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Estimating Cost of Air Pollution Abatement for Road Transport in India

This paper provides some methods of estimation of physical and monetary accounts of air pollution from road transport. Using data from secondary sources and a vehicular survey, estimates of annual air pollution abatement cost for vehicles complying with Euro norms are made for the road transport sector in Andhra Pradesh and Himachal Pradesh. The pollution abatement cost of each vehicle comprises the cost of upgrading vehicular technology and cost of improving fuel quality. For example, the annual pollution abatement cost for a passenger car complying with Euro III norms is estimated at Rs 7,190 and Rs 6,624 for AP and HP, respectively. If all vehicles comply with Euro III norms, total air pollution abatement cost of the road transport sector constitutes 2.13 per cent and 2.16 per cent of state domestic product of the respective states.

Estimating Cost of Air Pollution Abatement for Road Transport in India

Case Studies of Andhra Pradesh and Himachal Pradesh

This paper provides some methods of estimation of physical and monetary accounts of air pollution from road transport. Using data from secondary sources and a vehicular survey, estimates of annual air pollution abatement cost for vehicles complying with Euronorms are made for the road transport sector in Andhra Pradesh and Himachal Pradesh. The pollution abatement cost of each vehicle comprises the cost of upgrading vehicular technology and cost of improving fuel quality. For example, the annual pollution abatement cost for a passenger car complying with Euro III norms is estimated at Rs 7,190 and Rs 6,624 for AP and HP, respectively. If all vehicles comply with Euro III norms, total air pollution abatement cost of the road transport sector constitutes 2.13 per cent and 2.16 per cent of state domestic product of the respective states.

SUSHMITA CHATTERJEE, KISHORE K DHAVALA, M N MURTY

T
ransport, especially road transport, is one of the most polluting activities in the economy. Burning of fossil fuels by vehicles contributes to air pollution loads in the form of carbon monoxide (CO), hydrocarbon (H), nitric oxide (NO) and particulate matter (PM) emissions. For example, a

xpassenger car without emission reduction technology (pre-Euro

technology) emits 0.0002 kg of PM and 0.0009 kg of NO

x every kilometer travelled.1 The pollution concentration in the atmosphere, particularly in the metropolitan areas in India has been much higher than the safety standards due to a pheno menal growth of traffic in recent years. The number of vehicles on the roads have increased from a mere 306 thousand in 1951 to 58,863 thousand in 2002 as shown in Table A1 in the Appendix. Currently roads carry 85 per cent of passenger and 70 per cent of freight traffic in the country. Some recent estimates show that a passenger car travels on an average of 30-35 km per day in India [Mashlekar 2002] and there are about 7,571 thousand cars on road. The per day pollution loads of PM from passenger cars without emission reduction technology are estimated to be 62.25 thousand kg. In contrast, the technology of emission reduction corresponding to Euro II norms provides for the reduction of PM emissions of cars to 0.00001 kg per km travelled. That means if all the cars operating on roads in India comply with Euro II norms, the pollution load of PM reduces from 62.25 thousand to 9.27 thousand kg per day. Physical accounts of air pollution load from the transport sector in India could be estimated as load with and without emission reduction technologies. Table A2 in the Appendix provides these estimates for different pollutants and for different vehicle types in India. Monetary accounts of air pollution abatement from the transport sector in India could be developed given the physical accounts described above if there are estimates of the cost of pollution abatement per km travelled for different vehicles. This paper suggests two methods for estimating the cost of pollution abatement of vehicles. One method suggests that

the pollution abatement cost of a vehicle consists of the cost of pollution abatement technology used and the incremental cost of producing fuels compatible with this technology. Another method prescribes the estimation of abatement cost incurred by vehicle owners/users implicit in the choice of vehicles having different characteristics determining vehicular pol lu tion. Estimation of a hedonic travel cost function is suggested by considering the travel cost of vehicle users as a function of vehicle characteristics such as the technology of air pol lution abatement, type of fuel used, distance travelled annually and size of the vehicle. Data of vehicular traffic in two states, Andhra Pradesh and Himachal Pradesh, are used to estimate the air pollution abatement cost of different vehicles. There is no specific academic consideration for choosing these two states for this study except the requirement of the research project funded by the Central Statistical Organisation (CSO), government of India [Murty and Gulati 2005].

I Emissions and Air Pollution Abatement Technologies

Vehicular technologies in India have seen an improvement only in recent years. Vehicles with old technologies (pre-Euro) are large in number, though the vehicle age in major cities is reducing. There is an urgent need to reduce vehicular emissions. In this context, the expert committee on auto fuel policy [Mashlekar 2002] has recommended an auto fuel policy to address the issues of vehicular emissions, vehicular technologies, and auto fuel quality in a cost efficient manner. It recognises that efficient transport is an essential service. It is also conscious of the health implications and social costs of automobile emissions and the need to neutralise costs to the extent it is feasible. The committee puts forth that the primary requirement of the auto fuel policy is to formulate measures that will help reduce auto emissions and improve air quality.

Upgrading auto fuel quality and vehicular technology to levels that are compatible with the emission norms are crucial components in any strategy that aims at reducing auto emissions and improving air quality. Particularly, investments are needed to enable the automobile industry to produce vehicles that are compatible with the recommended emission norms. In this context, the report provides estimates of investments that are

Table 1: Emission Coefficients of Various Pollutants (CO, NOX, HC and PM) Corresponding to Different Emission Technologies (Kg/Km)

Pre-Euro Buses Trucks PCG PCD 2W LCV (Tractor, (1991-95) Water-carrier)

Emission Coefficients CO 0.0055 0.006 0.0098 0.0073 0.0065 0.0087 HC 0.0018 0.002 0.0017 0.00037 0.0039 0.00034 NOX 0.019 0.01 0.0018 0.00277 0.00003 0.00315 PM 0.003 0.002 0.00006 0.00084 0.00023 0.0008 Pre-Euro (1996-2000) CO 0.0045 0.005 0.0039 0.0012 0.004 0.0069 HC 0.0012 0.001 0.0008 0.00037 0.0033 0.00028 NOX 0.0168 0.008 0.0011 0.00069 0.00006 0.00249 PM 0.0016 8E-04 0.00005 0.00042 0.0001 0.0005 Euro I-India stage 2000 CO 0.0036 0.0036 0.0024 0.0011 0.0022 0.0051 HC 0.00097 0.00097 0.00048 0.00025 0.00213 0.00014 NOX 0.0126 0.0063 0.00039 0.00059 0.00006 0.00128 PM 0.00056 0.00028 0.00004 0.00014 0.00005 0.0002 Euro 2/Bharat stage 2 CO 0.0032 0.0032 0.0022 0.001 0.0015 0.00072 HC 0.00087 0.00087 0.00035 0.00014 0.001425 0.000063 NOX 0.011 0.0055 0.00015 0.00056 0.000075 0.00059 PM 0.00024 0.00012 0.00003 0.00008 0.00005 0.00007 Euro 3/Bharat stage 3 CO 0.0028 0.0028 0.00139 0.00058 0.00064 HC 0.00077 0.00077 0.00015 0.00005 0.000056 NOX 0.01 0.005 0.00012 0.00045 0.0005 PM 0.00023 0.0001 0.00002 0.00005 0.00005

Source: Transport Fuel Quality, 2005, Central Pollution Control Board (CPCB), Delhi.

Table 2: Incremental Cost of Bharat Stage II and Euro III Equivalent Vehicles

Vehicle Category Conversion Incremental Cost/ Vehicle (Rs Lakh)

Passenger cars Bharat II to Euro III 0.5 Trucks Bharat 2000 to Bharat Stage II 1.25 Bharat 2000 to Euro III 2.25 Buses Bharat 2000 to Bharat Stage II 1.25 Bharat 2000 to Euro III 2.25 Two and three wheelers Bharat 2000 to Euro III 0.05-0.10

Source: SIAM.

Table 3: Incremental Cost of Bharat Stage II and Euro III Equivalent Vehicles

Vehicle Category Conversion Incremental Cost/ Vehicle (Rs Lakh)

Passenger cars Bharat 2000 to Bharat Stage II 0.3 Bharat 2000 to Euro III 0.5 Trucks Bharat 2000 to Bharat Stage II 0.61 Bharat 2000 to Euro III 1.62 Buses Bharat 2000 to Bharat Stage II 0.61

Bharat 2000 to Euro III 1.62 Two wheelers Bharat 2000 to Euro III 0.35-0.52 Three wheelers Bharat 2000 to Euro III 0.55

Source: TERI.

needed by the automobile industry and oil producing companies in India. In the past two decades, investments have been made in the infrastructure, design and development of vehicles. With the commencement of formal emission standards for vehicles in 1991, a number of steps have been taken to improve the energy efficiency of vehicles and reduce their environmental effects. Some emission norms were in place in India before 2000, which are known as pre-Euro norms. Bharat Stage I or Euro I norms were introduced in April 2000 for all new vehicles. Bharat Stage II or Euro II norms were introduced in Delhi in the year 2000 and were extended to other metros in 2001. Bharat Stage III or Euro III norms are currently being considered for all the vehicles. Table 1 provides information about these norms.

The air pollution abatement cost of vehicles to comply with the prescribed emission standards has two components. They are the additional cost of switching to new vehicular technology and the incremental cost of producing auto fuels compatible with this technology. The Society of Indian Automobile Manufacturers (SIAM) has provided estimates of incremental costs for the manufacture of vehicles that are compatible with Euro II and Euro III norms as given in Table 2. The Energy Research Institute (TERI), which undertook a study on “Incentives for cleaner automobiles” has also estimated the incremental costs to be incurred by manufacturers for producing Bharat Stage II and Euro III equivalent emission compatible vehicles, which are given in Table 3. For example, the estimates of TERI show that the incremental cost of adopting new technology for passenger cars to realising Euro III norms are Rs 50 thousand while the same for buses are Rs 163 thousand. Tables 4 and 5 provide estimates of incremental production costs to refineries of different vintages in India for producing petrol and diesel of improved quality compatible with the Euro norms. These estimates show that the incremental production cost of a litre of petrol or diesel compatible with the Euro III vehicular technology is as high as Rs 4 for some refineries in India.

Estimation of “green GDP” for a country using the United Nations Methodology of Integrated Environmental and Economic accounting [UN 1993; Murty James and Mishra 1999; Murty and Kumar 2004] requires the development of physical and monetary accounts of environmental changes for different sectors of the economy. Case studies of the road transport sectors of Andhra Pradesh and Himachal Pradesh in India attempted in this paper require the preparation of annualised physical and mone tary accounts of air pollution for the road transport sector in each state. Given the data for emission coefficients for pre- and post-Euro vehicular technologies, distance travelled and number of vehicles for each type of vehicle, the physical accounts of air pollution for the road transport sector in the form of annual flows could be estimated for pre- and post-Euro scenarios as described in the next section. Two methods are used to develop the monetary accounts of air pollution. In one method, the annual cost of air pollution abatement for a vehicle is estimated by annualising the incremental capital cost of changing the technology and the additional cost for using fuels compatible with the new technology as described in Section III. Another method described in Section IV uses the hedonic travel cost method for estimating the annual cost of air pollution abatement for each type of vehicle.

Economic and Political Weekly September 8, 2007

II Physical Accounts of Air Pollution from Road Transport

Physical accounts of air pollution of road transport in the two states corresponding to various norms described above could be developed. In fact, using the data on the number of vehicles in a state, emission coefficients and distance travelled by each vehicle, one can compute the physical load of each of the pollutants (CO2, hydrocarbon, NO, and SO2). It is

ximportant to note that emission coefficients are prescribed for CO, and hence using the atomic weight of carbon (=12) and oxygen (=16), one can calculate the equivalent load of CO2 (carbon dioxide) from the pollution load of CO.

Andhra Pradesh

The data on the number of vehicles plying on the roads in each district is obtained from the statistical abstract of Andhra Pradesh, which gives the district-wise number of motor vehicles

Table 4: Incremental Production Cost for Petrol

Sl Refineries BIS-2000 to BIS-2000 to No Bharat Stage II Rs/Litre Euro III Rs/Litre

1 IOCL, Digboi 1.38 4.03 2 IOCL, Barauni 1.71 3.20 3 IOCL, Halda 0.60 1.45 4 IOCL, Gujarat 1.00 2.35 5 IOCL, Mathura 1.11 1.94 6 ICOL, Panipat 0.80 1.71 7 HPCL, Mumbai 2.80 3.95 8 HPCL, Vaiskh 1.50 4.00 9 BPCL, Mumbai 0.50 2.10 10 KRL, Kochi 0.98 3.17 11 CPCL, Chennai 1.50 1.80 12 BRPL, Bongaigaon Nil* 3.90 13 RPL, Jamnagar Nil* 0.60 14 MRPL, Managalore Nil* 2.50

Note: * Have set up facilities for Euro II equivalent. Source: Ministry of petroleum and natural gas.

Table 5: Incremental Production Cost for Diesel

Sl Refineries BIS-2000 to BIS-2000 to No Bharat Stage II Rs/Litre Euro III Rs/Litre

1 IOCL, Digboi 3.35 4.11 2 IOCL, Guwahati 2.50 2.70 3 IOCL, Barauni 1.60 2.10 4 IOCL, Gujarat 0.84 1.03 5 IOCL, Halda 1.16 1.24 6 IOCL, Mathura 1.23 1.41 7 ICOL, Panipat 0.83 0.93 8 HPCL, Mumbai 1.40 2.00 9 HPCL, Vaiskh 1.50 2.00 10 BPCL, Mumbai 1.50 2.40 11 KRL, Kochi 0.73 2.15 12 CPCL, Chennai 1.30 1.60 13 BRPL, Bongaigaon 1.90 2.20 14 NRL, Numaligarh 0.51 0.98 15 RPL, Jamnagar 0.25 0.90 16 MRPL, Managalore 1.00 1.10

Notes: (i) Import parity premium differential between BIS-2000 and Bharat Stage II petrol and diesel, inclusive of 20 per cent customs duty, is 20 paise per litre and 40 paise per litre (approximately).

(ii) Import parity premium differential between BIS-2000 and Euro III equivalent petrol and diesel, inclusive of 20 per cent customs duty, is Rs 1.35 and Rs 1.50 per litre (approximately).

Source: Ministry of petroleum and natural gas.

of different classes and categories registered and on the roads in the state. The average distance travelled per day by each type of vehicle is obtained from the urban road traffic and air pollution report on Hyderabad. The report gives figures as per outer cordon surveys and fuel station surveys.2 For district Hyderabad, the study uses the latter whereas for all other 22 districts, outer cordon survey figures have been used. Since the classification of vehicles into different categories is different in the statistical abstract report and the traffic and air pollution report, certain assumptions have been made in this regard. For calculating the distance travelled by goods’ vehicles, a weighted average of the distance travelled by light commercial vehicle (LCV), heavy commercial vehicle (HCV) and medium commercial vehicle (MCV) have been taken, with the weights being the number of observations for each category of vehicle. Tractors have been assumed to be in the LCV category, taxicabs as old brand cars (OBC) and motorcars and jeeps as a mix of OBC and new brand cars (NBC), thus taking a weighted average of the distance travelled by an OBC and a NBC.

Data on emission factors for different categories of vehicles for each of the pollutants, CO, NOX, HC and PM is obtained from the transport fuel quality report, Central Pollution Control Board (CPCB). However, since the emission factors are available for a few broad heads namely, two wheelers, three wheelers, passenger cars – diesel (PCD), passenger car – gasoline (PCG), LCV, buses and trucks, the present study has assumed the emission factors of all goods’ vehicles and certain non-transport vehicles (as classified in the statistical abstract) such as rigs, cranes, road-rollers, fire engines etc to be the same as that of trucks. Also, for motorcars, emission factors for PCG and for jeeps, emission factors for PCD have been used.

Regarding the methodology, to arrive at the emission of a specific pollutant from a particular category of vehicle, say trucks, one can multiply the emission factor for trucks with the total distance travelled by trucks in a day in each district. Also, an estimate of the total distance travelled is obtained by multiplying the number of trucks plying in each district with the average distance travelled per day by a truck. It is thus possible to arrive at emis sions from each category of vehicle as well as the estimate of total emission of a pollutant for each district and for the entire state.

Similarly, using emission factors corresponding to Euro II norms, total emissions of various pollutants according to the norms can be generated. The difference between the actual emissions and the emissions according to the norms gives us an estimate of the pollution load that is to be reduced as per the given norm. Table 6 provides estimates of pollution loads from vehicular traffic in Andhra Pradesh during the year 2001-02.

Himachal Pradesh

Data on the number of vehicles has been obtained from the transport commissioner’s office in Shimla, and the information on the distance travelled by different vehicles has been obtained from a primary survey of vehicles conducted in Shimla.3 Taking the average distance from a sample of 100 vehicles of each category, and multiplying this by the emission coefficient of say, CO2, gives us the per day emissions of CO2 from a vehicle, which can then be extrapollated for obtaining total emissions of CO2 by further multiplying the result with the total number of vehicles in the state. Table 7 provides

Table 6: Pollution Loads by Vehicular Traffic in Andhra Pradesh

CO2 HC NOX PM

Pollution load (tonnes/year) Pre-Euro 369463.9 148887.7 45556.2 9285.2

Euro II/Bharat II 147389.8 70309.7 30402.7 3157.9 Load reduced/ physical accounts (tonnes/year) Pre-Euro to Euro II 222074.1 78578 15153.6 6127.3

Source: Estimated as explained in the text. Table 7: Pollution Loads by Vehicular Traffic in Himachal Pradesh

CO2 HC NOX PM

Pollution load

(tonnes/year) Pre-Euro 49626.5 9220 24248 2920 Euro I/Bharat 2000 22829.2 5822 16150 940

Euro II/ Bharat II 17967 4181 13651 452

Load reduced/

physical accounts

(tonnes/year) Pre-Euro to Euro I 26793 3396 8097 1977 Pre-Euro to Euro II 31657.2 5038 10596 2.47 Euro I to Euro II 4862 1640 2497 4872

Source: Estimated as explained in the text.

Table 8: Annualised Incremental Cost of Investment Per Vehicle for Improving Vehicular Technology as Per Euro Norms

Vehicle Category Conversion Annualised Cost/Vehicle (Rs)

Passenger car Bharat 2000 to Bharat Stage II 3187.5 Bharat 2000 to Euro III 5312.5

Trucks Bharat 2000 to Bharat Stage II 6481.25 Bharat 2000 to Euro III 17212.5 Buses Bharat 2000 to Bharat Stage II 6481.25 Bharat 2000 to Euro III 17212.5 Two wheelers Bharat 2000 to Euro III 4621.87 Three wheelers Bharat 2000 to Euro III 5843.75

Source: Based on TERI estimates of investment cost.

Table 9: Total Annualised Cost of Conversion of Technology of Different Vehicles Operating in Andhra Pradesh

Vehicle Conversion Annualised No of Total Category Cost/ Vehicles Annualised Vehicle on Road Cost (Rs) 2001-02 2001-02 (Rs)

Passenger Bharat 2000 to Bharat Stage II 3187.5 370398 1180643625 car Bharat 2000 to Euro III 5312.5 1967739375 Trucks Bharat 2000 to Bharat Stage II 6481.25 160185 1038199031

Bharat 2000 to Euro III 17212.5 2757184313 Buses Bharat 2000 to Bharat Stage II 6481.25 215769 1398452831

Bharat 2000 to Euro III 17212.5 3713923913 Two wheelers Bharat 2000 to Euro III 4621.87 3609373 16682052788 Three wheelers Bharat 2000 to Euro III 5843.75 171834 1004154938

Source: Estimated as explained in the text.

Table10: Total Annualised Cost of Conversion of Technology of Different Vehicles Operating in Himachal Pradesh

Vehicle Conversion Annualised No of Total Category Cost/ Vehicles Annualised Vehicle on Road Cost (Rs) 2002-03 2002-03 (Rs)

Passenger Bharat 2000 to Bharat Stage II 3187.5 63249 201606187.5 car Bharat 2000 to Euro III 5312.5 336010312.5 Trucks Bharat 2000 to Bharat Stage II 6481.25 37805 245023656.3

Bharat 2000 to Euro III 17212.5 650718562.5 Buses Bharat 2000 to Bharat Stage II 6481.25 4417 28627681.25

Bharat 2000 to Euro III 17212.5 76027612.5 Two wheelers Bharat 2000 to Euro III 4621.87 149286 689980484.8 Three wheelers Bharat 2000 to Euro III 5843.75 2611 15258031.25

Source: Estimated as explained in the text.

estimates of pollution loads by vehicular traffic in Himachal Pradesh during the year 2002-03.

III Monetary Accounts of Air Pollution

The cost of pollution abatement or the cost of vehicles complying with the emission norms (Euro norms) consists of (as explained in Section I) the cost of change of vehicle technology and cost of improving fuel quality. The estimates of capital cost of air pollution abatement of different vehicles complying with Euro norms given by TERI and SIAM studies could be used to estimate the per vehicle annual cost of air pollution abatement from the change in vehicular technology. The capital cost of changing vehicle technology could be annualised using the interest rate at which commercial banks in India are currently lending, which is about 10.625 per cent (during the year 2003-04). Table 9 provides these estimates for different types of vehicles. Estimation of the second component of air pollution abatement cost of a vehicle – the cost of improving the fuel quality compatible with Euro norms – requires data on the incremental production cost of improving the quality of fuels, distance travelled by the vehicle per liter of fuel, and the distance travelled by the vehicle per day. The report of the expert committee on auto fuel policy [Mashelkar 2002] provides estimates of the incremental production cost of improving the quality of petrol and diesel compatible with Euro norms for refineries of different vintages in India as given in Tables 4 and 5 in Section I. These estimates form a range of Rs 0.50-2.80 and Rs 0.60-4.03 per litre petrol respectively for Bharat Stage II and Stage III technologies. Similarly, for diesel, they form ranges of Rs 0.25-3.35 and Rs 0.90-4.11 for these technologies. The vehicular survey in Shimla described in Section IV provides estimates of km travelled per litre of fuel used, and the average distance per day travelled by different vehicles. Also, Mashelkar (2002) provides estimates distance travelled per day by different vehicles in Andhra Pradesh. These estimates are used to estimate the incremental fuel cost consumed per day by different vehicles in Andhra Pradesh and Himachal Pradesh as given in Tables 11 and 12. Tables 13 and 14 provide estimates of the incremental annual cost of different vehicles in the two states due to the increased cost of fuel from the improvement of fuel quality as per the Euro norms.

With the help of information on the number of vehicles operating on the road in a year for each of the above vehicle categories, one can estimate the total annualised cost of conversion (from one technology to another) of different vehicles operating in a state. Tables 9 and 10 provide the estimates of the annualised cost of investment for converting vehicular technology as per Euro norms in Andhra Pradesh and Himachal Pradesh respectively.

IV Vehicular Survey in Himachal Pradesh and Estimation of Air Pollution Abatement Cost of Vehicles

Estimates of cost of air pollution abatement for different vehicles are also obtained using data collected through a primary survey of vehicles in Shimla. As explained in the earlier sections, data on distance travelled and fuel consumed per day by different vehicles used in preparing physical and

Economic and Political Weekly September 8, 2007 monetary accounts of air pollution from the transport sector in Himachal Pradesh are obtained from this survey. The survey of vehicles conducted in Shimla covers a sample of 700 vehicles pertaining to different vehicle categories, namely, buses, trucks, private cars, jeeps, taxicabs, two wheelers and other commercial vehicles. For all these vehicle categories, the focus has been on Himachal Pradesh registered vehicles. For instance, for the “bus” category, the survey has been conducted for state transport buses and Himachal Pradesh registered tourist buses. Information has been obtained on the per day distance travelled by the

Table 11: Incremental Production Cost of Fuel for Different Vehicles (Rs/day in Andhra Pradesh)

Vehicle Pre-Euro to Bharat Pre-Euro to Bharat Category Stage II/Euro II Stage III/Euro III

PC High 6.22 8.95 Low 1.11 1.33 Bus High 33.03 40.52 Low 2.46 8.87 Truck High 36.72 45.05 Low 2.74 9.87 Jeep High 11.78 14.46 Low 0.88 3.17 Two wheeler High 2.70 3.89 Low 0.48 0.58 Commercial vehicles High 16.38 20.10 Low 1.22 4.40

Source: Estimated as explained in the text.

Table 12: Incremental Production Cost of Fuel for Different Vehicles (Rs/day in Himachal Pradesh)

Vehicle Pre-Euro to Bharat Pre-Euro to Bharat Category Stage II/Euro II Stage III/Euro III

PC High 6.10 8.77 Low 1.09 1.31 Bus High 154.69 189.79 Low 11.54 41.56 Truck High 147.81 181.34 Low 11.03 39.71 Jeep High 34.70 42.57 Low 2.59 9.32 Two wheeler High 2.40 3.45 Low 0.43 0.51 Commercial vehicles High 62.34 76.48 Low 4.65 16.75

Source: Estimated as explained in the text.

Table 13: Annualised Cost of Vehicles for Using Fuels Compatible with Euro Norms in Andhra Pradesh

Vehicle Pre-Euro to Euro II Pre-Euro to Euro III Category Per Vehicle Cost Total Cost Per Vehicle Cost Total Cost

PC 1338 495505110 1877 695208525 Bus 6477 1397615216 9014 1945014480 Truck 7202 1153651249 10023 1605497412 Two wheeler 581 2097546333 815 2942921044

Source: Estimated as explained in the text.

Table 14: Annualised Cost of Vehicles for Using Fuels Compatible with Euro Norms in Himachal Pradesh

Vehicle Pre-Euro to Euro II Pre-Euro to Euro III Category Per Vehicle Cost Total Cost Per Vehicle Cost Total Cost

PC 1311 82927661 1840 116349698 Bus 3034 13401178 4222 18648574 Truck 2899 109596695 4034 152505370 Two wheeler 516 77013662 724 108053207

Source: Estimated as explained in the text.

vehicles, model and age of the vehicle, characteristic features such as the size of the vehicle, type of fuel used, mileage, cost related information such as fuel cost, maintenance cost and insurance cost, and purchase and current price of the vehicle. Information has also been obtained on whether the vehicle has undergone any conversion in technology or if it is complying with any particular emission technology such as the pre-Euro, Bharat Stage 2000 or Euro II norm.

Estimation of Hedonic Travel Cost Function

The hedonic travel cost function which is a function of various characteristics of the vehicle: size of vehicle, distance travelled per day, and the emission coefficients is estimated for the passenger cars:

C = f (Size, Dist, EF) where C: total per day cost to the owner of the vehicle; Size: size of the vehicle. This variable takes a value of 1 for big vehicles and 0. Otherwise; Dist: distance travelled per day by the vehicle and; EF: emission factor or coefficient of the pollutant (CO2, HC, NOX, PM, as the case may be).

The variables in the Hedonic Cost Function are as follows: Cost: This variable has been constructed using the annualised current price of the vehicle plus other costs like the fuel cost, maintenance cost and insurance cost. The current price, which the private car owners stated, is the price, which they perceive to obtain if they sell the vehicle. This price has been annualised using the current bank-lending rate, which is 10.625 per cent (in the year 2003-04). The annualised cost thus obtained has been converted to the per day cost. Size: This is a dummy variable, which takes a value 1 for a big vehicle and 0 for a small vehicle.

Table 15: Descriptive Statistics of Variables

Variables Mean Std Dev
Cost (C) Dist 163.63 28.89 82.47 19.67
CO2HC 0.00774 0.00089 0.00509 0.00056
NOXPM 0.00092 0.00005 0.00068 0.00001

Table 16: Correlation Matrix of Emission Variables

CO2 NOX HC PM
CO2 NOX HC 1.00 0.93 0.99 0.93 1.00 0.97 0.99 0.97 1.00 0.88 0.99 0.93
PM 0.88 0.99 0.93 1.00

Table 17: Parametric Estimates of Hedonic Travel Cost Function Dependent Variable: Cost (C)

Variables Log-Log Model (Expected Signs) Coefficients (t-statistics) Reg 1 Reg 2 Reg 3

Constant 2.05** (7.546) 2.17** (8.306) 1.47** (4.208) Size (+) 0.30** (3.956) 0.33** (4.244) 0.32** (4.139) Dist (+) 0.48** (10.056) 0.51** (10.524) 0.49** (10.316) CO2 (-) -0.26** (-5.700) HC (-) -0.26**(-5.828) NOX (-) -0.15** (-5.446) Uncentred R2 0.62 0.61 0.62 Adjusted R2 0.60 0.59 0.61

Note: ** Denotes 1 per cent level of significance, * denotes 5 per cent level of significance.

Distance: Data on distance is expressed in km travelled per day. Emission coefficients: Expressed in kg/km.

Table 15 provides the descriptive statistics of these variables.

The parametric estimates of the hedonic travel cost function are given in Table 16. Separate estimates of the cost function are made for three pollutants because the correlation matrix of the emission factors shown in Table 16 reveals very high pair-wise correlation coefficients, which are of the order of 0.8 and above. This implies that all the emission factors cannot be used as explanatory variables in the estimation of the cost function because it would lead to biased estimates. Hence, the cost variable has been regressed separately on each of the emission factors, with size and distance travelled per day as the other two explanatory variables. The standard diagnostic tests of heteroscedasticity have been performed on these models and the models are free from any such problem. Results indicate that the coefficients are highly significant (at the 1 per cent level of significance) and have the expected signs.

Abatement Cost of Vehicular Pollution

Using the estimated hedonic cost functions, the annual abatement cost of vehicular pollution can be calculated for CO2, NOX, and HC. The derivative of the cost function with respect to emissions gives us an estimate of the increase in the travel cost per day due to a reduction of one kg of emissions per km.

dC C

—— = ——* β = –0.264747*163.69/0.00774 = (–)5599.02dCO2 CO2

dC C

—— = –––* β = –0.260463*163.69/0.00085 = (–)50159.04

dHC HC

dC C

——– = —––* β = –0.151446*163.69/0.000922 = (–)26887.4 dNOX NOX

For instance, the incremental cost for CO2 is computed as Rs 5,599.02. Switching from pre-Euro to Euro I vehicle technology requires an emission coefficient of 0.0013 kg per km for CO2. Therefore, the per day abatement cost of a small car is estimated at Rs 7.28, which makes the annual abatement cost equivalent to Rs 2,729.72. Table 18 provides similar estimates for NO, and

xHC. The data shows that there is a very high degree of correlation among emission variables as shown in Table 16, implying that the switching of vehicles to emission reduction technologies results in the simultaneous reduction of all emissions. Therefore the estimate of the annual abate ment cost for a passenger car is obtained as the maximum of the abatement cost estimates for CO2, NOX, and HC given in Table 18.

V Conclusion

Air pollution from road transport is a non-point source of pollution as it is the case with water pollution from agriculture. In the absence of clearer methods in the literature on environmental pollution to measure the pollution load and the cost of pollution abatement from road transport, this paper outlines certain methods and provides case studies of road transport in Andhra Pradesh and Himachal Pradesh in India. The sug gested methods as shown in this paper require a lot of data on road transport. Vehicular transport creates demand for waste disposal services from the atmosphere and there is a supply con straint on these services imposed by environmental regulation in the form of emission norms (for example, the Euro norms dis cussed in the paper). There is a problem of air pollution from the transport sector if the pollution load from vehicles exceeds the load cor responding to emission norms. The cost of air pollution abatement is the cost to vehicles for complying with the emission norms.

Vehicular pollution could be reduced by changing vehicular technologies and by improving fuel quality. The government of India has recently been introducing Euro norms, which are different for different vehicles. As explained in this paper, the vehicular technologies and fuel quality are different for different norms (Euro I, II, III, and IV). Estimates of air pollution load in excess of load compatible with norms for each type of vehicle are obtained. Estimates of pollution abatement cost for each type of vehicle in terms of the cost of changing vehicular technologies and the cost of using improved fuel to comply with the emission norms are made. For example, the annual pollution abatement cost for a passenger car complying

Table 19: Monetary Accounts of Air Pollution Abatement in Transport Sectors (Rs million)

Andhra Pradesh Himachal Pradesh
Technology Euro II Euro III Euro II Euro III
Cost of upgrading vehicular technology Cost of change in fuel Total cost (1+2) 3617.295 5144.318 8761.613 25120.900 7188.641 32309.541 475.258 282.939 758.197 1752.737 395.557 2148.294

Notes: It is to be noted that regarding the cost of technology upgradation, TERI provides estimates of investment costs of technology upgradation per vehicle for different vehicles from Euro I to Euro II and Euro III whereas the information on cost of fuel quality conversion is available for conversion from pre-Euro to Euro II and Euro III. This essentially implies that the total cost of abatement figures (for complying with Euro II and Euro III) at which the present study arrives by summing up the cost of technology upgradation and change in fuel quality, are in fact less than what they would have been, in case the conversion cost of upgrading vehicular technology was available for pre-Euro to Euro II and pre Euro to Euro III.

Source: Esimated as explained in the text.

Table 18: Estimates of Annual Abatement Cost Per Vehicle

Private Car Reduction of the Emission (Kg/Km) CO2 HC NOx (Due to change in technology) Estimates of Annual Abatement CostCO2 HC NOx Abatement cost per kg of emission 5599.02 50159.04 26887.4 Annual Abatement Cost (Rs/Veh)
Pre-Euro 1996-2000 to Euro I Pre-Euro 1996-2000 to Euro II Pre-Euro 1996-2000 to Euro III Euro I to Euro II Euro I to Euro III 0.0013 0.0015 0.0025 0.0002 0.0011 0.0002 0.0003 0.0005 0.0001 0.0003 0.0004 0.0005 0.0006 0.0001 0.0002 2729.72 3050.87 5025.9 321.144 2296.18 4027.77 6224.74 8879.4 2196.97 4851.63 3974.63 5299.51 5986.48 1324.88 2011.85
Source: Estimated as explained in the text.
Economic and Political Weekly September 8, 2007 3667

with Euro III norms is estimated at Rs 7,190 and Rs 6,624 for Andhra Pradesh and Himachal Pradesh respectively.

Table 19 shows the total abatement cost for complying with Euro II and Euro III emission norms for road transport sectors in the two states. The air pollution abatement cost for each type of vehicle is estimated as the sum of estimates of the cost for the change in vehicular technology and improving fuel quality.

The estimates of aggregate pollution abatement costs for road transport in Andhra Pradesh and Himachal Pradesh are obtained by adding up costs for all the above vehicle categories. Estimates of air pollution abatement cost for the transport sector reported in Table 19 are made by taking into account the number of vehicles on roads in the year 2001-2002 for Andhra Pradesh and the year 2002-2003 for Himachal Pradesh. The estimates of air pollution abatement cost of road transport required for complying with Euro III norms constitute 2.13 and 2.16 per cent of the state domestic product in Andhra Pradesh and Himachal

Appendix Table A2: Vehicular Traffic and Air Pollution Loads in India

Two Wheeler Car Bus Truck Others

No of Vehicles (1000) 41478 7571 669 3045 6100 Avg dist/day km 30.99 34.99 37.76 32.675 36.19 Dist km (1000) 1285403.2 264909.29 25261.44 99495.375 220759 Load per day 1000 kg CO 5141.61 675.52 113.68 497.48 1523.24 HC 4241.83 154.97 30.31 99.50 61.81 NOx 77.12 237.09 424.39 795.96 549.69 PM 128.54 62.25 40.42 79.60 110.38 Load per day as per Euro II CO 1799.56 260.94 70.73 278.59 141.29 HC 1696.73 26.49 19.45 76.61 12.36 NOX 51.42 75.50 252.61 497.48 110.38 PM 51.42 9.27 5.81 9.95 11.04 Load Reduction Required As per Euro II Norms1000 kg CO 3342.05 414.58 42.94 218.89 1381.95 HC 2545.10 128.48 10.86 22.88 49.45 NOX 25.71 161.59 171.78 298.49 439.31 PM 77.12 52.98 34.61 69.65 99.34 Concentration (kg/km)

Bus Truck PCG 2W Others
Pre-Euro (1996-2000)
CO 0.0045 0.0050 0.0026 0.0040 0.0069
HC 0.0012 0.0010 0.0006 0.0033 0.0003
NOXPM 0.0168 0.0016 0.0080 0.0008 0.0009 0.0002 0.0001 0.0001 0.0025 0.0005
Euro III
CO 0.0028 0.0028 0.0010 0.0014 0.0006
HC 0.0008 0.0008 0.0001 0.0013 0.0001
NOXPM 0.0100 0.0002 0.0050 0.0001 0.0003 0.0000 0.0000 0.0000 0.0005 0.0001

Source: Estimated as explained in the text.

Pradesh respectively. Similar estimates for complying with Euro II norms are obtained as 0.578 and 0.76 per cent.

EPW

Email: mnm@iegindia.org

Notes

[This paper forms part of research for the ongoing project on NaturalResources Accounting at the Institute of Economic Growth funded by the Central Statistical Organisation, government of India. We have received helpfrom a number of people and organisations in Andhra Pradesh and HimachalPradesh while collecting data used in this paper, particularly the directorates ofeconomics and statistics, offices of commissioners of transport, Himachal PradeshUniversity, State Transport Corporations, State Pollution Control Boards, N S Bisht of Himachal Pradesh University, and R N Batta, Secretary, road transport, Himachal Pradesh government. We express our thanks to all of them. We are grateful to an anonymous referee for very useful comments on an earlier version of this paper.]

1 See Table A2 for information about other vehicles.

2 In Outer Cordon Surveys, a total of 7 outer cordon points were selected around Hyderabad and classified traffic volume counts along with roadside interviews were conducted on a sampling basis for 24 hours at eachof these locations. In Fuel Station Surveys, a total of 15 out of 150fuel stations located in Hyderabad were selected to conduct interviewsof the owners/drivers of vehicles visiting the fuel stations. The survey was conducted round the clock at stations, which were in peripheralareas because the traffic passing through these areas was likely to fill fuel at these stations during night hours. In the city, the survey was conducted for a period of 12 hours.

3 For details of the vehicular survey in Himachal Pradesh see Section IV.

References

CPCB (2005): Transport Fuel Quality Report, Central Pollution Control Board, Delhi.

CRRI (2002): Urban Air Traffic and Air Pollution Report, Central Road Research Institute, Chapter 8.

Murty, M N and B N Goldar (2006): ‘Economic Evaluation of Invest ment Projects inIndia’, a report submitted to the Planning Commission, government of India.

Murty, M N and S C Gulati (2005): ‘Natural Resource Accounts of Air andWater Pollution: Case Studies of Andhra Pradesh and Himachal Pradesh Sates of India’, a report submitted to the Central Statistical Organisation,Government of India.

Murty, M N and Surendar Kumar (2004): Environmental and Econ omic Accounting for Industry, Oxford University Press, New Delhi.

Murty, M N James, A J and Smita Mishra (1999): Economics of Industrial Pollution, Oxford University Press, New Delhi.

Report of the Expert Committee on Auto Fuel Policy Report, Chairman: R A Mashelkar, August 2002, Government of India.

Statistical Abstracts of Andhra Pradesh, Directorate of Economics and Statistics, Government of Andhra Pradesh, various issues.

Statistical Abstracts of Himachal Pradesh, Directorate of Economics and Statistics, Government of Himachal Pradesh, various issues.

The Tata Energy Research Institute (TERI), report on ‘Incentives for CleanerAutomobiles’.

UN (1993): ‘Integrated Environmental and Economic Accounting’, Interimversion (Sales No E93 XVII 12), New York, United Nations.

Appendix Table A1: Growth of Vehicles in India during the Period 1951-2002

Year No of Two Wheeler Car, Jeep, Taxi Bus Goods Vehicles Others Vehicles (thousands) (thousands) Percentage (thousands) Percentage (thousands) Percentage (thousands) Percentage (thousands) Percentage

1951 306 27 8.82 159 51.96 34 11.11 82 26.8 4 1.31 1961 665 88 13.23 310 46.62 57 8.57 168 25.26 42 6.32 1971 1865 576 30.88 682 36.57 94 5.04 343 18.39 170 9.12 1981 5391 2618 48.56 1160 21.52 162 3.01 554 10.28 897 16.64 1991 21374 14200 66.44 2954 13.82 331 1.55 1356 6.34 2533 11.85 1996 33783 23252 68.83 4204 12.44 449 1.33 2031 6.01 3850 11.39 1997 37231 25729 69.01 4672 12.52 484 1.31 2343 6.07 4104 11.09 1998 41,369 28642 69.23 5138 12.35 538 1.31 2536 6.18 4514 10.94 1999 44,875 31328 72.04 5556 12.38 540 1.20 2554 5.69 4897 10.91 2000 48857 34118 70.08 6143 12.49 562 1.16 2715 5.54 5319 10.74 2001 54991 38556 70.11 7058 12.83 634 1.15 2948 5.36 5795 10.54 2002 58863 41478 70.47 7571 12.86 669 1.14 3045 5.17 6100 10.36

Source: Department of Road Transport and Highways, GOI.

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