The methodology and results of a cost-benefit analysis of air quality control during oil production in the Caspian Region in Kazakhstan are presented. The benefits are defined as the decrease in health costs from reduced air pollution. The health costs are the income losses which depend on the attributes of illness (duration and number of symptoms) and on respondents' characteristics such as age, education, and gender. The results are obtained by comparing two cities, one with a high rate of pollution due to oil extraction, Atyrau, and the other, Astana, without. The incremental health costs for Atyrau caused by the oil production industry are estimated to be at least 5.1 million USD per year. The annual benefits of investments into abatement technologies are at least five times higher than the virtual annual abatement costs of about 0.46 million USD. (c) 2003 Elsevier Ltd. All rights reserved.