Steve Pye / Mike Holland NEC-PI Working Group, 19th June 2007 Costs and Benefits of Proposed Revisions to the National Emission Ceilings Directive Baseline and optimisation runs Steve Pye / Mike Holland NEC-PI Working Group, 19th June 2007

Baseline runs

Baseline runs Comparison of the health impacts associated with current legislation (CLE) in 2020, and situation with no abatement controls (NOC) Two current legislation baselines: National activity projections PRIMES coherent projection Pollutant concentration data outputs from GAINS model Restricted to health impact quantification – as necessary metrics for quantitative impact assessment of agricultural / materials unavailable

Headline numbers (€ billion) Cost €77.4 €80 billion – National CLE €60 billion – PRIMES CLE Cost €66.1 PRIMES coherent baseline lower as includes significant climate policy action

Selected health impacts in 2020, EU27 – NOC vs. CLE NATIONAL PROJECTION BASELINE – 80% reductions for PM; 40% for ozone

Annual (€) per capita health benefits associated with current legislation Similar to previous graph – as mortality drives the health effects Implementation of CLE in Europe – highest per capita benefits in BE, DE, LU, NL; lower benefits in Scandinavia, Baltic States, Ireland, CY / MT

Optimisation runs

Optimisation runs Assessment of benefits of meeting TSAP (modified) and EP (proposed) targets Benefits estimated relative to benchmark version of CLE baseline; assumes Euro VI measures for heavy duty vehicles and meets the NEC 2010 emission ceilings Results presented for both national and PRIMES coherent projections 4 scenario combinations – National / PRIMES and TSAP / EP

Headline numbers The benefit to cost ratio for the PRIMES coherent scenario are much higher (more favourable) than the National Projections scenario, even though absolute benefits are lower, because of the much lower costs associated with the targets. It is anticipated that the lower costs with the PRIMES coherent analysis (and higher benefit to cost ratio) occur because the measures introduced in addition to climate change policy are more cost-effective measures (i.e. it avoids the need to introduce measures high up the cost curves). The converse is true for the national projection EP target (which has the lower ratio of benefits to costs). Costs of measures to reduce SO2 / PM very low – as much less of these fuels in energy mix. Difference between benefits estimated for national and PRIMES projections ‘estimated’ to be co-benefits of climate policy in coherent projections (~€29- 90 billion) Higher reductions already realised under the PRIMES coherent baseline due to climate policy

Annual health benefit numbers (non-monetised) National Ozone related impacts – 11% - 14% reduction PM related impacts – 25% - 28% reduction PRIMES Ozone related impacts – 5% - 8% reduction PM related impacts – 11% - 16% reduction NATIONAL: Ozone related impacts – 11% - 14% reduction PM related impacts – 25% - 28% reduction PRIMES: Ozone related impacts – 5% - 8% reduction PM related impacts – 11% - 16% reduction

Total annual health damages / benefits (€ billion)

Monetised health impacts under CLE case (low / high) Difference between national and PRIMES projections estimated to be co-benefits of climate policy

Country benefit-cost ratio – National projection: TSAP targets (low estimate) EU27 value IE / CY – below 1. Other low B-C ratios for Scandinavian countries; all higher using higher estimate EU average – 4.5 Why is Malta so high?

Country benefit-cost ratio – PRIMES coherent: TSAP targets (low estimate) EU27 value IE / CY – below 1. Other low B-C ratios for Scandinavian countries; all higher using higher estimate EU average – 4.5 Why is Malta so high?

Conclusions Benefits of meeting TSAP targets exceed costs by 4.5 – 14.5 times, depending on valuation estimate under national projection B-C ratio under PRIMES coherent case much higher – due to much lower costs (due to climate policy / lower cost measures taken) PRIMES coherent case illustrates the large co-benefits to air quality improvements from climate policy B-C ratio lower for the EP case, as measures more costly to ensure additional emission reductions

Next steps Uncertainty assessment Inclusion of macroeconomic analysis using GEM-E3 – impacts on GDP / employment etc