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

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

3. 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*

4. 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

5. 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)

6. Baseline

7. 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

8. Health Analysis – Impacts IncludedO3 PM

9. 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

10. Summary – Health Impacts – EU25O3 PM

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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?

18. 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

19. 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

20. 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... 

21. 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

22. Scenarios

23. 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

24. PM Exposure gap closure
First Scenarios:
PM Exposure gap closure

25. 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).

26. 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)?

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

28. 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

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

30. 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

31. 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

32. 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)

33. 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

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

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

36. 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

37. 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%

38. 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