Economic Evaluation of the Recommendations of the Inquiry into Urban Air Pollution in Australia

Economic Evaluation of the Recommendations of the Inquiry into Urban Air Pollution in Australia

Report of the Economic Evaluation Group by Nariida C. Smith Group Chair

CSIR0 - Building, Construction and Engineering Improving the Built Environment

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ABOUT THIS REPORT TITLE: Economic Evaluation of the Recommendations of the Inquiry into Urban Air Pollution in Australia DATE: October 1997 This report is provided in support of the Inquiry into Urban Air Pollution in Australia, conducted by the Australian Academy of Technological Sciences and Engineering. It provides economic context for the inquiry recommendations and represents the work of the team of: Dr Nariida Smith, CSIRO, Building Construction and Engineering Mr Peter Dempster, Aquatech Environmental Consultants Dr Geoff Syme and Dr Bradley Jorgensen, Australian Research Centre for Water in Society, CSIRO, Land & Water Associate Professor Rod Simpson, Queensland Centre for Public Health, Griffith University Mr Terry Ahearn, EPA, Victoria ACKNOWLEDGEMENTS: We gratefully acknowledge the helpful advice of Professor John Taplin, University of Western Australia, Mr Charles Jubb, Aquatech, Dr David James, Ecoservices and the input provided by a large number of individuals from industry, industry associations and government agencies - often generously provided at very short notice. We benefited from the work of the NSW EPA, through their environmental valuation database ENVALUE. NOTE: Whilst the inquiry tasks groups recommendations took over six months consideration, their economic evaluation was constrained to under six weeks. Moreover the group who undertook the task was predominantly recruited at the eleventh hour. Members in general believed that with a longer time frame a more complete assessment would have been possible. In particular in costing it would have been possible to follow up a broader range of sources and in assessment of benefit the results of recent studies might have been obtained. For additional information on this report, please contact: Dr Nariida Smith CSIRO Lot 12, Riverside Corporate Park, Delhi Road, North Ryde, NSW 2113 Tel (02) 9490 5466, Fax (02) 9490 5777 e-mail [email protected]

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EXECUTIVE SUMMARY The purpose of this report is to provide economic information needed to guide decisions on appropriate choices of management options to limit air pollution. In particular it considers costs and benefits of a set of recommendations relating to: stationary sources, domestic sources, transport vehicles, transport logistics and urban infrastructure, together with economic instruments which might support their introduction. These recommendations are to lead to reduction of six pollutants Carbon Monoxide(CO), Oxides of Nitrogen (NOx), Oxides of Sulfur(SOx), Hydrocarbons/Air Toxins(HC or VOCs), Particulates (PM10) and Lead. VOCs and NOx are the precursors of ozone. The economic evaluation process was influenced by three issues: • The Need for Broad Scale Values: Costs and benefits will vary among classes of pollutant source and both within and between urban areas. However, Australiawide generic values are needed here. • The Complex Path from Cost to Benefit: Most suggested management options or measures are for limiting pollutant emissions. This leads to changes in concentration of pollutants in the atmosphere and again via complex mechanisms to health and other amenity. Economic assessment of benefit is thus challenging and frequently challenged. • A Multiplicity of Recommendations makes evaluation of individual scenarios unrealistic. The combination of the first and second of these issues means cost benefit assessment of individual recommendations would be of little practical value. The third means that there will be various subsets of measures under consideration for adoption by particular jurisdictions. Decision makers can be assisted by economic information about: • The relative cost effectiveness of various strategies for the same amount of benefit in terms of pollution reduction, • The relative benefits of lower emissions of specific pollutants to allow assessment of the relative advantages of measures with respect to individual pollutants, and • Economic instruments available to encourage adoption of desirable strategies. This allows assessment of groups of measures in terms of aggregate emissions and costs. These can then be compared to the benefit of limiting that pollutant. The assumption that, for example, one kilogram of CO emission avoided has the same benefit, whatever measure is put in place to produce the saving, is sufficiently accurate for broad assessments and in keeping with the community view that limiting pollution is of general benefit. Estimating Costs Recommendations put forward fall in two broad classes. Those which will directly limit pollution, and those that will do so indirectly by aiding decision making processes or through broad structural change.

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The direct measures can be assessed in terms cost for amount of pollutant emission avoided. This cost is net of the direct gains or losses associated with the measure, for example extra energy savings. Tonnes of each pollutant avoided, dollars per tonne of pollutant avoided and Australia-wide total dollars are calculated to allow the cost effectiveness of measures to be compared. Table I shows some example measures with reduction in pollutants and associated costs. Some measures such as road pricing are extremely cost effective. Others, such as introduction of minimum standards for firewood and vehicle inspections, are quite effective. Measures of more limited general cost effectiveness may still have a contribution to make within bundles of measures since there are many other effectiveness issues apart from cost. TABLE I Examples of Cost effectiveness of Emission Reduction Measures $A1997 $/t = dollars per tonne, tpy = tonnes per year, AT = Australian urban total

6.(a) Emission limits based on ADR / Inspection and Maintenance programs

CO

NOx

Petrol 79K tpy 4.3 $/t $340M AT

Petrol 5.7K tpy 61K$/t $340M AT

SOx

8. A voluntary reduction of 9 kPa in gasoline vapour pressure 14. Electronic Road Pricing indicative cost effectiveness if introduced Australia wide

VOCs

PM

Petrol 32.0K tpy 10.6K $/t $340M AT

Diesel 10.0K tpy 85.0K $/ $850M AT

25K tpy 225 $/t $5.6M AT 86.7M tpy 14.6M tpy$14billion $14billion

Total net cost -ve

15.4M tpy $14billion

Total net Total net cost -ve cost -ve

17. Cover transfer and storage points for lead 23. (b) Installation of larger, more efficient and reduced NOx emitting gas turbines

Lead

0.01 tpy 1M $/t 25M AT 12K tpy 6K $/t $72M AT

25. (a) adoption of uniform wood heater legislation across all states: AS4013

380 tpy 65 $/t $24K AT

25. (h) controls to prevent the sale of excessively wet firewood

400 tpy 45 $/t $18K AT

The effectiveness of the indirect measures cannot be calculated. For example monitoring programs may lead to abatement measures but estimates of the amount of pollutant saved would be speculative at best. For specific measures, an annualised cost, the amount that would need to be paid during the life of the measure in order to meet all of the costs of the measure, including establishment costs, was estimated to assist comparisons. For example the annualised cost over a period of ten years for a basic air quality monitoring network was estimated as $4.14 million. Broad measures of indeterminate cost such as policy recommendations for cooperation between jurisdictions have not been costed although it is noted that, when assessing the worth of such measures, the costs of lack of coordination should be considered.

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Impacts of Pollutants The science linking emission, via a complex path, to final impact is not yet sufficiently well developed to provide precise monetary values of benefit in most cases. Indeed the inquiry recommendations include initiatives to provide better understanding of such links. It can also be argued that valuation of non market goods based on market valuation processes is inherently flawed and alternative means of impact assessment should be considered. Benefit assessment in this report is designed to serve two roles: • It allows broad comparisons of categories of benefits of reduced emissions of different pollutants. • It indicates the scope of monetary benefits through identifying possible costs of pollution to society. Four physical effects of pollution on Human Health, Built Structures, Flora / Fauna, and Visibility are complemented by a General Amenity effect to account for community perceptions of well being. For example when looking at a hazy view people may be concerned about both limited visibility and risk of damage to their health from pollution. Despite difficulties with non linearity and vulnerability, physical harm can be assessed. Then economic costs can be calculated, with varying degrees of accuracy, from simple repair/replacement of buildings to more complex valuations of morbidity and mortality. Perceived amenity costs are more difficult to estimate. Indirect valuation techniques link non market advantages to tradeable commodities, such as clear views to house prices, but are dependent on the availability of a market substitute and are subject to confoundment. This has lead to a variety of survey based direct valuation techniques the most frequently used being contingent valuation or willingness to pay. However these too have variable reliability. These caveats need to be kept in mind in considering estimates of costs due to each pollutant with respect to both physical and amenity effects which are provided, for comparison purposes only, in the report. Value of Clean Air In the absence of reliable valuations of the benefits of reduced emissions that can be aggregated and related to total costs, an alternative approach to consideration of the value of clean air is suggested. It is based on broad estimates of the effects of pollution on public health and the premise that there are other economic losses which may be as significant at a national level as those due to health. Health: Estimates of impacts vary considerably in part due to differences in valuations of human life. Values suggested in Australian studies range from a low of $1million through a median of $5 million to a high of $12 million per fatality. For scoping purposes only, a broad estimate of Australia wide annual cost of fatalities is made as $550 million to $2,750 million. Tourism: is one of Australia’s most important “export” earners contributing 13.7% of export income,or 13.9 billion dollars per annum and up to 10.5% of GDP in direct and indirect effects. Most inbound tourists spend a proportion of their stay in cities. A

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scenario that suggests 5% of visitors might be deterred by polluted cities is conservative considering over 70% of inbound tourists nominate Australia’s unique flora, fauna and landscape as the main reasons for their visit This would result in an annual loss of $0.7 billion. Competitive Cities: There is global competition between cities to attract businesses. The employees in such businesses prefer to live and work in areas of high amenity. Maintaining an attractive environment, including clean air, then becomes vital. As an indication of the scale of such investment opportunity potentially foregone, loss of a “medium size” business would translate to around three quarters of a million dollars per annum immediately. Indirect losses to the economy would be even greater. Instruments for Implementation Having settled on a package of desirable measures for limiting pollution, measures for putting these in place need to considered. Education: Economic valuations can play a role in general Community Awareness Campaigns such as NRMA Clean Air 2000 or more specifically targeted education campaigns. Cost information relating to “no regrets options”, or high reported pollutant damages may also encourage people to see their individual actions as causing community harm. However in many cases some incentive is needed to redress the “market failure” which arises when the users of a resource such as the air are not responsible for the full cost of its use. Economic Instruments: There has been a general move from earlier direct regulation of the environment sometimes termed “command and control” systems to the use of economic instruments. These instruments work on the general tenet that the “polluter pays” and thus is “encouraged” to limit emissions. Applications within Australia include the NSW EPAs load based licensing fees for particular air pollutants, Federal differential taxes on petrol to discourage use of leaded petrol and Victorian EPA’s encouragement of Cleaner Production Processes by industry. Support for research and development may be viewed as economic instruments, as may tax concessions or capital grants. Better Economic Valuation Better air shed analysis is required to provide cost effectiveness of measures in terms of pollutant concentration reduction Even when effects on concentration levels are known, benefit calculation is complex. Emerging indications show that even very low levels of pollution from particles can cause significant health effects. This leads to the precautionary principle suggestion that: “Australia should aim to reduce pollution as much as possible in a cost effective manner whilst the full health and indeed other impacts of air pollution are not known” Health effects over time and at varying levels of pollutant concentration with respect to varying populations need to be sought both locally and from international studies. In contrast it is absolutely vital that the environmental amenity is estimated locally. If it is accepted that an attractive natural environment with clear blue skies is needed to capitalise on our natural advantage of climate in attracting tourists and investment, analysis of how polluted Australian Cities can afford to be is needed. In cities the

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achievement of clean air is not costless but, in the longer term, that cost is far outweighed by the economic benefits. CONTENTS

1. INTRODUCTION.................................................................................................... 1 2. ESTIMATING COST.............................................................................................. 3 2.1 Direct Measures - Cost Effectiveness ................................................................. 3 2.2 Indirect Measures - Cost Estimates................................................................... 14 3. IMPACTS OF POLLUTANTS? ........................................................................... 17 3.1 Effects of Particular Pollutants.......................................................................... 18 3.2 Measurement of Impacts ................................................................................... 19 4. THE VALUE OF CLEAN AIR ............................................................................. 28 4.1 Health ................................................................................................................ 28 4.2 Tourism ............................................................................................................. 30 4.3 Competitive Cities::........................................................................................... 30 5. ENCOURAGING IMPLEMENTATION.............................................................. 31 5.1 Education:.......................................................................................................... 31 5.2 Economic Instruments:...................................................................................... 32 6. BETTER ECONOMIC EVALUATION ............................................................... 34 7. REFERENCES ..................................................................................................... 35

APPENDICES 1. Cost-effectiveness of measures to improve urban air quality 2. Economic Valuation of Air Quality 3. E&HIA Framework for Air Pollution Management 4. Urban Air Pollution: Current Policy Approaches to Improving Air Quality in

Victoria 5. Consolidated Management Options

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1. INTRODUCTION In October 1996, the Minister for the Environment, Senator the Honourable Robert Hill, announced that he had invited the Australian Academy of Technological Sciences and Engineering (AATSE) to conduct an independent Inquiry into Urban Air Pollution in Australia. The Academy appointed tasks groups (TGs) to focus on future levels of pollution from various sources as follows: • Stationary Sources - power stations, oil refineries, light and heavy industry,TG2 • Domestic or local scale sources - mainly dwellings,TG3 • Transport Vehicles - impacts of vehicle fleet technology, TG4 • Transport Logistics - impacts of vehicle fleet use, TG5 • Urban Infrastructure - impacts of city form and the built environment, TG6 plus • a task group with the assignment to provide baseline data by considering the current situation in the nations’ urban air sheds, TG1. The six pollutants specified within the inquiries terms of reference were: Carbon Monoxide(CO), Oxides of Nitrogen (NOx),Oxides of Sulfur(SOx), Hydrocarbons/Air Toxins(HC or VOCs), Particulates (PM10) and Lead. Each task group suggested management options or measures for reducing or limiting the increase of these criteria pollutants. Justification of the choice of measures can be found in the individual task group reports and the final inquiry report (AATSE, 1997). This report sets these recommendations in an economic context. This includes considering the costs and benefits from reduction in pollution and economic instruments which might support the introduction of the recommended measures. Environmental economic assessment is in general complex and the task of evaluating management strategies for air pollution mitigation is particularly so. Therefore it is important that the purpose of the assessment is kept in mind in approaching the problem. The purpose here is the provision of economic information needed to guide decisions on appropriate choices of management options to limit air pollution. The economic evaluation process was influenced by three issues: • The Need for Broad Scale Values: Costs and benefits will vary among classes of pollutant source, for example, vehicle type. They will also vary both within and between urban areas. However, Australia-wide generic values are needed here. These are based on generic types of pollutant source and urban Australia-wide averages. As such they are designed for use in initial broad-scale planning. Economic evaluation of specific projects will require re-assessment of values in view of local conditions.

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• The Complex Path from Cost to Benefit: Economic evaluation is complicated by the fact that most suggested management options or measures are for limiting pollutant emissions. Limiting emissions leads to changes in concentration of pollutants in the atmosphere but the linking mechanisms via air sheds are complex. The changes in concentrations link again via complex mechanisms to health and other amenity. Whilst economic costs are borne when limiting emissions, most of the benefits accrue from the final outcomes. This makes the economic assessment of benefit challenging and frequently leads to such assessment being challenged. • A Multiplicity of Recommendations: It is inappropriate with some fifty measures and six pollutants to evaluate individual scenarios. The number of possible choices is far too large. Neither is selection of scenarios involving the most economically efficient measures a realistic option. Economic evaluation will be important but is not the only consideration governing the feasibility of adoption of measures. The combination of the first and second of these issues means cost benefit assessment of individual recommendations would be of little practical value. The third means that there will be various subsets of measures under consideration for adoption by particular jurisdictions. Decision makers can be assisted by economic information about: • The relative cost effectiveness of various strategies for the same amount of benefit in terms of pollution reduction, • The relative benefits of lower emissions of specific pollutants to allow assessment of the relative advantages of measures with respect to individual pollutants, and • Economic instruments available to encourage adoption of desirable strategies. This allows assessment of groups of measures in terms of aggregate emissions and costs. These can then be compared to the benefit of limiting that pollutant. The assumption that, for example, one kilogram of CO emission avoided has the same benefit, whatever measure is put in place to produce the saving, whilst perhaps imprecise on a case basis, is sufficiently accurate for broad assessments. In economic terms this procedure corresponds to seeing limiting pollution as a “merit good” of value in its own right. Besides being a convenient assumption this now fits well with public perception. Surveys by the NSW EPA in 1995 and 1997 found air quality to be an environmental concern for the largest (28%) or second largest percentage (24%) of respondents. Perceptions of pollution can be equally important in the public mind, as measured concentration levels. The report begins in Section 2 by describing an approach to counting the costs of suggestions to limit pollution. It explains why cost effectiveness measurement is appropriate and summarises the findings of a report by Aquatech Environmental Consultants who undertook the cost assessment of the measures proposed by inquiry task groups. Recommendations are grouped as: measures where the cost of the measure and the amount of pollutant emission avoided can be calculated, those where the cost can be estimated, but the potential emission avoided is uncertain and a set of broad recommendations, such as inter-governmental cooperation which can not be usefully costed. The full assessment is attached as Appendix 1.

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In considering economic benefit valuation of clean air, Section 3 first considers the types of benefits arising from reductions in each of the major pollutants. Both the physical and perceived benefits are reviewed together with the most common measurement processes. Some example dollar values from the available literature are presented, with the proviso that such values are situation specific. The pitfalls and inherent limitations of using market valuation methods for “non market” goods such as clean air, are canvassed.. Further discussion of these important issues is provided in a paper by Dr Bradley Jorgensen “Economic Valuation of Clean Air” prepared for the inquiry. This paper is attached as Appendix 2. Clearly effects on public health are “top of mind” issues when air pollution is considered The health costs due to air pollution were particularly addressed by a recent report into National Environment Protection Measures for Ambient Air Quality which this inquiry is designed to complement. However, for completeness, the particular effects of individual pollutants on health are reviewed together with some consideration of Environmental and Health Impact Assessment (E&HIA). Professor Rod Simpsons paper for the inquiry on that subject is attached as Appendix 3. Section 4 compares these possible health costs to the community due to air pollution with other potential severe economic costs due to pollution. It is suggested that scenarios with different estimated risks from loss of amenity might be a useful way of approaching cost benefit assessment of broad scale measures for limiting pollution. Risk benefit analysis might provide an appropriate analytical framework. Finally, as in all cases where the benefit accrues to a different set of people than those who pay the cost, there is a strong possibility of market failure. There is no incentive for the polluter to bear the extra costs . Even when the polluter is a member of the public there is a need to recognise that individual actions can make an impact. A variety of economic instruments currently in place to influence behaviour in Victoria is reviewed in a paper by Mr Terry Ahearn, attached as Appendix 4. Instruments in use in Australian jurisdictions in general are summarised in section 5, which also briefly canvases other available economic instruments such as a carbon tax. The report concludes with a consideration of the case for better economic evaluation information. 2. ESTIMATING COST Recommendations put forward fall into two broad classes: those which will directly limit pollution, and those that will do so indirectly by aiding decision making processes or through broad structural change. 2.1 Direct Measures - Cost Effectiveness The effectiveness of the direct measures can be assessed in terms of the cost of achieving a specified reduction in emissions of a particular pollutant. For the purposes of comparisons, this facilitates an assessment of the relative effectiveness of measures rather than the efficiency of measures. The calculation seeks to answer either “What is the least cost way of limiting pollutant emissions?” or alternatively “for a given amount of money what is the maximum reduction in emissions that can be achieved?” Evaluation Group Report - 1997

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These are quite different questions from, for example: “At what level of emissions of NOx does the marginal social benefit of abatement equal the marginal social cost of abatement?” That is the marginal condition for economic efficiency. This differs from cost benefit analysis which is concerned with ensuring that the net present value (NPV), the discounted present value of benefits minus the discounted present value of costs, is equal to or greater than zero. This criterion ensures that society obtains at least as much benefit as the change costs but is not the criterion for economic efficiency. Economic efficiency demands maximisation of the NPV and this will occur at the point where marginal social benefit equals marginal social cost. The complexity of evaluating the economic impact of a large number of changes means that an appropriate initial step is to limit the analysis to a generic assessment of the impact of the measure. More detailed analysis of specific measures, such as cost benefit analysis or an assessment of economic efficiency, can be undertaken once policy makers have had the opportunity to consider the measures. Avoided costs are an appropriate means of characterising some of the resource savings that might accrue to the community provided that prices are equated with marginal social cost. For example, avoided costs can take the form of lower energy costs resulting from the adoption of a measure or the avoidance of higher safety costs resulting from not adopting a measure. Where reasonable estimates of avoided costs are available, these are included in the cost effectiveness calculations. For each direct measure this assessment is presented in a matrix of pollutants and measures. Assessment of Cost Effectiveness involves calculating: • impact of the measure on emission rates for the six target pollutants • the unit cost of reductions in emissions - ie the cost per kilogram of each pollutant that is avoided. For example if a measure reduces NOx by k1 and particulates by k2 and the cost of the measure is $x per unit. Then cost is derived by dividing x by k1 giving dollars per kilogram of NOx and x by k2 giving dollars per kilogram of particulates • the relative cost effectiveness of the different measures for particular pollutants • the aggregate cost and emission reductions for all urban areas of Australia Where each of the proposed measures could be associated with a particular piece of equipment, for example, a vehicle, a household appliance, or a piece of industrial machinery, the following six variables were estimated. (1) Number of items of equipment

(4) Total reduction in emissions

(2) Cost per item of equipment

(5) Cost per unit reduction in emissions

(3) Reduction in emissions per item of equipment

(6) Total cost

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Estimates of items 1 to 3 yield estimates of items 4 to 6, as follows: (4) = (1) * (3) (5) = (2) / (3) (6) = (1) * (2) However, it was not always possible or sensible to follow this particular sequence. Specifically, it was often not possible to calculate items (1), (2) and (3) but that does not necessarily prevent estimates of items (4), (5) and (6). For example: • Rather than focus on a particular item of equipment, in some cases it made more sense to focus on an input to the process, such as the quantity of fuel consumed or on an output like the number of vehicle-kilometres travelled. • In other cases it made sense to focus on the system as a whole; for example in road user charging and travel demand management. These approaches enabled final estimates for aggregate cost and emission reductions for most measures. These are calculated as the total reduction in emissions (tonnes), cost per tonne of emissions ($/t), and estimated total cost net of avoided cost ($). Full information on the basis of each calculation, including the assumptions made at each stage of the process, is set out in Appendix 1. It should be noted that measures are often intended to limit secondary pollutants, but calculations relate to primary pollutants. In particular where NOx and VOCs are reduced by x%, ozone will typically be reduced by a similar amount. Table 1a shows expected total reduction in pollutants and estimated total cost for each direct measure with respect to each pollutant. The costs are all in 1997 Australian dollars. The recommendation numbering follows that in the main inquiry report. The full set of those report recommendations is attached here as Appendix 5. In all cases it must be remembered that these are Australia-wide estimates. In some cases there is so much variation between the effects of a measure that the values given must be seen only as examples. For instance, the effects the alternative fuels CNG and LPG vary considerably both with respect to the vehicle type and the type of fuel, diesel or petrol they are replacing. In some vehicle/fuel categories emissions are even increased rather than reduced by the change. In the few cases there was not sufficient information available to calculate cost or emissions reduced. Then an indication of when such information might become available is provided, as in the case of new emissions standards for diesel vehicles, or an estimate of the direction of cost is made, as in the cost savings from more energy efficient appliances. Some measures, such as electronic road pricing, are extremely cost effective. Others, such as the introduction of minimum standards for firewood and vehicle inspections, are quite effective. Measures of more limited general cost effectiveness may still have a contribution to make within bundles of measures. As previously noted, there are many other effectiveness issues apart from cost. Moreover cost effectiveness may be affected by specific local savings or a broader consideration of associated savings. Evaluation Group Report - 1997

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Greater awareness of pollution issues may lead to other changes in behaviour. For example it has been suggested that testing tail pipe emissions in Denver, Colorado, led to increased public awareness of air pollution, and of the advantages of limiting emissions. In turn this led to acceptance of a ban on wood stoves with considerable clean air gains. Ideally before the final set of the task group recommendations were drawn up there should have been an opportunity to revise the list in view of cost effectiveness. Time constraints did not permit such review and there are some recommendations for which the costs seem high in relation to the benefits, although the measures may confer other non-monetary advantages.

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2.2 Indirect Measures - Cost Estimates At this stage the effectiveness of the indirect measures cannot be calculated. Monitoring programs that improve understanding of current pollutant concentrations, or modelling to estimate future pollution are designed to inform government or the community who might respond through adoption of abatement measures. Estimates of the amount of pollutant then abated would be speculative at best. Nevertheless, since numbers of such measures were suggested, it is important to provide estimates of costs where possible. The sets of indirect measures are divided into broad measures of indeterminate cost such as policy recommendations for cooperation between jurisdictions and specific measures, for instance improved pollution monitoring procedures. The costs of the latter were estimated at appropriate levels, frequently per city. The overall cost of implementation nationally was then calculated. For comparative purposes, it is important to focus on the annualised costs. The annualised cost is the annual amount that would need to be paid during the life of the measure in order to meet all of the costs of the measure including establishment costs. The effect is to spread establishment costs across the life of the measure. This approach provides a more accurate indication of the cost of a measure. For example, the cost of a basic air quality monitoring network is put at $15 million for the up-front cost and $2 million for annual on-going costs. It is assumed that the network would need to be physically replaced after 10 years. The annualised cost is $4.14 million being the amount needed to cover the on-going costs and to repay a loan of $15 million raised to cover the up-front costs. For the purposes of these calculations a real (after-inflation) discount rate of 7 per cent was assumed. As with the cost effectiveness estimates, these annualised costs must be taken as indicative only and for use in comparison of measures, not assessment of specific projects. The costs of setting up a facility in a particular area, and its maintenance may vary considerably from the generic value. Table 1b shows Australia-wide cost estimates for specific indirect measures and notes which pollutants would be targeted by the measure. Again all costs are in 1997 Australian dollars and recommendation numbering follows that in the main inquiry report. The broad, not costed measures, can be found in the full set of consolidated measures attached as Appendix 5, predominantly in the recommendations on policy,. page A5.1, and urban form, page A5.5. It is not possible to comment on the relative worth of any of these measures. However, as most are to provide better coordination and planning, the costs of lack of such coordination and planning are relevant when considering the expected costs of the measures.

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3. IMPACTS OF POLLUTANTS? There is a complex and often lengthy path between an original action to limit emissions and a final benefit. For example, Maddison et al (1996) have modelled the health impacts of pollution from car exhausts as: ∆Hij = bij*POPj*∆Ajt ∆Hij = change on particular health impact i per year due to particular pollutant j emitted t = transport fuel type - diesel, super, unleaded bij = slope of “dose response function” of health effect i per year due to pollutant j POPj = population exposed to pollutant j ∆Aj = change in ambient concentration of pollutant j in the atmosphere due to exhaust emissions from transport fuel type t: diesel, super, unleaded This example shows a multi step process with health impact due to a pollutant being linked via the health effect of the pollutant, to the number of people exposed and its concentration in the atmosphere . The concentration is further linked to its emission in exhausts from vehicles using particular fuel types. Yet this model is still a simplification as it does not include the spatial and temporal variations in both emissions and their impacts. Pollutant reduction strategies will limit emissions at points, due to industry measures, over areas, due to household pollutant reduction , or along the lines of road networks in the case polluting vehicles within the city. Emission reduction may vary by time of day and day of week, for example with reductions in emissions from peak hour traffic, or season of year, for example in reduction of heater emissions. The final benefits will also be distributed within the urban air shed both due to proximities to particular emitting sources and to meteorological conditions. Benefits from strategies to reduced emissions from large point sources will have immediate impacts in the vicinity of the sources. Effects of strategies to deal with household or vehicle emission will be less obvious. Pollutant concentrations in particular areas currently impact disproportionately on segments of the city population (Small et al, 1995 and Task Group 6 report). They will also differ by time of day and day of year as noted in both Task Group 1 and Task Group 6’s reports to the inquiry Analyses of the consequences of these variations are outside the scope of this benefit assessment. Both quantitative and equally importantly qualitative assessments of benefit in this report do not aim to provide precise monetary values. In most cases, the science linking emission to final impact is not yet sufficiently well developed to do so. Indeed the inquiry recommendations include initiatives to provide better understanding of the links between emissions and impacts.

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It can also be argued that valuation of non market goods based on market valuation processes is inherently flawed and alternative means of impact assessment should be considered. The advantage of a dollar figure is that it gives a standard of comparison however alternatives such as set community standards, or measures of community satisfaction/concern have been suggested. Benefit assessment in this report is designed to serve two roles: • It allows broad comparisons of categories of benefits of reduced emissions of different pollutants. • It indicates the scope of monetary benefits through identifying possible costs of pollution to society. It is important that this scope is considered because currently clean air is better recognised for its public good than its economic value. The remainder of this section is concerned with comparing the benefits that might arise from reducing emissions of particular pollutants, whilst the value of clean air, in general, is the subject of the next section. 3.1 Effects of Particular Pollutants For operational convenience the physical effects of pollution are dived into impacts upon Human Health, Visibility, Flora / Fauna, and Built Structures. These are complemented by a General Amenity effect to account for community perceptions of well being. When looking at a hazy view people may be concerned about both limited visibility and the risk of damage to their health from pollution. Their perception of these disadvantages may not correlate directly with the physical effects. Indeed even their perceptions when directly questioned about the physical effects of pollutants will be dependent on their experience and knowledge. Table 2 indicates perceptions of the six pollutants of interest with respect to these effects as High, Medium or Low based on the averaged opinions of a convenience sample of people associated with this inquiry. They were asked to consider the damage from the worst likely pollution in an Australian city treating secondary effects such as ozone as due to the precursor pollutants. Even this informed sample had a range of views. Table 2: Perceptions of Pollutant Impacts Effects on /

health

visual uildings amenity structures

CO

Low

Low

Low

Low

Low

NOx

Medium

High

Low

Low

Medium

SOx

Medium

Medium

High

Low

High

VOCs

High

High

Medium

Low

Medium

Particles

High

High

Medium

Medium

High

Lead

High

Low

Low

Low

Medium

Pollutant

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& erceived well being

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3.2 Measurement of Impacts Many physical effects of pollutants are non-linear with respect to increasing pollutant concentration, and most are also dependent on the current state of whatever is suffering the harm. However the amount of physical damage due to particular concentrations of pollutants on buildings or materials can be measured. Impacts on human, animal and plant health can be assessed using methods such as dose response measurement which account for non-linearity and vulnerability. Using time series data a, usually logarithmic, relationship is hypothesised between prevalence of disease, for instance cases of cancer per 10,000 population, and combined pollutant concentration and length of exposure. The economic effect or dis-benefit of such physical harm can then be calculated with varying degrees of accuracy. Simple repair/replacement costs can be used for damaged buildings. Health costs are more complex. The most direct derivations in terms of costs of treatment, are subject to a number of assumptions. More extensive assessment in terms of the value of lost productivity, or costs of pain and suffering requires further assumptions. Finally the cost of death itself is subject to the valuation placed on human life, which traditionally varies throughout a lifetime, with the elderly more susceptible to health damages (See for instance Schwartz and Dockerly, 1992). The issues involved in estimating health costs are further considered in Section 4 and in Appendix 3. Visibility can be measured in physical terms of distance to a “visual horizon”, or numbers of days when a particular land-mark can be seen. But, like perceived amenity, the economic value of visual amenity is more difficult to estimate. Indirect valuation techniques, or surrogate market techniques, such as hedonic pricing, link non market advantages to tradeable commodities, for example clear views to house prices. However they are dependent on the availability of a market substitute, and the extent to which the commodity can be sensibly disaggregated to avoid confoundment. For example house prices linked to view may be effected by what is being viewed as well as visibility. This leads to use of a variety of direct valuation techniques. The most frequently used is contingent valuation, a survey based technique, seeking societal willingness to pay for avoiding pollution. A hypothetical market is constructed, and it is assumed that consumers will respond in this contingent market in the same way as they respond in an actual market. Typical surveys provide respondents with information about a future hypothetical change in environmental quality. Their willingness to pay to prevent such change or to accept compensation to allow the change is sought. However like most surveys these methods can be affected by the respondents’ reference frame. In “thinking of the future” one respondent may be imagining a beautiful garden city, another might think of the city immersed in a Los Angeles smog. Additionally people may view the survey as a chance to vote for reform unless they believe that they will actually be required to pay. In the context of air quality changes, when contingency valuation used to value particular effects, there is evidence that people treat health improvements and visibility improvements as inseparably related (Fischoff & Furby, 1988, Mitchell & Carson, 1989). This is not surprising as the visual pollution provides a health warning

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but it causes measurement problems, since, when the components are valued separately, people will value both resulting in superadditivity: Values obtained separately will add up to more than the total value of air quality improvement (Schulze et al., 1993). Results are also found to be sensitive to the direction of change. People will sometimes pay more for pollution to decrease from x to y than they will pay to avoid an increase in pollution from y to x. In general it needs to be noted that “Estimates of the economic value for air quality changes, like those for environmental public goods in general, are a function of the good, the statistical and survey methods used, the respondents involved, the information available to respondents, and a whole host of other factors not least of which are the assumptions of the researcher”(Jorgensen,1997) These caveats must be borne in mind when considering a range of values for costs due to each of the six pollutants with respect to both physical and amenity effects drawn from some local, but predominantly overseas, studies, presented in Table 3. To facilitate comparison they have been converted to $A1997, except in the case of health impacts where expected fatalities have not been multiplied by a value of life since the different assumptions for these values confound comparisons. The table entries are annotated to provide context and might be used to give some indication of relative costs of various pollutants. They might also, with due regard for context, be applicable to individual cost benefit assessment, for instance in preparation of Environmental Impact Statements. In fact many of these values have been assembled by the NSW EPA for this purpose.(NSW EPA, 1995). Benefit transfer techniques (Desvouges, Naughton & Parsons, 1992) can allow monetary valuations from one site to be used for estimation at another, if conditions are similar, saving both money and time. It would however be a gross error to extrapolate particular context benefits to Australia-wide general estimates of benefits. So far this review has concentrated on measurement of costs of pollutants, or conversely the benefits of abatement. Although it is recognised that in peoples minds these may be implicitly linked to the benefits of clean air, the benefits of clean air, per se, have not been canvassed. In general, the natural environmental can be considered to have three types of economic value: current use value, option value and existence value. An example of the latter value is the value of the polar wilderness irrespective of any intention to visit or exploit it. Only the first value is usually considered relevant for urban air sheds partly because they are clearly in use, and perhaps because the constant circulation of the air leads to the belief that remediation will always be possible if problems need to be addressed. Its existence value is barely considered. Yet it may be argued that remediation involves costs far higher than those of the initial prevention measures, and it will be argued that the very existence of clear clean urban air confers economic advantage.

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4. THE VALUE OF CLEAN AIR In the absence of reliable valuations of the benefits of reduced emissions that can be aggregated and related to total costs, an alternative approach to consideration of the value of clean air is suggested. It is based on broad estimates of the effects of pollution on public health and the premise that there are other economic losses which may be as significant at a national level as those due to health 4.1 Health Estimation of the economic effects of pollution on public health are dependent upon assigning values to morbidity and mortality. The costs of morbidity, although the subject of debate, are far less controversial than the costs of mortality. Assigning a value to human life is apt to cause the community some discomfort. Nonetheless this is done explicitly or implicitly in many situations. A major problem for policy makers, however, is that valuations vary markedly. Values suggested in Australian studies vary from a low of $1million through a median of $5 million to a high of $12 million per fatality. Viscusi, 1992, reviewed 26 US studies and figure 1 shows the variation in estimates. Clearly the choice can lead to larges differences in estimates of health costs.

6 Num ber of 4 Estim ates in Range 2

0 0-1

1-2

2-3

3-4

4-5

5-6

6-7

7-8

8-9 9-10

1011

1112

1213

1314

Range of Estim ates (US1990$M)

Figure 1: Range in Estimates in Value of life from 26 US studies (after Viscusi,1992)

The pollutant concentrations believed to give rise to problems are also being revised downward as the mechanisms governing the effects are better understood. For example work by Japanese scientists (Ohtoshi et al,1994) has confirmed the biological effects of exposure to PM10. Table 4 shows the major health effects of different pollutants and the populations most vulnerable to their effects. Combinations of variable concentrations of air pollutants may also have synergistic and additive effects. It is clear that health effects

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are sensitive to the characteristics of the populations exposed to pollution. Global estimates of overall effects can only be used as indicators of the scope of effects rather than to quantify the expected frequency of illness or death. Table 4: Health Effects and Populations at Risk Pollutant

Health Effects

Population at risk

Sulfur dioxide

Mortality; respiratory diseases, decreases in lung function

Elderly people; sufferers respiratory disease

Nitrogen dioxide

Hospital admissions for respiratory disease; decreases in lung function

Particulates

Mortality due to cardiovascular and respiratory diseases; hospital admissions due to respiratory disease; decreases in lung function

Sufferers of respiratory disease, such as children with asthma Elderly people with respiratory and cardiovascular diseases; people with respiratory diseases, such as children with asthma

Lead

Behavioural disorders

Ozone

Mortality due to respiratory and cardiovascular diseases; hospital admissions due to respiratory diseases; decreases in lung function

Elderly people; people respiratory diseases.

Carbon Monoxide

Increase in illness due to ischaemic heart diseases

People with conditions

and

neurological

of

Children

ischaemic

with

heart

Simpson, in Appendix 3 of this report, discusses an Environmental and Health Impact Assessment (E&HIA) framework which considers health impacts and cost in terms of risk. He canvasses the problems involved in defining acceptable health risks. He argues against the use of single number estimates and the concept of threshold values below which no problems occur. For scoping purposes ONLY, an annual estimate of health fatality costs has been calculated. It is based on data from a study in Brisbane with broad assumptions; that 80% of fatality costs are due to particulates, and that urban Australia is affected in the same manner as Brisbane in direct proportion to populations. This would give an approximate annual cost of $550 million to $2,750 million for a $1million to $5million value of life. However health is not the only cost. Over a decade ago the USA Environmental Protection Authority (EPA) noted in relation to control of air pollution: The weight of our evidence leads us to conclude that the greater proportion of the benefits of control now resides in aesthetic improvements (e.g., atmospheric visibility), maintenance of the life-support and direct pleasurematerial-provision capacities of ecosystems, and the reduction of damages to human artefacts (e.g., household soiling). (US EPA, 1985, p.1)

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This comment reflects the fact that whilst the initial emphasis of US policy had been on taking actions that would reduce the likelihood of harm to public health, there was a growing realisation that other types of damage needed to be considered. It is important therefore that other economic benefits of clean air are canvassed. There are numbers of such benefits but the following two are chosen because their scope and importance to the economic welfare of the nation may be of a similar order to health benefits. They are considered in terms of the risk of economic loss. 4.2 Tourism Tourism is one of Australia’s most important “export” earners: 13.7% of export income or $13.9 billion per annum. When direct and indirect effects are taken into account, tourism contributed about 10.5 % of GDP, 6.2% directly. Moreover it is both a growth industry and labour intensive accounting for the employment in travel and tourism of 1,028,000 persons, 12.4% of the paid work force, in 1995-96 at a time of high unemployment. (TCA et al, 1997). It is the natural environment which attracts most of these tourists. The Australian Tourism Commission (ABS,1996) reported that over 70% of inbound tourists nominate Australia’s unique flora, fauna and landscape as the main reasons for their visit. Whilst clean air, good visibility and a clear blue sky are not directly ”traded” in the market, they are essential to Australian tourism’s economic welfare. In general “the view of Australia from abroad is dominated by images of unspoiled natural features with an environment free of industrial blight. This image is fragile and could be lost quickly if natural amenities were allowed to decline” (Hamilton et al, 1997) This applies equally to amenity within cities. Australia’s large cities are the gateways for the majority of inbound tourists most of whom spend a proportion of their stay in cities. The city of Sydney is still Australia’s major tourist destination with the Brisbane-Gold Coast conurbation not far behind, A scenario that suggests 5% of visitors might be deterred by polluted cities is conservative yet would result in an annual loss of income of 0.7 billion dollars per annum. 4.3 Competitive Cities Perhaps even more important for Australia’s longer term economic future are the opportunities that cities of high amenity will have as centres for future business activity and potential investment. There has been a growth in information based industry, and advances in transportation have meant that manufacturing industries are no longer tied to the source of raw materials. At the same time telecommunications advances make distance less relevant to commerce. There is global competition between cities to attract businesses. The decision makers, and the employees whom these industries hope to attract, prefer to live and work in areas of high amenity. Australian cities currently possess political stability and public safety together with inherent climatic advantages and natural attractions.

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Maintaining an attractive environment including clean air becomes a vital issue for Australia’s economic well-being. However estimates of possible values of business attracted and then scenarios of a percentage deterred by polluted air are less appropriate than for tourism. The natural environment is only one of several attractions for business. Incentives to business or active encouragement of set up may be the prime motivation. The attraction of a city as a “nice place to live” is far harder to quantify. The role of the livability of cities in location decisions by management may not be explicit, although it could reflect a subconscious preference. However as an indication of the scale of such investment, attraction of the Asia Pacific Head Offices of companies such as American Express brought $84 million into Sydney in 1993-94. (DIST, 1996). Loss of even one “medium size” business would translate to around three quarters of a million dollars per annum immediately. Indirect losses to the economy, for instance via housing purchases for relocating staff, would be even greater. Certainly more than double direct investment. Table 5 contrasts the scope of these risks of economic loss if Australian cities can no longer boast of clean air with the scope of health impacts. Table 5: Possible National Annual Economic Losses without Clean Air At Risk in Polluted Cities

Scenario

Broad Estimate of Possible Economic Loss

Health (fatalities)

current pollution with no safe thresholds

$550 - $2,750 million per annum

Tourism

5% drop

$0.7 billion per annum

International Business Investment

1 of 179 firms decides city is too unpleasant for executives

>$3.2million per annum

These are merely two examples of the broader impacts which should be considered in valuing urban clean air. Others include the attraction of Hallmark events such as the Sydney 2000 Olympics, sold to the International Olympics Movement as the Green Olympics, or the 2006 Commonwealth Games for Melbourne. Additional to these is the amenity value of livable cities to current citizens and the advantage those citizens derive from a sense of surety that future generations will have clean air. 5. ENCOURAGING IMPLEMENTATION Once a package of desirable measures for limiting pollution is determined the issue of meeting the costs of the measures needs to be addressed. 5.1 Education: Economic valuations can play a role in general Community Awareness Campaigns such as NRMA Clean Air 2000 or targeted education campaigns on specific issues. Cost information relating to “no regrets options” where other associated benefits such as energy savings will pay for the cost of the measure can be of particular use. High

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reported pollutant damages may also encourage people to see their individual actions as causing community harm. Public warnings of potential high pollution days might lead to changes in behaviour. For example, assume that a warning of a high pollution summer day in Melbourne was accompanied by a request to the public to use public transport. If the response, well within the bounds of possibility for Melbourne, were to be: four per cent of commuters take the day off; and there is extra use of public transport, mainly train, leading to a 70:30 private:public transport split, in contrast to the normal 80:20 split, then the prediction is for a 28% improvement in pollution exposure for Melbourne residents (Task Group 6 Report)

EXPOSURE (ppm-people-hours x 1000)

400 350 300 250 200 150 100 50 0 BASE1990

BASE30

Figure 2: Forecasting a summer air pollution day in Melbourne (left), and if the public responded to that forecast by using cars less (right).(task group 6 report)

However in many cases some form of regulation or economic incentive will be required. This is needed to correct the “market failure” which arises when the users of a resource such as the air do not bear the full cost of its use. There has been a general move from earlier direct regulation of the environment sometimes termed “command and control” systems, to the use of economic instruments to achieve the same end. In practice a balance of both direct regulation and economic instruments probably provides the best result. Both regulatory approaches face the same problem of establishing the link between the pollution at source and the effect perhaps in terms of ambient concentration. Detailed analysis of regulatory approaches is outside the scope of this economic evaluation but it would be incomplete without some discussion of the economic instruments available to assist implementation. 5.2 Economic Instruments: Economic instruments or market based approaches to regulation are those forms of regulation where, once established, there is minimum regulatory involvement. By this it is meant that the regulators do not dictate the method by which market participants must comply with regulations. Once the regulatory parameters are set, market participants decide, based on their preferences and cost structures, how best to Evaluation Group Report - 1997

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comply with the regulations. It is argued that this approach provides flexibility and so can be more efficient than direct regulation. The central tenet of regulation using economic instruments is the principle that the “polluter pays” and so has an incentive to upgrade equipment, change practices or do whatever else is needed to limit discharge of pollutants. The outcome at an individual level will be dependent on the cost of continuing to pollute against the cost of change. The final effect on urban air pollution is dependent on the economic instrument changing the behaviour of polluters city wide. Available economic instruments include environmental taxes and levies, proportional non-compliance fees, tradeable discharge permits, user charges and licences. Some of these are among the report recommendations. Other recommendations such as support for research and development may be viewed as economic instruments, as may tax concessions or capital grants. Good instruments should be effective, lead to efficiency gains, be equitable in application and acceptable both to the authorities who need to administer them and the community where they are applied. Applications within Australia include: • A proposed NSW Load based licensing scheme (NSW EPA 1996) which will set fees dependent on the discharge load and its potential impacts on the environment. This economic instrument would set both short and long term targets for achievable environmental outcomes. Of particular note is the incorporation of weightings according to the harm of the particular pollutant and in some cases also the state of the receiving environment • Federal differential taxes on petrol set to discourage use of leaded petrol. This resulted in a switch to unleaded petrol by 25% of vehicles capable of using either leaded or unleaded petrol in within one month of the schemes introduction. • Bubble Licensing for SO2 and Particulates was put in place in the Kwinana Industrial Area in Perth. Bubble licensing seeks to regulate emissions within a region or under an imaginary bubble rather than at individual sources.-This allows trading of pollution emitting “quotas” between companies. • The Victorian EPA encourages Cleaner Production Processes by industry through identification of opportunities, licensing and the works approval process. A more complete discussion of economic incentives set in an Australian context can be found in James,1997. Broader ecological tax reforms have also been proposed. They include a carbon tax on fossil fuels with estimated revenues of $6.3 billion per annum leading to a 30% reduction in total air pollution (Hamilton, Hundloe and Quiggin,1997). This was proposed within a context of ecological tax reform with a suite of potential revenue and spending reforms aimed at improving environmental performance without generating economic costs. It argues that environmental charges are not necessarily at odds with social equity. In fact a “double dividend effect” may result in increased economic welfare. However, whilst the total effect may be either neutral or economically positive it does involve shifts in revenues and costs, and, as with all

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economic instruments put in place by governments, economic impacts are not the only decision criteria. 6. BETTER ECONOMIC EVALUATION The accuracy of estimates of the relative cost effectiveness of emission reducing measures here is limited by the need to assess generic measures in cost per tonne of pollutant avoided, and then to estimate the scope of the measure in urban Australia. Where specific equipment is targeted and numbers accurately known, much better costing is possible. However, better air shed analysis is required to provide cost effectiveness of measures in terms of pollutant concentration reduction, since it is concentrations which lead to impacts. Costs are estimated net of direct benefits or avoided costs such as energy savings. It is likely that these would be lower if associated indirect benefits were taken into account. As generic measures are replaced with specific measures appropriate sets of additional benefits, or conversely additional costs, should be considered Even when effects on concentration levels are known, benefit calculation is complex. Emerging indications show that even very low levels of pollution from particles can cause significant health effects. Apply the precautionary principle this leads to the suggestion that: “Australia should aim to reduce pollution as much as possible in a cost effective manner whilst the full health and indeed other impacts of air pollution are not known” (Simpson, 1997) Even the costs of the more easily measured effects of pollution, such as damage to facades, still need better estimation, whilst environmental benefits such as improved productivity due improved well being, including both happiness and health, require more extensive investigation. However it is currently impractical to return the city air to a pristine state, and when funds are sought to limit pollution questions about ultimate benefits will be asked. For health this means moving beyond earlier concepts of threshold levels. Health effects over time and at varying levels of pollutant concentration with respect to varying populations need to be analysed. These estimates should be sought from both local and international studies. In contrast it is vital that the environmental amenity is estimated locally. If it is accepted that an attractive natural environment with clear blue skies is needed to capitalise on our natural advantage of climate in attracting tourists and investment, analysis of how polluted Australian Cities can afford to be is needed These benefit estimates cannot be imported. Communication of such values to business and the community may change attitudes with regard to the economic importance of the atmosphere and its perception as a free resource. In cities the achievement of clean air is not costless but, in the longer term, that cost is far outweighed by the economic benefits.

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7. REFERENCES ABS 1996, Australians and the Environment, ABS Catalogue No 4601.0 (AGPS: Canberra) AATSE, 1997 Australian Academy of Technological Sciences; Inquiry Into Urban Air Pollution Ahearn, T. (1997) “Urban Air Pollution: Current Policy Approaches to Improving Air Quality in Victoria”, A discussion paper prepared for the Inquiry into Urban Air Pollution Aquatech, 1997 “Cost-effectiveness of measures to improve urban air quality”, A Report prepared for the Inquiry into Urban Air Pollution Brookshire, D.S., Thayer, M.A., Schulze, W.D. & D'Arge, R.C. (1982). `Valuing Public Goods: A Comparison of Survey and Hedonic Approaches'. The American Economic Review, 72(1):165-177. Desvousges, W.H., Naughton, M.C.& Parsons, G.R.(1992), “Benefit Transfer: Conceptual Problems in Estimating Water Quality Benefits Using Existing Studies’ Water Resources Research, 28(3):657-663 Dickie, M. & Gerking, S. (1991a). `Valuing Reduced Morbidity: A Household Production Approach'. Southern Journal Of Economics, 51: 690-702. Dickie, M. & Gerking, S. (1991b). `Willingness to Pay for Ozone Control: Inferences from the Demand for Medical Care'. Journal Of Environmental Economics And Management, 21:1-16. DIST (1996), International Award For Commonwealth Program, Media Release, Department of Industry, Sport and Tourism, October 1996 Economic Commission for Europe (1982). Effects of Sulfur Compounds on Materials, Including Historic nnd Cultural Monuments. Draft Report, ENV/IEB/WG1, Geneva, in Pearce, D.W. & Markandya, A. (1989). Environmental Policy Benefits: Monetary Benefits. OECD, Paris Fischoff, B. & Furby, L. (1988). ‘Measuring values: A conceptual framework for interpreting transactions with special reference to contingent valuation of visibility’. Journal Of Risk & Uncertainty, 1, 147-184 Gerking, S. & Stanley, L.R. (1986). `An Economic Analysis of Air Pollution and Health: The Case of St. Louis'. The Review Of Economics And Statistics, 68(1): 11521. Giannias, D.A. (1989). `Consumer Benefit From Air Quality Improvements'. Applied Economics, 21: 1099-1109. Gillette (1975). `Sulfur Dioxide and Material Damage'. Journal Of The Air Pollution Control Association, in Ottinger, R.L., Wooley, D.R., Robinson, N.A., Hodas, D.R. & Babb, S.E. (1990). Environmental Costs Of Electricity. Pace University Centre for Environmental and Legal Studies, Oceana Publications, New York.

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Hamilton, C, Hundloe,T & Quiggin, J (1997) ‘Ecological Tax Reform in Australia’, Australia Institute Discussion Paper, No 10, April Harrison, D. & Rubinfeld, D.L. (1978). `Hedonic Housing Prices and the Demand for Clean Air'. Journal Of Environmental Economics And Management, 5:81-102. Heinz, I. (1986). `Zur ökonomischen Bewertung von Materialschäden durch Luftverschmutzung' in Kosten Der Umweltverschmutzung. Bercihte 7/86 des Umweltbundesamts, Berlin, in Pearce, D.W. & Markandya, A. (1989). Environmental Policy Benefits: Monetary Benefits. OECD, Paris. James, D (1997) “Environmental Incentives: Australian Experience with Economic Instruments fro Environmental Management”, Environmental Economics Research Paper, No 5 , Environment Australia Johansson, P.O. & Kriström, B. (1988). `Measuring Values for Improved Air Quality from Discrete Response Data: Two Experiments'. Journal Of Agricultural Economics, 39: 439-435. Jorgensen, B. S. (1996). “The determinants of Assigned Value: A social psychological approach to welfare measurement”. Doctoral thesis, School of Psychology, Curtin University of Technology, Perth, Western Australia. Jorgensen, B. S. (1997). “The Economic Valuation Of Air Quality”, A Discussion Paper prepared for the Inquiry into Urban Air Pollution.. Kinney, P.L. & Özkaynak, H. (1992). `Associations between ozone and daily mortality in Los Angeles and New York City'. American Review Of Respiratory Disease, 145(4:2): A95. Krupnick, A.J., Harrington, W. & Ostro, B. (1990). `Ambient Ozone and Acute Health Effects: Evidence from Daily Data'. Journal Of Environmental Economics And Management, 18: 1-18 Loehman, E.T. et al (1979). `Distributional Analysis of Regional Benefits and Costs of Air Quality Control'. Journal Of Environmental Economics And Management, 6: 222-243. Maddison, D., Pearce, D., Johansson, O., Calthrop, E., Litman, T & Verhoef, E (1996), The True Costs Of Road Transport, Blueprint 5, Earthscan Publications, London:52:53 McClelland, G. H., Schulze, W. D., Waldman, D., Schenk, D., Irwin, J. Stewart, T., Deck, L., & Thayer, M. (1993). “Innovative approaches for valuing perceived environmental quality: Valuing eastern visibility: A field test of the contingent valuation method”. University of Colorado Report to the US EPA, Washington DC. Mendelsohn, R. & Orcutt, G. (1979). `An Empirical Analysis of Air Pollution DoseResponse Curves'. Journal Of Environmental Economics And Management, 6(2): 85106.

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Mitchell, R. C. & Carson, R. T. (1989). Using Surveys To Value Public Goods: The Contingent Valuation Method. Washington DC: Resources for the Future. Mueller, W.J. & Stickney, P.B. (1970). Final Report On A Survey And Economic Assessment Of The Effects Of Air Pollution On Elastomers. National Air Pollution Control Association, Battelle Memorial Institute, Columbus, Ohio, in Ottinger, R.L., Wooley, D.R., Robinson, N.A., Hodas, D.R. & Babb, S.E. (1990). Environmental Costs Of Electricity. Pace University Centre for Environmental Legal Studies, Oceana Publications, New York. National Health & Medical Research Council (1993). Reducing Lead Exposure In Australia An Assessment Of Impacts. Final Report. Navrud, S. (1988a). Distributional Effects Of Environmental Regulations In The Ferro-Alloy Industries. Case Bjclvefossen A/S. Ministry of the Environment, in Barde, J.P. & Pearce, D.W. (1991). Valuing The Environment: Six Case Studies. Oecd, Paris. Netherland Ministry of Housing and Environment (1986). The Benefits Of Environmental Policy In The Netherlands. Excerpts From Recent Dutch Studies, in Pearce, D.W. & Markandya, A. (1989). Environmental POLICY BENEFITS: MONETARY VALUATION. OECD, Paris. NSW EPA (1995) “ENVALUE NSW EPA Environmental Database” ,EPA 95/34, Sydney Ostro, B.D. & Rothschild, S. (1989). `Air Pollution and Acute Respiratory Morbidity: An Observational Study of Multiple Pollutants'. Environmental Research, 50: 238247. Ohtoshi,T et al(1994) Allergy and Clinical Immunology, News Supplement 2, 264 Portney, P.R. & Mullahy, J. (1986). `Urban Air Quality and Acute Respiratory Illness'. Journal Of Urban Economics, 20: 21-38. Salmon, R.L. (1970). Systems Analysis Of The Effects Of Air Pollution On Materials. Midwest Research Institute, Prepared for Economic Effects Research Division, National Air Pollution Control Administration, Raleigh, NC, Kansas City, Missouri, in Ottinger, R.L., Wooley, D.R., Robinson, N.A., Hodas, D.R. & Babb, S.E. (1990). Environmental Costs Of Electricity. Pace University Centre for Environmental Legal Studies, Oceana Publications, New York. Schechter, M. & Kim, M. (1991). `Valuation of Pollution Abatement Benefits: Direct and Indirect Measurement'. Journal Of Urban Economics, 30: 133-51. Schulze, W., Cummings, R. & Brookshire, D. et al. (1984). `Experimental Approaches for Valuing Environmental Commodities', in Methods Development In Measuring Benefits Of Environmental Improvements. Vol.2, US EPA, in Dickie, M. & Gerking, S. (1991). `Willingness to Pay for Ozone Control: Inferences from The Demand For Medical Care'. Journal Of Environmental Economics And Management, 21: 1-16.

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Economic Evaluation of the Recommendations of the Inquiry into Urban Air Pollution in Australia

Schulze, W. D., McClelland, G. H., Schenk, D. J., Irwin, J. R., Elliott, S. R., Boyce, R. R., Stewart, T., Slovic, P., Deck, L., & Thayer, M. (1993). Improving accuracy and reducing cost of environmental benefit assessments: Field and laboratory experiments on the reliability of the contingent valuation method. University Of Colarado Report To The Us Epa, Washington DC Schwartz, J. & Dockery, D.W. (1992). `Increased Mortality in Philadelphia Associated with Daily Air Pollution Concentrations'. American Review Of Respiratory Disease, 145: 600-604. Schwartz, J. (1991). `Particulate Air Pollution and Daily Mortality in Detroit'. Environmental Research, 56: 204-213. Scott, W.D. & Co. (1982). Public Willingness To Pay For Clean Air: A Survey Of Community Attitudes. Australian Environment Council Report No.7, AGPS, Canberra. Simpson, R.W. (1997) “An E&HIA Framework for Air Pollution Management”, A discussion paper prepared for the Inquiry into Urban Air Pollution Small, K and Cazimi, C. (1995)”On the Costs of Air Pollution from Motor Vehicles” Journal Of Transport Economics And Policy, Jan: 7-32 Spence, J.W. & Haynie, F.H. (1972). Paint Technology And Air Pollution: Survey And Economic Assessment. US Environmental Protection Agency. Research Triangle Park, N.C., in Ottinger, R.L., Wooley, D.R., Robinson, N.A., Hodas, D.R. & Babb, S.E. (1990), Environmental Costs Of Electricity. Pace University Centre for Environmental Legal Studies. Oceana Publications, New York. Task Group 1 (1997) “Current Air Pollution in Australian Cities”, prepared for the Australian Academy of Technological Sciences for the Inquiry into Urban Air Pollution Task Group 6 (1997) “The Effects of Planning and Design on Urban Air Pollution”, prepared for the Australian Academy of Technological Sciences for the Inquiry into Urban Air Pollution US Department of Health and Human Services (1991). Health Hazard Evaluation Report, in National Health and Medical Research Council (1993). Reducing Lead Exposure In Australia An Assessment Of Impacts, Final Report. Viscusi, W. K (1992) Fatal Tradeoffs: Public and Private Responsibilities for Risk, New York: Oxford University Press

Evaluation Group Report - 1997

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