Guidance

Air quality: economic analysis

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

Introduction

Air pollution is the biggest environmental threat to public health. This page outlines the techniques available, and provides guidance, for valuing the effects of air quality.

Valuations of air quality impacts should be used in conjunction with HM Treasury Green Book guidance, which provides a framework for general economic appraisal. In line with its advice, you should reflect the effects of air quality in decision-making wherever possible.

Selecting a technique

  • Use the damage cost approach to estimate the size of your proposal’s total effect on air quality. If the effects are less than £50 million and do not affect compliance with legal limits on air pollution then you can report the damage cost estimates.
  • If effects 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 effects exceed £50 million, consider a detailed abatement assessment.

If there is any doubt on the must suitable approach, you should contact Defra by emailing igcb@defra.gov.uk.

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 effects (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 in the guidance document.

An Open Document format of the appraisal toolkit is available by emailing igcb@defra.gov.uk.

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 method of valuing 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 effects and their valuation.

Guidance on impact pathway approach

Abatement costs approach

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.

If you need further support, you should contact Defra.

Guidance on the abatement cost approach

Further information

Contact

Air quality economics
Environment Quality
Department for Environment, Food and Rural Affairs (Defra)
Ground floor, Seacole Building, 2 Marsham Street
London SW1P 4DF

Email: igcb@defra.gov.uk

Published 9 April 2013
Last updated 14 January 2019 + show all updates
  1. Updated the damage cost and impact pathway approach guidance.
  2. Damage costs approach updated to reflect 2015 prices and interim guidance published on changes to how nitrogen emissions are valued.
  3. Updated content in line with new guidance published including green book supplementary guidance.
  4. Changed table header locations
  5. Small amendments to table header
  6. First published.