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Quantifying the Ancillary Benefits of the Representative Concentration Pathways on Air Quality in Europe

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Abstract

This paper presents economic benefit estimates of air quality improvements in Europe that occur as a side effect of GHG emission reductions. We consider two climate policy scenarios from two representative concentration pathways (RCPs), in which radiative forcing levels are reached in 2100. The policy tool is a global uniform tax on all GHG emissions in the integrated assessment model WITCH. The resulting consumption patterns of fossil fuels are used to estimate the physical impacts and the economic benefits of pollution reductions on human health and on key assets by implementing the most advanced version of the ExternE methodology with its impact pathway analysis. The mitigation scenario compatible with \(+2\,^{\circ }\hbox {C}\) (RCP 2.6) reduces total pollution costs in Europe by 84 %. Discounted cumulative ancillary benefits are equal to about €1.7 trillion between 2015 and 2100, or €17 per abated tonne of \(\hbox {CO}_{2}\) in Europe. The less strict climate policy scenario (RCP 4.5) generates benefits equal to €15.5 per abated tonne of \(\hbox {CO}_{2}\). Without discounting, the ancillary benefits are equal to €46 (RCP 2.6) and €51 (RCP 4.5) per tonne of \(\hbox {CO}_{2}\) abated. For both scenarios, the local benefits per tonne of \(\hbox {CO}_{2}\) decline over time and vary significantly across countries.

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Notes

  1. For a survey see Chapter 15 of the Fifth Assessment Report of Working Group III to the IPCC (Somanathan et al. 2014).

  2. The Intergovernmental Panel on Climate Change (Third Assessment Report) distinguishes between ancillary benefits and co-benefits (IPCC 2001). Ancillary benefits are related to policies or measures that are targeted entirely on climate change mitigation, while co-benefits are referred to when policies or measures are designed for more than one target (Dudek et al. 2003). We consider aggregated ancillary benefits in this report.

  3. See, for instance, Bell et al. (2008) that discusses the methodological aspects in quantification of ancillary benefits.

  4. Davis et al. (2000) and then OECD (2002) report the ancillary benefits per tonne of carbon in 1996 US$. We use OECD CPI and purchasing power parity and express the benefits in 2005 Euro per tonne of \(\hbox {CO}_{2}\). Following same approach, we recalculated the 2008 USD from Nemet et al. (2010) and the 2010 USD from Parry et al. (2014) in 2005 Euro.

  5. For the purposes of this work, the European Union is given by the sum of WEURO (Western Europe) and EEURO (Eastern Europe), although this is not rigorously correct due to the presence of the EFTA countries in the EU.

  6. A cooperative solution, where one global social planner jointly maximizes a social welfare function can also be implemented but was not used to generate the scenarios used in this study.

  7. The European Commission in collaboration with the US Department of Energy launched a joint research projects to assess the energy-related externalities in 1991 (European Commission 1995; ORNL and RFF 1995). Following a detailed bottom-up methodology relying on impact pathway approach, the EU/US studies provided estimates of marginal external costs of electricity production from a wide range of energy technologies at various locations. The EC provided additional funding over the years to improve the ExternE accounting framework and to expand it to new EU member states and to other non-EU countries. The ExternE IPA framework that we use has been recently updated within the NEEDS project (http://www.needs-project.org/). For more information on ExternE see http://www.externe.info. Weinzettel et al. (2012) apply the ExternE method to quantify production and consumption related externalities of power sector in Europe.

  8. An internet accessible version of EcoSense (EcoSenseWeb1.3) was developed within the NEEDS project (Preiss and Klotz 2008).

  9. http://ecosenseweb.ier.uni-stuttgart.de/.

  10. EcoSense uses three models of air quality: (1) the Industrial Source Complex Model for transport of primary air pollutants on a local scale delaminated by 100\(\times \)100 km around the power plant, (2) the EMEP/MSC-West Eulerian dispersion model for modelling transport and chemical transformation of primary pollutants on a regional scale covering all Europe, and (3) the N-hemispheric model which served for estimation of the intercontinental influence primary and secondary pollutants (secondary inorganic aerosols, tropospheric ozone).

  11. The recommended value of so called chronic VOLY is based on the mean estimate of the willingness to pay for changing life expectancy by 2 months using data from a pooled sample of nine European countries. Data is adjusted using a simple benefit transfer technique to correct for the differences in income and population in EU Member States. Monetary values for work loss day, medical costs, or the willingness to pay to avoid illnesses also reflect EU-wide averages.

  12. The costs were estimated using several runs of the EcoSenseWeb tool with the EMEP/MSC-West Eulerian pollution dispersion model.

  13. Primary energy use in country j equals to (\(\textit{EN}_{f}sh_{j})\), where \(\textit{EN}_{f}\) denotes primary energy use for electricity generation in one of the two European regions from WITCH and \(sh_{j}\) indicates the share of country j on use of fuel f, in the base year 2005.

  14. Carbon capture and sequestration is an end-of-pipe technology for GHG emission reductions.

  15. A new version of the model with local pollutants and other non-GHG emissions was under preparation while this article was written.

  16. To analyse the distribution of the impacts, country-specific damage factors and external costs are derived for 28 countries. We have data on the EU28 countries, with the exceptions of Malta and Croatia. We include also Norway and Switzerland.

  17. The OECD (2012b) review finds that the income elasticity of the VSL is in the range of 0.7 and 0.9 in most of the regressions that use screening criteria. In other studies this range is substantially lower—about 0.3–0.4. In most studies the income elasticity of the VSL ranges between 0 and 1 and the income elasticity of WTP around unity may be justified for the transfers between countries with heterogeneous income (2010).

  18. The WITCH model provides results in 2005 USD, while the pollution costs in the ExternE are expressed in 2000 €.

  19. In WITCH the pure rate of time preference declines over time. It starts at 3  % p.a. in 2005 and declines to about 2 % p.a. in 2100. The interest rate of the economy declines over time following the Euler equation. The model is calibrated so that developed regions have an interest rate equal to about 5 % per year in 2005 while developing regions have an interest rate equal to 7 % per year in 2005.

  20. Experiments show that a trivially small carbon price can achieve the 6.0 \(\hbox {W}/\hbox {m}^{2}\) forcing level in 2100.

  21. The Reference scenario is thus characterized by: (1) slowly decreasing fossil fuel dependency, (2) reductions of resource and energy intensity, (3) uneven development of low-income countries, (4) weak global institutions, (5) slow continuation of globalization, with some barriers remaining, (6) well regulated information flow, (7) medium economic growth, slow convergence, (8) high intra-regional disparities, (9) medium population growth related to medium educational investments, (10) delay of achievement of the Millennium Development Goals (MDGs).

  22. The two carbon tax trajectories are consistent with the radiative forcing targets. They are not necessarily socially optimal taxes because they are obtained solving the model in the cost-effectiveness mode.

  23. These temperature levels have been calculated with the climate model MAGICC 6.4, integrated in the WITCH model.

  24. In order to test the effect of a less flexible technological setup on local pollution Ščasný et al. (2015) also used three scenarios in which technological adaptation in the RCP4.5 is limited (see Massetti et al. 2014; Leimbach et al. 2014). Specifically, they considered scenarios with limited energy efficiency (LA-EE), limited renewable energy (LA-REN), and limited supply and trade of biomass (LA-BIO). Due to limited technology adaptation, the level of the carbon tax is 10 % higher in LA-BIO and by 31 % higher in LA-EE in 2100, but it is almost identical in LA-REN, compared to the tax rate under the RCP4.5 scenario with full adaptation. Overall, the effect on GDP and ancillary benefits does not differ much.

  25. The average benefits are in this case computed as the ratio of total ancillary benefits cumulated over 2015–2100 and total \(\hbox {CO}_{2}\)eq abated over the whole period.

  26. Total cost of electricity generation includes all costs associated with this process, including investments, and operation and maintenance, but excluding input fuel costs and externalities such as carbon taxes.

  27. Specifically, we derive total pollution costs that are associated with impacts (1) in the country i, (2) in other European countries \(j\, (j \ne i)\), and (3) in the rest of Europe that are all three due to emissions released by country i. For the country i, the pollution costs due to domestic pollution is measured by (1), while the rest is the exported to other European countries (2) or to the rest of the world (3).

  28. In some cases climate and local pollution have a multiplicative effect. For example ozone formation depends on the joint combination of local pollutants and particular climatic conditions. However, these are special cases that require special treatment. It is safe to assume that short-term climatic conditions are not affected by the carbon tax and that long-term ozone formation is not affected by the present level concentrations of local pollutants. The same reasoning applies to environmental regulation that aims to curb local pollutants.

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Acknowledgments

This research received funding from the European Union’s Seventh Framework Programme (FP7/2007–2013) under the grant agreement \(\hbox {n}^{\circ }\) 266992 GLOBAL-IQ “Impacts Quantification of Global changes”. The preparation for the manuscript received support from project ECOCEP (Economic Modelling for Climate-Energy Policy) funded by the People Programme (Marie Curie Actions) of the European Union’s Seventh Framework Programme FP7-PEOPLE-2013-IRSES, Grant Agreement No. 609642. This support is gratefully acknowledged. The authors are grateful to Thomas Sterner and to an anonymous referee for providing valuable comments and suggestions during the preparation of this paper. We would also like to thank Laura Henderson Macháčková and Alicia Berrios for proofreading this article. Responsibility for any errors remains with the authors.

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Appendix

Appendix

See Tables 9, 10 and 11 and Fig. 5.

Table 9 Emission factors for source category 1.A.1—public electricity and heat production
Table 10 Review of ancillary benefits per tonne of \(\hbox {CO}_{2}\), in €2005
Table 11 Country’s contribution to generation of ancillary benefits and where these benefits appear, present (discounted) value cumulated over 2015–2100 for RCP2.6
Fig. 5
figure 5

The electricity generation mix in the EU

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Ščasný, M., Massetti, E., Melichar, J. et al. Quantifying the Ancillary Benefits of the Representative Concentration Pathways on Air Quality in Europe. Environ Resource Econ 62, 383–415 (2015). https://doi.org/10.1007/s10640-015-9969-y

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