2 BACKGROUND

2.1 Scenarios for emissions abatement

The scenarios used in this analysis were as follows:

UKREF: UK emissions based on the 1997 NAEI escalated for future years using provisional projections of industrial growth and fuel use provided by DTI, following revision of data from Energy Paper 65 (EP65). The Central (growth) / High (fuel price) scenario was used here. Emissions for other countries were based on IIASA’s Reference scenario (Amann et al, 1999a).

J1: Emissions for all countries in the UNECE domain based on IIASA’s J1 scenario (Amann et al, 1999a). This scenario is also referred to as G5/2rev in some reports.

H1: Emissions for all countries in the EU set to IIASA’s H1 scenario (Amann et al, 1999b). Emissions for other countries are set to IIASA Reference for 2010.

A fourth scenario was added towards the end of the study, following the publication of the emissions ceilings negotiated at the 31st Session of the UNECE Working Group on Strategies, on 2 September 1999, and subsequent developments prior to the signing of the Protocol. This was termed WGS31c (after the 31st meeting of the Working Group on Strategies). Full analysis could not be carried out on this scenario in the time available, although an indication is presented of the associated costs and benefits.

Emissions for the UK under these scenarios are summarised in Table 1. Appendix 2 shows emissions for all UNECE countries in mainland Europe, Scandinavia, Russia, the Baltic States and the British Isles under the IIASA Reference, H1 and J1 scenarios from the RAINS analysis carried out by Amann et al (1999a, b).

Table 1. Annual emissions of each pollutant for the UK in each scenario from 2010 on (kt)

Scenario

SO2

NOx

VOC

NH3

UKREF

784

1187

1300

319

WGS31c

625

1181

1200

297

J1

499

1181

1101

264

H1

497

1181

964

264

2.2 Earlier analyses

IIASA have produced a series of reports for the European Commission and the UNECE relating to the Directives and the Protocol (the most relevant to the position in force at the time of writing being Amann et al, 1999a, b). These studies took a series of environmental quality objectives for acidification, eutrophication and ozone, and assessed the reduction in national emissions required to meet them in a cost-effective manner. Table 2 provides estimated emissions and costs under each of the RAINS scenarios for the UK. The UKREF scenario used in this study is shown for comparison, demonstrating a significant reduction to the IIASA Reference case for SO2 by 20%.

Table 2. Estimates of emissions and costs for the UK in the RAINS scenarios (from Amann et al).

Scenario

SO2

NH3

NOx

VOC

Total cost (£M/year)

Emissions (kt)

 

        

IIASA Reference

980

297

1186

1351

  

UKREF

784

319

1187

1336

  

WGS31c

625

297

1181

1200

  

J1

499

264

1181

1101

  

H1

497

264

1181

964

  

Costs* (£M/year)

 

      

WGS31c

      

209

J1

197

15

235(NOx and VOC)

447

H1

200

15

684(NOx and VOC)

899

* Incremental to IIASA Reference, and not UKREF

£ = 1.5 Euro

This assessment of the benefits of abatement of SO2, NOx, NH3 and VOCs, and their comparison with the costs of abatement, follows a series of cost-benefit studies carried out by the same team. This earlier work was undertaken in the context of both the UNECE Protocol and the proposed EU Directives on national emission ceilings and ozone (AEA Technology, 1998a,b, 1999a,b,c). Funding was provided by several sources; DETR, DGXI of the European Commission and the Dutch Ministry of Housing, Spatial Planning and Environment (MVROM). The studies were widely reviewed by:

Based on a set of core assumptions, the results of the earlier work suggested that benefits would exceed costs for both the H1 and the J1 scenarios for the UK and the whole of the EC/UNECE (AEA Technology, 1999a,c). However, under some alternative sets of assumptions it was found that the quantifiable benefits would not exceed the costs, though a number of unquantifiable effects remained outside the analysis. These assumptions related, in particular, to the health effects assessment and include the following:

Obviously, it is necessary to also consider the benefits for those aspects that were not quantifiable, such as effects on ecosystems and cultural heritage.

Acceptance of this work increased substantially during the series of studies, largely as a consequence of the effort made to account for uncertainty. A major part of the uncertainty assessment involved the development of a confidence-ranking scheme. The ranking was determined from a survey of interested parties in UK Government, and experts in ecology, integrated assessment modelling, economics and health. A similar scheme has been followed in this report, but based more on recent reports produced through DETR and the Department of Health (DETR, 1998, 1999; COMEAP, 1998; EAHEAP, 1999).

2.3 Issues in benefits analysis and Cost-Benefit analysis (cba)

The quantification of monetised benefits of environmental policy remains controversial, particularly with respect to:

Ethical concerns regarding monetisation were answered succinctly in the recent EAHEAP report for the Department of Health:

“Two hard facts confront those who have to make decisions about the appropriate level of provision of public safety. First, safety is usually not costless; and second, society has limited resources. Consequently, a responsible decision about any proposed public safety improvement will require a judgement as to whether the resulting reduction in risk is large enough to justify incurring the cost of implementing the improvement. Put another way: is the reduction in risk …worth more than whatever good things could be provided if those resources were diverted elsewhere?”

In its proper context ‘money’ is therefore a simple metric for weighting different types of benefit. It is a metric that everyone is familiar with, and allows direct comparison of benefits with the costs of the measures required for achieving policy objectives. Further to this, the use of CBA can increase the transparency of the decision making process through explicit demonstration of the effect of applying societally based valuations to various environmental goods. Even if policy makers feel that alternative courses of action are preferable to those suggested through cost-benefit analysis, the fact that analysis has been carried out provides a baseline against which final decisions can be gauged.

The presence of uncertainty is more difficult to deal with. These uncertainties are both numerous and significant and affect all stages of the analysis – not just monetisation. At the present time there is dispute as to how they should be dealt with. In this report a pragmatic approach is taken that allows full account to be taken of the uncertainties present. It is important to distinguish between those aspects that can be quantified with a good level of confidence and those subject to a higher level of uncertainty.

It is often said that unquantified effects are forgotten in the final comparison of costs and benefits, with the effect that anything other than a full quantification provides a systematic bias to underestimation. On the other hand, it has been said that studies that go beyond the Department of Health’s position, as given by COMEAP/EAHEAP, introduce a danger of over-estimation. Either way, there is a danger of generating a misleading answer which may, perhaps, be worse than having no answer at all, if it provides an artificial impression of comfort. What is needed to resolve these problems is a methodology that promotes a better understanding of the overall(1) consequences of uncertainties. This report proposes such a methodology.

A recent study (SEI, 1999) highlights problems in the assessment of abatement costs, largely because the options included in the models tend to be restricted to end-of-pipe solutions. Available data suggest that this leads to overestimation of abatement costs, as a consequence of the failure to account for alternative measures that may well be cheaper, and a failure to account for the effects of technological change. Representatives of industry, however, tend to say that costs are underestimated (e.g. Cocks and Rodgers, 1997). Clearly, however, it is important to be aware of the limitations of the analysis on both sides of the cost-benefit equation.

(1) The individual elements of uncertainty, arising at each stage of the analysis of each type of impact are certainly important in that they affect the overall confidence in the final results, but they are of secondary importance to the aggregated uncertainty.

Chapter 1          Chapter 3
Report and site prepared by the National Environmental Technology Centre, part of AEA Technology, on behalf of the UK Department of the Environment, Transport and the Regions