CAFE CBA Paul Watkiss and Steve Pye, AEA Technology Environment Mike Holland, EMRC Fintan Hurley, IOM Alistair Hunt, Metroeconomica

Presentation Update on the CBA project Presentation of CAFE baseline – data and results Scenario analysis results

CAFE CBA Project Aim Quantify health / environmental effects of air quality policy Health (HIA), crops, materials, ecosystems, wider social-economic Monetise where possible Compare costs and benefits Project includes ‘Extended cost-benefit analysis’ Ensure capture all effects, including those we cannot monetise Uses pollution data generated by RAINS optimisation*

Update on CBA project since last SG Draft Final methodology report completed in November 2004 Comments and updates in December. Revised report: Volume 1 (Methodology) finalised and distributed to WG TS Volume 2 (Health) finalised Volume 3 (Uncertainty) in preparation

Update on CBA Model Study developed CAFE CBA model (GIS) Health module operational - baseline analysis completed /validated Quantifies and values annual mortality & morbidity from PM & ozone Crop and material modules running – in process of validating Finalising extended CBA (ecosystems, cultural heritage, other) Health module used to run the scenarios (PM exposure gap closure, limit values)

Baseline

CAFE CBA Baseline Draft version circulated to steering group Time profile with 1997 meteorological data for 2000 and for 2020 with Current Legislation (with climate policy) (CLE CP) Difference gives benefits of implementing current legislation Country specific tables produced

Health Analysis – Impacts Included O3 PM

Metrics – Chronic Mortality PM RAINS estimates change in life expectancy, measured in months Associated with a sustained pollution level, looking at effect over life-time of population alive, plus new cohorts to 2075 Represents the total stock change Can express as total loss in life expectancy = 225 million Years of life lost CBA needs an annual metric to compare to annualised costs CBA works with an annualised years of life lost (3 million YOLL per year) to compare to an annualised cost. However, due to valuation issues, also quantify annual number of ‘premature attributable deaths’ (0.3 million per year) Two alternative metrics for chronic mortality quantification in CBA

Summary – Health Impacts – EU25 O3 PM

Summary Points PM dominates mortality PM also dominates morbidity , though ozone more important Morbidity impacts are very significant Tens/hundred of millions of cases across EU25 from both PM and ozone For both ozone and PM, there are significant reductions in annual impacts over the period 2000 to 2020 But….significant health impacts remain in 2020

Valuation of Chronic Mortality - Metrics WHO guidance recommends quantification of change in longevity aggregated across the population ‘Years of Life Lost’ (YOLL) Can monetise based on the ‘Value of a Life Year’ (VOLY) However, remains some debate on how mortality should be valued Alternative is to use ‘Value of Statistical Life (VSL), applied to the change in number of deaths (premature attributable deaths) Two approaches have contrasting strengths and weaknesses

Health Valuation Peer review suggested that both the VSL and the VOLY approaches should be used to show transparently and show uncertainty Base values on recent NewExt study (DG Research). Study presented both a ‘mean’ and ‘median’ estimate Four alternative values for chronic mortality effects from PM To simplify presentation – range of ‘low’ and ‘high’ estimate Childhood mortality uses VSL. Ozone ‘acute’ mortality uses VOLY

Summary – Health Valuation – EU25 The annual impact (the benefit) of implementing current legislation up to 2020 is valued at between €89 billion to €193 billion PM (mortality) dominates the numbers

Distribution of Total Health Benefits (Million Euro) Current Policies from 2000 to 2020 by Member State (EU25) Low estimate (YOLL – VOLY median) High estimate shows same pattern of distribution

Distribution of Health Benefits (Euro per Person) Policies from 2000 to 2020 by Member State (EU25) Low Estimate (YOLL – VOLY median) High estimate gives a value of 430 Euro per person per year

Extended CBA Importance of effects cannot monetise, or cannot quantify Where benefits are lower than costs Are unquantified effects likely to contribute enough for benefits to exceed costs? Even when benefits are larger than costs Are unquantified effects likely to add significantly to confidence that benefits > costs? Are unquantified effects likely to change the ratio of benefits : costs significantly?

Extended - CBA –ratings Effect Preliminary rating Forests Effects of O3, acidification and eutrophication  Freshwaters Acidification and loss of invertebrates, fish, etc. Other ecosystems Effects of O3, acidification and eutrophication on biodiversity

Extended - CBA –ratings Effect Preliminary rating Health Ozone: chronic effects on mortality and morbidity  SO2: chronic effects on morbidity  Direct effects of VOCs Social impacts of air pollution on health Altruistic effects Materials Effects on cultural assets

Extended - CBA –ratings Effect Preliminary rating Groundwater quality and supply of drinking water Effects of acidification  Visibility Change in amenity Crops Indirect air pollution effects on livestock Visible injury following ozone exposure Interactions between pollutants, with pests and pathogens, climate... 

Final Steps to Complete the Baseline Waiting on some grid baseline data to allow calculation of materials and crops effects (SO2, AOT40) This will increase the ozone damages due to crop effects Import and report information on ecosystems in report so that all benefits are captured Finalise ‘Extended CBA’ Include uncertainty and sensitivity analysis – discussion of limitations

Scenarios

Analysis Use results of RAINS optimisation runs First scenarios on Gap Closure for PM exposure up to MTFR (without Citydelta, excluding road transport, PM and ozone) Second scenarios on Gap Closure for PM exposure and Limit values (with Citydelta, including ‘further road transport’, PM only) 1997 meteorology. Compared to 2020 baseline with CP Numbers are presented as benefit over baseline

PM Exposure gap closure First Scenarios: PM Exposure gap closure

First Scenario – Annual Health Benefits EU25 High benefits € 178 billion Low benefits € 57 billion Costs €39 billion Benefit over 2020 baseline w/CP. Gap Closure for PM exposure up to MTFR (without Citydelta, excluding road transport, PM and ozone).

Benefit to Cost Ratio – EU25 Interested if the benefit to cost ratio >1 (i.e. benefits larger than costs) Interested to see how ratio changes with measures, countries, etc As expect, see declining benefit to cost ratio as move towards MTFR ……What happens if consider each 25% separately (as increments)?

Incremental Annual Health Benefits EU25 High benefits Costs Low benefits Costs increase sharply above 75%: cost increase above low estimate of benefits

Incremental Health Valuation – EU25 Summary EU25 Health Valuation (Million) – benefits low & high estimate Point at which crosses will vary with different member states, and different policies

Most ambitious gap closure (70%) Second Scenarios Most ambitious gap closure (70%) Most stringent limit value (15.5 ug/m3)

Second Scenario Analysis RAINS optimisation (city delta included) Both with and without ‘further Road Measures’ in place Limited data analysis, as RAINS data still feeding through PM2.5 grid only, Health module only Baseline w/CP (2020) & Maximum Technical Feasible Reduction Estimate annual PM health benefits above baseline for: High ambition (70%) between CLE and MTFR Limit value 15.5 ug/m3

Annual PM Health Benefits EU25 €Billion Change in annual PM health benefits 39 to 124 billion for 70% gap closure with further road measures 44 to 140 billion for 70% gap closure without further road measures Compares to Benefit of MTFR of 56 to 176 billion

Benefit to Costs EU25 €Billion Compares to costs of gap closure With ‘further road transport’ in place = 5 billion annualised costs Without ‘further road transport’ = 10 billion annualised costs (additional cost of stationary measures to meet the environmental objectives) Ratio of benefits to costs = 8 to 24 (wRT) and 4 to 14 (without RT)

Annual PM Health Benefits EU25 €Billion Change in annual PM health benefits attributable 38 to 118 billion for 15.5 limit value with further road transport 46 to 142 billion for 15.5 limit value without further road transport measures

Total Health Benefits (Million Euro) Limit value and High Ambition by Member State With further road transport in place Low estimate

Total Health Benefits (Million Euro) Limit value and High Ambition by Member State Without further road transport in place Low estimate

Annual Health Benefits per Person (Euro per person per year) Limit value and High Ambition by Member State With further road transport in place Low estimate LV = Average 87 Euro per person per year EU25 70% = Average 84 Euro per person per year EU25

Annual Health Benefits per Person (Euro per person per year) Limit value and High Ambition by Member State Without further road transport in place Low estimate LV = Average 101 Euro per person per year 70% = Average 98 Euro per person per year%

Interim Conclusions Monetised benefits of ambition levels are very large Analysis shows the benefits are greater than costs by a significant margin at EU25 Benefit to cost ratio will vary at individual member state level, and for specific measures