Bach, H., Andersen, K.S., Illerup, J.B., Møller, F., Birr-Pedersen, K., Brandt, J., Ellermann, T., Frohn, L.M., Hansen, K.M., Palmgren, F., Nielsen, J.S & Winther, M.  2006. Technical Report No. 586 from NERI. 90 p.

 

Summary

The Commission has presented a thematic strategy on air pollution and has completed an Impact Assessment, which describes the costs and benefits for the member states.

The thematic strategy is to result in a revised air quality directive as well as a revised NEC-directive that determines maximum emissions for a number of air pollution components, the so-called emission ceilings. The air pollution components include sulphur dioxide (SO2), nitrogen oxide (NOX), volatile organic compounds (NMVOC), ammonia (NH3) and particulate matters (PM2,5).

The thematic strategy draws up targets for reductions of the Danish emissions for these components, which have to be met by 2020. These reductions will contribute to a lowering of PM2,5 concentrations both in Denmark and in neighbouring countries. The concentration of PM2,5 in the air includes both primary particles that come from emission of particles from e.g. incineration processes, and so-called secondary particles that are generated from emissions of NOX, SO2 and NH3, and from releases from e.g. vegetation. A very large part of the secondary particles in the air in Denmark stems from emissions of these components in the rest of Europe. A very important condition for a reduction in the concentration of PM2,5 in the air is thus a reduction of the emissions of these components in all of Europe.

A preliminary target for PM2.5 in the air quality directive is a 20% reduction of the concentration in urban background from 2010 to 2020. At the same time the directive suggests that the concentration of PM2,5 must not exceed 25 µg/m3 in 2010.

The thematic strategy is framed in such a way that the benefit of emission reductions expressed by number of gained years within all of EU is obtained at the least possible costs. It has thus been a governing factor for the elaboration of the final thematic strategy that the number of lost years - as a consequence of air pollution related diseases – must be reduced as much as possible at the least possible costs. The emission reductions will, true enough, have positive consequences regarding health as well as the quality of the eco-systems – expressed by the share of natural areas where critical loads are exceeded– but it is estimated that the value of the health effects by far surpasses the value of the consequences on the eco-systems.

The outlined optimization problem is solved with the RAINS-model developed by IIASA. The cost module of the model contains information about the costs of a range of measures to reduce the emissions for each of the contemplated air pollution components in the individual EU country. The costs are linked to a technological approach in relation to each air pollution component within the individual EU country.

It is subsequently described, using the air dispersion module of the RAINS model, how changes in the emissions of each air pollution component from each area (the so-called 50x50 km grids) impact the air quality - including the concentration of PM2,5 – in the individual grid cells within the entire EU. By means of a dose-response function that indicates the relationship between the concentration of PM2.5 and the number of life years lost per person, the final consequence of the emission change is describes as a change in the number of expected life years in the individual areas within the EU.

The change in the number of expected life years can be valuated so that the benefit can be compared with the costs of implementing the emission reducing measures. Such a cost-benefit analysis made it possible to determine a level for the number of gained life years whose value, with a certain margin, exceeds the minimal costs of achieving the benefit. This solution is characterised by the fact that a certain amount of emission reductions should be implemented. The actual amount varies between air pollution components and countries, depending on the initial position of the individual countries, the possibilities for emission reductions, and the costs of these. These reductions are the basis for determination of the emission ceilings for air pollution components for each country as presented in the thematic strategy.

The number of gained life years and from that, the value of the benefits of the thematic strategy will also vary between countries. As emphasized it is the number of gained life years within the entire EU that governs the framing of the strategy and which has to be obtained as cost-effectively as possible.

The thematic strategy includes four scenarios for possible development of air quality, emission level, costs and benefits. The most ambitious scenario describes the technical improvement of air quality. The other three scenarios are placed between 55 and 90 percent of this level. Moreover, the Commission has selected a so-called policy scenario.

It is impotent to realise that the calculated reduction requirements for Denmark are determined from a basic projection for the emissions in which emission reductions that will be carried out to meet the emission ceiling of the NEC-directive in 2010 are not included. The measures that IIASA suggests accomplished regarding fulfilment of the thematic strategy are thus, as a starting point relevant both in relation to the fulfilment of the NEC-directive and in relation to the thematic strategy itself. The costs assessed by IIASA regarding the thematic strategy actually also cover the costs of fulfilling the NEC-directive, c.f. below. This implies that in order to determine which initiatives to carry out in Denmark during the period 2011 – 2020 (according to the thematic strategy) it is necessary to determine which measures to carry out before 2010 to fulfil the emission ceilings of the NEC-directive. Knowledge about the costs of fulfilling the NEC directive is a prerequisite for determining the additional costs of the thematic strategy.

Targets concerning emission reductions

for Denmark

NERI’s estimation of the required emission reductions up until 2020 as a consequence of the thematic strategy differs from the deficiencies in the IIASA statement of the reduction demands for Denmark in 2020. The differences are in particular due to IIASA using a different energy projection for the future energy consumption and its composition. Table A compares the

NERI estimates with those of IIASA, with the NERI figures being based on the most recent energy projection.

NERI estimates that due to the development in the supply sector the emissions of NOX will be considerably higher in 2020 than estimated by IIASA. The latest projection from NERI shows that the emission in 2020 will be 117,000 tonnes and not the 105,000 tonnes stated by IIASA. However, since the elaboration of the projection new measures reducing NOX emission have been passed in the Danish Parliament and changes in prices on energy and CO2 quotas are expected to lead to a lower NOX emission. This means that with an emission ceiling at 84,000 tonnes the reduction requirement for Denmark is in the order of 22-33,000 tonnes of NOX.

For ammonia NERI estimates that the emission as a result of already agreed measures and the technological development in agriculture will be reduced by 60,000 tonnes, which means that Denmark is able to comply with the suggested emission ceiling for 2020 without further initiatives.

NERI has not made its own projections for SO2, NMVOC and PM2.5 for 2020. On the basis of comparisons with projections up until 2010 it is, however, estimated that the SO2 deficiency of approx. 1,600 tonnes for 2020 is underestimated by IIASA. Besides the supply sector differences in the data basis for industrial plants contribute to this discrepancy.

For NMVOC NERI worked out a projection in 2002. The calculations have not been up-dated, but do not differ substantially from IIASA’s projections for 2010.

As it is new to perform projections of primary particles it cannot be assessed whether the shortfall of 1,000 tonnes in 2020 estimated by IIASA will prove to be correct. Later this year (2006) NERI will in collaboration with the Danish EPA publish a projection for all of the above mentioned air pollution components.

Table A Projected emissions (1,000 tonnes) for 2010 and 2020

	SO2		NOX		NH31
Year	2010	2020	2010	2020	2010	2020
Total emissions, NERI	222		148	117	68	60
Emission ceiling 2010	55		127		69
Basic projection IIASA	19	13	151	105	69	78
Thematic strategy 2020		12		84		62

 

1) The ammonia emissions cover exclusively sources included in the NEC-directive (not including emissions from crops). Agriculture is responsible for 97% of the total ammo-nia emission.

2) Preliminary

 

The projections are based on a number of key assumptions regarding the economic development, oil prices and the CO2 quota price as well as the rate of replacement of the vehicle fleet and applied energy technologies in the period up until 2020. Thus it is naturally difficult to produce exact numbers on the actual reduction demands in relation to the emission ceilings of the thematic strategy. The changes in the basic knowledge regarding the technical emission coefficients could also change emission estimates. However, in the following the assessment in Table A is a starting point.

Targets concerning particle concentration

Regarding the effect of the reduction in the PM2,5 concentration (air quality) in the air quality directive the question is partly what it will take to achieve a 20% reduction in urban background in 2020 in relation to the 2010-level, and partly whether the general concentration ceiling at 25µg/m3 PM2,5 as annual mean value and taking effect as from 2010, can be complied with.

The urban background concentrations are dominated by long-range transboundary air pollution. Reduction in Denmark at such a general level is therefore in particular governed by European initiatives. The size of the reduction requirements for the Danish emissions has a limited effect on the urban background concentration in Denmark.

In the thematic strategy IIASA estimates that the least extensive scenario will result in a PM2,5 reduction of 15% in urban background in Denmark, while another scenario with higher demands on the emission reductions results in a 19% PM2,5 reduction. Being between these two scenarios the suggested policy scenario indicates that it may be difficult to reach a 20% reduction by virtue of the policy scenario. However, the applied method is a simplified assessment procedure, which only offers a first-hand estimate.

On the basis of among others estimates from EEA’s (European Environmental Agency) semi-empirical method NERI estimates that a larger relative reduction in the PM2,5 concentration will be achievable in Denmark provided that the EU thematic strategy results in a future revised NEC-directive with the suggested emission reductions of the policy scenario. This means that the assessment concludes that the 20% reduction is within reach. The basic knowledge regarding the sources and the atmospheric chemical processes that leads to formation of secondary organic particles is still under development, which is also the reason why the 20% target is not expected to be realized into legally binding requirements until the data and monitoring basis of EU-25 is improved.

As a rough estimate secondary organic particles constitute approx. 20-40% of PM2,5. These particles are not included in IIASA’s RAINS estimates or in other atmospheric models. The particles are estimated to contribute with an annual mean value of approx. 5 µg/m3 PM2,5 by IIASA; however, NERI estimates that the contribution could be up to 8-9 µg/m3 PM2,5. They will be included in the PM2,5 target from which the 20% reduction is being calculated since these particles will be measured together with the other types of particles. The NEC-direc-tive is also expected to have implications for this fraction because of the NMVOC reductions.

The RAINS model is an acknowledge model but it is an extremely demanding task to model the effects of the suggested measures and to arrive at assessments of the effects on the background concentration of PM2,5. In certain respects RAINS uses simplified calculation procedures. This may be a possible source of error when estimating which effect emission reducing measures in other EU countries would have on the PM2,5 concentration in Denmark.

The contributions from NOX, ammonia and NMVOC to the PM2,5 concentrations in Denmark are characterized by non-linear relations due to the atmospheric chemical processes. RAINS describes these non-linear processes by rather simple linear mathematical functions that are associated with non-negligible uncertainty. For SO2 and primary particles it is acceptable to presume linearity between emission and receptor. Because of the complicated processes involved in the formation of PM2,5 it is not possible to estimate whether the simplified methodology of RAINS provides an overestimation or an underestimation of the PM2,5 concentration.

Therefore, it should be considered to re-calculate the finally negotiated result regarding the emission reductions for the individual countries with a state-of-the-art atmospheric chemistry transport model simulation to control the validity of the scenarios. The calculations are of importance to the emission reduction requirements posed at the individual member countries and thus for the burden sharing. The deviations between the Danish projection and the basic projection of the RAINS model regarding Danish emissions in 2020 also suggest a re-calculation.

The weaknesses of the RAINS model are of importance to both the reduction requirements and the targets for Denmark and to whether the framing of the differentiated burden sharing is credible.

The concentration ceiling of 25 µg/m3 for PM2,5 in annual mean value is a change of the already approved concentration ceiling for PM10 to a corresponding ceiling based on PM2,5 and with a longer time-limit. In recent years the existing concentration ceiling for PM10 has been exceeded in crowded streets in the capital, but it is estimated that the fulfilment of this requirement is within reach provided that the emission ceilings in the existing NEC-directive are being met.

Costs associated with the thematic strategy

IIASA has estimated the costs of the thematic strategy on the basis of the previously mentioned gaps, which underestimates the reduction demand of NOX and presumably SO2, while ammonia is over estimated. The reduction requirements for NMVOC and PM2,5 are small and do not count much in the analysis. The implication is, however, that the measures that would be necessary to meet the emission ceilings for Denmark must be composed differently than predicted in the IIASA calculation of costs.

IIASA has used a method to assess the costs, which is quite different from the usually used methods in Denmark. Firstly, only technical measures that change the emission coefficients of the known technologies are included; more structural changes or technological shifts are not assessed despite the long-termed time horizon of the thematic strategy. Secondly, to some extend the calculation of costs corresponds to what is known as financial economic costs where the method, which has become common in Denmark, is a welfare economic cost analysis. The welfare economic analysis is carried out at consumer price level and is broader than the more narrow financial economic analysis as the derived welfare related effects such as derived environmental effects are included. IIASA does not include derived effects. It is particularly conspicuous that the accompanying emissions of CO2 to the conventional air pollution are left out of the calculation. The effects on greenhouse gas emissions are included in the welfare economic analyses in Denmark. All in all this means that the IIASA cost analysis must be assessed as being somewhat narrow as certain types of measures as well as a number of derived costs and benefits are being disregarded.

As the gap in relation to the target for Denmark is especially pronounced for NOX a certain parallel exists between the measures included in the thematic strategy and the measures examined in connection with the preliminary socio-economic analysis of NOX measures to meet the NEC-directive, performed by the Danish Environmental Protection Agency (Danish EPA – the NOX report). These preliminary analyses are included in the work as the best possible estimate at present. It is, however, necessary to keep in mind that the measures of the NOX report are elaborated with the intention of being carried out within the substantially shorter time horizon up until 2010.

Chapter 5 offers an overview of measures that are evaluated as able to contribute to the intended NOX reduction. As the IIASA analysis contains certain measures that are either included in the basic projection or that are not - on a closer view - technologically relevant to Denmark, it is not all of the outlined measures that count in relation to the gap, but only those that are relevant with respect to closing the gap between the basic projection and the thematic strategy. It cannot be excluded that other measures that are technically and economically more advantageous than the mentioned may be identified.

The examination of the measures reveals a number of deviations between the IIASA report and the NOX report concerning the estimates of both the environmental effect of the measures and the financial economic costs.

IIASA examines measures that for stationary plants in supply and industrial plants result in a total reduction of 16,800 tonnes. Correspondingly the NOX report identifies the measures that in this sector produce the possibility of a total reduction of 5,400 tonnes.

The IIASA report has emission reductions of 4,600 tonnes NOX for the transport sector while the NOX report has emission reductions of 11,500 tonnes.

The cost statements of the IIASA and the NOX report cannot be compared directly. However, the financial economic costs from the analysis from Danish EPA are more comparable with the IIASA calculations than the welfare economic costs and are therefore chosen for further analysis. The difference in the financial economic costs in the IIASA analysis and the NOX report, respectively, reflects many different aspects. IIASA uses EU prices, which may be different from Danish prices. The time horizon in the IIASA analysis is longer, which results in better possibilities for a life conditional change of capital goods than in the NOX analysis. IIASA also uses a lower discount rate than the recommendations of Ministry of Finance in Denmark, namely 4% instead of 6%, which tends towards a lower estimate of costs.

In order to reach a more correct picture of the costs it would be necessary to carry out a welfare economic estimation of the measures beyond the NEC-directive. The estimation must be carried out in consumer prices, which will include taking the net tax factor into account. A number of other methodological demands to the welfare economic analysis, which was shortly analysed in Chapter 5 and which is explained more detailed in (among other) the socio-economic guide lines of the Ministry of Environment. In order to calculate the additional costs the strategy inflicts upon Denmark it will be necessary to carry out the following analysing steps:

• Basic projection of emissions from 2006 to 2020 before the initiatives to the fulfilment of the NEC-directive is being carried out.

• Determination of cost effective measures to be carried out during the period 2006-2010 in order for the NEC-directive to be fulfilled by 2010.

• New basic projection of emissions in which the measures to the fulfilment of the NEC-directive have been incorporated.

• Determination of the need for emission reductions up until 2020 in order to meet the emission ceilings of the thematic strategy.

• Determination of cost effective measures that lead to the fulfilment of the 2020 emission ceiling of the thematic strategy.

On the basis of the present revision of the projection of the NOX emissions and the fact that no decision has been made as to which measures to use to implement the NEC-directive, there is not at present the necessary basis for a more precise calculation of the additional costs of the thematic strategy.

On the basis of the IIASA analysis and the Danish EPA draft of the socio-economic analysis of the NOX reduction Table B outlines which measures to be considered to meet of the suggested emission ceilings in 2020 after the target of the existing NEC-directive has been meet.

Table B NOX reduction measures, which will be possible to use in order to reduce the Danish emissions in 2010 and 2020 in relation to the most recent Danish basic projection.

	Emission 2010 Ktonnes	Emission 2020 Ktonnes
Danish basic projection	147.600	116.500
Adjustment of emissions	- 8.000	- 11.000
NEC-directive measures
Low NOX burner gas and gas oil (industry) NOx-rep	-1.400	-1.400
Advance reburning (power plants) NOx-rep	- 600	- 600
Better management of power plants NOx-rep	-2.300	-2.300
Partial boosting (power plants) NOx-rep	- 900	- 900
Sea wind mills NOx-rep	- 200	- 200
SCR (fishings vessels) NOx-rep	- 4.800	- 4.800
Retrofitting SCR on heavy vehicles NOx-rep	- 2.200
Basic projection incl. NEC measures	127.200	95.300
Measures thematic strategy
Heavy fuel, coal, bio mass, waste (industry) IIASA		- 1.100
Gas (dwelling and trade) IIASA		- 500
SCR (industry) IIASA		- 2.000
Control of process emissions IIASA		- 3.200
Tightening of Euro standards IIASA		- 4.600
Emission incl. thematic strategy		83.900

 

Note: The costs estimated in EUR by IIASA are re-calculated to DKK with an ex-change rate of 7.4. IIASA states the costs in 2000 price level while cost calculations of the NOX report are stated in 2004 price level. Information from the not published NOX report from the Danish EPA is used as the best possible estimate at present. The calculations of the NOX report will be revised by the Danish EPA as soon as the next energy projection is available. The final report is expected in May 2006. Source: IIASA (2006) and Miljøstyrelsen (Danish EPA) (2006).

 

Furthermore, Chapter 5 contains overviews of the applied measures calculated by IIASA when reducing SO2 and NOX.

The measures stated in Table B up until 2010 is in the preliminary analysis in the NOX report estimated to be sufficient to meet the NEC-directive. In the report the measures – computed from financial economic principles - are estimated to cost well above 300 million DKK annually. Assuming that the downward adjustment of the NOX emission in 2020 stated in Table B is correct the thematic strategy will be fulfilled by further reducing the emissions by 11,400 tonnes. With the measures stated in the table this will according to IIASA cost approx. 240 million DKK calculated using financial economic principles.

A more qualitative inventory of the costs in relation to sectors and pollutants offers the possibility of some insights. First of all it seems like the costs of the strategy will be evenly distributed between the transport sector and the stationary plants (supply plants and industry) while agriculture is expected to meet the reduction ceiling without further cost demanding measures.

Secondly, it looks as if especially the NOX emissions will request measures and to a lesser degree SO2. No costs are connected with ammonia. Finally, IIASA implies a very modest reduction effort for the NMVOC and primary PM2,5.

The costs are primarily to be accounted for by the private sector; however, the public sector is to bear the additional expenses for vehicles with new EU norms and possible subsidies for wind energy.

Benefits of the strategy

The health benefits from the strategy can be assessed after an approached welfare economic method, by which especially the expected effect on avoided premature deaths but also on reduced infirmity provides the opportunity for socio-economic benefits.

The assessment of the benefits rest on the expectations of a reduction in the PM2,5 concentration as a consequence of the emission reductions in Denmark and in the rest of EU, consequently the assessment depends on a successful reduction of especially the PM2,5 concentration in urban background. The IIASA figures show that Denmark, as a result of the thematic strategy, statistically expects a reduction in the number of annual premature deaths of about 500 as well as a reduction in the number of days lost due to sickness and days with reduced working effort of 250,000 annually. In total the number of premature deaths is reduced annually from 3,200 to 2,200 as a result of already passed measures, the NEC-directive as well as the initiatives of the strategy. The assessments assume that all particle exposures from the emissions contribute.

The socio-economic inventory of the benefits can be achieved by different methods according to whether lost life years or lost statistical life are valued. Further, different externality estimates will be obtained based on average and median values, respectively, from the willingness-to-pay-studies. A number of very important methodological issues and considerations are further discussed in Chapter 6.

The highest IIASA estimate of health benefits is based on values that are not used by Danish institutions. The medium estimate of 4.2 – 4.4 billion DKK in annual benefits for Denmark in 2020 is obtained by using externality estimates comparable with the figures used by NERI hitherto. The most precautious estimate at 2.3 billion annually in health benefits is obtained using the externality estimates comparable with the figures used by COWI for the Danish Ministry of Transport and Energy.

The benefits include measures – besides already planned and agreed measures – for the fulfilment of the entire thematic strategy. That is to say fulfilment of the NEC-directive in 2010 as well as fulfilment of the targets of the strategy in 2020. As mentioned, these estimates of the socio-economic benefits cannot be compared with the financial economic costs, since a cost-benefit analysis presupposes that the welfare economic costs are calculated.

In addition to this there are benefits for the natural environment, habitats and wetlands as the pollution load is reduced markedly. These benefits have not been attempted valued by IIASA and therefore NERI has not gone further into the estimation of the benefits in this report.

Table C Benefit-cost ratios going from the basic projection for 2020 to the least extensive scenario (scenario A) for 2020. The table shows the size of the benefits a member country can achieve in relation to its costs of implementing this scenario based on the IIASA assessment of costs and benefits.

European Country	Benefit-cost ratio (VSL median)	Benefit-cost ratio (VOLY median)
<st1:place w:st="on"><st1:country-region w:st="on">Belgium</st1:country-region></st1:place>	9.7	5.7
<st1:place w:st="on"><st1:country-region w:st="on">Denmark</st1:country-region></st1:place>	5.3	2.9
<st1:place w:st="on"><st1:country-region w:st="on">Finland</st1:country-region></st1:place>	1.0	0.6
<st1:place w:st="on"><st1:country-region w:st="on">Portugal</st1:country-region></st1:place>	4.9	2.7
<st1:place w:st="on"><st1:country-region w:st="on">Sweden</st1:country-region></st1:place>	3.8	2.3
<st1:place w:st="on"><st1:PlaceName w:st="on">Czech</st1:PlaceName>  <st1:PlaceType w:st="on">Republic</st1:PlaceType></st1:place>	15.1	8.5
<st1:place w:st="on"><st1:country-region w:st="on">Germany</st1:country-region></st1:place>	17.7	9.6
<st1:place w:st="on"><st1:country-region w:st="on">United Kingdom</st1:country-region></st1:place>	11.4	7.4
<st1:place w:st="on"><st1:country-region w:st="on">Austria</st1:country-region></st1:place>	8.8	5.2
EU-25	10.8	6.3

 

Conclusion

Evaluation of the emission targets of the thematic strategy

NERI estimates that the reduction requirement for NOX to meet the suggested emission ceiling will be substantially higher in 2020 than calculated by IIASA. The reduction requirement for Denmark is expected to be in the order of 22-33,000 tonnes of NOX.

NERI estimates that for ammonia - as a result of already agreed measures and the technological development within agriculture, the emissions will be reduced to 60,000 tonnes, thus complying with the suggested emission ceiling for 2020 without any further steps.

For SO2, NMVOC and primary PM2,5 NERI has no projections for 2020. It is, however, estimated that the SO2 gap, which for 2020 is valued by IIASA to approx. 1,600 tonnes is underestimated. NERI worked out a projection in 2002 for NMVOC. The calculations have not been updated but do not differ very much from the IIASA projection for 2010. Thus NERI cannot claim that the IIASA projection for NMVOC is not correct. It is new to make projections of primary particles, therefore it cannot be estimated whether IIASA’s assessed shortfall of 1,000 tonnes in 2020 is correct. NERI will publish a projection for all of the above mentioned air pollution components later this year (2006).

Evaluation of the air quality targets of the thematic strategy

NERI estimates that the achievement of a 20% PM2,5 reduction of the concentration in urban background is within reach for Denmark should the EU thematic strategy result in a future revised NEC-directive with the suggested emission ceilings for the member countries included. The knowledge foundation to estimate this is, however, still under development, which is also the reason why the 20% target will not be converted into legally binding demands until the EU-25 data and monitoring basis has been improved.

The concentration ceiling of 25µg/m3 for PM2,5 in annual mean value is a change of the already agreed concentration ceiling for PM10 to a corresponding ceiling based on PM2,5 and with a longer respite. It is estimated that the fulfilment of this demand is within reach provided that the emission ceilings in the NEC-directive are met.

Assessment of the IIASA cost estimate for Denmark’s fulfilment of the thematic strategy

A qualitative estimation of the costs in relation to sectors and air pollution components presents the opportunity for some insights. First of all it seems that the cost of the strategy will be somewhat equally distributed between the transport sector and stationary plants (supply plants and industry) while agriculture is expected to meet the emission ceiling without further cost demanding initiatives.

Secondly, it seems that especially the NOX emissions will require measures and to a lesser extend SO2. No costs are connected with ammonia. Finally, IIASA assumes a very modest reduction effort for NMVOC and primary PM2,5.

The costs are primarily to be accounted for by the private sector; however, the public sector is to bear the additional expenses for vehicles with new EU norms and possible subsidies for wind energy.

The estimates of the costs and benefits in the Impact Assessment of the thematic strategy include the fulfilment of the already agreed NEC-directive as well as the new targets following from the thematic strategy.

The highest costs are expected to be those connected with the reduction of the NOX emission, in accordance with the fact that it is here the largest gap is found. The measures that are assumed sufficient to fulfil the NEC-directive up until 2010 are estimated based on a preliminary analysis elaborated by Danish EPA. It is regarded as the best possible knowledge at present. The preliminary report that assesses the measures by financial economic principles estimates the measures to cost well over 300 million DKK.

Presuming that the adjustment of the NOX emission in 2020 (see Table B) is correct the thematic strategy will be met with a further reduction of the emissions by 11,400 tonnes. This will, according to IIASA, and with the measures outlined in the table, amount to approx. 240 million DKK calculated by financial economic principles.

The total annual costs, which are partly based on the IIASA cost estimate do not differ decisively from the total IIASA cost estimate of 600 million DKK for Denmark.

However, a more true cost estimate ought to be worked out by performing the estimates and the calculations using welfare economic principles.

Evaluation of the IIASA benefit assessment for Denmark

The highest IIASA estimate of health benefits is based on values not used by Danish institutions. The medium estimate of 4.2 – 4.4 billion DKK in annual benefits for Denmark in 2020 is obtained by using externality estimates comparable with the figures used by NERI hitherto. The most precautious estimate on 2.3 billion annually in health benefits is approximately based on the externality estimates used by COWI for the Danish Ministry of Transport and Energy.

The above mentioned assessment of the benefits includes the benefits achieved from a full implementation of the already agreed NEC-directive with the extra measures needed to fulfil the new targets suggested in pursuance of the thematic strategy. It is not possible on the existing basis to separate the benefit by implementing the NEC-directive from the total benefit.

These socio-economic benefit estimates are not directly comparable with the financial economic costs. An actual cost-benefit analysis assumes that the welfare economic costs are calculated.

Uncertainties regarding the assumptions of the thematic strategy

The uncertainties of the projections and the atmospheric modelling suggests a re-examination of the IIASA calculations in order to test whether the emission ceilings suggested by the Commission and the associated burden sharing between the countries result in the expected sharing of costs and benefits. Furthermore it should be secured that comparable calculations of the costs and benefits are carried out.

 

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