Acidification and tropospheric ozone in Europe: towards a dynamic economic analysis

Acidification and tropospheric ozone are important transboundary environmental problems with many economic and environmental aspects related to their role in the biogeochemical cycles. The main acidic substances are sulphur dioxide, nitrogen oxides and ammonia. The most important precursors of tropospheric ozone are volatile organic compounds and nitrogen oxides. Emissions of these substances are the result of economic activities.The problems of acidification and tropospheric ozone formation are interrelated to each other in many ways: (i) the emitted substances are partly caused by the same economic activities, (ii) emission reduction of these pollutants can often be realised by the same policy measures, (iii) nitrogen oxides affect both acidification and tropospheric ozone, and (iv) both problems have impact on the same ecosystems.The transboundary nature of acidification and tropospheric ozone necessitates international cooperation. The need for international cooperation is recognised both in the literature and among European countries and policy makers. The current scientific, as well as, policy approach to combat the environmental problems of acidification and tropospheric ozone can be criticised on two issues: (i) policies to reduce the problem of acidification should be analysed in a dynamic framework, and (ii) policies to reduce the problems of acidification and tropospheric ozone should take into account the many interactions. These two issues are analysed in this thesis.The objective of this research is, therefore, to investigate economic aspects of the combined reduction of soil acidification and tropospheric ozone formation in the context of a dynamic analysis of transboundary air pollution in Europe.The novelty of this study is the integrated analysis of a dynamic economic model with a dynamic soil acidification model. The approach taken here goes beyond the often used critical loads concept by explicitly modelling dynamic soil acidification processes. It also incorporates the multi-pollutants multi-targets approach. The two basic tools used in this thesis are dynamic optimisation and cost-effectiveness analysis. These are combined in dynamic optimisation models to analyse dynamic cost-effective abatement strategiesChapter 2 provides relevant details about the problems related to the acidifying pollutants, sulphur dioxide, nitrogen oxides and ammonia, and the precursors of tropospheric ozone, nitrogen oxides and volatile organic compounds. The chapter provides information about the main emission sources, the effects and the environmental impacts. The chapter shows that complex non-linear relationships exist between nitrogen oxides and volatile organic compounds emissions and tropospheric ozone formation. In addition, the RAINS model and its structure is briefly described, because the models in this thesis often use data from the RAINS model. Finally, a short overview is given of the UN-ECE LRTAP emission reduction policies for European transboundary air pollution.Chapter 3 illustrates that including a multi-pollutants multi-targets approach significantly affects the outcomes of air pollution research compared to a single-pollutant single-target approach. Cost-effective abatement strategies are identified leading to a combined reduction of sulphur dioxide, nitrogen oxides, volatile organic compounds and thus acidification and tropospheric ozone. Calculations with a two country model show that negative synergetic effects exist between abatement of acidification and tropospheric ozone. Moreover, in the model a reduction of acidifying deposition can lead to an increase in ozone levels. These insights may suggest that together with nitrogen oxides reduction stringent volatile organic compounds reduction may be necessary to reduce tropospheric ozone concentrations. Nitrogen oxides abatement seems to be most effective for reducing ozone concentrations in countries with relatively low nitrogen oxides concentrations in the air.The study confirms that a simultaneous analysis of the various pollutants and their effects contributes to a better understanding of the various policy options.Chapter 4 studies the dynamic aspects related to the problem of acidification. The chapter shows how accumulation of acidification in ecosystems can be studied through economic modelling by incorporating dynamic aspects of soil acidification. In contrast to the often applied critical loads approach, which only focuses on the final state of a soil, the dynamic approach, applied in this chapter, gives information about the temporal development of soil quality. The model also takes into consideration the time necessary for soil to recover. In addition, information about the soil quality can be used to avoid damage to ecosystems in the period during which critical loads are exceeded.The results show that a high discount rate, high marginal abatement cost and a high soil recovery capacity tend to postpone emission reduction, though for different reasons. A high discount rate or high marginal abatement costs have a price effect and lead to postponement of emission reduction because of a higher present value of abatement costs. A high recovery rate has a volume effect and makes it less necessary to abate, because from a natural science point of view, the soil can absorb a greater deposition of acid. The slope of the marginal abatement cost curve also determines the distribution over time. A steeper marginal cost curve results in smaller changes in abatement over time.Numerical simulations indicate that abatement cost savings may be realised when intertemporal cost efficiency is taken into account. The results also show that current policies which are based on a critical loads approach, instead of a dynamic analysis of soil quality, are non-optimal from both an ecological and an economic point of view.Chapter 5 describes the application of an optimisation model for calculating cost-effective abatement strategies for the reduction of acidification in Europe while taking into account the dynamic character of soil acidification. Environmental targets are defined in terms of the aluminium ion concentration in the soil solution. The optimisation determines optimal abatement time paths for sulphur dioxide, nitrogen oxides and ammonia, to realise defined soil quality targets in the United Kingdom and Ireland in 2010 and onwards.The results indicate that reduction of sulphur dioxide emissions is more cost-effective than that of nitrogen oxides or ammonia. The reduction percentages for sulphur dioxide are highest, for two reasons: i) marginal sulphur dioxide reduction costs are relatively low compared to marginal reduction costs of nitrogen oxides and ammonia, and ii) sulphur dioxide reduction is more effective in reducing acidification in physical terms than nitrogen oxides or ammonia abatement. Ammonia abatement would probably be higher if eutrophication would be taken into accountChapter 6 analyses the current European strategy to reduce the acidification problem in various scenarios and optimisations. Optimal abatement strategies are determined in a full dynamic approach in which emission targets are derived from predefined soil quality targets. In the optimal abatement strategy, central European countries realise the highest reduction levels. Emission reduction in Scandinavian countries and countries in eastern Europe is less cost-effective and emission reduction in these countries is lower. Ammonia abatement plays a minor role, because marginal ammonia abatement costs are relatively high and ammonia abatement is not very effective. Ammonia abatement would be more important if eutrophication targets were incorporated in the model. Once the soil quality targets are reached, less stringent emission reductions are sufficient to maintain the soil quality on a constant acceptable level.Given a stringent soil quality target to be reached in a short period (within the period 1990-2010) very high reduction percentages are required with high reduction costs. Lower environmental quality targets lead to considerably lower reduction costs, and, if soils get a longer period to recover by defining targets for 2020 or 2030, total reduction costs are also lower.Protocols from the United Nations Economic Commission for Europe agree on deposition targets or gap-closure targets based on critical loads to be reached at some point in time, usually 2010. The model shows that full implementation of the emissions ceilings agreed on in the protocol to Abate Acidification, Eutrophication and Ground-Level Ozone will not completely solve the acidification problem in Europe.In addition, the model results suggest that the soil quality that will be reached assuming full implementation of European policies might be reached with large cost savings. Model results indicate that total European reduction costs in the dynamic optimal strategy are half of the total reduction costs associated with the current and intended European abatement policies. However, the environmental targets specified in my model do not included eutrophication and tropospheric ozone. Therefore, the model selects relatively inexpensive options to reduce sulphur dioxide emissions, instead of the more expensive options to reduce nitrogen oxides emissions. If environmental targets with respect to eutrophication and tropospheric ozone would be incorporated than nitrogen oxides emission reduction would be more cost-effective and costs would be considerably higher.Chapter 7 analyses the interdependence of the problems of tropospheric ozone and acidification when dynamic processes of soil acidification are taken into account in an optimal control framework The model mathematically shows that nitrogen oxides reduction required to reduce acidification, can lead to an increase or a decrease in ozone levels. The direction of the effect depends on the ratio of nitrogen oxides/ volatile organic compounds concentration in the air which differ depending on the geographical location in Europe. Three groups of countries are important to distinguish. For the first group of countries a nitrogen oxides emission reduction leads to lower ozone values and lower environmental damages. Optimal reduction policies based on a single target approach, the reduction of acidification only, would underestimate the optimal abatement level. For the second group of countries a nitrogen oxides emission reduction always results in an increase in ozone levels and, hence, increases the damage due to tropospheric ozone. Therefore, for these countries the cross-effect decreases the optimal abatement time path and, though economically efficient, the environment is worse-off. For the third group of countries both positive and negative effects exist and the total effect of an nitrogen oxides emission reduction can both have increasing and decreasing effects on tropospheric ozone levels. The total influence of the interactions on the optimal abatement level remains unclear and additional research is necessary to obtain better insights. The reduction of volatile organic compounds always leads to lower tropospheric ozone values.Chapter 8 presents some numerical simulations with a stock-flow model in which acidification is modelled as a stock pollutant and tropospheric ozone as a flow pollutant.Because empirical application at the European level would require huge amounts of data, the main mechanisms are shown by using a 2 country model with hypothetical data. It is difficult to distil 'hard' economic and policy implications since the model does not realise an application at the European level. However, the model shows the influence of acidification related policies on ozone precursors and ozone formation. The calculations show that both positive and negative cross-effects exists. If the problem of tropospheric ozone is included, the results show that in addition to acid related policies extra measures might be needed with respect to volatile organic compounds.