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Title:
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Uncertainty of air pollution cost estimates. To what extent does it matter?
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Author(s):
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Zwaan, B.C.C. van der; Rabl, A.; Spadaro, J.V.
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Published by:
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Publication date:
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ECN
Policy Studies
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1-8-2005
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ECN report number:
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Document type:
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ECN-RX--05-199
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Article (scientific)
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Number of pages:
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9
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Published in: Environmental Science & Technology (American Chemical Society), , 2005, Vol.39, p.399-408.
Abstract:
How large is the social cost penalty if one makes the wrong choice becauseof uncertainties in the
estimates of the costs and benefits of environmental
policy measures? For discrete choices there is
no general rule other
than the recommendation to always carefully compare costs and benefits
when introducing policies for environmental protection. For continuous
choices (e.g., the ceiling for the total emissions of a pollutant by
an entire sector or region), it is instructive to look at the cost penalty
as a function of the error in the incremental damage cost estimate.
Using abatement cost curves for NOx, SO2, dioxins, and CO2, this paper
evaluates the cost penalty for errors in the following: national emission
ceilings for NOx and SO2 in each of 12 countries of Europe, an emission
ceiling for dioxins in the UK, and limits for the emission of CO2 in
Europe. The cost penalty turns out to be remarkably insensitive to errors.
An error by a factor of 3 due to uncertainties in the damage estimates
for NOx and SO2 increases the total social cost by at most 20% and in
most cases much less. For dioxins, the total social cost is increased
by at most 10%. For CO2, several different possible cost curves are
examined: for some the sensitivity to uncertainties is greater than
for the other pollutants, but even here the penalty is less than 30%
and in most case much less if the true damage costs are twice as high
as the ones estimated. The paper also quantifies the benefit of improving
the accuracy of damage cost estimates by further research.
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