Costs and Benefits of Reduced Sulfur Fuels in China

1. Costs and Benefits of Reduced Sulfur Fuels in China Katherine Blumberg BAQ 2006 Yogyakarta, Indonesia

2. International Council on Clean Transportation • Goal of the ICCT is to dramatically reduce conventional pollutant and greenhouse gas emissions from all transportation sources in order to improve air quality and human health, and mitigate climate change. • Promotes best practices and comprehensive solutions to: • Improve vehicle emissions and efficiency • Increase fuel quality and sustainability of alternative fuels • Reduce pollution from the in-use fleet, and • Curtail emissions from international goods movement. • The Council is made up of leading regulators and experts from around the world.

3. Purpose of the study • Collaboration between Tsinghua University and ICCT, in cooperation with the State Environmental Protection Administration (SEPA). • The vehicle fleet is growing exponentially and health impacts of vehicle emissions in China are already substantial. • Demonstrate the tremendous public health benefits of a already adopted vehicle standards and show the additional benefits to be gained from introducing corresponding fuel standards.

4. Chinese fuel and vehicle standards • Aggressive timetable for vehicle emissions standards, only a few years behind European regulations. • Cleaner fuel standards, a critical component of the European regulatory program, are not yet in place.

5. Cost-benefit methodology • Mobile source emissions modeling • Impact of reduced emissions on exposure • Quantification and valuation of health benefits of reduced exposure to mobile source emissions • Determination of added vehicle and fuel costs • Comparison of costs and benefits

6. Emissions benefits • Emissions increase greatly in the absence of tighter standards • Both vehicle & fuel standards are necessary to curb emissions growth Emissions reductions with vehicle standards Additional reductions possible with improved fuels

7. Human Exposure • Translate emissions reductions into exposure impacts without complex atmospheric modeling. • Direct PM emissions and secondary PM from Nox • Did not consider ozone – much less straightforward • Intake fraction (iF) gives the portion of pollutant emissions that is inhaled by people in the air basin: iF = Population Intake/Total Emissions • Vehicle pollution is emitted in close proximity to people breathing.

8. Public Health Benefits • Used studies from mainland China to set value for each avoided premature death and scaled the costs of other illnesses to reflect Chinese values. • Values were expected to grow over time as a result of growth in GDP, value of avoided premature death growing slightly faster (elasticity of 1.4).

9. Compliance Costs • Average incremental costs for vehicle and fuel standards are expected to be similar: • Vehicle standards are expected to add less than 1% to the price of most passenger cars, an average of ¥1 – ¥3 per week. • Fuel standards would be expected to increase the cost of producing gasoline and diesel by 1 to 3%, also an average increase in over typical fuel costs of ¥1 – ¥3 per week. • (Higher crude prices on the world market increased fuel prices in China by 140% between 2002 and 2006.) • Vehicle and fuel costs are higher for diesel cars. • Advanced diesel technologies are even more critical. • Diesels typically emit 10x the PM of gasoline vehicles. • Without stringent standards and clean fuels, an increasing diesel market share will exacerbate pollution problems in China.

10. Net Benefits • Benefit-to-cost ratio of 20.

11. Sensitivity Analysis • Net benefits most sensitive to value of a statistical life (VSL) & elasticity, which set the monetary value of avoided premature death. • Least sensitive to incremental fuel and vehicle costs.

12. Higher sulfur fuels –Put new vehicles at risk • Analysis was not able to consider the potential for much higher vehicle maintence and replacement costs if higher sulfur fuels damage advanced vehicle technologies. • Use of higher sulfur fuels would jeopardize the investment being made in cleaner vehicle technologies, especially: • Light-duty cars required to meet Euro 4 standards in 2010 • Heavy-duty trucks required to meet Euro V in 2012 • Some of the most effective technologies to meet these standards are damaged by higher sulfur fuels. • If cleaner fuels are not available, higher sulfur fuels will increase emissions and could cause important emission-control devices to fail.

13. Lower sulfur fuels –Enable further technology improvement • Low sulfur fuels (~10 ppm) are absolutely required in order to meet the next steps in emissions standards: • Euro 5 & 6 for passenger cars • Euro VI for heavy-duty vehicles • Likely to require diesel particulate filters, which would provide significant additional health benefits, provided low sulfur fuels are available. • These standards would allow China to stabilize and reduce total vehicle emissions, even in the face of continued fleet growth.

14. Conclusions • Forthecoming emissions standards will provide tremendous public health benefits, increasing over time. • The full benefits will not be realized until vehicle standards are matched by corresponding fuel standards. • The incremental costs for improved fuels and vehicles are reasonable and recoverable. • These steps are necessary but not sufficient – must ensure that vehicles are meeting certification standards and performing as expected in use.

15. Continue to act aggressively • The next steps in European vehicle emissions standards would provide significant additional benefits, if lower sulfur fuels are available. • Increased market share for diesel passenger vehicles will exacerbate air quality concerns unless cleaner fuel standards are in place. Even if cleaner fuels are available, more progress on emissions standards will be necessary to protect human health and air quality. • Diesel particulate filters are needed to protect human health – require both stringent vehicle emissions and fuel quality standards.

16. Thank you for your attention! • Thank you to the authors and reviewers who generously contributed their time, expertise and insight. • Authors: Dr. He Kebin, Zhou Yu, Liu Huan, Dr. Nancy Yamaguchi • ICCT reviewers: Dr. He Dongquan, Dr. Fu Lixin, Margo Oge, Michael Walsh, Dr. Martin Williams • The full report is available in English and Chinese at: www.theICCT.org