Methods for Benefits Assessment and CBA for the NEC Directive Revision Mike Holland, EMRC Steve Pye, AEA Energy and Environment With acknowledgements to Paul Watkiss, PWA; Fintan Hurley, IOM; and Alistair Hunt, Metroeconomica

Basis for quantification of benefits General methods developed since 1991 under the EC DG Research ExternE Programme Applied in preparation of earlier Directives and other work for DG Environment and UNECE: Air quality directives on CO, benzene, ozone, PAHs Acidification strategy Original NEC Directive Gothenburg Protocol Waste Incineration Directive Position on PVC Waste Management etc.

Specific methodology developed 2004/5 under the CAFE Programme Quantification of benefits under CAFE and for the revision of the NEC Directive Specific methodology developed 2004/5 under the CAFE Programme Reflecting latest European research on impact assessment and valuation Methods used for NEC analysis are the same as those subjected to extensive discussion and international peer review under CAFE

Available reports Reports available at http://cafe-cba.aeat.com/ Volume 1: Overview Volume 2: Health impact assessment and valuation Volume 3: Uncertainty analysis

The role of CBA in the NEC analysis Scenario development and target setting EMEP Modelling of pollutant concentration across Europe on 50 x 50 km grid Other models TREMOVE PRIMES Etc. RAINS model Processing of pollutant data Assessment vs. targets, e.g. critical loads exceedance Cost analysis CBA Quantification of impacts Health, crops, materials, social and macroeconomic effects, etc. Monetisation of impacts where possible Comparison of quantified costs and benefits Uncertainty analysis - Related activities EC DG Research Programmes Working Groups under Convention on Long Range Transboundary Air Pollution (CLRTAP) WHO Europe commentary on air pollution impacts Activities specific to CAFE

The impact pathway approach

Health Impacts quantified Ozone PM2.5 Acute effects on mortality Acute effects on morbidity Hospital admissions, restricted activity days, use of respiratory medicine, etc. PM2.5 Chronic effects on mortality (infants and those > 30 years) Chronic effects on morbidity Bronchitis

Health damage Population: UN sources Sensitivity adjustments: Epidemiological literature Response functions: Agreed by WHO working group convened under CAFE Valuation: Review for CAFE Potentially significant unquantified effects Effects of long term exposure to ozone Effects of secondary organic aerosols

Crop damage Ozone effects on crop production Crops database: SEI Response functions: ICP Vegetation Crop prices: FAO website Potentially significant unquantified effects Ozone damage to pasture Visible injury to crops during ozone episodes Photo from Prof. D. Velissaroiu, Kalamata, Greece

Materials damage Acid damage to utilitarian buildings ICP Materials Ozone damage to rubber (insignificant) Potentially significant unquantified effects Damage to cultural heritage

Ecological damage Not quantified in the benefits analysis, simply take outputs from GAINS Stakeholders need to consider how important they are in appraisal of final results Acidification in 2020 Eutrophication in 2020

Uncertainty analysis Uncertainty analysis is critical for the comparison of costs and benefits Methods account for three types of uncertainty Statistical variation Sensitivity to methodological assumptions Inherent biases in the models used

Uncertainty analysis – first steps (example from the CAFE-CBA, not NEC Directive analysis) Takes account of statistical uncertainties in input parameters and key methodological assumptions Provides output in terms of probability distributions for each assumption set Example shows probabilities for CAFE scenario B (medium ambition) VOLY, median VSL median VOLY, mean VSL mean

Example further output of uncertainty analysis (again from CAFE-CBA) Describe the probability of deriving a net benefit accounting for sensitivity to: Methodological assumptions Assumptions on uncertainty in cost estimates Example shows probabilities for CAFE scenario C (high ambition)

Summary Methods developed since the early 1990s CAFE-CBA methodology, as used here, refined in collaboration with WHO, LRTAP ICPs, etc. and subject to international peer review Similar approaches used elsewhere, e.g.: USEPA Some EU Member States Analysis quantifies impacts on health, crops and materials in monetary terms Reports ecological risk via critical loads/levels exceedance calculated by GAINS Methods include uncertainty analysis (statistical, methodological, modelling bias)