Rrusco

This brief essay summarizes the main results of our forthcoming HKCER monograph entitled Clearing the Air: Vehicular Emissions Policy for Hong Kong.

There is no question that clean air is preferred to dirty air. However, it does not follow that we should strive to reduce vehicular emissions to zero. In our study, we do not attempt to calculate the optimal level of pollution, but we do note that the optimal level of pollution---the level where the incremental benefit of reduction equals the incremental cost of reduction---is unlikely to be zero.

Pollution reduction is beneficial to the extent that morbidity, mortality, and property damage are reduced. There is no consensus on the quantitative impact of air pollution on human health or property values. There are likely no significant direct health effects at ambient levels of nitrogen oxides in Hong Kong. Nitrogen oxides are deleterious to human health only to the extent that they are a catalyst in the generation of ozone which has been linked in some studies to respiratory illness and eye irritation. There may be some adverse health effects from particulates although these have not been conclusively demonstrated. Both nitrogen oxides and particulates contribute to unsightly smog and cause reduced visibility.

The air quality in Hong Kong compares well to that of most major cities in industrialized countries and is far better than in most developing countries. In particular, the pollutants which are attributable to motor vehicles---carbon monoxide, hydrocarbons, nitrogen oxides and particulates---are not evident in high concentrations by international standards. However, there are two exceptions: (1) In heavily congested urban corridors, levels of particulates and nitrogen oxides reach high levels. (2) In tunnels and carparks, carbon monoxide levels frequently exceed EPD standards.

The carpark and tunnel problems are largely the result of inadequate design and misuse of existing ventilation systems. Moreover, the high carbon monoxide levels are only potentially dangerous to the very small number of carpark and tunnel workers who are exposed for long periods of time. Finally, carbon monoxide emissions are 99 percent attributable to petrol-powered vehicles. With the requirement (from January 1, 1992) that all new petrol-driven private cars be equipped with catalytic converters, carbon monoxide emissions will fall dramatically and will be of even less concern. The congested urban areas are more problematic and we focus our study on particulates and nitrogen oxides, as these are the only vehicular emissions with any potential for significant damage to health and welfare.

The main source of particulates and nitrogen oxides in Hong Kong is motor vehicles. On an aggregate level, vehicles generate as much as 80 percent of the total emissions of these pollutants. Our results, shown in Table 1, indicate that the primary sources of vehicular emissions are goods vehicles and buses; taxis and private cars contribute only a small fraction of these pollutants. At a more disaggregate level, our analysis yields the same substantive conclusions. In the densely populated urban areas, such as Mong Kok and Sham Shui Po, goods vehicles and large buses (and to a lesser extent, small buses) are the principle contributors to vehicular emissions. Taxis are only important in the relatively less polluted areas such as the Mid Levels and on a few major corridors such as Connaught Road in Central. Hence, policies which focus on goods vehicles and large buses will be relatively more effective in reducing the concentrations of particulates and nitrogen oxides.

The White Paper entitled Pollution in Hong Kong: A Time to Act, put forward by the government in 1989, suggested an emission control strategy consisting of four parts: (1) The existing program to detect and cite vehicles emitting excessive smoke would be expanded. (2) Unleaded petrol would be introduced into Hong Kong. (3) With the introduction of unleaded fuel, more stringent emission standards for new petrol-fuelled vehicles could be implemented. (4) Measures to reduce the reliance on diesel vehicles would be explored. These measures have in large part been implemented, although measures to reduce the reliance on diesel vehicles are still under study. A fifth measure, not mentioned in the White Paper is the adoption of a higher grade of diesel fuel. The government recently announced a program to introduce higher quality diesel fuel into Hong Kong over the next five years.

Since April 1, 1991, all petrol stations have been required to sell unleaded petrol. Most of the private car fleet at that time could use unleaded petrol with minor adjustments to engine tuning. To encourage the switch, the government charged a lower duty on unleaded petrol, and as a consequence, its price was approximately $1 per liter less than leaded petrol. Private car owners responded to the price differential, and by the end of 1992, unleaded petrol accounted for 60 percent of petrol sales. The largest advantage of unleaded petrol comes in combination with the use of a catalytic converter---a device which generates certain chemical reactions that transform noxious exhaust gases into less undesirable gases. Since January 1, 1992, all newly registered cars were required to be equipped with a catalyst. Our estimates indicate that at the current rate of vehicle replacement, more than half of the vehicle fleet will be equipped with catalytic converters by 1997, and nearly the entire fleet by 2002. The government has begun to reduce the duty differential between unleaded and leaded petrol and has plans to eliminate it altogether. As the incentive to use unleaded fuel is eliminated, people will switch back to leaded fuel and this may be quite harmful, as catalytic converters become ineffective when leaded petrol is burned.

The policy measures currently under consideration are those which attempt to reduce the emissions from diesel vehicles. One way to do this would be to switch to higher grades of automotive diesel fuel while requiring minor design improvements for new diesel vehicles purchased in Hong Kong; an alternative way would be to outlaw the use of diesel fuel in certain classes of vehicles.

Adopting a higher grade of diesel fuel while requiring design improvements for new vehicles would significantly reduce particulate emissions---and at lower cost than major design changes or than conversion from diesel to petrol power. For example, a conservative estimate is that switching to low sulphur diesel would reduce emissions from all diesel vehicles by 25 percent. This would cause a 22.5 percent decrease in vehicular particulate emissions and a 21.7 percent reduction in nitrogen oxides. If emissions fell by 50 percent as a result of switching to higher grade fuel, the reduction in particulate and nitrogen oxide levels would be 45 and 43.4 percent respectively. (We note that a very high grade of diesel fuel often referred to as "city diesel" has been commercially produced and sold in Sweden since 1988.)

Alternatively, requiring all taxis and light buses to switch to petrol-powered engines would reduce particulate emissions by 22.5 percent and nitrogen oxides by 8.2 percent. Switching to petrol is more costly and less effective than adopting higher grade diesel fuel. While it is true that replacing diesel vehicles with petrol vehicles unambiguously results in lower levels of particulates and nitrogen oxides, such a "petrol only" policy may well result in costs that far exceed the benefits. Given the availability of high-grade diesel fuel, the diesel-to-petrol-conversion policy is particularly unattractive.

It has been argued by some commentators that while taxis and light diesel vans and buses do not generate a large fraction of total emissions, their contribution is greater in densely populated areas and so-called "urban canyons." This is simply not the case. In Mong Kok, where population density is the highest, taxis contribute a small share of emissions and the role of light vans and buses is typically smaller than of medium and heavy goods vehicles and heavy buses (see Table 1). The facts argue against high cost emissions control policies directed at taxis and light buses, as the benefits will be relatively small. Policies directed at reducing emissions from all diesel vehicles---such as the adoption of high-grade diesel fuel and tighter emissions standards for new vehicles---are sensible. Such policies directly reduce emissions of the most polluting class of vehicles, goods vehicles, while still reducing the emissions of the relatively less polluting vehicles, taxis and light buses.

As incomes rise in Hong Kong, an inevitable conflict arises between an increasing demand for vehicles and an increasing demand for cleaner air. At the current size of the private car fleet, congestion of roadways seems to be of much greater concern than the contribution of private cars to air pollution. However, transport policies that restrict vehicle ownership (such as first registration taxes) raise the value of existing vehicles and cause them to be used more intensively and for longer periods of time. This causes vehicle emissions per kilometer travelled to rise and mitigates any effects caused by a reduction in total kilometers travelled. Transport policies which reduce congestion in heavily populated areas will have a far greater impact on health and welfare than reductions in overall ambient levels of air pollution. The concentrations of pollutants are much greater at street level than even a few meters above the street. Hence, most of the damage from vehicle emissions is borne by those who work and live in close proximity to congested streets. Reducing traffic will do the most towards improving the air quality in highly polluted areas. Either road pricing or increases in fuel taxes would reduce congestion and pollution directly, and with fewer unintended and undesired effects than controls on vehicle ownership.

Dr. F.W. Rusco and Dr. W.D. Walls are both lecturers in the School of Economics and Finance at The University of Hong Kong.

Table 1: Composition of Vehicular Emissions
Proportion of Pollutants Attributable to Various Types of Vehicles

	Vehicle Type

Pollutant/Location	Mcycles	Priv Car	PLB	L Goods	M/H Goods	Pub Bus	Taxis

NITROGEN OXIDES
Mong Kok	0.00	0.09	0.04	0.19	0.21	0.41	0.05
Mid Levels	0.01	0.43	0.14	0.10	0.12	0.01	0.19
Kwun Tong	0.01	0.11	0.07	0.26	0.41	0.11	0.05
Urban Railway Line	0.01	0.15	0.07	0.25	0.35	0.10	0.07
Hong Kong Internal	0.01	0.20	0.11	0.18	0.26	0.14	0.09
Kowloon External	0.00	0.11	0.04	0.23	0.51	0.09	0.02
Aggregate (1992)	0.01	0.12	0.06	0.23	0.48	0.07	0.04
PATRICULATE MATTER
Mong Kok	0.00	0.06	0.04	0.19	0.16	0.31	0.23
Mid Levels	0.00	0.21	0.10	0.07	0.06	0.01	0.55
Kwun Tong	0.00	0.08	0.07	0.25	0.32	0.08	0.20
Urban Railway Line	0.00	0.10	0.06	0.22	0.25	0.07	0.29
Hong Kong Internal	0.00	0.13	0.09	0.16	0.18	0.10	0.35
Kowloon External	0.00	0.09	0.05	0.24	0.43	0.07	0.11
Aggregate (1992)	0.01	0.09	0.06	0.23	0.39	0.06	0.17

LEGEND---Mcycles = motor cycles; Priv Car = private cars; PLB = public light buses; L Goods = light goods vehicles; M/H Goods = medium and heavy goods vehicles; Pub Bus = large public buses.

Source: F.W. Rusco and W.D. Walls, Clearing the Air: Vehicular Emissions Policy for Hong Kong, Hong Kong Centre for Economic Research, Hong Kong, forthcoming.


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