Phase II: Estimating Health and Economic Damages (ILLNESS COSTS OF AIR POLLUTION) pdf

FINAL REPORT
Phase II:
Estimating Health and Economic Damages
Illness Costs
Illness CostsIllness Costs
Illness Costs
of
ofof
of
Air Pollution
Air PollutionAir Pollution
Air Pollution
Submitted to
Ontario Medical Association
By
DSS Management Consultants Inc.
July 26, 2000
DSS Management Consultants Inc.
Designers of Decision Support Systems
July 26, 2000
Dr. Ted Boadway
Executive Director, Health Policy Department
Ontario Medical Association
525 University Avenue
Suite 300
Toronto, ON M5G 2K7
Dear Dr. Boadway:
Re: Phase II: Estimating Health and Economic Damages
Illness Costs of Air Pollution
Our File No. 257a.20
Following is our final report for the above project.

This report contains complete technical documentation for ICAP and the derivation of all of the
data used in that model. As well, the results of applying ICAP to analyze the Ontario Anti-Smog
Action Plan are included.
Yours truly,
Edward Hanna
c.c. M. Perley
Project Team
1886 Bowler Drive, Pickering, ON L1V 3E4 Telephone: (905) 839-8814, Fax 839-0058
ii
Executive Summary
For several decades, the Ontario Medical Association has played a leadership role promoting
improvements in air quality to prevent illness and premature death. This report builds on these
initiatives and develops a quantitative foundation for estimating the health and economic damages
caused by air pollution. Accompanying this report is a computer model (ICAP – Illness C
osts of
Air Pollution) which is based on the data presented in this report. ICAP provides forecasts of
health and economic damages for expected or desired future air quality conditions in Ontario.
The main body of this report outlines the technical foundations for ICAP. Information
requirements and uncertainties are reviewed. The results of an analysis of the Ontario Anti-Smog
Action Plan are discussed. Eleven technical appendices deal in detail with various aspects of
ICAP and the forecasting of health and economic damages due to air pollution.
The impacts of two pollutants (i.e., ozone and particulate matter) on human health are analyzed.
Human health impacts are grouped into five broad categories, namely, premature mortality,
hospital admissions, emergency room visits, doctor’s office visits and minor illnesses. Each
broad illness category is further broken down into specific illness types for a total of 19 specific
cardio-respiratory illnesses. For each illness type, the illness rate is forecast by age group (i.e., 0-
17, 18-65, 65+).
Economic damages corresponding to these illnesses are forecast according to four discrete
components, namely value of loss of life (i.e., increased risk of premature death), value of quality
of life (i.e., increased pain and suffering from illness), health care costs and lost productivity (i.e.,

lost wages and time). Total economic damages are calculated by summing these damage
components.
This information has been used to analyze the health and economic benefits of Ontario’s Anti-
Smog Action Plan (ASAP). The benefits of the ASAP are compared to the expected damages if
current air quality conditions remained the same (i.e., the status quo). As well, the benefits of
advancing the date for the ASAP reduction targets from 2015 to 2010 are forecast. Health and
economic damages associated with background levels of ozone have been deducted from these
forecasts.
iii
In the year 2000, Ontario is forecast to suffer in the order of 1,900 premature deaths, 9,800
hospital admissions, 13,000 emergency room visits and 46 million illnesses as a result of air
pollution. (Forecasts of doctor’s office visits are not included due to the absence of supporting
epidemiological studies.) If air quality conditions remain constant for the next 20 years (i.e., to
the year 2020), these illnesses and deaths will increase substantially. This increase is due to an
expanding population as well as an aging population which is at higher risk to air pollution
impacts.
These health impacts involve about $10 billion in annual economic damages. Loss of life and
pain and suffering account for about $4.1 and $4.8 billion of this total. Annual health care costs
of air pollution are in the order of $600 million; lost productivity accounts for an additional $560
million in annual damages. These economic damages are expected to increase substantially over
the next 20 years.
The ASAP will reduce health and economic damages by about 11% overall, compared to the
status quo. The residual damages (i.e., those damages expected even with full implementation of
the ASAP) in 2015 are substantial and in total are forecast to be in the order of $10.7 billion
annually.
Advancing the target date for the ASAP from 2015 to 2010 will reduce somewhat the expected
damages for the intervening years. Nonetheless, substantial residual damages are forecast. The
benefits of the ASAP are largely attributable to emissions reduction measures in the U.S., not to
initiatives in Ontario. If Ontario-only impacts of the ASAP are included, the avoided damages
amount to about 4% of the total.

The potential for over- or underestimates is discussed at appropriate locations throughout the
report. It is concluded that these estimates of health and economic damages are underestimates.
Recommendations are included in the report with respect to future initiatives to use and improve
ICAP for policy analysis.
iv
Acknowledgements
This report was prepared for
Dr. Ted Boadway
, Director of Environmental Health Policy at the
Ontario Medical Association. Dr. Boadway provided ongoing encouragement, support, direction
and input to the study from its inception to completion.
Michael Perley
, Director of the Ontario
Campaign for Action on Tobacco, and a consultant to the OMA, also provided ongoing and
helpful input over the entire course of the study.
Patricia Graham
, Assistant to Dr. Boadway,
played an invaluable role in facilitating and coordinating the flow of e-mails, reports, phone calls,
meetings, etc. relating to the project.
This project was funded by the Walter and Gordon Duncan Foundation.
Ms. Christine Lee
,
Executive Director of the Foundation maintained a keen and positive interest from start to finish.
The DSS project team involved a number of people with diverse backgrounds. Following is a list
of the individuals involved and their responsibilities.
Dr. David Bates –
Illness risk factors
Mrs. Soile Hämäläinen –
Administration, report production and graphics
Mr. Ed Hanna

– Project direction
Dr. Robin Hanvelt –
Health economics
Dr. Kapil Khatter
– Environmental health
Ms. Dianna Kopansky
– Researcher
Dr. David McKeown
– Environmental health
Mr. David Schneider
– Health data analyst
Mr. Steve Spencer
– Computer model design and programming
Dr. Peter Victor –
Economic valuation
The project draws on data from diverse sources. Many people and organizations assisted in
providing access to data. This list of sources is long but several sources deserve special mention.
Dean Stinson-O’Gorman
at Environment Canada is responsible for their Air Quality Valuation
Model. He made available documentation and data related to their model.
Dr. David Stieb
at
Health Canada provided helpful comments on some of the inputs included in ICAP.
Jack
Donnan
at the Ontario Ministry of the Energy was helpful in identifying critical relevant
information for Ontario.
Despite the many individuals and organizations who provided key inputs to this study, DSS
accepts responsibility for the contents of this report.
Notice:

A final draft of this report was circulated to the federal government for comment. Their
comments could not be provided before the deadline for issuing this final report. These
comments may be incorporated in later version of this report. Any revised versions will be posted
on the OMA web-site.
v
Table of Contents
Executive Summary ii
Acknowledgements iv
Table of Contents v
List of Tables ix
List of Figures x
List of Acronyms xii
1. INTRODUCTION 1
1.1 B
ACKGROUND
1
1.2 P
URPOSE AND
S
COPE
2
1.2.1 Project 2
1.2.2 ICAP 3
1.2.3 Technical Report 4
1.3 M
ETHODOLOGY
4
2. CONCEPTUAL FOUNDATION 5
2.1 O
VERVIEW

5
2.2 R
ESOLUTION
7
2.2.1 Spatial Resolution 9
2.2.2 Temporal Resolution 9
2.3 E
XPOSED
P
OPULATION
10
2.4 A
IR
Q
UALITY
C
ONDITIONS
11
2.5 E
XPOSURE
/R
ESPONSE
F
UNCTIONS
11
2.6 E
CONOMIC
V
ALUATION
12

2.6.1 Health Care Resource Utilization 13
2.6.2 Lost Productivity 14
2.6.3 Quality of Life 15
2.6.4 Risk of Death 15
2.7 T
REATMENT OF
U
NCERTAINTY
16
3. INFORMATION BASE 18
3.1 P
OPULATION
18
3.1.1 Ontario 1996 Population 18
3.1.2 Population Forecasts 18
3.2 A
IR
Q
UALITY
19
3.2.1 Baseline Data 19
3.2.2 Air Quality Forecasts 19
3.3 I
LLNESS
R
ISKS
19
3.4 H
EALTH
C

ARE
R
ESOURCE
U
TILIZATION
20
3.4.1 Hospital Admission Costs 20
3.4.2 Emergency Room Visit Costs 20
3.4.3 Doctor’s Office Visit Costs 21
3.4.4 Medication Costs 21
3.5 L
OST
P
RODUCTIVITY
21
3.6 Q
UALITY OF
L
IFE
21
3.7 P
REMATURE
D
EATH
22
3.8 S
UMMARY
22
4. UNCERTAINTIES AND GAPS 24
4.1 S

OURCES OF
U
NCERTAINTY
24
4.2 S
CIENTIFIC
I
GNORANCE
25
4.3 S
TOCHASTICITY
25
4.4 I
MPRECISION
26
4.5 M
ETHODOLOGICAL
W
EAKNESSES
27
5. HEALTH DAMAGE FORECASTS FOR ONTARIO 28
5.1 S
CENARIO
1 - N
ATURAL
B
ACKGROUND
C
ONCENTRATIONS
28

5.1.1 Rationale 28
5.1.2 Health Effects 29
vi
5.1.3 Economic Damages 30
5.2 S
CENARIO
2 – M
AINTENANCE OF
C
URRENT
L
EVELS OF
P
OLLUTION
31
5.2.1 Rationale 31
5.2.2 Health Effects 32
5.2.3 Economic Damages 38
5.3 S
CENARIO
3 – I
MPLEMENTATION OF
A
NTI
-S
MOG
A
CTION
P
LAN IN

2015 39
5.3.1 Rationale 39
5.3.2 Health Effects 39
5.3.3 Economic Damages 41
5.4 R
EGIONAL
D
ISTRIBUTION OF
D
AMAGES
42
5.5 N
EW
2010 T
ARGET FOR
ASAP 43
5.5.1 Health Damages 43
5.5.2 Economic Damages 43
5.6 U.S. C
ONTRIBUTION
44
5.7 C
OMPARISON OF
R
ESULTS
45
5.7.1 Premature Mortality 45
5.7.2 Hospital Admissions 45
5.7.3 Interpretation 46
5.8 S

UMMARY
46
6. CONCLUSIONS AND RECOMMENDATIONS 47
6.1 A
IR
Q
UALITY
47
6.1.1 Need for Improved Air Quality Monitoring Data 47
6.1.2 Impacts of Air Quality Initiatives on Ambient Concentrations of Key Pollutants 47
6.1.3 Net Air Quality Effects of Multiple Government Policies 48
6.2 H
EALTH
E
FFECTS
48
6.2.1 Supporting Clinical Studies 48
6.2.2 Multi-Pollutant Exposure/Response Functions 49
6.2.3 Less Acute Air Pollution Induced Illnesses 49
6.2.4 Illness Prevalence 50
6.3 E
CONOMIC
D
AMAGES
50
6.3.1 Improved Estimates of Pain and Suffering Damages 50
6.3.2 Improved Estimates of Medication Costs 51
6.3.3 Doctor’s Office Costs 51
6.4 ICAP 51
6.4.1 Improved Public Awareness 52

6.4.2 Local Analysis of Air Quality Impacts 52
6.4.3 Need for Regular Updating 52
6.5 E
NVIRONMENTAL AND
H
EALTH
C
ARE
P
OLICY
52
6.5.1 Significant Residual Damages 53
6.5.2 Cost of Delay 53
6.5.3 Absence of Comprehensive Economic Evaluations 53
Bibliography 54
Appendix A ICAP Model Description
Appendix B Population Forecasting
Appendix C Air Quality
Appendix D Estimation of Morbidity and Mortality Frequencies
Appendix E In-patient and Emergency Room Treatment Costs
Appendix F Doctor’s Office Treatment Costs
Appendix G Medication Costs
Appendix H Economic Losses Due to Premature Mortality
vii
Appendix I Quality of Life Damages
Appendix J Lost Productivity Damages
Appendix K ICAP Results
viii
List of Tables
Table 5.1 Comparative Human Health Damages With Changes in Air Quality p. 30

Table 5.2 Comparative Economic Damages With Changes in Air Quality p. 31
Table B.1a Breakdown of 1996 Ontario Population By Census Division – Males p. B-3
Table B.1b Breakdown of 1996 Ontario Population By Census Division – Females p. B-4
Table B.2a Breakdown of 1996 Ontario Population By Census Metropolitan Area –
Males p. B-5
Table B.2b Breakdown of 1996 Ontario Population By Census Metropolitan Area –
Females p. B-6
Table B.3a Annual Population Growth Rates for Ontario Male Population –
Low Growth p. B-7
Table B.3b Annual Population Growth Rates for Ontario Female Population –
Low Growth p. B-8
Table B.4a Annual Population Growth Rates for Ontario Male Population –
Central Growth p. B-9
Table B.4b Annual Population Growth Rates for Ontario Female Population –
Central Growth p. B-10
Table B.5a Annual Population Growth Rates for Ontario Male Population –
High Growth p. B-11
Table B.5b Annual Population Growth Rates for Ontario Female Population –
High Growth p. B-12
Table C.1 1996 Baseline Air Quality Data by Census Division p. C-10
Table C.2 1996 Baseline Air Quality Data by Census Metropolitan Area p. C-11
Table C.3 PM
10
Reductions with Anti-Smog Action Plan and U.S. Clear Air
Act SO
2
Emission Reductions p. C-6
Table D.1 Weighted Average Percentage Increase in Hospital Admissions
With 10 ppb Change in Pollutant Concentration p. D-13
Table D.2 Age-specific Illness Frequencies for Respiratory and Cardiac

Hospital Admissions p. D-13
Table D.3 Illness Risks for Emergency Room Visits With a 10 µg/m
3
Change
In Pollutant Concentration p. D-18
Table D.4 Illness Risks for Minor Illness Symptoms With a 10 µg/m
3
Change
In Pollutant Concentration p. D-21
Table D.5 Exposure/Response Functions for Ozone p. D-27
Table D.6 Exposure/Response Functions for PM
10
p. D-28
Table E.1 Operating Cost Information for Ontario Hospitals p. E-9
Table E.2 Average Hospital and Emergency Room Costs by Census Division p. E-11
Table E.3 Average Hospital and Emergency Room Costs by Census Metropolitan
ix
Area p. E-12
Table E.4 Correspondence Among ICD-9 Codes and Major Case Mix Groups p. E-13
Table E.5 Resource Intensity Weights for Each Eligible Case Mix Group p. E-16
Table E.6 Correspondence Among ICD-9 Codes and Major Illness Categories p. E-21
Table E.7 ICD-9 Case Frequencies for Ontario in 1998 p. E-23
Table E.8 Weighted RIWs by Illness Category for Ontario p. E-26
Table E.9 Average Costs for a Hospital Admission by Illness Category and Age
Group for Ontario Census Divisions p. E-27
Table E.10 Average Costs for a Hospital Admission by Illness Category and Age
Group for Ontario Census Metropolitan Areas p. E-28
Table F.1 Average Costs for Doctor’s Office Visit by ICD-9 Diagnostic Category p. F-6
Table F.2 Average Costs Per Doctor’s Office Visit by Illness Category p. F-7
Table G.1 Calculations Used To Derive Medication Cost Coefficients p. G-5

Table G.2 Medication Costs on a Per Incidence Basis by Illness Category p. G-6
Table H.1 Estimates of the Economic Value of Premature Mortality p. H-8
Table H.2 Average Annual Health Care Consumption by Gender and Age Group p. H-9
Table H.3 Net Present Value of Health Care Savings from Premature Mortality p. H-10
Table H.4 Economic Coefficients – Value of a Statistical Life p. H-11
Table I.1 Economic Coefficients and Probabilities for Quality of Life Losses p. I-6
Table J.1 Lost Days by Illness Category and Age Group p. J-6
Table J.2 Value of Lost Working Day by Census Division p. J-9
Table J.3 Value of a Lost Working Day by Census Metropolitan Area p. J-11
Table K.1 Forecasts of Illnesses Attributable To Natural Background Levels of
Ozone and Particulate Matter p. K-4
Table K.2 Forecasts of Economic Damages Attributable To Natural Background
Levels of Ozone and Particulate Matter p. K-6
Table K.3 Forecasts of Total Illnesses with the Maintenance of Current Levels of
Anthropogenic Ozone and Particulate Matter p. K-8
Table K.4 Forecasts of Total Economic Damages with Maintenance of Current
Levels of Ozone and Particulate Matter p. K-9
Table K.5 Forecast of Avoided and Residual Illnesses Attributable to Air Pollution
in 2015 With a Fully Effective Ontario Anti-Smog Action Plan p. K-10
Table K.6 Forecast of Avoided and Residual Economic Damages Attributable to Air
Pollution in 2015 With Fully Effective Ontario Anti-Smog Action Plan p. K-11
x
List of Figures
Figure 1 Overview of Health Effects Analysis Procedure p. 6
Figure 2 Overview of Health Damages Estimation Procedure p. 8
Figure 5.1 Projected Annual Premature Deaths by Age Group p. 33
Figure 5.2 Projected Annual Hospital Admissions by Illness Category p.34
Figure 5.3 Projected Annual Hospital Admissions for Congestive Heart Failure
by Age Group p. 35
Figure 5.4 Projected Annual Hospital Admissions for Asthma by Age Group p. 35

Figure 5.5 Projected Annual Emergency Room Visits by Illness Category p. 36
Figure 5.6 Projected Annual Minor Illness Cases by Illness Category p. 38
Figure A.1 Three Stages of ICAP Operation p. A-3
Figure A.2 Schematic Overview of ICAP Operation p. A-4
xi
List of Acronyms
AQVM Air Quality Valuation Model
ASAP Anti-Smog Action Plan
CD census division
CIHI Canadian Institute of Health Information
CMA census metropolitan area
CMG case mix group
CO carbon monoxide
COPD chronic obstructive pulmonary disease
E/RF exposure/response function
ELOS expected length of stay
EPA U.S. Environmental Protection Agency
ERV emergency room visit
H
+
hydrogen ion (these ions are the basis for measuring acidity)
ICAP Illness Cost of Air Pollution
ICD-9 International Classification of Diseases Code
1
MCS Monte Carlo simulation
NAPS National Air Pollution Surveillance
NO
2
nitrogen dioxide
NO

3
-
nitrate ion (a common acid aerosol and a component of PM
10
and PM
2.5
)
NO
x
nitrogen oxides (both nitrogen monoxide and nitrogen dioxide)
O
3
ozone
OMA Ontario Medical Association
PM
10
particular matter with an aerodynamic diameter of < 10 microns
PM
2.5
particular matter with an aerodynamic diameter of < 2.5 microns
RIW resource intensity weight
SO
2
sulphur dioxide
SO
4
-2
sulphate ion (a common acid aerosol and an important component of PM
10
and PM

2.5
)
VOC volatile organic carbons (e.g., various gas released by gasoline)
WTA willingness to accept
WTP willingness to pay

1
See the Centre for Disease Control website for more information:
/>1
1. INTRODUCTION
1.1 Background
Historically, the Ontario Medical Association (OMA) has taken a strong stand advocating
reductions in air pollution in Ontario as an essential means to improve public health. Beginning
in 1967, the Ontario Medical Association Council endorsed a program of air pollution control in
Ontario which included the establishment of monitoring stations and regulation of emissions from
industry and vehicular traffic (15). Shortly thereafter, the government enacted the Air Pollution
Control Act encompassing a number of the recommendations from the OMA. This initiative
established the principle of preventative health care through improvements in environmental
quality. The OMA has continued in these early footsteps and in 1998, a position paper entitled
OMA Ground Level Ozone Position Paper was released. This position paper identified the public
health significance of poor air quality. The paper drew on an extensive scientific literature
demonstrating the direct connection between certain air pollutants and human health impacts
(15).
The OMA recognized the need to explore not only the direct health effects of air pollution but
also the need to understand the associated economic ramifications for the provincial health care
system as well as for Ontario more generally. To this end, a feasibility study was undertaken, the
purpose of which was to determine how best to develop appropriate estimates of the economic
damages relating to air pollution-induced illnesses (42). A methodology was designed for
developing an integrated analytical system which would bring together the best knowledge and
data on air quality, human health and economics and which would produce forecasts of expected

damages (and avoided damages) relating to changes in air quality.
In 1999, the OMA embarked on implementing this methodology. This report, and the
accompanying Illness Cost of Air Pollution (ICAP) model are the products of this latest
endeavour.
2
Public awareness of the subtle, yet pernicious, impacts of poor air quality is gradually increasing
with political action following close behind. Recent announcements by the federal Minister of
the Environment dedicating increased resources to air quality monitoring is a case in point (50).
Recently, the Canadian Council of Ministers of the Environment approved new Canada-wide air
quality standards (27). Ontario has committed to move its Anti-Smog Action Plan deadline
forward by five years to 2010 if comparable reductions can be negotiated with the U.S. (51).
Canada is engaged in international discussions with the U.S. about reducing smog-related
pollutants which drift across the border into Canada (26). Awareness at the local municipal level
is increasing as well (13).
Despite the flurry of media and political attention to air quality-induced illnesses and deaths, the
question still remains as to what will be the future air quality in Ontario and what are the health
consequences. Are more aggressive measures required to reduce the risk of poor air quality for
human health? What benefits would be realized now and in the future from improved air quality?
These are examples of pertinent environmental policy questions for which sound answers are
needed. This need has been recognized for many years by the OMA. This report and the
accompanying ICAP model are designed to assist in focusing this key public policy discussion.
This discussion needs to move past considering the need for air quality initiatives to confronting
their extent and the timing of implementation.
1.2 Purpose and Scope
1.2.1 Project
This project was undertaken to provide technically sound and helpful information to health care
professionals, public policy decision-makers and the general public in considering these
significant public health questions. Understanding the complex interactions involving human
activities, air pollutant emissions, atmospheric transport and chemical transformation of
pollutants, human exposure, risk factors and health responses and economic damages is a

daunting challenge. While understanding these interactions is difficult, it is much more complex
to forecast the combined effects of seemingly unrelated trends like population growth, aging baby
boomers, economic growth, reductions in air pollutant emissions, new epidemiological research
results, etc. in terms of provincial health damages. Yet, these are the complexities being faced on
3
virtually a daily basis when considering the question of air quality. A systematic means to distill
this complexity to a reasonable level of simplicity relevant to the central issues at hand is critical.
A primary purpose of this study is to bring together this complexity and to provide an efficient
means for people of all sorts to gain improved understanding of air quality and related
government policies in terms of the future health and well-being of Ontarians.
This study has focused on cardio-respiratory illnesses caused by the principal components of
smog, namely ozone and air-borne particulate matter.
2
Smog consists of a complex “soup” of
pollutants, some of which may cause human health problems directly and others which may be
precursors to causal contaminants or which are closely correlated with causal contaminants and
hence act as “markers” for human health risks. The complexities associated with the cause/effect
relationships between this soup of pollutants and human health are explored in this report.
The focus of this analysis is Ontario. The basic concept and structure of the methodology and
analyses are applicable to any jurisdiction concerned about air quality impacts on human health.
The underlying scientific foundations for this study have wide application far beyond the
boundaries of Ontario.
1.2.2 ICAP
ICAP (Illness Costs of Air Pollution) is a computer model developed as part of this project. The
purpose of ICAP is to provide an analytical tool to assist people in understanding the complex
interactions determining the impacts of air quality on human health and related economic
damages.
ICAP includes all of the elements included in the scope of this project. ICAP was designed
specifically to make the results of this project readily available, and in a useful form, to those
concerned about the health impacts of air pollution.

2
Of particular concern is the fine fraction of air-borne particulates (i.e., particulates <10
µ
aerodynamic
diameter) originating from anthropogenic sources, in particular from internal combustion engines and
industrial and utility emissions.
4
1.2.3 Technical Report
The purpose of this technical report is to document the data and methodology underlying the
forecasts of health and economic damages attributable to air pollution. This report also provides
a more indepth understanding of the technical underpinnings of ICAP.
Estimates of health damages are included in this report. No analysis is included as to what air
quality policy actions are, or are not, warranted given the magnitude of damages being, and
expected to be, incurred. This step is vital but is outside the scope of this report and this project.
1.3 Methodology
Two major methodological hurdles needed to be cleared as part of this study. The first involved
identifying and assembling all of the data required to develop reliable forecasts of human health
and related economic damages. The second hurdle was to convert data and scientific results from
diverse sources into a technically sound, internally consistent and fully integrated database useful
for policy analysis. This latter task required ingenuity and diligence to maintain the integrity of
the data yet to express the data and knowledge in a useful form.
This report describes the data compiled and the calculations used to derive the damage forecasts
included in this report.
Two parallel aspects of this project were undertaken coincidentally. One involved compiling and
analyzing the diverse array of data required to generate estimates of health and economic
damages associated with air pollution. The second task involved the building of a computer
model with which to analyze the data compiled. The main body of this report deals with
analytical results and their interpretation. The details concerning the underlying data are
addressed in the accompanying technical appendices.

The resulting computer model (i.e., ICAP) is publicly available in digital form.
3

3
Digital copies of ICAP can be obtained from the OMA web-site (www.oma.org.ca)
5
2. CONCEPTUAL FOUNDATION
This section describes the logic and analytical framework underlying the results presented in this
report.
2.1 Overview
The estimates of health damages presented in this report are based on pollutant exposure/health
response relationships (i.e., E/RFs – exposure/r
esponse functions). E/RFs have been derived
from the environmental health literature (see Appendix D and Tables D.5 and D.6 for further
elaboration). When a population of people is exposed
4
to air pollutants, increases in the
frequency of certain illnesses
5
are observed (Figure 1). These increases over baseline average
illness frequencies are attributed to air pollution. As levels of air pollution are reduced, illness
frequencies approach baseline frequencies. The benefits of improving air quality are the reduced
frequencies of these illnesses in the general population. The shift in illness frequencies with air
quality is expressed as the illness risk of air pollution.
This analytical approach adheres to the general requirements of cost/benefit analysis. Benefits of
improved air quality include avoided health damages.
6
This approach to estimating benefits is
commonly referred to as an avoided damages methodology (30). Developing comprehensive and
sound estimates of potentially avoided health damages is essential for reaching informed and

responsible environmental policy decisions.

4
Air pollutant exposure can vary greatly from individual to individual depending on daily activity patterns.
E/RFs from cross-sectional epidemiological studies reflect variations in exposure rates across all members
of the sample population and variations in risk factors within the exposed population. These E/RFs reflect
the results of average levels of exposure and activity patterns. The level of risk faced by an individual may
vary greatly from the average.
5
For the purposes of this discussion, the term “illness” includes morbidity and mortality; air pollution can
cause both types of health effects.
6
Air pollution is responsible for a range of physical and economic damages in addition to those relating to
human health. These impacts include damages to materials and structures, agriculture, forestry and natural
ecosystems. This study does not address these impacts and related economic damages. Any damages to
these other components of the environment are additive to the health damages estimated in this report.
6
Figure 1 – Overview of Epidemiological Analysis Procedure
Exposed Population
Risk Factors
Age Place of Health Other Factors
Residence
Air Quality
Particulate Ozone
Matter (PM) (O
3
)
Exposed Population
Air Quality
Baseline Illness Frequencies

Hospital Emergency Doctors’ Minor
Deaths Admissions Room Office Illnesses
Visits Visits
Attributable Illness Frequencies

Hospital Emergency Doctors’ Minor
Deaths Admissions Room Office Illnesses
Visits Visits
Elevated Illness Frequencies
Hospital Emergency Doctors’ Minor
Deaths Admissions Room Office Illnesses
Visits Visits
7
Benefits are estimated first in physical terms (i.e., the number of cases of a particular illness
expected to be avoided). These physical benefits are converted to economic benefits
7
using four
basic economic measures, namely:
i) the value of reduced risk of premature mortality
ii) the cost of reduced health care resource utilization (e.g., hospital care)
iii) the value of avoided lost productive time (e.g., lost wages)
iv) the value of increased quality of life (e.g., pain and suffering)
Figure 2 illustrates the procedure for calculating physical and economic damages which an
exposed population is expected to experience as a result of air pollution.
Developing estimates of air pollution damages requires certain specific information relating to the
exposed population and environmental factors. Key information requirements are:
i) current and future air quality conditions,
ii) current and future size, distribution and composition of the exposed population,
iii) E/RFs for key air pollutants, and
iv) economic coefficients for air pollution-induced illnesses.

This report describes the information which has been compiled for Ontario for estimating
physical and economic human health damages attributable to air pollution.
2.2 Resolution
Air pollution is not uniform across Ontario nor are air pollution levels constant from day to day,
week to week or month to month. Likewise, the population is not evenly distributed throughout
the province. Instead, people tend to be concentrated in southern Ontario and more particularly,
in urban areas. Capturing these variations in time and space requires dividing the province into
discrete areas and examining air pollution over discrete intervals of time. In other words, spatial
and temporal resolution is essential to reflect this variation. Following is an overview of the
spatial and temporal resolution used in this analysis.

7
All economic data and results are reported in 1998 Canadian dollars.
8
Figure 2 – Overview of Health Damages Estimation Procedure
Exposed Population
Risk Factors
Age Place of Health Other Factors
Residence
Air Quality
Particulate Ozone
Matter (PM) (O
3
)
Exposed Population
Illness Risk
(Exposure/Response Functions)
Unit Value of Avoided Illnesses
Hospital Emergency Doctors’ Minor
Deaths Admissions Room Office Illnesses

Visits Visits
Air Pollution Economic Damages

Health Quality of Lost
Death Care Life Productivity
Number of Illnesses by Population Segment
Hospital Emergency Doctors’ Minor
Deaths Admissions Room Office Illnesses
Visits Visits
9
2.2.1 Spatial Resolution
Statistics Canada has divided Canada into a hierarchy of spatial units as a convenient means to
organize their data collection and analysis programs, in particular, the collection of census data.
The finest level of spatial resolution is the census tract. Groups of census tracts are lumped into
progressively larger units, two of which are census divisions (CDs) and census metropolitan areas
(CMAs). The CDs correspond to regional municipalities (in more urban areas), counties (in more
rural areas) and districts (in northern areas). A total of 49 CDs comprise all of Ontario. Table
B.1a in Appendix B contains a list of CDs for Ontario which have been used in this analysis.
The CMAs are centered on urban areas. Not all of Ontario is included. A total of 48 CMAs have
been defined for Ontario. Table B.2a in Appendix B contains a list of CMAs for Ontario which
have been used in this analysis
Choosing an appropriate level of spatial resolution requires trading off detail for efficiency and
practicality. As the level of detail increases, so too do information requirements, computer
processing capacity demands and the time required to interpret results. Perhaps most importantly,
the complexity of the inputs and results can exceed the needs of decision-makers and may not
contribute to better public policy decisions. Reaching an appropriate level of detail is critical.
For this study, the CD and CMA level of spatial resolution has been chosen to represent a
reasonable balance between detail and efficiency.
2.2.2

Temporal Resolution
Air pollution warnings relate to short-term (e.g., hourly or daily) episodes. Theoretically, one
could develop hourly forecasts for key pollutants for 365 days of the year for the next 20 years or
so. Doing so would be paralyzingly onerous, particularly for provincial or federal policy-level
analysis. As with choosing an appropriate level of spatial resolution, so too must judgements be
made as to a practical and efficient level of temporal resolution, particularly in terms of air
quality conditions.
10
The baseline and forecast pollutant concentrations used in this analysis are annual averages.
These averages include allowance for periodic evaluated pollution episodes. For example, if the
daily summertime average 1 hour peak concentration of ozone in Toronto decreases from 45 ppb
to 40 ppb, a range in ozone concentrations from day to day will still occur. Some days, the peak
1-hour concentration will be much more than 40 ppb and, other days, much less. The frequency
and/or the peak concentrations, however, will be higher overall with a daily average of 45 ppb
than with 40 ppb.
Health effects are forecast to occur in direct proportion to the level of air pollution. These effects
occur at low and high concentrations, although the risk (i.e., expected illness frequency) increases
as the concentration increases. As a result, using estimates of annual average daily air pollutant
concentrations will yield the same annual estimate of illnesses as estimates based on cumulative
daily illnesses caused by daily air pollutant concentrations. The level of temporal resolution (i.e.,
on an annual basis) in this analysis is common in the air pollution/health effects epidemiological
literature and is appropriate for public health and environmental policy analysis.
2.3 Exposed Population
Estimating health effects attributable to air pollution requires identifying the number of
individuals exposed to air pollution in different parts of the province. Some segments of the
population are more susceptible to certain air pollution induced-illnesses than others. For
example, young children and the elderly are high risk segments of a population (11, 22, 38, 40,
39, 60, 99, 100, 139). Such risk factors need also be considered.
This study is designed to assist public policy decisions regarding air pollution control. Policy
analysis requires prospective evaluations (i.e., evaluation of potential future conditions). The

Ontario population is dynamic and its make-up is constantly changing. These population changes
need to be considered in forecasting potential future health damages.
The composition and geographic distribution of the Ontario population in 1996 is used as the
starting point for all future projections. The population is forecast to expand at different rates in
different geographic areas. As well, the composition of the population in terms of age and gender
is forecast to change. Future illness frequencies will change, not only as air quality conditions
11
change, but as the composition and distribution of the population changes. For this reason, a
population forecasting component is an integral part of ICAP.
2.4 Air Quality Conditions
Cardio-respiratory illnesses are well known to increase as air quality declines (see Appendix D
for discussion of supporting scientific evidence). Government initiatives are periodically
introduced which are designed to control air pollution. On the other hand, economies continue to
grow. The result often may be that increases in total air emissions outstrip initiatives to control
individual emissions.
Evaluating the potential benefits of air quality policies requires knowledge of current air quality
conditions and also estimates of how air quality is likely to change in the future given alternative
courses of action and outcomes. Forecasting future air quality involves determining future
pollutant emission rates, atmospheric transport/dispersion and chemical transformations. Various
air quality forecasting models have been developed specifically for this purpose.
8
The analytical approach used in this study relies on forecasts of future air quality conditions. An
objective of this study was not to develop such forecasts but to analyze the future health damages
associated with existing forecasts of future air quality in Ontario.
2.5 Exposure/Response Functions
Various illnesses are induced by different air pollutants. Table D.1 in Appendix D sets out all of
the different categories of illnesses considered in this analysis. These range from minor illnesses
to death.
The illness risk varies by pollutant as well as by the age and health status of exposed individuals.
By combining these E/RFs with current or forecast air quality and the number and type of people

8
For example, as part of the development of Ontario’s smog plan, Environment Canada’s Air Deposition
and Oxidant Model (ADOM) was refined for the Windsor/Quebec Corridor by combining ADOM with
GESIMA (a mesoscale meteorological model) to project future ambient air quality conditions with varying
levels of pollutant emissions (82).
12
exposed, estimates of the expected annual number of air pollution-attributable cases
9
for each
illness category can be generated. The total number of cases over a period of years can be
estimated by summing these annual estimates. A significant benefit of improving air quality is
the avoidance of these illnesses each year in the future.
2.6 Economic Valuation
Improving air quality can be costly. Benefit/cost analysis is based on the concept of determining
the optimum balance of benefits and costs to advance the public interest. Emission control costs
are measured in economic terms (e.g., the costs of improved vehicle emission control systems or
cleaner fuels). Balancing of costs and benefits
10
is facilitated when both are expressed in
commensurate units. For this reason, avoided health damages need to be expressed not only in
physical terms, but in economic terms as well.
Estimates of damages are estimated for each of the four economic components listed in Section
2.1. Two of these components (i.e., health care resource utilization and lost productivity) involve
direct out-of-pocket costs. Economic coefficients for these damage components are derived from
market-based information (e.g., expenditure and wage data). Economic coefficients for the other
two components (i.e., risk of premature mortality and pain and suffering) are derived from
estimates of the willingness of people to pay (WTP) to reduce the risk of premature mortality and
pain and suffering.
While out-of-pocket losses involve financial transactions, this is not so with the latter two types

of economic damages. No financial transactions routinely occur in Ontario with premature
mortality and pain and suffering induced by air pollution. Several reasons account for the
absence of any direct financial compensation for these damages.

9
The term “case” refers to an individual illness incident or episode. For example, an asthmatic may suffer
an asthma attack. Each attack is considered to be a case or episode. A subsequent attack at a later time by
the same person is considered to be a separate episode. This study does not address chronic cardio-
respiratory illnesses which may be suffered by an individual person.
10
From a strict economic perspective, the objective of air pollution policies should be to achieve the level
of air quality that will yield the greatest long-term net benefit to the people of Ontario. Net benefit is the
difference between the total benefits of improved air quality and the costs of achieving this level. The
phrase “balancing benefits and costs” is used in this report to mean the need to evaluate benefits and costs
such that the greatest net benefit from air quality improvement will be achieved.
13
The courts routinely make awards for loss of life or pain and suffering where clear liability can be
established. In these cases, financial transactions regularly occur to compensate for loss of life
and pain and suffering. These awards are often quite substantial. With air pollution, significant
barriers to establishing clear liability exist. First, people are exposed to pollutants emitted from
multiple sources. Determining which emissions affected which people is difficult to establish.
Secondly, air pollution is a contributory factor to many cardio-respiratory illnesses. Cases of
these illnesses cannot be totally attributed to air pollution (except perhaps under extreme
circumstances like the 1952 London smog episode). Air pollution is a contributory factor, and
often a relatively subtle contributing factor, to a large number of cardio-respiratory illness cases.
Finally, environmental laws permit pollutants to be emitted to the air, making the activity legal.
In doing so, the financial liability of polluters is reduced significantly.
While all of these factors create significant barriers to financial transactions for premature
mortality and pain and suffering, the fact remains that real economic damages are suffered by
those afflicted with air pollution-induced illnesses. These damages are significant. Furthermore

from an economic analysis perspective, damages from premature mortality and pain and suffering
can be, and should be, added to estimates of out-of-pocket economic losses in deciding on the
best environmental policy. Damage estimates in this report are presented for individual economic
components as well as for the combined total. Doing so allows separation of these different types
of damages. When comparing damages to the costs of pollutant emissions reductions, the total
damages is the correct measure to use.
The rationales for selecting these four economic components are set out following.
2.6.1 Health Care Resource Utilization
When people are ill, many require some type of health care service (e.g., doctor’s office visit,
emergency room treatment, hospitalization, medication). These demands on these health care
services increase health care resource utilization and the economic burden on society. Providing
health care services is a major cost in our modern society. An objective of this study is to
estimate the amount of these costs which are attributable to air pollution.