function approach (DFA) aims to reveal the damage costs due to an adverse environmental effect. In the first stage an exposure assessment identifies the amount of people exposed to elevated environmental Cd levels. Using the relative risk factors from the epidemiologic research the pollution-attributable cases of hip fractures and lung cancer are estimated. In the second stage of the DFA the economic evaluation of the damages are considered. For lung cancer, 359 patients were followed up for 21 months using a case-control design. Direct medical costs of hip fractures were transferred from another Belgian study (Hiligsmann et al, 2011). Results: Approximately 38,000 individuals in the area are exposed to elevated Cd levels. Applying the lower range of the 95% confidence interval for relative risks, the contamination is expected to cause 11.63-42.37 cases of hip fracture and 1.39-19.24 cases of lung cancer on a yearly basis. The cost analysis shows that lung cancer patients on average incur €24,445 incremental costs in comparison with a similar control sample. Direct medical costs for hip fractures amount to €10,389 for women and €10,828 for men. The results indicate that environmental pollution yearly accounts for €33,979-€470,322 in lung cancer costs and €121,175-€443,940 in hip fracture costs. Conclusion: Damage costs attributable to environmental pollution can be substantial. Moreover, given the restricted scope of the analysis and the conservative cost estimates, the willingness to pay for avoiding environmental pollution is likely to be underestimated.