World Resources 1996-97
(A joint publication by The World Resource Institute, The United
 Nations Environment Programme, The United Nations Development
 Programme, and the World Bank)
 (Edited by Dr. Róbinson Rojas)

1. Cities and the Environment

ECONOMIC COSTS OF URBAN ENVIRONMENTAL DEGRADATION 

In addition to their toll on human health and natural resources, urban environmental problems exact economic costs as well, some direct, some indirect. All told, these problems can significantly undermine the productivity that urbanization fosters. Some of these costs are relatively simple to calculate, such as the medical costs of treating pollution-related illnesses. But the majority prove far more problematic.

Environmental problems that affect human health, for instance, are often measured in terms of lost worker productivity. But economic losses encompass more than losses in productivity or output as conventionally measured. A loss of a working day due to pollution- caused health problems is an economic cost, but so is ill health unrelated to work loss, as well as the loss of an amenity such as the pleasure of a natural area, or lost leisure time spent in traffic jams. Valuing health symptoms and risks of mortality in economic terms is especially controversial because it rests on assumptions about the value of a human life.

A handful of studies in recent years give an indication of the economic losses incurred by urban environmental degradation. In Mexico City, economic damages due to the health impacts of air pollution are estimated at $1.5 billion per year. Particulates are estimated to cause 12,500 extra deaths and 11.2 million lost workdays per year, both due to respiratory illnesses. Because of excessive exposure to lead, about 140,000 children suffer a reduction in IQ and agility--with implications for adult productivity (185). Problems of inadequate infrastructure show up in direct economic costs as well. In Jakarta, households spend more than $50 million per year to boil water for drinking--an amount equal to 1 percent of the city's gross domestic product (186).

Even more vexing is gauging the monetary costs of the impact of cities on surrounding ecosystems. Yet they, too, appear to be substantial. Ozone damage to U.S. crops, for example, is estimated to cost several billion dollars per year (187). Often the economic value of the services ecosystems provide are apparent only after they have been lost. In East Calcutta, for instance, the filling of 4,000 hectares of lagoons and wetlands not only resulted in an annual loss of some 25,000 metric tons of fish but also caused local flooding after the rains (188) (189). More difficult still to capture in monetary terms are the amenity losses associated with urban environmental degradation--for instance, the pleasure that is lost when a view is degraded or a pristine beach is spoiled.

Impacts on human health and degradation of the natural resource base combine to undermine a city's economic productivity. In addition to the increased cost of treating illness, health problems reduce productivity through lost workdays, lost educational opportunities, and shorter working lives (190). When the natural resources in the surrounding area are exhausted or degraded, cities must draw on them from further away, at increasing cost.

The productivity of cities also depends on a reliable and well- maintained urban infrastructure. When women have to devote considerable amounts of their time to fetching water from distant standpipes or disposing of household wastes, they have less time for income-earning activities. For business as well, dependable supplies of power and water, communications, and transportation networks can raise output and lower production costs. Infrastructure shortages, or intermittent failures in delivery, by contrast, can exact severe economic losses (191).

One notable example of infrastructure failure is congestion. Congested city streets slow the movement of goods and services and generally increase the price of doing business in cities. Not only does traffic congestion allocate time to unproductive waiting, but it also results in inefficient fuel use and worsening air pollution. Indirectly, congestion also reduces productivity by adding to workers' stress and aggravation.

The costs of congestion are significant; however, as with all cost estimates, they vary widely according to the assumptions used to calculate them. The cost of traffic congestion in Bangkok, for instance, varies from $272 million to more than $1 billion per year, depending on the value imputed to time stuck in traffic (192). Conservative estimates for losses due to congestion in a number of Asian cities are shown in Table 1.5 (193). In the United States, estimates of the cost of congestion (from traffic delays and wasted fuel) in urban areas range between $35 billion and $48 billion (194) (195) (196). Other estimates suggest that the United States loses roughly 2 percent of its gross national product to congestion and that the United Kingdom loses about 5 percent (197).

References and Notes


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