Win-Win-Win: Benefits of Regulating Vehicle Emissions on Air Quality, Health, & the Economy

Win-Win-Win: Benefits of Regulating Vehicle Emissions on Air Quality, Health, & the Economy Department of Environmental Sciences, June 19, 2014

1 Introduction 2 Win1: Air Quality 3 Win2: Health 4 Win3: Economy 5 Conclusions

Air Pollution Air pollution causes low air quality, adverse health impacts, and reduces agricultural yields. Source: sustainablecitiescollective.com, US EPA

Tropospheric ozone and particulate matter Ozone precursors: carbon monoxide (CO), nitrogen oxides (NO x : NO + NO 2 ), and volatile organic compounds (VOCs)

Tropospheric ozone and particulate matter Ozone precursors: carbon monoxide (CO), nitrogen oxides (NO x : NO + NO 2 ), and volatile organic compounds (VOCs) Tropospheric ozone (O 3 ): created by a chemical reaction of ozone precursors (CO, NO x, and VOCs) and sunlight

Vehicles are becoming a major air pollution source Vehicle ownership is increasing rapidly in China. In Beijing, vehicles emit 46% of NO x, 78% of CO, & 83% of HC (Hao et al., 1996)

Diffusion of Vehicle Emission Standards

Diffusion of Vehicle Emission Standards The United States Clean Air Act in 1970 mandated 90% emissions reductions from vehicles.

Diffusion of Vehicle Emission Standards Japan followed suit in 1975 with the US Clean Air Act.

Diffusion of Vehicle Emission Standards EU countries followed next.

Diffusion of Vehicle Emission Standards There were three similar standards at the end of 1992.

Diffusion of Vehicle Emission Standards Even developing countries adopted these standards.

Questions Why do countries adopt vehicle emission standards? What are the impacts of emissions regulation?

Questions Why do countries adopt vehicle emission standards? What are the impacts of emissions regulation? Impact on Asian air quality by regulating Chinese vehicles Impact on health in China and Japan by this regulation Mechanisms of policy diffusion and its impact on the economy

Methodology to analyze regional air quality Update detailed emission inventory (REAS) for road transport sector in China. (Collaboration with NIES, Japan) Emission scenarios: 2000 Baseline - No emission standards 2020 No Policy 2020 Euro 3 Quantify the impacts on regional atmospheric concentrations Regional chemical transport model WRF/Chem Initial/Lateral boundary conditions from the global model MOZART

Transport Sector Emissions Saikawa et al., 2011

Emission factors

Scenario comparison Total emissions in China

Scenario comparison

Regional chemical transport model WRF/Chem Regional 3-dimensional chemical transport model (Grell et al., 2005; Fast et al., 2006) Simulates chemistry & transport of 39 species Horizontal resolution: 40km x 40km Vertical levels: 31 from the surface to 50hPa Fully coupled online model For each scenario, we performed four 1-month simulations (January, April, July & October)

Positive Impact on Air Quality Atmospheric O 3 mixing ratio decreases significantly simply by China s implementation of the Euro 3 emission standards Saikawa et al., 2011

Positive Impact on Air Quality PM 2.5 concentrations also decrease in the region but the impact is primarily within China Saikawa et al., 2011

Win1: Regulating vehicle emissions improves air quality Total Chinese vehicle emissions are reduced by 78% (CO), 74% (NO x ), and 61% (PM 2.5 ) by adopting the Euro 3 emission standards relative to no regulation in 2020. Maximum reductions from BAU to Euro 3: 22 ppbv O 3 in China, 6-7 ppbv in Korea 31 µg m 3 PM 2.5 in China, 1-3 µg m 3 in Korea/Japan

Methodology to analyze health impacts Use MIT Emissions Prediction Policy Analysis Health Effects (EPPA-HE) model to calculate health impacts Use population-weighted concentrations in China and Japan for the two scenarios in 2020 Use the concentration-response function for O 3 and PM 2.5 Calculate the increase in welfare in the two countries by the reduction in adverse health impacts Saikawa et al., in prep.

Positive Impact on Health China Japan O3 PM2.5 O3 PM2.5 Respiratory hospital admissions 275,000 61,500 4,900 300 Cerebrovascular hospital admissions 0 44,100 0 300 Cardiovascular hospital admissions 0 38,000 0 200 Symptom days 725,000,000 583,000,000 13,000,000 3,010,000 Acute Mortality 62,000 49,300 1,000 300 Chronic bronchitis (adult) 0 5,520,700 0 24,500 Congestive heart failure (elderly) 0 8,600 0 100 Asthma attacks (all asthma) 3,770,000 0 67,600 0 Bronchodilator (asthma population) 48,300,000 37,000,000 967,000 208,400 Lower Respiratory Symptoms 0 583,000,000 0 3,010,000 Mortality from chronic exposure to PM2.5 42,700 200 Saikawa et al., in prep.

Positive Impact on Health & GDP Welfare increase in China and Japan in 2020 due to China s implementation of the Euro 3 vehicle emission standards China Japan From reduced O 3 $5.77B $1.80B From reduced PM 2.5 $27.60B $2.06B Total welfare gain $33.37B $3.87B 2010 GDP % 1.02 0.07 Saikawa et al., in prep.

Win2: Regulating vehicle emissions reduces adverse health impacts Regulating Chinese vehicle emissions reduces premature mortality in China and Japan. Possible reduction in mortality: China: 42,700 from chronic exposure to PM 2.5 and 11,300 from acute mortality Japan: 190 from chronic exposure to PM 2.5 and 1,300 from acute mortality The increase in Japanese GDP is approximately equivalent to the amount of environmental aid Japan has given to China over the years.

Why do countries adopt emission standards? Countries adopted emission standards to enhance the competitiveness of their automobile industries. Except for low-income countries, automobile exports increase after adoption.

Mechanisms of Diffusion 4 major mechanisms in the Policy Diffusion literature (Simmons, Dobbin, and Garrett 2006; Shipan and Volden 2008): Competitiveness International Pressure Normative Emulation Learning The California Effect (Vogel, 1997)

Competitiveness Mechanism Importer Pressure Exporting countries adopt emission standards when major importing countries adopt standards

Competitiveness Mechanism Importer Pressure Exporting countries adopt emission standards when major importing countries adopt standards Competitor Pressure Exporting countries adopt emission standards when competing exporting countries adopt standards

Methodology Analysis 1. Event History Analysis Identify mechanisms of policy diffusion Analysis 2. Gravity Model of Trade Assess impact of policy diffusion on competitive advantage in trade

Data on Emission Standards Adoption Created a database of the years that countries first adopted vehicle emission standards Dichotomous coding Code 0 without adoption Code 1 with adoption

Competitiveness Mechanisms Importer Pressure: Share of automobile exports to countries with standards

Competitiveness Mechanisms Importer Pressure: Share of automobile exports to countries with standards Competitor Pressure: Index to measure an exporter s market share and diversity of the market

Control variables International Pressure: ODA & Official aid as share of GDP Normative Emulation: Number of countries that have adopted standards Learning: Number of environmental IGOs of which a country is a member CO 2 emissions from transport sector (proxy for tail-pipe emissions) Real GDP per capita EU membership Automobile exports share of GDP

Standards Adoption Tested using a rare events logistic regression Analyzed all countries 1975-2000 Cluster by country Include year dummies Saikawa, 2013

Results Model 1 Model 2 Model 3 Base High Developing Income Countries Diffusion Mechanisms Competitive Pressure Importer Pressure Emission Standards Share 1.790 ** 2.051 * 2.161 ** (0.711) (1.128) (0.912) Competitive Pressure Competitor Pressure Auto Exports Status 0.271 ** 0.202 ** 2.524 * (0.106) (0.100) (1.479) Controls International Pressure International Aid Share of GDP 1.68 1.778 2.587 (0.1.52) (1.229) (1.966) Normative Emulation Standards 0.112 *** 0.072 ** 0.144 * (0.036) (0.036) (0.085) Learning Environmental IGO Membership 0.135 ** 0.116 * 0.175 * (0.056) (0.063) (0.094) Saikawa, 2013 N 2096 500 1596

Automobile exports increase after the adoption Saikawa, 2013

Impact of standards on automobile exports Gravity Model of Trade Standard framework to assess the effects of bilateral trade Estimates the impacts of emission standards on automobile exports

Impact of standards on automobile exports 4 variables to consider: Std it : exporter s adoption of standards Std jt : importer s adoption of standards Both t : both exporter/importer adopting standards ln(std t ): log number of countries with standards Saikawa, 2013

Positive Impact on the Economy High Upper-Middle Lower-Middle Exporter Standards 0.248 *** 0.398 ** 2.363 *** (0.069) (0.202) (0.370) Importer Standards 0.658 *** 0.507 *** (0.161) (0.163) (0.160) Both Standards 1.443 *** 0.562 ** (0.160) (0.265) (0.560) Log Number of Standards 0.297 *** 0.329 *** 0.826 *** (0.042) (0.126) (0.177) 0.71 0.54 0.71 N 40998 6516 4391 Saikawa, 2013

Adoption of emission standards results in more automobile patents Adoption of emission standards gives countries a competitive advantage China Brazil Number of vehicle patents 0 100 200 300 400 500 Number of vehicle patents 0 10 20 30 40 1985 1990 1995 2000 2005 Year 1980 1990 2000 2010 Year Saikawa and Urpelainen, 2014

Win3: Regulating vehicle emissions has positive impact on the economy Enhances economic development Increases the competitiveness of a country s automobile industry Increases automobile exports Increases technology transfer in developing countries

Regulating vehicle emissions has 3 positive impacts Win 1: Reducing vehicle emissions leads to improved air quality.

Regulating vehicle emissions has 3 positive impacts Win 1: Reducing vehicle emissions leads to improved air quality. Win 2: Improved air quality results in reduced adverse health impacts.

Regulating vehicle emissions has 3 positive impacts Win 1: Reducing vehicle emissions leads to improved air quality. Win 2: Improved air quality results in reduced adverse health impacts. Win 3: The economy also benefits by reduced mortality and also by stronger automobile industry.

Acknowledgments Air Quality Health Jun-ichi Kurokawa (Acid Rain Center), Toshimasa Ohara (NIES), J. Borken-Kleefeld (IIASA), Masayuki Takigawa (JAMSTEC), Denise Mauzerall (Princeton), and Larry W. Horowitz (GFDL) Noelle Selin (MIT) The Economy Others Christina L. Davis (Princeton), Daniel Y. Kono (UC Davis), Johannes Urpelainen (Columbia) Ron Prinn (MIT), C. Adam Schlosser (MIT), Matt Rigby (MIT), Gil Rozman (Princeton), M. V. Ramana (Princeton)

Vehicle emissions are also related to climate change Black carbon absorbs light and thus warms the atmosphere. By reducing BC, we reduce positive radiative forcing. Sulfate aerosols and organic carbon cool the atmosphere by scattering the light. So by reducing them, we increase positive radiative forcing.