A CGE analysis of the health co-benefits of GHG emission reduction strategies in the UK

High and increasing greenhouse gas (GHG) emissions have remained an urgent priority on the international political agenda since the first Assessment Report of the Intergovernmental Panel on Climate Change (IPCC 1990) and evidence suggests that immediate global action to curb GHG emissions is necessary. The Stern report (Stern 2007) outlined some of the sources of and their relative contributions to overall GHG emissions as power (24%), buildings (8%), transport (14%), agriculture (14%) and land use (18%). In alignment with this suggestion, Haines et. al. 2009 showed that by targeting the domains of transport, built environment, electricity generation and agriculture for GHG emission reduction policies, health co-benefits are likely to result but have not been considered in analyses to date. The CGE modelling exercise described in this paper analyses three UK based scenarios which are designed to meet sector specific CO2 reductions which conform to UK GHG emission targets for 2030 to show the potential value of accounting for the economic impact of health co-benefits. The three scenarios described below are implemented in a recursive dynamic version of the IFPRI standard CGE model which is run from the period 2010-2030. The underlying social accounting matrix for the UK is constructed from the GTAP database and the modelling scenarios consider active transportation, housing insulation and ventilation control and healthier eating. The active transport scenario is a mixed mitigation scenario which targets the reduction in GHG emissions from reduced private transportation use in urban areas. It involves a 35% demand reduction for urban motorized transport services (by the introduction of a road pricing scheme). An urban road pricing scheme, mirrored by a tax on private transportation services, increases the cost of driving in urban UK areas. The implied reduction in urban motorized transportation and, therefore, congestion, is projected to lead to a 16% improvement in fuel efficiency for urban private motorized transportation which is shown to correspond to a 13.3% reduction in household demand for – and a 6% fuel efficiency gain in household production of economy-wide private transportation services. The health effects from the transportation scenario are generated from two main sources: positive health effects from increased physical activity, and negative health harms from increased road accidents and injuries due to increased use of walking and cycling with estimates taken from a range of systematic reviews of the effects of sedentary lifestyle on health. The housing insulation scenario simulates a programme of investment in housing insulation and ventilation control. This programme conforms to the UK coalition government’s “green deal” initiative to support energy efficiency measures for households is utilised and parameter estimates are taken from an adapted version of an environmental housing insulation model employed by the Department of Energy and Climate Change (DECC 2011). The scenario involves a gradually increasing dynamic 2011-2030 growth path for productivity gains in household production of heating services, supported by a dynamic sequence of unit insulation investment costs. The health co-benefits from the housing insulation scenario are estimated from reduced exposure to cold and to indoor and outdoor pollutants. The healthier eating scenario targets the agriculture sector and a fat tax on saturated fat is used to reduce consumption of meat and dairy products by 30% and reduce GHG emissions associated with their production. The health co-benefits from this scenario are estimated from reduced exposure to saturated fat resulting from healthier eating. The health effect estimates associated with each of the above scenarios were estimated by the WHO comparative risk assessment approach and distributed in this analysis over a 20 year horizon. The resulting dynamic patterns of health effects, including Years Lived with Disability (YLD) and Years of Life Lost (YLL), were used to derive (1) changes in the effective labour force (based on reduced YLD and YLL for the working age population corrected for gender-specific labour market participation rates), (2) changes in social security transfers including reduced labour market payments (based on reduced YLD for the working age population) and increased pension payments (based on reduced YLL for the old-age population). In addition, changes in healthcare costs were measured on the basis of incidence numbers. For each illness (with the exception of road traffic injuries) a disease-specific sigmoid curve was used to determine the lag time between the implementation of an intervention and the health co-benefits (or harms) which result. Health harms from increased road traffic injuries (attributable to the increased number of pedestrians/cyclists from the intervention) are assumed to occur linearly. The results of this study are yet to be finalised, but preliminary results show that the health co-benefits arising from GHG reduction strategies, when isolated from the non-health effects, can generate substantial macro-economic benefits and large gains to the workforce in terms of additional person years. The active transport scenario yields approximate 20 year macroeconomic gains of £23bn from labour force gains and reductions in healthcare expenditure, despite an old age bias of health benefits resulting in increased social security payments to those surviving into pensionable age. For the home insulation and healthy diet scenarios macroeconomic gains are more modest, £250m and £3.8bn respectively. In terms of overall macroeconomic effects the mixed mitigation and abatement (Active Travel) scenario leads to a welfare gain (£10.2bn), the pure abatement (Housing Insulation) scenario leads to a welfare loss (£24.8bn) and the pure mitigation (Healthy Diet) scenario, as might be expected from the use of a blunt fat tax, leads to a large aggregate welfare loss (£96.7bn), although sensitivity analysis shows this loss could be greatly reduced if a high level of substitutability could be shown between fruit and vegetables and meat and dairy products. Final results, together with more details will be provided at the conference, but current results suggest that GHG reduction strategies could yield positive health-related economic outcomes which could help to offset the costs of reducing GHG emissions. Given the increasing pace of climate change and the prospects of profound, wide ranging damage to health, the economy and the environment, policymakers should urgently implement deep cuts in emissions which capitalise on the potential for improving health and stimulating the economy by maximising the marginal efficiency gains, and consider abatement as part of any strategy to cut emissions.