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Holland

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									Cost-benefit analysis of the
    CAFE Programme
     Mike Holland, EMRC
   Gothenburg, October 2004




                               1
                   Project team
•   Paul Watkiss, Steve Pye, AEA Technology, UK
•   Mike Holland, Sheri Kinghorn, EMRC, UK
•   Fintan Hurley, Institute of Occupational Medicine, UK
•   Alistair Hunt, Anil Markandya, University of Bath, UK
•   Stale Navrud, ECON, Norway
•   Peter Bickel, IER, Germany
•   Elisabeth Ruijgrok, Witteveen en Bos, Netherlands




                                                            2
Overview of the CAFE analysis
                                                Activities specific to CAFE
   Scenario development
   and target setting


   EMEP                     RAINS model              CBA

   Modelling of pollutant   Processing of            Quantification of impacts
   concentration across     pollutant data              Health, crops,
   Europe on 50 x 50 km                                 materials, social and
   grid                     Assessment                  macroeconomic
                            vs. targets, e.g.           effects, etc.
                            critical loads
                            exceedance               Monetisation of impacts
   Other models                                      where possible
                            Cost analysis
   TREMOVE                                           Comparison of quantified
   PRIMES                                            costs and benefits
   Etc.
                                                         -
                                                     Extended CBA


 Related activities
 EC DG Research Programmes
 Working Groups under Convention on Long               -Range
        Transboundary Air Pollution (CLRTAP)                                     3
 WHO Europe commentary on air pollution impacts
            RAINS and CBA
• RAINS
  – Cost-effectiveness: What is the most efficient
    way of meeting pre-defined targets based on
    the measures included in the RAINS
    database?
• Cost-benefit analysis
  – Can it be demonstrated explicitly that it is
    worth meeting the targets?


                                                     4
            Similar CBA work
• Gothenburg Protocol (AEA Technology, 1999)
• NEC Directive (AEA Technology, 1999)

• Appraisals of the US Clean Air Act and similar
  legislation

• Various CBAs of the air
  quality daughter directives,
  some emission standards,
  etc.
                                                   5
   Conclusions of the CBAs of the
   NEC Directive and Gothenburg
• Estimated health damages were substantial,
  outweighing estimated costs of various
  scenarios across Europe
• Similarly, at the national level
• Chronic effects of
  secondary particles
  on mortality were
  the single largest
  quantified impact

                                               6
Main limitations of the CBAs of the
 NEC Directive and Gothenburg
• Effects of air pollution on ecosystems quantified
  only in terms of critical loads exceedance
• No assessment of damage to cultural heritage
• Very basic structure for dealing with unquantified
  effects
• No account taken of effects of primary particle
  emissions
• Very coarse resolution for modelling
• Non-marginal basis for modelling
                                                   7
 Improvement vs. the CBAs of the
  NEC Directive and Gothenburg
• Functions, valuations updated
• More effects considered (though only partial
  assessment of ecosystems, etc.)
• ‘Extended CBA’ for dealing with unquantified
  effects, describing effects in more detail
• Primary particles considered
• Finer resolution modelling
• Scenario and marginal basis for modelling
• Methods have been peer reviewed
                                                 8
     Review of the CAFE CBA
• Series of three draft reports
   – October 2003, February and June 2004
   – Workshops held in Brussels to discuss
• Discussion of methods at ICP meetings
• Formal peer review (summer 2004)
   – Alan Krupnick (Resources for the Future,
     Washington)
   – Bart Ostro (California Office of Environmental Health
     Hazard Assessment )
   – Keith Bull (UNECE CLRTAP Secretariat)
                                                             9
             Current status
• Methodology report currently being
  finalised
• Overall method finalised, but some
  revisions possible as work goes on
  – Definitions of impacts
  – Functions
  – Valuations


                                       10
  Monetised effects in the CBA
• Health – mortality and morbidity
• Crops – direct effects of ozone on yield
• Materials – erosion/corrosion of buildings
  in ‘utilitarian’ applications
• Macroeconomic impacts on the wider
  economy (from GEM-E3 model)

• Most are quantified using impact pathway
  approach
                                               11
Quantifying
pollutant
effects




              12
         What is left that is or may be
                  important?
•   Crop losses through visible injury
•   Crop losses through stimulation of pests
•   Impacts on natural ecosystems
•   Damage to cultural heritage
•   Effects on water quality
•   Indoor exposure to pollution
•   Impacts via social inequity
•   Restriction of visible range

• Treat using ‘Extended CBA’
                                               13
                              Key
                                    Costs
Outcomes of CBA                     Benefits




  Cost or
  Benefit
  €




            Case 1   Case 2    Case 3          Etc.
                                                 14
           ‘Extended CBA’
• Highlight effects that have not been
  monetised
• Describe them, quantitatively and
  qualitatively to the extent possible (now
  extending to all effects)
• Invite stakeholders to use their judgement
  on how inclusion of unquantified effects
  would affect the cost-benefit ratio
                                           15
    Example: Cultural heritage
Qualitative assessment
1. Define impacts.
2. Summarise strength of knowledge on link
   between pollution and effect.
3. Identify economic
   components of impacts
   (existence values,
   amenity value, repair
   costs, etc.).

                                             16
    Example: Cultural heritage
Semi-quantitative assessment
5. Use maps to show exceedence of critical load
   and possible improvement under scenarios
   being considered.
6. Refer to a selection of
   case studies that provide
   more detail.
7. Identify most sensitive
   components of European
   cultural heritage.
                                                  17
   Example: Cultural heritage
Semi-quantitative assessment
8. Provide review of existing economic
   research (does it point to
   values being significant?).
9. Comment on
   development of past
   trans-boundary air
   pollution legislation
   and importance of
   impacts on cultural
   heritage.                             18
    Example: Cultural heritage
Semi-quantitative assessment
10. Likely to conclude that impacts could be
    economically important, though rates of
    deterioration are much reduced.




                                               19
    What this would give us…
• A nice description of impacts
  – Mix of quantitative and qualitative data


• Buried at the back of a long report

• How do we draw attention to the things
  that we cannot monetise?

                                               20
                 Presenting results
Costs                                   €€€€€
Benefits
        Health                          €€€€€
        etc.                             €€
Sub-total benefits                      €€€€€
        Ecosystem effects
                 Physical impact    Summary RAINS
                                       results
                 Economic effect       see ref…
        Cultural heritage              see ref…
        Crops – visible injury         see ref…
        Effects of ozone on paint     Negligible     21
                   Key
          Considered likely to have a
             significant effect at the
             European scale
           May have a significant effect at
             the European scale
            May have a significant effect
             locally, but not Europe-wide
Negligible   Unlikely to be important at
             national or local scales

                                                22
                 Presenting results
Costs                                   €€€€€
Benefits
        Health                          €€€€€
        etc.                             €€
Sub-total benefits                      €€€€€
        Ecosystem effects
                 Physical impact    Summary RAINS
                                       results
                 Economic effect       see ref…
        Cultural heritage              see ref…
        Crops – visible injury         see ref…
        Effects of ozone on paint     Negligible     23
   Conclusions on the role of the
         Extended CBA
• Can integrate some impacts with CBA
  much better than previously
• Improves understanding
• Provides decision makers with a structure
  from which to factor their own weightings
  on damage to cultural heritage,
  ecosystems and other impacts into the
  CBA
                                              24
      Dealing with uncertainty
• Variety of techniques
  – Statistical analysis
  – Sensitivity analysis
  – Extended CBA
• Need to consider uncertainty in results for
  both costs and benefits
• These techniques to be tested once first
  results become available
                                                25
              Summary
• Much work has gone into refinement of
  methods for air pollution CBA
• Methodology has been extensively peer
  reviewed
• More extensive framework than previously
  used
• First results will shortly be available

                                         26
               Questions
• Do we go far enough in quantification?
• Is the ‘Extended CBA’ approach useful?
• Are there good examples of similar work
  that transparently account for uncertainty
  in CBA?
• Are there new sources of information that
  we should take into account?

                                               27

								
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