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Executive Summary

New Zealand, along with the rest of the global community, faces a number of environmental problems that require actions from governments and citizens. Two of these problems are: poor air quality, leading to public health effects, and greenhouse gas emissions that affect the climate.

Scope

A number of measures exist to address these problems, and many are being enacted in New Zealand. They generally have costs and consequences – and in particular with these two emissions issues, what is beneficial for one, might be deleterious for the other, and vice versa. There are also measures that have positive gains for both issues: the co-benefits. This study examines a range of possible measures and assesses the potential co-benefits for both reducing greenhouse gas emissions, and reducing public health effects and costs through lower air pollution emissions.

Methodology

The air pollution health effects are based on the outcomes of a recent large study (The HAPiNZ study – Health and Air Pollution in New Zealand, 2007, available at www.hapinz.org.nz). This has quantified the effects associated with various sources of air pollution, in three major categories: domestic heating emissions (mainly from wood burners), vehicles emissions, and industrial emissions.

The greenhouse emissions are based on data in the 2006 official New Zealand reporting mechanism prepared by the Ministry for the Environment: New Zealand’s Greenhouse Gas Inventory 1990–2005 (MfE, 2007b).

Economics

To make the quantitative comparison, both effects have been costed and put in dollar values. It would otherwise be very difficult to compare the benefit of a tonne of carbon emission reduced, with say the reduced hospital admissions for air pollution effects. The public health costs for air pollution are taken from the HAPiNZ study, which are of the order of $1.14 billion (B) per year for all effects throughout the country. These comprise costs from premature mortality (at $750,000 each), for additional hospital admissions (at around $3,000 each), down to lower-level ‘restricted activity days’ (at $92 each). The cost of carbon emissions has been selected at $25 per tonne carbon dioxide-equivalent (CO2-e). This is slightly higher than the $21 per tonne CO2-e used by The Treasury in its December 2007 valuation of New Zealand’s Kyoto liability, and possibly lower than expectations, but the results can be scaled appropriately if desired. The 2007 benefit-cost analysis for the New Zealand Energy Strategy used values of $15, $25 and $50.

There is a high degree of subjectivity in determining the costs of the air pollution health effects and the greenhouse gas emissions.

Results

The focus of the analysis has been on those sectors of the economy that have emissions of both air pollution and greenhouse gases. The analysis has been almost entirely upon activities producing CO2, since other greenhouses gases have little or no air quality impacts. The analysis has thus focused on energy use in three main sectors – domestic, vehicle, and industry (where industry includes two main sub-categories – thermal electricity production and energy use in industrial processes).

Several assumptions have had to be made, to account for lack of specific data, and for regional differences. The analysis has been conducted using a number of scenarios, designed to be plausible, although not necessarily easy to achieve, such as “... what if general vehicle use was reduced by 10%?”, or “... what if 25% of wood burner users switched to heat pumps?”.

Domestic heating emissions

Increasing the use of wood burners by 25% has a health effect cost of up to $70 million (M) per year depending on the type of wood burner used. As wood is considered ‘carbon neutral’ there is no direct greenhouse gas benefit. There is only a greenhouse co-benefit, of up $12M, if users have switched from electricity and use new low-emissions wood burners, associated with thermal electricity generation. This includes a slight extra cost ($1M) due to the extra methane emissions from using wood as a fuel.

Conversely, if 25% of current wood burner users switch to efficient electricity (specifically heat pumps), there is a benefit in air pollution costs of up to $183M, with an increase in greenhouse costs of $3M from the extra electricity generation required.

Overall, for any move to increase wood burner use there is a small greenhouse emissions benefit (mainly due to offsets from thermal electricity generation), but a significantly larger air pollution cost.

Vehicle emissions

Almost any measure to reduce vehicle trips (by say 10%) will have benefits for both greenhouse gas emissions ($11–32M per year) and local air quality effects ($43–49M per year). The only increase (a modest $6M) occurs if bus use increases significantly, using buses with current emissions rates. In practice this is an overestimate, since many bus fleet operators are meeting new lower emission standards. Any switches to biofuels for transport (say 3–10% uptake) have a strong gain in reducing greenhouse emissions ($8–24M per year), roughly in proportion to the amount of imported petrol and diesel replaced. Biodiesel blends could also have a significant air quality benefit (up to $99M per year for 20% blend – although this is not well validated by current research). Ethanol in petrol blends probably does not have strong air quality benefits since (a) petrol vehicles are responsible for a small fraction of particulate pollution (associated with the main health effects), and (b) probably result in increased oxides of nitrogen emissions which can exacerbate the health effects (by up to $2M per year for E10, a blend with 10% ethanol). This latter factor has not yet been fully researched in New Zealand.

Overall, biofuels appear to offer strong co-benefits, although the research backing the air quality gains is by no means solid, and much depends on the formulations and types of biofuels used.

Industry emissions

As would be expected, any measures to reduce fossil fuel energy use in the industrial sector (say 5–20%) will have benefits for greenhouse gas emissions reductions ($6–26M per year). These also have modest air quality health effects gains (up to $28M per year), but only if the process does not involve industry switching to using wood, in which case the health costs increase (by up to $7M per year). Some of this wood combustion emissions effect could be reduced if processes were fitted with modern emissions control technology – but this would only be applied to the larger emitters, and needs substantial financing.

Summary

It is possible with existing data to make quantitative estimates in both physical and monetary terms, of the health co-benefits and co-costs (via changes in air quality) associated with measures to reduce emissions of greenhouse gases. They are indicative only because such estimates:

  • do not cover all aspects of air quality

  • are sensitive to a number of the assumptions made (eg, greenhouse gas (GHG) emission factor for electricity; level of 10-micron Particulate Matter (PM10) emissions from an expanded population of wood burners)

  • involve a high degree of subjectivity with regard to the monetary estimates.

The scenarios examined show that co-benefits are possible, but so are contrary outcomes. The clearest gains are obtained in the transport sector, with either (a) reducing the amount of general vehicle use, or (b) increasing biofuel use. Having people use wood burners more – ie, with a carbon neutral fuel – can have gains for reducing greenhouse gas emissions. However, these gains are almost certainly offset, and exceeded, by the larger cost rises in public health effects, even with new low emissions burners. Improving energy efficiency across the industrial sector also has modest gains and co-benefits for both greenhouse gases and air quality.

Using different values for key factors would change the relative benefits and costs, and the total net benefits, of the scenarios examined. Examples are the GHG emission factor for electricity; or the level of PM10 emissions from an expanded population of wood burners; and different values for the cost of GHG emissions on the cost of health effects.