Environmental management – guidance

Air quality: economic analysis

This guide explains how impacts on air quality should be incorporated into a cost benefit analysis.

Introduction

Air pollution harms human health and the environment. A conservative estimate for one type of pollution (particulates) is that it reduces average life expectancy in the UK by around six months, worth £16 billion a year.

HM Treasury’s Green Book guidance provides the framework for economic appraisal and evaluation of all Central Government policies, programmes and projects. In line with its advice, you should reflect air quality impacts in decision-making wherever possible. Supplementary Green Book guidance on how to value changes in air quality is available to help you do this. This web page outlines the techniques available to government analysts (local or national) that are covered in more detail in the supplementary guidance.

Selecting a technique

  • Use the damage cost approach to estimate the size of your proposal’s total air quality impacts. If the impacts are less than £50 million and do not affect compliance will legal limits on air pollution then you can report the damage cost estimates.
  • If impacts are greater than £50 million then the impact pathway approach is appropriate.
  • If your proposal is expected to affect compliance with legal limits on air pollution then you should use the unit abatement cost approach for emission changes exceeding the limit (use the damage cost approach for changes below the limit). If the air quality impacts exceed £50 million, consider a detailed abatement assessment.

Damage costs approach

Damage costs are a simple way to value changes in air pollution. They estimate the cost to society of a change in emissions of different pollutants. Damage costs are provided by pollutant, source and location. This is appropriate for small air quality impacts (below £50 million) provided your proposal does not affect areas likely to breach legally binding air quality limits. A full list of damage costs is available (see below, under ‘Further information on damage cost guidance’).

Table 1 provides the most commonly used damage costs used to assess national policies, programmes and projects. The values provided in table 1 are presented in £ per tonne of emission change.

Table 1: Air quality damage costs per tonne, 2015 prices

  Central (1) Central sensitivities (2)
Low High
Oxides of nitrogen (NOX) Transport average £25,252 £10,101 £40,404
Industry £13,131 £5,253 £21,010
Domestic £14,646 £5,859 £23,434
Particulate Matter (PM) Transport average £58,125 £45,510 £66,052
Industry £30,225 £23,665 £34,347
Domestic £33,713 £26,396 £38,311
Sulphur oxides (SOX) £1,956 £1,581 £2,224
Ammonia (NH3) £2,363 £1,843 £2,685

(1) This estimate is intended for use only where a single point estimate is necessary and should always be accompanied by the central range.

(2) The central sensitivity for PM, SOX and ammonia reflect uncertainties around the lag between exposure and the health impact. The sensitivity for NOX also reflects the uncertainty around the link between NO2 exposure and mortality.

Further information on damage cost guidance

September 2015: The damage cost for NOX was updated on 12 September 2015 to reflect the latest evidence. The new values should be used instead of the values published in “Air quality damage cost guidance”.

Full list of damage costs 2015 (PDF, 44.7KB, 4 pages)

More information on these changes and the use of these values:

Valuing impacts on air quality: Updates in valuing changes in emissions of Oxides of Nitrogen (NOX) and concentrations of Nitrogen Dioxide (NO2) (PDF, 242KB, 16 pages)

February 2011: Air quality damage cost guidance (PDF, 131KB, 5 pages)

Impact pathway approach

Proposals with large air quality impacts (over £50 million using damage costs) that are not expected to affect compliance with legal limits should be assessed using the impact pathway approach. In these instances you should contact Defra for advice.

The impact pathway approach is a more detailed way to value air quality changes. It estimates air pollution costs based on location-specific modelling of how changes in pollution affect air quality, but relies on standard estimates of impacts and their valuation.

Guidance on impact pathway approach

Abatement costs

Proposals that change emissions in a way that affects compliance with legal obligations should use the abatement costs approach. The abatement costs recognise that changes in emissions will affect the level, and cost, of action required to comply with such obligations. Where the proposal affects emissions in other locations, or below the limit, you should use the damage cost or impact pathway approach as appropriate. You will need to know the levels of pollution in relevant areas and the current legally binding air quality objectives.

Guidance on the abatement cost approach

Unit abatement costs

You can use unit abatement costs if the air quality impact of your proposal is below £50 million. Nitrogen dioxide is the main pollutant likely to cause non-compliance with legal obligations and unit abatement costs for NO₂ are available in £/tonne. These reflect the likely technologies available to reduce NO₂ emissions in 2015, based on current policy. Unit abatement costs are available in the air quality supplementary guidance or the abatement cost guidance. Nine possible unit abatement costs are provided and you should select the most relevant technology for the central case and higher/lower values as sensitivity tests.

Detailed abatement assessment

If your proposal affects compliance with legal obligations, and air quality impacts are estimated at over £50 million, please [contact Defra] (mailto:igcb@defra.gsi.gov.uk) for advice. You will need to consider in detail how your proposal changes the level of abatement action needed to offset your proposal’s impacts on legal obligations. For example, if your proposal increased emissions from a particular source, you could examine abatement opportunities, and their costs, specific to the affected location.

Further information

Contact

Air quality economics
Atmosphere and Local Environment
Department for Environment, Food and Rural Affairs (Defra)
Area 5F, Ergon House
London SW1P 3JR

Email: igcb@defra.gsi.gov.uk