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AEAT/ ED48763001/Climate policy co-benefits. Issue 6 Assessing the air pollution benefits of further climate measures in the EU up to 2020 November 2006 Service Contract for Carrying out Cost-Benefit Analysis of Air Quality Related Issues, in particular in the Clean Air for Europe (CAFE) Programme AEAT/ ED48763001/Climate policy co-benefits. Issue 6 Title Assessing the air pollution benefits of further climate measures in the EU up to 2020 for Service Contract for carrying out cost-benefit analysis of air quality related issues, in particular in the clean air for Europe (CAFE) programme Customer European Commission DG Environment Customer reference ENV.C.1/SER/2003/0027 Confidentiality, copyright and reproduction This document has been prepared by AEA Technology plc in connection with a contract to supply goods and/or services and is submitted only on the basis of strict confidentiality. The contents must not be disclosed to third parties other than in accordance with the terms of the contract. Validity Issue 6 File reference Reference number AEAT/ ED48763001/ Climate policy co-benefits AEA Technology Environment The Gemini Building, Fermi Avenue Harwell International Business Centre Didcot, OX11 0QR, United Kingdom Telephone +44 (0) 870 190 6554 Facsimile +44 (0) 870 190 6318 Email: stephen.pye@aeat.co.uk AEA Technology Environment is a business division of AEA Technology plc AEA Technology Environment is certificated to ISO9001 & ISO 14001 Reviewed by Name Mike Holland (EMRC) Steve Pye (AEA Technology) Steve Pye Approved by Steve Pye Authors Signature Date 08/11/06 AEAT/ ED48763001/Climate policy co-benefits. Issue 6 Executive Summary Action to reduce CO2 emissions has the potential to also reduce emissions of various regional air pollutants, such as SO2, NOx and fine particles. This can arise, for example, as a result of fuel switching or through the implementation of various energy efficiency measures. This report assesses the co-benefits of climate policy scenarios via changes in emissions of NH3, NOx, PM2.5, SO2 and VOCs to get an understanding of the magnitude of these benefits. Three levels of climate policy are considered using the CAFE methodology against scenarios for the year 2020: • Carbon price of €0; • Carbon price of €20 and • Carbon price of €90. All three scenarios describe emissions assuming that current legislation (CLE, the baseline for the CAFE assessments) for air pollutants is in place. As a sensitivity these three carbon price scenarios were combined with the Maximum Feasible Reduction case (MFR) for air pollutants according to the RAINS model at price levels of €20 and €90/t CO2. For the Current Legislation Scenario, moving from a shadow carbon price of €0/t CO2 to €20/t CO2 leads to a fall in emissions of 390 million tonnes for CO2, 277 thousand tonnes (kt) for NOx, 43 kt for PM2.5 and 397 kt for SO2 by 2020. Increasing the price from €20/t CO2 to €90/t CO2 would lead to a further increase of 563 million tonnes for CO2, 460 thousand tonnes (kt) for NOx, 38 kt for PM2.5 and 418 kt for SO2 by 2020. An increase in price from €0/t CO2 to €90/t CO2 would thus lead to a total fall in emissions of 953 million tonnes for CO2, 737 thousand tonnes (kt) for NOx, 81 kt for PM2.5 and 815 kt for SO2 by 2020. The following figure summarises these results in terms of the % change in emissions of each pollutant across the EU25 relative to a price of €0/t CO2 t in 2020 under the Current Legislation Scenario. i AEAT/ ED48763001/Climate policy co-benefits. Issue 6 105 100 95 90 85 CO2 80 75 SO2 NOx PM2.5 70 €0/t CO2 €20/t CO2 €90/t CO2 Estimated % reduction (in 2020 under CLE scenario) in emissions of CO2, NOx, PM2.5 and SO2 in 2020 in response to increasing levels of climate policy. Emissions of NH3 and VOCs are little affected by climate policy. The PRIMES model, run at the National Technical University of Athens (NTUA), was used to estimate the effect of CO2 prices on energy consumption and fuel use in Europe. The outputs from PRIMES were used by the RAINS model to forecast emissions of NH3, NOx, PM2.5, SO2 and VOCs for each country in the EU25 for baseline conditions under current legislation (CLE) for 2020 with shadow carbon prices of €0, €20 and €90/t CO2, and also for scenarios describing the maximum feasible reduction (MFR). These emission estimates fed into the EMEP Eulerian model, which models the associated changes in air pollution concentrations. The changes in concentration levels (relative to the baseline) were then input into the CAFE cost-benefits model; using concentration-response functions, the health impacts were estimated. The CBA analysis enables a link between changes in NOx, PM2.5 and SO2 and various health impacts including mortality, the incidence of bronchitis, hospital admissions for respiratory and cardiac illness and various other effects such as restrictions to daily activity and increased incidence of asthma symptoms. Quantified impacts are monetised using values agreed with stakeholders during the CAFE programme. Results are shown in the figure below. The low-high ranges reflect sensitivity to the approach used to characterise mortality impacts. ii AEAT/ ED48763001/Climate policy co-benefits. Issue 6 Health benefits, €billion/year 60 50 Low High 48.1 40 27.8 30 20.4 20 10 14.7 8.5 6.2 0 €0 to €20/t CO2 €20 to €90/t CO2 €0 to €90/t CO2 Annual co-benefits (€ billions) for climate policy under the CLE scenario in terms of the change in health impacts as a result of reduced emissions of NOx, PM2.5 and SO2 in 2020 for the EU-25.1 Results indicate that climate policy is likely to generate ancillary benefits through reductions in regional air pollutants of several €billion each year. The analysis indicate that the cobenefits can be significant and vary between nearly 10 to just under 50 billion € per year depending on how vigorous a climate policy is pursued. The analysis does not include all impacts of NOx, PM and SO2, perhaps most significantly the effects of SO2 and NOx on ecosystems but also impacts on materials and crops are also missing. This clearly biases the results to underestimation of benefits. 1 Co-benefits under the Maximum Feasible Reduction Scenario according to the RAINS model are smaller as there is significantly less emission of NOx, etc., at the starting point. iii AEAT/ ED48763001/Climate policy co-benefits. Issue 6 Contents THE CO-BENEFITS OF CLIMATE POLICY ................................................................. 1 INTRODUCTION ................................................................................................................... 1 SCENARIOS INVESTIGATED .................................................................................................. 1 METHODS ........................................................................................................................... 2 RESULTS............................................................................................................................. 2 DISCUSSION ...................................................................................................................... 11 REFERENCES .................................................................................................................. 13 APPENDIX 1 CO-BENEFITS OF CLIMATE POLICY UNDER MAXIMUM FEASIBLE REDUCTION (MFR) SCENARIO ............................................................... 14 APPENDIX 2 EMISSIONS FOR THE CLIMATE POLICY ANALYSIS. .................... 17 iv AEAT/ ED48763001/Climate policy co-benefits. Issue 6 v AEAT/ ED48763001/Climate policy co-benefits. Issue 6 The co-benefits of climate policy Introduction Action to reduce CO2 emissions has the potential to also reduce emissions of various regional air pollutants, such as SO2, NOx and fine particles. This can arise, for example, as a result of fuel switching or through the implementation of various energy efficiency measures. Past analysis of the benefits of abating the CAFE pollutants (NH3, NOx, PM2.5, SO2 and VOCs) has started from a baseline scenario where CO2 emissions are stabilised by 2020, with an estimated shadow price for CO2 control of €20/t. The question then naturally arises of what additional benefits via further reductions in the CAFE pollutants could accrue from different levels of climate policy. Scenarios investigated As part of the CAFE work, a set of emission scenarios were developed based around three different prices for CO2, €0/t (IIASA, 2005), €20/t and €90/t (IIASA, 2004). The PRIMES model, run at the National Technical University of Athens (NTUA), was used to estimate the effect of these prices on energy consumption and fuel use in Europe. For this analysis PRIMES implicitly assumed that the overall economy did not change (i.e. Europe produces the same amount of cement, steel, etc. in each model run) with exactly the same GDP growth between 2000 and 2020. This would of course not be the case if it was known that CO2 would cost €90/t. The European economy would be likely to move towards different production modes, producing less energy intensive goods. One effect of this is that the model runs presented here are likely to provide an underestimate of ancillary benefits in Europe via reductions in emissions of the CAFE pollutants. A general equilibrium analysis should ideally be performed to characterise these broader impacts on the economy. The outputs from PRIMES were used by the RAINS model to forecast emissions of NH3, NOx, PM2.5, SO2 and VOCs for each country in the EU25 for baseline conditions under current legislation (CLE) for 2020 with shadow carbon prices of €0, €20 and €90/t CO2, and also for scenarios describing the maximum feasible reduction (MFR) in each pollutant according to the measures included in RAINS for shadow carbon prices of €20 and €90/t CO2. The results associated with the MFR scenario are shown in Appendix 1. Total emissions are shown in Table 1 and the change in emissions with increasing carbon price is shown in Table 2. National emissions of each pollutant are given in Appendix 2. Table 1. Total emissions (kt) in 2020 under the scenarios investigated. Pollutant NH3 NOx PM2.5 SO2 VOCs CLE, €0/t CO2 3,687 12,114 1,364 6,729 6,135 CLE, €20/t CO2 3,687 11,837 1,321 6,332 6,139 CLE, €90/t CO2 3,677 11,377 1,283 5,914 6,107 1 AEAT/ ED48763001/Climate policy co-benefits. Issue 6 Table 2. Change in emissions (kt) in 2020 with increased CO2 price. Pollutant NH3 NOx PM2.5 SO2 VOCs CLE, €0 to €20/t CO2 0 277 43 397 -4 (increase) CLE, €20 to €90/t CO2 10 460 38 418 32 CLE, €0 to €90/t CO2 10 737 81 815 28 Methods The emissions data derived by RAINS for each scenario were used in the EMEP model to estimate the concentration and deposition of air pollutants across Europe on a 50 x 50 km grid. The analysis presented here then applied the CAFE methodology (Holland et al, 2005a, b; Hurley et al, 2005) to the EMEP outputs to quantify the health impacts arising from emissions of each pollutant, mediated through exposure to primary and secondary particles. Effects on both mortality and morbidity were quantified. Sensitivity analysis on mortality characterisation and valuation provides a range of estimates, as follows: • CAFE-low: Quantifies mortality as years of life lost (YOLL) and applies the median estimate of the value of a life year (VOLY)2. • CAFE-low/mid: Quantifies mortality as deaths and applies the median estimate of the value of a statistical life (VSL). • CAFE-high/mid: Quantifies mortality as YOLL and values it using the mean estimate of the VOLY. • CAFE-high: Quantifies mortality in terms of deaths and values it using the mean estimate of the VSL. The analysis presented here did not include quantification of various other impacts associated with emissions of NOx, PM and SO2. The most significant omissions are likely to be: 1. Effects of acidification and eutrophication following emission of nitrogen and sulphur on ecosystems. 2. Effects of ozone on health, crops and ecosystems linked to emissions of NOx and VOCs. Following from the CAFE analysis it is very likely that these effects are small compared to the health impacts of exposure to PM. Note that effects on health and crops from ozone are usually included in the CAFE analysis. 3. Damage to materials. Results Estimates of health impacts from exposure to primary and secondary particles are shown in Table 3. Health impacts are subsequently shown in monetary equivalent in the following tables. Total estimates of annual damage are given in Table 4. Incremental benefits arising from the changes in CO2 price are shown in Table 5. Results at the national level are shown in Table 6 to Table 9 for the CAFE-low and CAFE-high assumptions. Results have been 2 More complete discussion of mortality valuation is given in Volume 2 of the CAFE-CBA methodology report (Hurley et al, 2005), and in the CAFE-CBA scenario analyses (Holland et al, 2005d, e). 2 AEAT/ ED48763001/Climate policy co-benefits. Issue 6 checked against a simplified method, using marginal damage estimates generated using the CAFE methods, and good agreement has been found (Holland and Pye, 2006). Table 3. Estimated annual health impacts in 2020 (EU25) via population exposure to primary and secondary particles under current legislation (CLE) scenario based on different prices applied to CO2 (thousands). Health endpoint Chronic Mortality – thousand years of life lost (YOLLS)1 Chronic Mortality – thousand deaths1 Infant Mortality (0-1yr) – thousand deaths Chronic Bronchitis (thousand cases, adults) Respiratory Hospital Admissions (thousands) Cardiac Hospital Admissions (thousands) Restricted Activity Days (thousands) Respiratory medication use (thousand days, children) Respiratory medication use (thousand days, adults) Lower respiratory symptom days (thousands, children) Lower respiratory symptom days (thousands, adults) €0/t CO2 €20/t CO2 €90/t CO2 2,484 2,369 2,285 265 0.34 125 41 25 216,631 252 0.33 119 39 24 206,661 243 0.32 115 38 23 199,323 1,956 1,872 1,815 20,359 19,409 18,708 87,109 83,199 80,477 202,518 193,111 186,213 1 For chronic mortality (PM), two alternative values are presented, based on quantification using years of life lost and numbers of premature deaths). The two measures are not additive. Table 4. Estimated annual damage in 2020 (EU25) via population exposure to primary and secondary particles under current legislation (CLE) scenario based on different prices applied to CO2. Sensitivity case €0/t (€M) €20/t (€M) €90/t (€M) CAFE-low CAFE-low/mid CAFE-high/mid CAFE-high 183,084 312,573 345,197 587,298 174,606 297,824 329,219 559,544 168,410 286,996 317,556 539,170 Table 5. Incremental benefits in 2020 with increasing price of CO2 under the CLE scenario. Sensitivity case €0 - 20/t (€M) €20 - 90/t (€M) €0 - 90/t (€M) CAFE-low CAFE-low/mid CAFE-high/mid CAFE-high 8,479 14,749 15,979 27,754 6,196 10,828 11,663 20,374 14,674 25,577 27,641 48,128 3