Cost-benefit analysis can weigh the economic benefits of policies that improve the environment against the costs to society of such policies. The OECD helps policymakers stay at the forefront of developments to this approach by offering guidance on tools and methodologies, while providing insights on best practices for environmental policy assessment
Environmental cost-benefit analysis and valuation
Policymakers often face the challenging task of weighing the costs of new policies against their potential economic, environmental and health benefits. In this context, cost-benefit analysis and economic valuation are essential tools for creating and maintaining effective policies. The OECD has a longstanding track record of applying these approaches to support and inform decision-making across its Member Countries.
Key messages
Chemicals play an important role in the everyday life of people around the world. However, they must be soundly regulated. The OECD is working to develop internationally comparable values on the economic benefits of policies seeking to reduce negative chemicals-related impacts to the environment and human health. Policymakers can use these data to set chemicals at their proper stringency.
Policymakers need reliable data to assess the economic benefits of health improvements of policies. The Value of Statistical Life concept has become a cornerstone in policy assessments to gain a better measure of the expected benefits of a policy in terms of lives saved. The OECD helps governments understand expected benefits in terms of lives saved of any policy that involves changes in mortality risk, from transport safety laws to air quality improvement initiatives.
Context
Citizens place a high value on avoiding premature death
When considering new policies that affect human health and well-being, it is essential to consider both potential benefits and costs and express these in monetary terms when possible. The value of statistical life represents the amount an average individual would be willing to reduce their risk of a fatality. It is an increasingly common part of cost-benefit analyses that can be used to quantify the economic benefits of policies that impact mortality. Across six country groupings, the value of statistical life estimates range from about USD 1 million in low- and middle-income countries to between USD 7.1 Million and USD 8.5 Million for OECD and high-income countries.
People are willing to spend a significant amount to protect their health
The project assessed people’s willingness-to-pay to reduce their risk of developing or worsening ten chemicals-related health effects. Willingness-to-pay values were also used to calculate the societal benefit of avoiding one case of each condition.
Across the health effects surveyed, the average societal benefit of avoiding a single case ranges from USD 5 000 on the low end when it comes to skin sensitisation to USD 1 273 000 on the high end for very low birth weight. On average, people are also willing to pay USD 667 annually over 5 years to avoid the loss of one IQ point in a child. Using these data, policymakers can quantify the economic benefits of avoiding a given condition and compare them against the costs of implementing chemicals regulations.
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