High economic benefits of new NEC directive

The annual benefits of achieving the interim targets of the thematic strategy on air pollution are valued at 15-49 billion euro in 2020.

Additional air pollution abatement measures under a revised National Emissions Ceilings (NEC) are clearly cost-effective, according to an updated cost-benefit analysis (CBA) prepared for the European Commission. It is estimated that the monetised health benefits of achieving the interim targets of the EU’s thematic strategy on air pollution exceed the costs by up to 37 times.

The costs of the additional emission reduction measures beyond the baseline (current legislation) that are required to meet the targets of the strategy have been estimated at 1.3-1.5 billion euro per year in 2020 (see AN 3/2010, pp.6-8). This equals an annual cost per EU citizen of approximately three euro, or a daily cost per person of less than one eurocent.

A comparison between the costs of additional emission reductions and the incremental monetised health benefits, shows that the benefits far outweigh the costs. Even when assuming the lowest figures for health damage valuation, the benefits are 15 billion euro – about 12 times higher than the costs. If a higher health damage valuation is assumed instead, benefits are estimated at 49 billion euro, i.e. 37 times higher than the costs.

It should be noted that this comparison of costs and benefits does not include all the benefits that would result from improved air quality – notably it excludes benefits to ecosystems and cultural heritage as well as some health benefits.

The study includes information on costs and benefits for each of the 27 EU member states. Net benefits from the assessment of health impacts – both for the low and high mortality valuation cases – are recorded in all countries except Cyprus.

As the benefit calculations include only health effects it is not surprising that the greatest benefits accrue to countries with the largest populations (Germany, France, UK, Italy, Poland). A more even spread of benefits is seen when results are normalised per head of population. Benefits across the EU are estimated to average between approximately 30 and 100 euro/person and year.

Not surprisingly, benefits are more concentrated towards the centre of Europe, where countries pick up the benefits of emission controls in many neighbouring countries, than around the edges. Countries with higher than EU average benefits per person include Belgium, Czech Republic, France, Germany, Hungary, Luxembourg, Netherlands, Poland, Portugal, Romania, and the United Kingdom.

The report concludes that the analysis clearly demonstrates that monetised benefits outweigh costs for the EU even under the assumption of the lower valuation of mortality.

It is pointed out that the surplus of benefit over cost could well be greater than shown here, because some benefits are not included in the analysis and because previous research has demonstrated that estimates of the costs of pollution control tend to be exaggerated.

Christer Ågren

Source: Cost Benefit Analysis for the Revision of the National Emission Ceilings Directive. Interim Report to European Commission (20 December 2010). By M. Holland et al, AEA Technology plc, UK.

Table: Monetised annual health damage in 2000 and in 2020 under three scenarios, compared to incremental annual costs over the baseline scenario in 2020.

Note: When evaluating chronic mortality from exposure to PM_2.5 two alternative values are used, the lower one is based on value of life years lost (VOLY) and the higher one on value of a statistical life (VOSL). Figures for the year 2000 are from “NEC CBA Report 1 – Baseline report” (AEA, May 2007).
Baseline = Baseline scenario assumes implementation of current legislation and policy.
TSAP = Optimized scenario achieving the environmental targets of the 2005 thematic strategy on air pollution at the least cost for EU27 as a whole.
MTFR = Maximum technically feasible reductions in the GAINS computer model, i.e. limited to include only so-called end-of-pipe technical measures.