CE Delft External Costs Fo Aviation 2297

TEXTE
ENVIRONMENTAL RESEARCH OF THE

FEDERAL MINISTRY OF THE ENVIRONMENT,
NATURE CONSERVATION AND NUCLEAR SAFETY
Research Report 299 96 106

UBA-FB 000411
External Costs
Texte
24
03 of Aviation
ISSN
0722-186X
by
J.M.W. Dings
R.C.N. Wit
B.A. Leurs
M.D. Davidson
CE, Centre for Energy Conservation and Environmental Technology,
Delft
W. Fransen
INTEGRAL Knowlegde Utilization
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Edited by: Section I 3.1

Dr. Burkhard Huckestein
Berlin, June 2003

Foreword
Besides numerous benefits to citizens and companies, air transport also has
undesired side-effects such as emissions and noise nuisance. Most of these
negative ‘external’ effects, as they are called, are not currently priced or to a
limited degree only. The marketplace consequently creates insufficient in-
centives for the aviation industry and its clients to reduce these external
effects.
The present study on ‘External costs of aviation’, commissioned by the Ger-

man Umweltbundesamt, aims to contribute to the ongoing international pro-
cess of creating market-based incentives for the aviation industry to reduce
the environmental impact of its activities. It does so by estimating, within as
narrow margins as possible, the external costs of aviation.
The report at hand is the main report of the ‘External costs of aviation’ study.
Besides this main report, a background report is also available with five
technical annexes.
We gratefully acknowledge the support of the German Umweltbundesamt,

and in particular Mr Friedrich, Mr Huckestein, Mr Heinen and Mrs Mäder for
their always constructive comments and flexible and respectful attitude.
Needless to say, responsibility for the content of this report rests fully with
the authors.
Contents
Executive summary 1
1 Introduction 9
1.1 Why this report? 9
1.2 Aim 9
1.3 Scope 10
1.4 Report structure 10
2 Economic benefits and external costs 13

2.1 Introduction 13
2.2 Internal and external effects 13
2.3 Benefits of air transport 14
2.4 Costs of air transport 15
2.5 External costs 16
2.5.1 Negative external effects 16
2.5.2 Can external costs be estimated? 17
2.6 Is it useful to add external benefits and costs to yield a ’net’
result? 17
2.7 Efficiency and fairness 18
2.7.1 External costs: internalisation and efficiency 18
2.7.2 Taxation and fairness 19
3 Financial valuation of environmental impacts 21

3.1 Why financial valuation ? 21
3.2 Damage and prevention costs 21
3.3 Valuation methods for environmental effects 23
3.3.1 Valuation methods for damage, nuisance and
avoidance 23
3.3.2 The prevention cost method 25
3.3.3 Summary 27
3.4 Definition of types of aircraft and flight 28
4 Valuing greenhouse gas emissions 31

4.1 The IPCC ’Third Assessment’ and ’Aviation’ Reports 31
4.2 Impacts of NOX emissions 34
4.3 Impacts of contrail formation 34
4.4 Greenhouse gas emissions reduction policies 37
4.5 Damage and prevention cost approach 37
4.5.1 Damage cost approach 38
4.5.2 Prevention cost approach 38
4.5.3 Conclusion 41
4.6 Valuation of CO2 emissions 42
4.6.1 Overview of CO2 damage cost estimates 42
4.6.2 Overview of ‘Kyoto’ CO2 prevention cost estimates 44
4.6.3 Conclusions on CO2 valuation 45
4.7 Valuation of NOx and H2O emissions 46
4.8 Climate impact per aircraft type 47
5 Valuing noise and air pollution 49
5.1 Introduction 49
5.2 Noise nuisance 49
5.2.1 Impacts of noise nuisance 49
5.2.2 Valuing noise nuisance 49
5.2.3 Noise emissions per aircraft type and valuation 51
5.3 LTO emissions of NOX, PM10, HC, and SO2 52
5.3.1 Environmental impact 52
5.3.2 Valuation of impacts 53
5.3.3 LTO emissions per aircraft and valuations 54
6 Synthesis of results 57
6.1 Introduction 57
6.2 Summary of assumptions and variants 57
6.3 Variant 1: fleet-average technology 57
6.4 Variant 2: state-of-the-art technology 59
6.5 Overview of other results 60
Literature 65
List of terms and abbreviations 73

Executive summary
Brief overview
• This report aims at quantifying, within ranges as small as possible, external costs from
environmental impacts of aviation. Benefits of aviation are important too, but they are
generally, in contrast to the negative impacts, well captured by the market.
• For the valuation of climatic impacts from aviation, both the damage cost and preven-
tion cost approach is used, leading to a middle estimate of 30 per tonne of CO2
equivalent, with sensitivities of 10 and en 50 per tonne. As contrails have a rela-
tively large climatic impact and their formation can quite accurately be predicted, the
climatic impact is differentiated for situations with and without contrail formation. For
this analysis the most important assumption is hat contrails are formed during 10% of
flight kilometres.
• For the valuation of regional and local impacts, the damage cost approach has been
followed. Avoidance or adaptation costs (e.g. costs of zoning around airports) have
been included in the damage cost assessment.
• For aircraft flying at distances up to a few hundred kilometres, external costs related
to LTO emissions are dominant, especially noise costs. For flights over about 1,000
km, external costs of climatic impacts exceed those of LTO impacts, also in case no
contrails are formed. New technology has more impact on LTO related costs than on
costs related to climatic impact.
• Contrail formation has a large influence on the climatic impact of aircraft, and thus on
external costs related to this climatic impact. Based on a number of assumptions, a
middle estimate is that the climatic impact of a contrail-causing aircraft km is, on aver-
age, about eight times as high as an aircraft km that does not lead to persistent con-
trails.
• Expressed as a share of ticket prices, external costs (without contrail impacts) vary
from roughly 5% of ticket prices (long-haul flights, new technology, no contrail forma-
tion) to roughly a quarter of ticket prices for 200 km flights with average technology.
These figures rise sharply when contrails are formed during part of the trip.
$LUWUDQVSRUWEHQHILWVDQGXQGHVLUHGVLGHHIIHFWV
Besides numerous and sizeable benefits to citizens and companies, air
transport also brings undesired and damaging side-effects to people living
near airports and to the local and global environment. The marketplace is
generally well-equipped to charge users appropriately for the benefits of
transport, in this case aviation. However, this does not hold for its undesired,
i.e. negative impacts, such as noise and climate change. These effects are
generally external to the market. ([WHUQDO HIIHFWV DUH HFRQRPLFDOO\ UHOHYDQW
LPSDFWVWKDWDJHQW$LPSRVHVRQDJHQW%ZLWKRXWUHFRJQLVLQJRUDFFRXQWLQJ
IRU WKHP External effects cause economic inefficiencies because efficient
economic decisions are only taken if ALL social costs and benefits are taken
into due account in decision-making.
For all modes of transport, therefore, policies are currently being considered
to bring costs that are currently ’external’ to the market, such as the costs of
noise and climate change, into the transport market. The aim of such actions
is not to reduce the negative impacts to zero, nor is it to reduce the volume
of transport. The aim is provide market-based incentives for the transport
market to reduce its negative impacts to a socially optimal level. Air transport
7.700.1 / External costs of aviation 1

February 2002
is no exception here: at both ICAO and EU level, options are being sought to
achieve this goal. In developing such policies, knowledge about the magni-
tude and structure of these costs is obviously of crucial importance.
The aim of the present study is consequently to quantify – within ranges as

narrow as possible – the external costs of air transport, and in particular the
costs of climate change, air pollution and noise, and to provide insight into
the principal factors determining these external costs. The report is written
from a global perspective as far as the climatic impact of aviation is con-
cerned, and from a European perspective for local and regional environ-
mental effects ('LTO cycle effects'). The study does not provide a description
or assessment of policy options. Neither are safety risks assessed or valued.
The impacts assessed are shown in Figure 1.
Figure 1 Environmental impacts of aviation considered in this report
contrails
CO2
NOx
H2O
noise
NOx
PM10
HC
SO2
)LQDQFLDOYDOXDWLRQRIHQYLURQPHQWDOLPSDFWV
The extent to which a financial value can be assigned to environmental im-
pacts has been debated extensively. At the outset it is important to note that
environmental impacts can lead to UHDO economic costs, although these will
not generally show up clearly in statistical or financial overviews. Examples
include higher hospital bills, decreased productivity (of people and land),
2 External costs of aviation / 7.700.1

February 2002
costs of mitigation measures (insulation, cleaning, etc.), costs of zoning,
etcetera. For an aggregate assessment of environmental costs, all these
costs should obviously be added. In an average cost approach they should
be divided by the magnitude of the relevant environmental impact.
However, the aim of this report is not to establish quantitative figures for the
total cost of the environmental impact of aviation. The aim, rather, is to sup-
port the development of policies to reduce that impact to socially optimal
levels. Hence, in this report we are looking for the PDUJLQDO costs of one
extra kg of emission or one extra dB(A) of noise.
There are two fundamentally different approaches to estimating marginal

costs or, in other words, assigning a VKDGRZ SULFH to a certain amount of
environmental impact. The first is to assess the costs of GDPDJHQXLVDQFH
plus DYRLGDQFHDGDSWDWLRQ resulting from one extra unit of impact. Direct
damage costs can be estimated via direct dose-response relationships,
questionnaires (revealed preference) or changes in market prices (stated
preference). Avoidance or adaptation costs are the costs of avoiding expo-
sure to environmental impacts without reducing the actual impacts them-
selves, for example the costs of establishing
FRUGRQV VDQLWDLUHV
around
airports. For overall marginal cost assessment, the avoidance costs should
be added to the direct damage costs: increased exposure will lead both to
greater direct damage and to more avoidance behaviour.
A second - fundamentally different - approach, is the so-called SUHYHQWLRQ

or DEDWHPHQW cost approach, use of which may be considered when across-
the-board emission reduction targets are in place that have been politically
agreed and are duly respected. In this case, one extra unit of emission does
not lead to extra damage or avoidance costs, but rather to additional abate-
ment measures - somewhere in the economy - to reduce emissions to the
agreed target level. In such cases, the costs of emissions can therefore be
represented by the marginal costs of reducing emissions to the agreed tar-
get.
Given their different nature, the damage and prevention cost approaches do
not necessarily lead to the same shadow prices. Only if the politically agreed
target is at a theoretical optimum will shadow prices based on the two ap-
proaches be the same. Each approach has its own specific pros and cons,
which are considered in greater detail in the main text. An appropriate valua-
tion methodology should be used for each environmental aspect studied.
(VWLPDWLQJWKHFRVWVRIWKHFOLPDWLFLPSDFWVRIDYLDWLRQ
(VWLPDWLQJDVKDGRZSULFHIRU&2HPLVVLRQV
As a first step towards economic valuation of the climatic impact of aviation,
a cost estimate of one tonne of CO2 emission was established by preparing
a compilation of both damage and prevention cost assessments.
With respect to the damage cost approach, it was found that the social dis-
count rate employed is one of the most important factors governing the cal-
culated CO2 shadow price (Table 1).

February 2002
Table 1 Middle estimates of marginal cost of CO2 emissions in often cited
international literature as a function of social discount rate (extreme values
omitted); values in SHUWRQQH&22 emitted between 2000 and 2010
Discount rate: 0% 1-2% 3% 5-6%
CO2 shadow price 47-104 17-56 7-20 2-8
With respect to the prevention cost approach, the only international reduc-
tion target on which political agreement has been reached is the Kyoto Pro-
tocol. Although separate emission ceilings for the aviation sector have also
been considered, these have not (yet) been agreed upon; prevention cost
estimates following from such ceilings are substantially higher than those
following from the Kyoto Protocol and are given in the main text of the report.
Figure 2 reviews the results of prevention cost studies completed prior to the
COP meetings in Bonn and Marrakech.
Figure 2 Overview of marginal prevention costs of one tonne of CO2-equivalent under

the Kyoto Protocol, under several assumptions with respect to scale of trade,
mechanisms and timeframe

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Regional Annex 1 Annex 1 + Annex 1 + Annex 1, Global Double 2020 2020
trade trade sinks 1/2*sinks CO2 only trade bubble Annex 1 global
trade trade
Ranges indicated by OLQHV represent the extremes found in the literature, ranges in ER[HV the range
disregarding the most extreme values found.
• regional trade: only trade ZLWKLQ EU, US, and Japan is permitted;
• annex 1 trade: JI (Joint Implementation) permitted (trade between all Annex I countries);
• global trade: JI + CDM (Clean Development Mechanism) permitted, to be considered a variant
with maximum use of Clean Development Mechanism;
• (1/2*)sinks: (half of) sinks may be used in addition to JI;
• CO2 only: infinite prevention costs of non-CO2 greenhouse gases;
• ‘double bubble’: trade permitted in two bubbles: one US/Japan/Australia, the other all other
Annex 1 countries. Lower value represents costs for first bubble, higher for the second;
• 2020: Kyoto targets apply to 2020 as well.
As can be seen, the shadow price estimates yielded by the damage and
prevention cost approaches are of a similar order of magnitude, ranging from
around WR RYHU SHU WRQQH RI &22. The Bonn and Marrakech
agreements on sinks will certainly push down the shadow prices from the
prevention cost approach to the lower end of the range. On the other hand, it
is clear that ’Kyoto’ is only an interim target. Figure 2 shows that a mere
stabilisation in 2020 will drive shadow prices up.

February 2002
In this broad range of estimates, we have chosen to work with a middle es-
timate of SHUWRQQHRI&22 equivalent and to perform sensitivity analy-
ses using figures of DQG SHUWRQQH
&RQWUDLOVDQGRWKHUQRQ&2FOLPDWHLPSDFWV
According to an IPCC middle estimate, in 1992 the full climatic impact of
aviation emissions was 2.7 times greater than that of CO2 alone. Contrail
formation and NOX emissions are the most important environmental impacts
besides CO2 emissions.
Specific attention has been given to contrail formation in this study. This is
for two reasons: its substantial contribution to the overall radiative forcing
due to aviation, and the specific and fairly well predictable operational cir-
cumstances under which contrails arise. It has been assumed in this study
that contrails are, on average, formed during 10% of flight kilometres. It is
furthermore assumed that contrail formation is not correlated with any other
environmental impact of aviation. Finally, the possible additional impact of
cirrus cloud formation from persistent contrails has not been addressed.
Under these assumptions, we have differentiated between the climatic im-

pact of average flights that do, and do not, cause contrails (Table 2).
2
Table 2 Global average perturbation of radiative balance, in W/m , differentiated for
situation with and without contrails, under assumptions stated below the
table, based on 1992 data and 1999 IPCC report
perturbation due to average situation (with situations ZLWKRXW situations ZLWK
assumed 10 % prob- contrails contrails
ability of contrails for (about 90% of flight (about 10% of flight time)
each km flown) time)
CO2 +0.018 +0.0162 +0.0018
contrails +0.02 0 +0.02
other (NOX, H2O, +0.011 +0.0099 +0.0011
sulphur, soot)
WRWDO +0.049 +0.026 +0.023
SHUIOLJKWNP +2.4 +1.4 +11
(picoW/m2)
As the table shows, under the stated assumptions the total average climatic
impact of a contrail-inducing flight kilometre is about eight (8) times the WRWDO
1
average impact of a flight kilometre without contrails (11 vs. 1.4) . For an
average contrail-inducing flight kilometre, the climatic impact of the contrail
DORQH is about eleven (11) times that of CO2 DORQH (0.02 vs. 0.0018).
An advantage of the differentiation made is that the ’average’ climatic impact

of flights, as presented in the first column of Table 2, is in practice never
achieved and therefore always ’wrong’. The differentiated figures in the sec-
ond and third columns provide insight into the additional impact of contrails,
and probably come closer to real-world situations.
The climatic impact of NOX emissions arises from two entirely different proc-
esses: net production of tropospheric ozone and net loss of methane. Each
1
As already mentioned, this factor 8 applies to 1992 and does not include the highly uncer-
tain impacts of additional cirrus cloud formation.

February 2002
mechanism has a different chemical background and occurs under different
circumstances. Although, strictly speaking, the two mechanisms should be
valued separately, for reasons of simplicity we have opted here to work with
a global average net result. Subsequently, non-LTO NOX emissions have
been valued at DQGSHUNJDVORZPLGGOHDQGKLJK YDULDQWV
2
With these values one W/m of radiative forcing due to NOX emissions is
2
valued identically to one W/m forcing due to CO2 emissions.
The climatic impacts of sulphur and soot aerosol emissions have not been
financially valued because at a global level the two effects cancel.
(VWLPDWLQJWKHFRVWVRIQRLVHDQG/72HPLVVLRQV
With respect to the non-climate impacts of aviation, this report assesses the
costs of LTO-related emissions of noise, NOX, PM10, HC and SO2. The mar-
ginal costs of these emissions have been established using a combination of
the damage cost and the avoidance cost approach. An extensive literature
analysis showed that, once corrected for population density, most of the
shadow prices per unit impact were remarkably consistent. We chose to
work with typical population densities around large European airports. With
respect to noise, the most important cost items are decreased property
prices and the costs associated with noise contours around airports. With
respect to emissions, the most important cost item is damage to human
health.
5HVXOWV
Below, the results following from the methodological principles and choices
explained above are presented. External costs have been calculated for two
levels of aircraft technology: fleet-average and state-of-the-art. Other vari-
ants calculated but not shown here in this summary include variants with
lower and higher valuations per tonne CO2-equivalent ( DQG Ue-
2
spectively) .
Results for the ‘fleet average’ and 'state-of-the-art' variants are presented in
Figure 3 and Figure 4.
2
The variants with these lower and higher values for climatic impact lead, respectively, to a
two-thirds lower and 60% higher estimate of the external costs of climatic impacts.

February 2002
Figure 3 External costs in FW SHU SDVVHQJHUNLORPHWUH IOHet-average aircraft
technology, CO2 emissions valued at WRQQH
40 seats 200 km External costs in -cts per pax.km
local/regional impacts (LTO)

climatic impacts (no contrails formed)
100 seats, 500 km
climatic impacts (contrails formed)
200 seat, 1500 km
1500 km, local/regional impacts (LTO)
400 seats, 6000 km
0 2 4 6 8 10 12
Local/regional impacts SO2 Climatic impacts contrails
HC NOx (via O3 en CH4)
PM2.5 CO2 + H2O
NOx
noise
Figure 4 External costs in FW SHU SDVVHQJHUNLORPHWUH VWDWHRIWKHDUW DLUFUDIW

technology, CO2 emissions valued at WRQQH

100 seats, 500 km
200 seat, 1500 km
400 seats, 6000 km
0 2 4 6 8 10 12
PM2.5 CO2 + H2O
NOx
noise

February 2002
From these graphs and from the figures presented earlier the following con-
clusions can be drawn:
• on flights of up to a few hundred kilometres the external costs of LTO
emissions predominate, in particular noise costs. There are several rea-
sons:
• the LTO phase represents a substantial part of such flights;
• the generally smaller aircraft have relatively high noise emissions
and relatively low NOX emissions;
• on such flights aircraft do not reach cruise altitudes, where contrails
are formed.
The LTO impacts of state-of-the-art aircraft are, on average, about half
those of fleet average aircraft;
• the longer the trip, the more dominant climatic impacts become com-
pared with local and regional (LTO) impacts. For flights over about 1,000
km, the external costs of climatic impacts exceed those of LTO impacts
(when no contrails are formed);
• external costs of the climatic impacts associated with NOX emissions are
approximately half those of CO2 and H2O emissions; the share of NOX
increases slightly with aircraft size, owing to the higher NOX/CO2 emis-
sion ratios of the engines in these large aircraft;
• the question of whether or not FRQWUDLOV are formed is of major influence
on the external costs of the climatic impacts of aviation. This report esti-
mates that, for fleet-average technology, the climatic impact of a contrail-
causing aircraft-kilometre is, on average, about eight times as high as an
aircraft-km that does not lead to persistent contrails. It should be
stressed that:
1 the factor 8 is based on the assumption that contrails are formed on
10% of global aircraft-kilometres;
2 the factor 8 results from a middle estimate of the globally averaged
climatic impact of contrails;
3 there is a 67% probability that the true climatic impact of contrails
falls within one-third to three times this middle estimate;
4 the IPCC judges scientific evidence on the climatic impacts of con-
trails as ’fair’; hence much work still needs to be done on this issue.
• the external costs calculated in this study can also be expressed as a
percentage of ticket prices. On flights on which QRcontrails are formed,
total external costs are approximately 5% of average ticket prices for a
6,000 km flight, and about 20-30% of average ticket prices for a 200 km
flight. This share is naturally lower for high-fare tickets and higher for
low-fare tickets. These percentages rise sharply for flights on which
contrails DUH formed during a substantial part of the trip. For example,
external costs of medium and long-distance flights on which contrails are
formed during half the flight are about 20-25% of the ticket prices paid
for such flights.
By their very nature, studies that endeavour to assess external costs involve
numerous methodological choices. This study is no exception and we have
tried to describe and underpin the most important choices made as trans-
parently as possible. It is therefore our sincere hope that this study will serve
not only as a quantitative contribution to the debate on external costs, but
also as an analytical framework for other assessments of external costs.

February 2002
1 Introduction
:K\WKLVUHSRUW"
Air transport brings numerous benefits to both citizens and companies. It

allows people to visit new countries, opens up new markets and permits
greater contact with existing markets. The air transport industry is still rela-
tively young and is still undergoing rapid development. Against a backdrop of
overall economic growth, the volume of air transport is currently growing at
about 5% per year.
In addition, though, air transport brings a number of undesired side-effects to

people living near airports as well as to the local and global environment.
These negative effects are not necessarily more important than the benefits.
Undoubtedly, the benefits of most flights far outweigh their negative impacts.
The reason for writing this report, though, is that the benefits and the unde-
sired side-effects of air transport are not well-balanced. While the benefits of
air transport are generally adequately captured by the market and thus re-
flected in the prices paid by customers for air transport services, most of the
negative side-effects remain unpriced. This is an inefficient situation, for
efficient economic decisions are only taken if DOO relevant benefits and costs
are taken into due account.
Aviation is not the only economic activity associated with so-called negative
external effects. In fact, practically all economic activities and certainly all
forms of transport have such effects. In order to boost economic efficiency,
options are being sought in all transport modes to internalise these external-
ities as far as possible, by means of economic instruments, regulation or
voluntary agreements, for example.
In the past few years a number of studies (ECMT 1998, CE 1999, In-
fras/IWW 2000) have been published in which the external costs of a variety
of transport modes are calculated. However, despite the fact that the envi-
ronmental effects of aviation emissions are substantially different from those
of land transport, none of these reports focused specifically on aviation. A
more specific approach for aviation was therefore in order.
This main report was written by authors at CE and is based on a background

report with annexes written by CE and one subcontractor, Mr W. Fransen,
contracted by Integral Knowledge Utilisation B.V
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The aim of this report is to quantify – within as narrow ranges as possible –

the external costs of air transport, in particular the costs associated with the
impacts of climate change, air pollution and noise, and to provide insight into
the principal factors determining these external costs. Information on the
structure and magnitude of external costs is useful for developing policies to
mitigate the environmental impacts of aviation.

February 2002
6FRSH
This report is limited in scope to a quantification of the principal external

costs of aviation, in each case taking into account the main determining
factors. The report does not contain an assessment of policy options, or
even a description of policy options. We emphasise that this report is merely
one of the inputs to discussions in these issues. Furthermore, it is written
from a global perspective where the climatic impact of aviation is concerned,
and from a European perspective where local and regional environmental
effects (LTO cycle effects) are concerned.
Figure 5 shows the impacts of aviation covered by this report.
Figure 5 Environmental impacts of aviation considered in this report
contrails
CO2
NOx
H2O
noise
NOx
PM10
HC
SO2
5HSRUWVWUXFWXUH
Chapter 2 is a broad discussion of the theoretical context of this study, with

particular focus on how external costs relate to the economic benefits of air
transport.

February 2002
Chapter 3 treats the contentious [’central and controversial’?] issue of as-
signing a value to environmental impacts. Available methodologies are de-
scribed and those used in the present report justified.
Actual valuation of environmental effects takes place in Chapters 4 and 5,

with separate calculations provided for climate change, local air pollution and
noise nuisance. Chapter 6 presents the conclusions of the study.
As already mentioned, an elaborate background report is also available

which describes the exact methodologies followed in assessing external
costs. The background report also describes in full detail the extensive lit-
erature reviews conducted for this study.
The following annexes are contained in the background report:

I External costs of greenhouse gas emissions.
II The contribution of contrail occurrence to climatic change induced by air
traffic (W. Fransen).
III External costs of LTO emissions.
IV External costs of noise nuisance.
V Allocating costs to passengers, freight and aircraft types.

February 2002
February 2002
2 Economic benefits and external costs
,QWURGXFWLRQ
The concepts of external effects and external costs of transport and, more
specifically, aviation, give rise to frequent discussions and misunderstand-
ings. This chapter therefore seeks to clarify the most important issues.
The chapter consequently starts with a little economics, which is then

brought to bear on the benefits and costs of the aviation sector. Finally, we
discuss the important linkages between policies to internalise external costs
and policies to reform fiscal treatment of aviation.
,QWHUQDODQGH[WHUQDOHIIHFWV
To properly grasp the context of the present study it is, in the first place, very
important to understand the distinction between internal and external effects.
The concept of external effects was first introduced by Marshall (3ULQFLSOHV
RI (FRQRPLFV, 1890) and later refined by Pigou ((FRQRPLFV RI :HOIDUH
3
1920) . In an era encompassing two world wars, mass unemployment and
hyperinflation the concept was originally deemed primarily a theoretical re-
finement. However, in the last few decades the practical implications have
become much more apparent. This has led to multiple and increasingly re-
fined definitions of external effects, of which the following is perhaps the
easiest to understand:
([WHUQDOHIIHFWVDUHHFRQRPLFDOO\UHOHYDQWLPSDFWVWKDWDJHQW$LPSRVHVRQ
4
DJHQW % ZLWKRXW UHFRJQLVLQJ RU DFFRXQWLQJ IRU WKHP Note that external ef-
fects are thus not synonymous with ‘damage’, but with ‘costs unaccounted
for’.
Frequent discussions arise from the fact that some studies take the WUDQV
SRUWXVHU as the reference point of distinction between internal and external
effects. From the perspective of the transport sector, it is clear that not all
benefits accrue to the direct user. Many direct user benefits are processed in
a 'second round' by markets by way of changes in relative prices (see fol-
lowing section). These so-called SHFXQLDU\ external transport benefits are
external to the user but still no reason for government intervention as they
are properly captured by the market.
However, external effects as we define them here DUH ground for govern-
ment intervention as they do GLVWRUW markets and thus cause economic LQHI
ILFLHQFLHV. These WHFKQRORJLFDO external effects occur when economic ac-
tors use assets without paying for them. The opposite is also possible: ex-
ternal benefits occur when economic actors provide assets without being
paid for them. It is clear, however, that while economic actors will generally
3
Pigou describes the example of the ‘uncompensated disservices’, as he calls them, of a
smoke-producing factory, ‘… for this smoke in large towns inflicts a heavy uncharged loss
on the community, an injury to buildings and vegetables, expenses for washing clothes and
cleaning rooms, expenses for the provision of artificial light, and in many other ways’.
4
Based on the literature survey conducted in (Delucchi 1998).

February 2002
themselves try to internalise all external EHQHILWV as far as possible, third
parties such as governments are generally necessary to make them pay
their external FRVWV. This is why debates on government intervention in the
aviation sector usually focus on external costs, with less attention given to
external benefits.
Examples of technological external costs include the costs of air pollution,

noise and accidents involving people off the actual aircraft. In these cases
the transport users use the ’assets’ clean air, peace and quiet and public
safety without paying for that use. At root, the problem is that there are no
property rights for these goods: no one ’owns’ the markets in question.
A clear example of a technological external EHQHILW of air transport is plane-

spotting. Plane-spotters enjoy the pleasure of watching the aircraft, but do
not generally pay the airlines for it (except in the case of air shows, or levy-
ing of a fee for a particularly good spot).
%HQHILWVRIDLUWUDQVSRUW
The benefits of air transport are obviously large. To a major extent these
benefits are reflected in the willingness of citizens and companies to pay
airlines for their services. However, the revenues from tickets and cargo do
not tell the full story. As holds true for every economic good, in the case of
air transport, too, aggregated benefits to consumers are (far) greater than
aggregated expenditure on tickets. This is because citizens and companies
only buy tickets if this improves their welfare. In economics this difference
between society’s willingness to pay and actual payment is referred to as the
FRQVXPHU VXUSOXV. Airlines continuously strive to reap as much of the con-
sumer surplus from their clients as possible by offering them a broad range
of services and ticket price options. The consumer surplus minus ticket and
cargo fares paid probably forms a good proxy for the net user benefits of air
5
transport (Button, 1999) .
6SLOORYHUHIIHFWV
In the context of transportation, an often-discussed category of benefits is
the so-called ’spill-over’ effect: the fact that not all transport benefits accrue
to the user (as described in the previous paragraph). Many non-aviation
business activities are able to operate more efficiently thanks to the exis-
tence of the (air) transport industry. In the case of business transport, the
passenger’s consumer surplus is transferred to his employer, who might in
turn transfer these benefits to his customers by supplying better services or
cheaper products. Another example of benefits that do not accrue to trans-
port users is the relocation of businesses following airport expansion to
benefit from the improved accessibility. Businesses can balance these new
transport benefits against the costs of relocation. Because these spill-over
effects are indirectly part of market decisions and private calculation, they
are not considered external effects according to the definition adopted here
and would, as such, not form grounds for government intervention.
5
Another often used criterion, the value added by the aviation industry, is interesting because
it provides insight into the sectoral economic interest. However, it is not a good measure for
societal economic benefits. Consider cost reduction in the aviation industry: this could de-
crease added value within the sector, at the same time increasing overall societal benefits.

February 2002
,PSHUIHFWPDUNHWV
It should be noted, however, that this reasoning is based on neo-classical
economic theory, under the assumption that markets work perfectly. In real-
ity, though, this is not always the case. Distortions arise because of cross-
border competition, for example, which restricts the scope for domestic deci-
sion-making. Non-economic factors such as consumer perception and ’brand
image’ also play a major role in business decisions and may lead to cluster-
ing effects, for example.
Virtually all studies agree that (air) transport does not LQ LWVHOI give rise to
external benefits, apart from the aforementioned case of plane-spotting. It is
the airlines’ business to internalise as many of the benefits of air transport as
possible, so there is no specific role for governments here.
Most studies also agree that, under very specific circumstances, (air) trans-
6
port LQIUDVWUXFWXUH might lead to additional benefits (or additional costs) . In
other words: all relevant benefits of air WUDQVSRUW can generally be considered
as internal to the market. In the case of airport infrastructure investments, all
benefits and costs should be carefully analysed to establish whether any
additional benefits or costs arise.
Finally, it is worth noting that even if air transport does give rise to external
benefits in certain situations, it is still always economically efficient to inter-
nalise any external costs. This is because costs and benefits have an en-
tirely different background and should therefore be treated separately. It is
always economically efficient to reduce unwanted noise and emissions due
to aviation to optimum levels, irrespective of the benefits that the same avia-
tion brings to society. See section 2.6.
&RVWVRIDLUWUDQVSRUW
Before mapping out the external costs of air transport, it is useful to provide
the context of a full cost review. Aviation costs can be divided into costs
borne by the user, external costs and costs incurred by the state.
8VHUFRVWVLQWHUQDOFRVWV
These encompass all SULYDWH H[SHQGLWXUH RQ WUDQVSRUW. In aviation this is
generally the price paid for tickets. These costs are not the subject of this
study. It is assumed that the market mechanism brings about proper prices
for these types of costs, and that this is not therefore an issue for the state.
*RYHUQPHQWH[SHQGLWXUHGLUHFWDQGLQGLUHFWILQDQFLDOVXSSRUW
Government expenditures on (air) transport are unpaid costs, to the extent
that the user does not take them into consideration in his mobility decisions.
Expenditures can be classified as either:
• direct financial support, i.e. direct money transfers, or
• indirect financial support, such as tax exemptions or lower tax rates.
In this study we shall not address these government expenditures.
([WHUQDOFRVWV
Verhoef (1996) sets out three different types of external transport costs.
Although these hold for all modes of transport, external effects may differ
markedly from one mode to another.
6
See, for example, ’Evaluating infrastructure projects; guidance for appraisal’ (Dutch Ministry
of Transport), and ’Transport and the economy’ (SACTRA 1999).

February 2002
1 External costs resulting from actual transport activities, which can
therefore be considered marginal costs: the costs of emissions of haz-
ardous substances, noise nuisance, odour nuisance and public safety,
for example. Emissions include nitrogen oxides (NOX), carbon dioxide
(CO2), hydrocarbons (HC) and particulates (PM10). These costs are at
the heart of this study and will also be assessed financially. Odour nui-
sance and public safety are not treated, however.
2 External costs caused by stationary vehicles, here parked aircraft. These
costs are not included in this study. In the case of aviation these will be
limited compared with other costs, with the exception of Auxiliary Power
Units (APUs) that, when powered with jet fuel, may cause substantial
HC emissions at ground level.
3 External costs closely related to the existence of infrastructure: barrier
effects, fragmentation of the countryside (with adverse effects on eco-
systems and other consequences) and eyesores (’horizon pollution’, al-
though some may gain pleasure from the same view). We shall ignore
these costs, too, as they are highly variable across different airports and
are probably small compared with the other impacts associated with the
aircraft using them.
The valuation of external effects will be discussed in Chapters 3 to 5.
0DUJLQDOIL[HGDQGVRFLDOFRVWV
The aforementioned cost items can be further categorised as follows:
• marginal costs: strictly interpreted (short term), these are the additional
costs arising from the addition of one aircraft to the skies or at an airport;
• fixed costs: these are costs that are independent, in the medium term, of
the amount of mobility, e.g. the costs of building infrastructure;
• social costs are the sum of all mobility costs: internal costs, external
costs and government expenditures. Internal costs are not taken into
consideration in this report, because the market mechanism enables
these costs to be properly allocated to users.
([WHUQDOFRVWV
1HJDWLYHH[WHUQDOHIIHFWV
External costs are the costs of negative external effects. These negative
external effects arise from the absence of markets for such valuable collec-
tive goods as a stable climate, clean air, peace and quiet and public safety.
Negative external effects do not form part of private decisions or calculations
and are thus not included in private costs or market prices.
In this study we restrict ourselves to a consideration of the following negative

external effects:
• climate change due to aviation emissions;
• air pollution due to aviation emissions. with impacts on humans and
nature;
• the effects of noise: nuisance, health effects and indirect effects on land
use resulting from sub-optimum spatial planning due to zoning.
This study does not consider the impacts of aviation on the stratospheric
ozone layer. This is because of the uncertainties surrounding these impacts
and the paucity of information for assigning a financial value.

February 2002
The safety risk, i.e. the risk of crashes and accidents for property, communi-
ties and individuals near airports is another negative external effect not con-
sidered in the present study. Especially in the case of airports in or near
cities, this risk may give rise to significant externalities.
It is widely accepted that aviation is associated with negative external ef-

fects. As mentioned earlier, however, the problem for society is not so much
the existence of the negative effect as such, but rather the tensions arising
from the non-existence of a market. According to Verhoef (1996), the "unre-
solved tension between the receptor, facing a quantitative constraint on the
consumption of the externality, and the supplier, who has no a priori interest
in the magnitude of the externality, can only persist provided there is no
market on which the externality is traded, caused by a lack of well defined
property rights concerning the externality." If the receptor and supplier could
directly negotiate about optimum emission levels, this tension would be re-
solved. We call this internalisation.
&DQH[WHUQDOFRVWVEHHVWLPDWHG"
The challenge of this study is to predict the probable prices (’shadow prices’)
that would occur if markets existed for clean air, peace and quiet and so on.
Two developments facilitate this process.
First, in certain areas like climate change markets are beginning to emerge.
Studies on probable shadow prices in this market are now abundant.
Second, there has been considerable progress in the science of establishing

shadow prices on the ’imaginary’ markets for clean air and peace and quiet.
Knowledge on dose-response relationships has greatly improved and there
is an increasing consensus on methodologies for valuing these responses,
especially health effects. As a result it has become increasingly feasible,
after a careful study of the body of literature, to explain the differences found
between individual studies, so that small-range estimates can now be pro-
vided for specific situations. As long as there are no real markets in exis-
tence, however, ’real’ prices will never be known. The aim of this study, then,
is not to provide definitive answers as to the level of external costs, but
rather to present plausible ranges and explain these.
At the same time, though, policy development does not require a precise
knowledge of external costs. The primary aim of ’internalisation’ policies is to
generate efficient market incentives to reduce negative impacts to optimum
levels. This implies that, in the short term certainly, the sWUXFWXUH of the in-
centive being given is at least as important as its OHYHO. In the longer term, it
is easier to adapt incentive levels to the optimum than it is to change the
incentive structure.
,VLWXVHIXOWRDGGH[WHUQDOEHQHILWVDQGFRVWVWR\LHOGD
QHW
UHVXOW"
Now that we have described the relevant costs and benefits of air transport,
the question is whether it is useful to add these costs and benefits to arrive
at a ’net’ result.
The answer to this question is simply no. The backgrounds and causes of
external benefits and costs are very different, and different instruments and
mechanisms are therefore necessary to address them. Even aside from the
issue of the extent to which external benefits truly exist, it would be ex-
tremely inefficient if the same instruments were used for internalising both

February 2002
external benefits and costs, because the lack of market incentives to reduce
costs would persist. Internalising external costs is, in principle, always effi-
7
cient , regardless of the existence of external benefits.
(IILFLHQF\DQGIDLUQHVV
Although it is not the principal aim of this study to discuss policies aimed at
internalising external costs or fiscal policies, the subject of internalisation of
external costs cannot be adequately addressed without describing the links
between internalisation, pricing and taxation. In the public debate about
aviation charges two arguments prevail and are used in combination: first,
external effects need to be reduced and, second, it is only fair that aviation
should pay taxes, like road traffic, for example.
([WHUQDOFRVWVLQWHUQDOLVDWLRQDQGHIILFLHQF\
The first pillar on which this report is built is the issue of the external costs of
aviation, which is in essence a problem of economic inefficiency. This eco-
nomic inefficiency can be resolved by internalising external costs. It should be
stated once more that the main aim of such internalisation is to reduce exter-
nal effects to a ’social optimum’, i.e. to a point at which the marginal abate-
ment costs are just as high as the marginal damage costs (see section 3.2).
This means that the aim of internalisation is NOT to reduce emissions and
environmental impacts to zero. The cost of, say, reducing the last decibel of
noise will certainly be much (if not infinitely) higher than the benefits accruing
to society from doing so. It also means that the aim of internalisation is NOT
to reduce the volume of aviation, although this is a likely consequence. Con-
sider the case of there being numerous cheap options to reduce noise to
almost zero. In this case, internalising the external costs of noise will lead to
use of these cheap options and therefore to only limited cost increases and
only limited transport volume reductions. In other words, the ultimate volume
reduction following internalisation will depend on the magnitude of the exter-
nal effect and the availability of cheap abatement measures.
Second, it is important to mention that there are other options besides pric-
ing available to internalise external costs. For example, tradable permit
schemes and regulation might also be used to achieve internalisation.
Theoretically, the most efficient internalisation options are those in which

external costs are reduced to the optimum level in the most efficient manner.
Options to reduce external effects may include technological and operational
improvements, substitution to alternatives and volume reduction. Classical
examples of efficient, market-based policy options are pricing and trading
schemes.
An important choice is whether or not internalisation schemes are to gener-

ate government revenue. Pricing schemes provide such an opportunity, as
do emission charging schemes in which an auction serves as permit distri-
bution mechanism. Emission trading with a ‘grandfathering’ system of permit
distribution does not yield revenues. In principle, the revenue issue is a
matter of equity rather than efficiency, since it does not affect marginal pro-
7
Unless the benefits of internalisation in air transport are outweighed by increases in the
external costs associated with alternative modes of transport.

February 2002
duction costs. An advantage of revenue-raising approaches over non-
revenue generating alternatives is that the former provide an opportunity to
lower distorting taxes such as labour taxes, payroll taxes or VAT (the ’double
dividend’). This is where the link with taxation comes in (see next section).
From the perspective of economic efficiency, taxes corresponding directly
with external effects (e.g. fuel taxes) are to be considered internalisation
tools.
Compared with regulation, pricing and trading both have the advantage of
flexibility: market parties are all free to implement the abatement options
best suited to their particular circumstances rather than adopting standard
measures.
Under efficient internalisation policies, all negative effects will be priced ac-
cording to their marginal social costs and consequently all measures
cheaper than the marginal social costs will be duly implemented.
7D[DWLRQDQGIDLUQHVV
Besides the issue of the external environmental costs of aviation, fair fiscal
treatment also plays a key role in the debate on environmental policy vis-à-
vis aviation. These issues are often intermixed, however, and it is important
to make a distinction as economic efficiency is the main aim of internalisa-
tion, while fairness is an important argument in the case of taxation.
It is generally considered fair for all economic actors to be afforded equal

treatment, i.e. pay the same taxes for the same goods. A good example is
VAT. VAT has no direct relationship with external effects and imposing VAT
is therefore not necessarily an efficiency-promoting policy. However, it is
generally considered unfair for different VAT regimes to apply to different
modes of transport. A more complicated issue is the fuel tax.
7KHFDVHRIWKHIXHOWD[
In the case of the fuel tax, the efficiency (internalisation) and fairness (taxa-
tion) perspectives are both at stake. From the angle of economic efficiency,
fuel taxes can be considered a prime instrument for internalising fuel-related
externalities, primarily CO2 emissions. According to the relevant tax laws,
however, most countries regard these road transport taxes not as instru-
ments for achieving part-internalisation of external costs, but as general
taxes. This implies that, in the case of road transport, any charges aimed at
internalisation would come on top of the existing taxes for that mode of
transport. For aviation the consequence of this interpretation is that, on top
of efficiency-promoting charges, a general tax could be considered in order
to do away with the current tax exemption, as is the case for road transport.
In some countries tax laws adopt a different approach, regarding specific

taxes on road transport, such as fuel and vehicle taxes, as (part-)payment
for the use of infrastructure and external costs. This implies that the level of
additional, efficient pricing will be much lower than in the case of the afore-
mentioned fiscal approach.

February 2002
Of course, the issue treated is closely related to the ICAO Council Resolu-
tion on Charges and Taxes of December 1996. This Resolution strongly
recommends that, LQWHU DOLD, "the funds collected should be applied in the
first instance to mitigating the environmental impact of aircraft engine emis-
sions", and urges that:
• "there should be no fiscal aim behind the charges;
• charges should be related to costs;
• the charges should not discriminate against air transport compared with
other modes of transport".
The interpretation of existing and possible new fuel and vehicle taxes and
charges is thus another crucial element in the debate on internalisation and
fair fiscal treatment of aviation and other modes of transport.
)DLUQHVVDQGRWKHUWUDQVSRUWPRGHV
As already mentioned, this study does not attempt to compare current inter-
nalisation or fiscal treatment of aviation with the situation for other transport
modes. The bulk of the air transport market does not face serious competi-
tion from other forms of transport, and besides, such comparisons would
require many subjective assumptions to be made.
In short, the aviation (and car) industry often state that it is unfair that they
should have to pay full social costs, including external costs, as long as rail
transport does not have to pay for its infrastructure. In general, each trans-
port mode points to the perceived or real advantages of the other modes, as
an excuse for not having to internalise their own external costs. Here indeed
lies a true challenge for decision-makers: to develop a transparent policy
that is perceived as fair to all modes of transport.

February 2002
3 Financial valuation of environmental impacts
:K\ILQDQFLDOYDOXDWLRQ"
Most economic activities, including air transport, bring with them a range of
unintended side-effects, among them emissions contributing to global
warming, air pollution and noise. Although these emissions are unwanted by
society and therefore lead to social costs, they come with no price tag at-
tached. The economic actors responsible for these emissions therefore have
no financial incentive to reduce them and abatement efforts are conse-
quently generally below the social optimum.
Assigning a financial value to emissions may provide better leverage for

enhancing the efficiency and rationality of measures to tackle the environ-
mental problems of global warming, air pollution, noise and so on. This
chapter discusses the principal methods available for such financial valua-
tion.
'DPDJHDQGSUHYHQWLRQFRVWV
The social costs of aviation emissions can be divided into two categories:
• &RVWVRIGDPDJHQXLVDQFHSOXVDYRLGDQFHDGDSWDWLRQ
Aircraft emissions of greenhouse gases, pollutants and noise may dam-
age human health, the natural environment, buildings and equipment as
well as give rise to nuisance. Accidents are another possible source of
social costs (off-site risks). Finally, costs are sometimes incurred in try-
ing to avoid or minimise the damage caused by pollution. Governments
may, for example, decide to impose zoning restrictions on land that is
subject to excessive noise or off-site risks. These costs can be catego-
rised as avoidance costs of adaptation costs.
• &RVWVRIDEDWHPHQWDQGSUHYHQWLRQPHDVXUHV
For some environmental effects, general (environmental) quality criteria
may be laid down in the political decision-making process, i.e. across-
the-board emission standards for all sectors of society. Extra emissions
occurring under this kind of regime do QRW lead to extra environmental
damage, but imply, rather, that somewhere in society additional emis-
sion abatement measures are required. Such measures to compensate
for e.g. aviation emissions are once again associated with social costs.
Transaction costs, the costs of planning and monitoring the process, play a
frequently forgotten but nevertheless often decisive role in the decision-
making process.
As already mentioned, at present the social costs of emissions, noise and

safety risks are not adequately taken into account in the aviation industry’s
decision-making processes. When such social, or H[WHUQDO, costs arise, it
means general economic welfare would be improved by taking measures to
reduce the particular environmental impact concerned. The situation is illus-
trated in Figure 6, on the right of the intersection of the two curves.
Figure 6 shows first, as a function of total aviation emissions, the social cost
of one extra unit of emission – the cost of health damage due to toxic emis-

February 2002
sions, for example. The second curve represents the cost of one additional
unit of emission UHGXFWLRQ, which also comes with a price tag. However, the
costs associated with emission reduction are not paid by society as a whole,
but by airlines, where the scope for effective action lies. This action may take
the form of technological measures (using quieter aircraft), operational
measures (altering approach corridors) or volume measures (grounding
aircraft). The further emissions are reduced by the aviation sector, the
greater the costs of additional reduction, assuming that the cheapest meas-
ures are implemented first. If little emission abatement action has already
been taken, an extra unit emission can be reduced at relatively low cost. If a
wide range of measures are already in place, however, and technological
options have been exhausted, there comes a time when even very quiet and
profitable aircraft will have to be grounded in order to achieve a little extra
emission reduction.
Figure 6 Costs to society (upward curve) and to airlines (downward curve) of one
extra unit of emission
marginal
costs
(Euro/kg)
s
ion
iss
em
of
costs
l
so cia
shadow price
cos
ts o
f em
issio
n red
uction
optimum
emissions
(kg)
From the figure the following conclusions can be drawn:

1 Theoretically there is a social optimum, at a certain emission level, rep-
resented by the intersection of the two curves. If airlines reduce their
emissions by more than this optimum, they will be implementing abate-
ment measures that cost them more than the benefits accruing to soci-
ety in the form of reduced nuisance, say. If emissions are reduced by
OHVV than the social optimum, the converse holds. Thus, the optimum
consists neither in zero emissions nor in unrestricted emissions.
2 The social optimum is associated with a ‘price’ per unit emission. It is
unwise to implement abatement measures costing more than this price,
and equally unwise to reject abatement measures that are cheaper. The
optimum therefore represents a situation in which only the cheapest
measures required for achieving the optimum are implemented.
Because the social costs of aviation are not currently reflected in the price of
air travel or transport, it is more than likely that current aircraft emissions are
greater than the optimum (to the ULJKWof the figure).

February 2002
9DOXDWLRQPHWKRGVIRUHQYLURQPHQWDOHIIHFWV
The next question is how to assign a suitable price to the environmental

effects. Different valuation methods may be applied, depending on whether
or not environmental standards are in place for the specific impact con-
cerned. These methods will be discussed in the following sections.
9DOXDWLRQPHWKRGVIRUGDPDJHQXLVDQFHDQGDYRLGDQFH
If there are no across-the-board emission reduction targets (see Section

3.3.2) in place for the pollutant in question, it is the costs of damage, nui-
sance and avoidance (in this case, in the form of indirect land use) that de-
termine the social costs of emissions. Several methods are available for
estimating these costs. In itself, however, this knowledge is not sufficient for
calculating a shadow price, which also requires a knowledge of the curve
representing the prevention costs incurred by the emitters (see Figure 6).
The simplifying assumption is often made that the total costs of emission
damage are proportional to the emission level or, in other words, that the so-
called marginal costs remain constant. How reasonable this assumption is
will depend on the external effect in question. The advantage of the as-
sumption is that it enables valuation to be undertaken in a single step (see
Figure 7).
Figure 7 Assuming constant marginal damage costs for ease of valuation
marginal
costs
(Euro/kg)
social costs of emissions

shadow price
cos
ts o
f em
issio
n red
uction
optimum
emissions
(kg)
The following methods are available for calculating the social costs of dam-
8
age, nuisance and avoidance :
'LUHFWGDPDJHFRVWHVWLPDWHV
This method seeks to make a direct valuation of the damage arising from a
given activity, as illustrated by a few examples. A value can be assigned to
air pollution damage to agriculture and forestry by valuing the ensuing crop
losses. In the case of accidents, an estimate can be made of the victims’ lost
productive output and medical expenditure. Air pollution damage to buildings
8
The following discussion is based on interpretation of numerous reports, including Schipper
(1999), ECMT (1998), Infras/IWW (2000), CE (1994, 1999) and MuConsult (1999).

February 2002
can be estimated on the basis of repair costs. From a fundamental view-
point, this method is undoubtedly the best: if actual damage can be perfectly
assessed and valued, this method is superior to the others, each of which
has at least one fundamental drawback. At the same time, however, more
practical considerations often make application of other methodologies un-
avoidable.
The first practical drawback of this method is that dose-effect relationships

cannot generally be established for each and every material consequence
occurring in actual practice. The main reasons are lack of measurement data
and statistical problems. There may even be as yet unidentified forms of
damage and the method will therefore often leave many items unvalued, as
‘items pending’, thus providing merely a minimum estimate of lost welfare.
Secondly, it is often virtually impossible to value immaterial damage. Dam-
age to nature and biodiversity, as well as psychological damage (in the case
of noise and accidents), are notoriously difficult to assess.
:LOOLQJQHVVWRSD\:LOOLQJQHVVWRDFFHSWYLDVXUYH\V
A second approach is to use 'stated preference' (SP) surveys to establish
how much people are prepared to pay to avoid damages (‘willingness to
pay’, WTP) or the compensation they desire to accept damages ('willingness
to accept', WTA). One of the strengths of this method is the fact that it cov-
ers immaterial as well as material damages. Besides several practical weak-
nesses (respondents providing 'strategic' answers, major influence of type of
question asked), it also has two more fundamental weaknesses:
• it is extremely debatable whether respondents are capable of assigning
a meaningful value to external effects, as is obvious from the example of
global warming and even becoming apparent for (the health effects of)
noise. While the method is useful for valuing local effects (‘quality of
life’), therefore, it is in principle less suitable for global and regional envi-
ronmental problems;
• the method is usually applied to small groups of respondents who gen-
erally seem to be those most concerned about the problem being sur-
veyed. However, the welfare of other people may also often be affected
indirectly by the external effect. For example, while aircraft noise is of di-
rect influence on the welfare of local residents, restrictions on land use
as well as the noise itself will inhibit people outside the directly affected
area from choosing an optimum housing location and raise property
prices in unaffected areas.
:LOOLQJQHVVWRSD\:LOOLQJQHVVWRDFFHSWYLDFKDQJHVLQPDUNHWSULFHV
In this 'hedonic pricing' or ‘revealed preference’ (RP) approach a cost is as-
signed to external effects on the basis of their observed (revealed) impact on
market prices, as when noise and air pollution cause rent and property
prices to fall. This method has one fundamental drawback: its limited scope.
The potential damage caused by the greenhouse effect, for example, will not
be reflected in property prices. Where appropriate, though, this method is
probably superior to the survey approach for WTP/WTA, since 'revealed
preferences' (i.e. as reflected in market prices) appear to be a more reliable
yardstick than 'stated preferences'. There remain several practical obstacles
in the statistical assessment and isolation of variables, however.

February 2002
7KHSUHYHQWLRQFRVWPHWKRG
For certain environmental impacts, across-the-board targets for environ-

mental burden are in place for all sectors of society. In these cases, society
has weighted – explicitly or implicitly – the costs and benefits of abatement
measures. The price of emissions will then be formed by the marginal costs
of reducing the impact to the overall target level. If one assumes that society
will apply the cheapest measures first to achieve the targets, then an extra
unit emission will make it necessary to apply an extra abatement measure of
which the costs are equal to the shadow price. This method therefore re-
quires greater knowledge of the shape of the reduction cost curve, i.e. the
costs of the abatement measures involved (Figure 8).
Figure 8 Obtaining a shadow price from environmental targets
Marginal
costs
(Euro/kg)
Shadow price
Red
uctio
n costs
Environmental
target Emissions
(kg)
An important discussion that often arises when the prevention cost method-
ology is used is whether the across-the-board emission reduction target is
‘correct’. Some people may argue that the target is too strict (too far to the
left of the graph), others that it is too lax (too far to the right). They have dif-
ferent perceptions of environmental damage and risks, on the one hand, and
the economic damage and risks involved in setting different targets, on the
other. In effect, the first category would like laxer policies and the second
stricter policies.
We feel that this report – which assesses a single, internationally operating

economic sector, namely aviation – is not the appropriate place to discuss
the correctness of international across-the-board emission reduction targets
that have been agreed in a political process. The aim of this report is to es-
tablish the costs that arise when the aviation sector emits one extra kg of
emissions. If there are across-the-board reduction targets in place, these
costs are given by the costs of reducing one kg of emissions somewhere in
the economy.
In particular, we would mention a few reasons for not using so-called ‘scien-
tific’ or ‘sustainability’ targets when governments have agreed on official
targets:
1 Using targets that differ from those politically implemented would lead to
inconsistencies in government policy. It is doubtful whether a sectoral

February 2002
study, such as this one on aviation, is the appropriate platform for ques-
tioning policies at a higher level, such as across-the-board emission
standards for all sectors of society.
2 Setting a price tag on emissions on the basis of a target different from
that holding for the rest of society would lead to inefficiencies. If a more
ambitious target were set, it would lead to the aviation sector imple-
menting measures that reduce emissions at higher cost than would have
been incurred by other economic sectors. With a less stringent target the
opposite would occur.
3 It is highly debatable whether targets can be formulated on a scientific
basis alone. Science may be able to indicate the emission levels at
which damage and risks become small. However, in virtually all cases,
one must weigh the costs of risk reduction against the remaining risks. In
some cases, such as global warming, there is also uncertainty involved.
There will never be zero risk and there is no clear-cut point at which
risks become negligible, tolerable or acceptable, none of which concepts
belong in the realm of the natural sciences, but rather require political or
normative judgement.
4 If normative judgements are a necessary part of policy target formula-
tion, the democratic decision-making process seems to be the most
qualified arena for setting those targets. It will be clear that such issues
as the asymmetric influence of certain lobby groups and lack of demo-
cratic legitimacy of parties at the international negotiating table may dis-
turb this arena. Still, in the framework of the present study it cannot be
judged D SULRUL to which side of society’s preferences the outcome of
such negotiations will tend. Besides, as already stated, the aim of this
study is not to contribute to the debate on across-the-board emission
standards for all sectors of society, as these are already in place.
Finally, a few practical problems associated with the prevention cost method
should be mentioned which should not be overlooked. This is because the
establishment of marginal prevention costs requires the shape of the reduc-
tion cost curve to be known, as an H[ DQWH assessment of possible future
measures.
This gives rise to the following problems:

• costs are often overestimated because the G\QDPLFV of technology de-
velopment are underestimated. Only measures identified at the time of
establishing the cost curve are taken into account, with new solutions
unforeseen;
• costs are also often overestimated because in many studies only WHFK
QRORJLFDO options to reduce emissions are considered. If behavioural
(operational) changes and volume changes are included in the cost
curves, the marginal prevention costs will obviously fall;
• on the other hand, costs are often underestimated because prevention
cost curves assume measures to be applied in order of cost-
effectiveness. In other words, they assume that a perfect market exists
for emission reduction. In reality, the market for emission reduction is
often far from perfect, as all kinds of regulations and agreements cur-
rently in place hamper actual reduction of emissions across all sectors;
• costs are also often underestimated because transaction costs and
comfort costs are often ignored or overlooked. An example of transac-
tion costs is the cost of incomplete information. An example of the exis-
tence of comfort costs is the fact that many people do not choose to
drive a very fuel-efficient car, although doing so would save them a con-
siderable sum of money.

February 2002
Finally, we note that damage and prevention costs may not be added to
arrive at a ‘final’, 'net' result. The two approaches are complementary, stem
from different valuation philosophies and have their own specific pros and
cons. If the reader's aim is to obtain an impression of the actual damage
arising from one extra tonne of emissions, in the context of negotiations on
optimum emission reduction targets, for example, they should use the dam-
age cost approach. If the reader is convinced that one extra tonne of emis-
sions in one place will not lead to extra damage because this will be miti-
gated by emission reductions elsewhere, they should use the prevention
cost approach.
6XPPDU\
If NO across-the-board emission reduction targets exist, the most satisfac-

tory approach to environmental valuation is direct valuation of damage, nui-
sance and avoidance costs. This can be done by establishing dose-
response relationships for all relevant effects and valuing each of them indi-
vidually. If enough data are available to value at least some of the effects,
this approach can be used to obtain a good minimum estimate of costs. Indi-
rect valuation methods, such as stated and revealed preference methods,
can be applied in cases where environmental effects have a direct and local
character, but due note should be taken of their drawbacks. In cases where
the environmental effects are long-term and regional or even global in char-
acter, stated and revealed preference methods do not seem satisfactory
because either too much knowledge is required on the part of respondents
(stated preference) or clear relationships with real-market prices are lacking
(revealed preference).
If broadly agreed across-the-board emission reduction targets DO exist, the

prevention cost method can be applied. This is because in this case the cost
of an extra unit of emissions at one location is NOT determined by the dam-
age due to these extra emissions, but by the marginal costs of measures to
reduce the same emissions elsewhere. As the costs of measures are all that
count here, the debate on whether or not targets are 'correct' (i.e. set at or
near the social optimum) is not relevant in this approach. Besides, this report
is not the place to discuss the correctness of across-the-board emission
reduction targets that have been politically agreed. The most important ad-
vantage of this approach is its consistency with politically agreed, across-
the-board environmental policies. Its greatest disadvantage is that many
people consider these targets either too strict or too lax. Besides, the pre-
vention cost method has several practical drawbacks that makes actual es-
timation of the costs of measures harder than it may seem here.
The major findings are summarised in Table 3.

February 2002
Table 3 Principal pros and cons of different approaches to valuing environmental
effects
cost category damage/nuisance + avoidance/adaptation cost approaches prevention /
subcategory direct damage stated preference revealed prefer- abatement cost
costs (SP), CVM, ence (RP); approach
(dose-response) WTP/WTA hedonic pricing
main theoretically good at non- within its scope consistent with
advantage satisfying material damage better than stated reduction targets
preference defined
fundamental none lack of knowledge limited scope reduction targets
drawback about effects may be ‘wrong’
limited population
practical dose-response strategic answers statistical dynamics of
drawback relationships for analysis technological
all effects development
valuation of non- importance of assumption of
material damage question type perfect markets
transaction and
comfort costs
application when adequate for short-term and for short-term and for regional/global
recommended damage and local effects local effects effects, with
valuation data are when non-material when damages agreed reduction
available damages are are mainly mate- targets
substantial rial
Source CE interpretation of international literature.
Abbreviations:
CVM Contingent Valuation Method
WTP/A Willingness to Pay / Accept
'HILQLWLRQRIW\SHVRIDLUFUDIWDQGIOLJKW
Aircraft types play no significant role throughout most of this study. An im-
portant aim of this project is to establish external costs per unit emissions or
noise, irrespective of the aircraft causing these emissions.
In the presentation of the results, however, it is important to translate the

costs to several types of aircraft. We distinguish four different passenger
aircraft, ranging from 40 to 400 seats, and two flight distances, 200 and
6,000 km. We also distinguish two technology levels: ’market-average’ and
’state-of-the-art’ technology. We make no reference to aircraft complete with
names and makes; the main purpose of this study is to present typical val-
ues for specific aviation markets.
Freight is a special issue. Most freight is transported in combination with

passengers and is generally transported over long distances. KLM and Luf-
thansa’s average freight transport distance is about 6,000 km. For the freight
analysis we have therefore taken a combination flight of 6,000 km as our
reference. For this distance flight, external costs will have to be allocated to
passengers and freight separately. The methodology used for this purpose is
described in Annex V.

February 2002
We shall consider the following cases:
3DVVHQJHUWUDQVSRUW
• aircraft with about 40 seats flying about 200 km (typical of short-distance
domestic transport);
• aircraft with about 100 seats flying about 500 km (typical of short-haul
intra-EU transport);
• aircraft with about 150 seats flying about 1,500 km (typical of longer-
distance intra-EU air transport);
• aircraft type with about 400 seats flying about 6,000 km (relevant for
intercontinental travel).
The characteristics of freight transport are entirely different from those of

passenger transport. Freight is moved over much longer distances, and
about three-quarters of the world’s freight is carried in passenger aircraft. For
the freight analysis we therefore consider the freight part of the 400-seater at
6,000 km.
We distinguish two aircraft classes with respect to environmental technology

(emissions and noise). The technical and environmental profiles below are
based on a model fed with inputs from a wide variety of sources (Janes
2001, CE 1997c, CE 2001b, IPCC 1999, Lee 2000, ICAO 2001).
Table 4 Technical characteristics of aircraft analysed, both market-average and

state-of-the-art technology
type typ. dis- MTOW* maximum seats pax freight
tance (km) (tonnes) payload (#) (#) (tonnes)
(tonnes)
1: 40 seats, 200 km 200 17 4.5 40 20 0
2: 100 seats, 500 km 500 52 12 100 65 1
3: 200 seats, 1,500 km 1,500 110 24 200 140 2
4: 400 seats, 6,000 km 6,000 395 72 400 320 25
* MTOW: Maximum Take-Off Weight
Finally, in order to gain an impression of the relative magnitudes of the ex-

ternal costs, we have also quantified several economic characteristics of the
aircraft. Both airport-related and flight-related costs have been taken into
account.
Table 5 Economic characteristics of aircraft analysed, both market-average and

state-of-the-art technology
type landing charges return ticket price
/72 SD[ FWVSD[NP
1: 40 seats, 200 km 200 10 100 25

2: 100 seats, 500 km 1,000 15 200 20
3: 200 seats, 1,500 km 1,500 11 300 10
4: 400 seats, 6,000 km 4,000 9 800 6.7
* MTOW: Maximum Take-Off Weight

February 2002
Table 6 Environmental characteristics of today’s market-average aircraft
type fuel consumption emission indices (g/kg fuel)
kg/LTO kg/km in non-LTO CO2 SO2 NOX PM2.5 HC
(‘cruise’) phase LTO cruise LTO LTO
1 130 1.0 3.15 0.6 8 7 1 5
2 730 2.1 10 9 0.4 2
3 1,500 5.1 14 12 0.2 1
4 3,100 11 18 15 0.2 1
Table 7 presents the figures for the emission characteristics of a ’state-of-

the-art’ aircraft. Compared with a market-average aircraft, it has a 20% lower
Specific Fuel Consumption (SFC), 20% lower NOX and SO2 emission index
(EI) in grams per kg of fuel burnt and 70% lower PM10 and HC emission
indices.
Table 7 Environmental characteristics of state-of-the-art aircraft

type fuel consumption emission indices (g/kg fuel)
kg/LTO kg/km in non-LTO CO2 SO2 NOX PM2.5 HC
(‘cruise’) phase LTO cruise LTO LTO
1 110 0.84 3.15 0.6 6 6 0.3 1.5
2 590 1.7 8 7 0.1 0.6
3 1,200 4,1 12 10 0.1 0.3
4 2,500 8,9 15 12 0.1 0.3

February 2002
4 Valuing greenhouse gas emissions
In this chapter we describe the methodology used in this study to value the
climate change impacts of aviation. First we provide a brief, general over-
view of the current status of climate science, subsequently focusing our at-
tention on aviation and on contrail formation in particular. Then, in section
4.4, we provide a short review of global policies to reduce greenhouse gas
emissions, which then serves as input for actual valuation, from section 4.5
onwards.
7KH,3&&
7KLUG$VVHVVPHQW
DQG
$YLDWLRQ
5HSRUWV
In recent years scientific knowledge on the possible impacts of greenhouse

gas emissions in general and aviation emissions in particular has improved
substantially. This is reflected in the IPCC’s 1999 ’Special Report on Aviation
and the Global Atmosphere’ and its ’Third Assessment Reports’, published in
2001.
As reported in the latter, "There is new and stronger evidence that most of
the warming observed over the last 50 years is attributable to human activi-
ties. (…) Most of the observed warming over the last 50 years is likely to
have been due to the increase in greenhouse gas concentrations. (…) Emis-
sions of CO2 from fossil fuel burning are virtually certain to be the dominant
st
influence on the trends in atmospheric CO2 concentration during the 21
century. (…) The globally averaged surface temperature is projected to in-
crease by 1.4 to 5.8°C over the period 1990 to 2100." (Report from Working
Group 1, Summary for policymakers)
In a report requested by the American White House to help the Administra-

tion’s ongoing review of U.S. climate change policy, the U.S. National Acad-
emy of Sciences confirms the major findings of the IPCC:
“The committee generally agrees with the assessment of human-caused

climate change presented in the IPCC Working Group I (WGI) scientific re-
port, but seeks here to articulate more clearly the level of confidence that
can be ascribed to those assessments and the caveats that need to be at-
tached to them. (…) The IPCC’s conclusion that most of the observed
warming of the last years is likely to have been due to the increase in
greenhouse gas concentrations accurately reflects the current thinking of
the scientific community on this issue.”
The former report, issued in May 1999, describes the likely global environ-
mental impact of aviation in the base year 1992 and in the future. The report
estimates that aviation’s contribution to anthropogenic radiative forcing
amounted to about 3.5% in 1992 and would, in a reference scenario, amount
to 5% in 2050. In absolute terms forcing in 2050 would be 3.8 times as high
as in 1992. The band width is rather broad: the lower and upper scenarios
considered give a factor of 1.5 less to a factor of 3 greater than that for the
reference scenario, ranging from 2.6 to 11 times the value in 1992.
One of the key graphs from this report is reprinted below.

February 2002
Figure 9 Impact of aviation emissions on the earth’s radiative balance and hence on
the forced greenhouse effect, in 1992 (IPCC 1999)
Radiative Forcing from Aircraft in 1992

0.10
a)
0.08
Radiative Forcing (Wm-2)
0.06
0.04
0.02
Direct
CH4 Sulfate
0.00
CO2 O3 H2O Contrails Cirrus Direct Total
Clouds Soot (without
-0.02 cirrus
clouds)
-0.04
}
-0.06 from NOx
good fair poor poor fair very fair fair

poor
Radiative forcing (RF) is defined here as the degree to which emissions change the radiative balance
of the atmosphere. Global mean RF is approximately linear to change in equilibrium mean surface
temperature and is therefore a good proxy for the global warming potential of emissions.
The bars indicate the best estimate of forcing, while the line associated with each bar indicates a
confidence interval: based on current scientific understanding, there is a 67% probability that the true
value lies within this range. The confidence intervals are largely independent of the level of scientific
understanding (‘poor’, ’fair’, etc.)
Ozone (O3) is not a direct emission but is formed by atmospheric reaction, triggered by NOX. The
lifetime of the potent greenhouse gas CH4, on the other hand, is shortened as a result of NOX-emis-
sions.
Table 8 presents the figures numerically, for calculations, and adds the fig-
ures for 2050.

February 2002
2
Table 8 Perturbation due to aviation emissions of the radiative balance, in W/m , for
the 1992 situation and a 2050 reference scenario, according to IPCC (1999)
perturbation due to 1992 2050 reference scenario, level of scientific
middle estimate middle estimate understanding
CO2 +0.018 +0.074 good
O3 (from NOX) +0.023 +0.060 fair
CH4 (from NOX) -0.014 -0.045 poor
stratospheric H2O +0.002 +0.004 poor
contrails +0.02 +0.10 fair
cirrus p.m. (0 - 0.04) p.m. (0 - 0.16) very poor
sulphate aerosols -0.003 -0.009 fair
soot aerosols +0.003 +0.009 fair
7RWDO SP SP
p.m.: SURPHPRULD’item pending’
As the graph and table show:

• in the middle estimate of the reference scenario, total radiative forcing
due to aviation will increase by a factor 3.8 between 1992 and 2050;
• emissions of NOX lead to changes in tropospheric ozone (O3) and meth-
ane (CH4). On a globally averaged basis, these two effects have oppo-
site signs: the net globally averaged impact on radiative forcing of O3 is
about half that of CO2. IPCC (1999) states that "Changes in tropospheric
ozone mainly occur in the Northern Hemisphere, while those of methane
are global in extent so that, even though the global average radiative
forcings are of similar magnitude and opposite in sign, the latitudinal
structure of the forcing is different so that the net regional radiative ef-
fects do not cancel." This implies that in certain regions and circum-
stances, the external costs of aviation might be higher than calculated in
this study, while in others they might be lower;
• the globally averaged impact of stratospheric H2O emissions is about
11% of that of CO2 and its share in environmental impact is likely to de-
crease somewhat;
• the globally averaged impact of persistent contrails is much more un-
certain but, according to best estimates, comparable to that of CO2.
Moreover, the climatic impact of contrails is likely to grow faster than that
of CO2: between 1992 and 2050 a factor 5 increase is expected. Contrail
formation can be accurately predicted for given atmospheric temperature
and humidity conditions;
• the impact of the cirrus clouds that sometimes result from persistent
contrails is known with even less certainty, but might be substantial, as
upper estimates give twice the impact of CO2 alone;
• the effects of sulphate aerosols and soot aerosols cancel; sulphate
aerosols cool the earth and soot aerosols warm it, both at a rate of about
15% of that of CO2 emissions;
• the total radiative forcing due to aviation, according to the middle esti-
mate and excluding cirrus clouds, is about 2.7 times (2 to 4 times) as
high as that due to CO2 alone. In the 2050 scenario this factor is likely to
remain fairly stable (2.6).
This implies that, according to current understanding, the prime concerns

with respect to the climate impact of aviation are: emissions of CO2, contrail
formation and emissions of NOX. In the following sections, which explain the
methodologies used for valuing the climate impact of aviation emissions, we
consequently focus principally on CO2 and NOX emissions and contrails. We
do not value sulphur or soot aerosol emissions, as their contribution is rela-

February 2002
tively small, there is wide variation in emission factors and the chemistry is
complex.
,PSDFWVRI12;HPLVVLRQV
As Table 8 shows, in 1992 the contribution of NOX to the global climate

change impact of aviation was about 18%. The forcing is the net result of the
warming effect of ozone (O3) and the cooling effect of methane (CH4) lifetime
reduction. Although the absolute radiative forcing resulting from NOX emis-
sions is predicted to increase, its contribution to total radiative forcing is ex-
pected to decrease to 8% in the 2050 reference scenario.
Ozone concentrations in the upper troposphere and lowermost stratosphere

are expected to increase in response to NOX increases and decrease in
response to sulphur and water vapour increases. An aircraft’s NOX emission
is therefore the first factor influencing ozone formation. Another important
factor for these processes is the lifetime of NOX, which is of the order of days
in the upper troposphere and about a week in the lowermost stratosphere.
Finally, ozone production also depends on the background NOX concentra-
tion. At higher altitudes increases in NOX may lead to decreases in ozone.
Much scientific work is still required to clarify the exact processes and influ-
ences at work.
We here value the environmental impact of NOX as follows:

• we use differentiated emission factors for different aircraft types;
• we work with globally averaged environmental impacts per kg of NOX
emission.
,PSDFWVRIFRQWUDLOIRUPDWLRQ
In this report we give particular focus to the issue of contrails. This is for two
reasons: their substantial contribution to the overall radiative forcing due to
aviation, and the specific and fairly well-predictable operational circum-
stances under which they are formed. This section is based largely on a
paper by Mr W. Fransen written specifically for this project (Annex II).
7KHFRQWULEXWLRQDQGIRUPDWLRQRIFRQWUDLOV
In Figure 9 we saw that in 1992 the contribution of contrails to radiative
forcing due to aviation was about 40%. This climatic impact is caused pri-
marily by so-called ’persistent’ contrails: contrails that do not evaporate rap-
idly but evolve into more extensive contrail cirrus. Formation of contrail cirrus
requires air that is about 30% ice-supersaturated. Recent humidity meas-
urements show that about 14% of flight time occurred in air masses that
were supersaturated with a mean value of about 15% (IPCC 1999, p.88).
Other sources (IPCC 1999, p. 91) mention that 10 to 20% of the air masses
over mid-Europe, or a global mean of 16%, would be cold and humid
9
enough to trigger persistent contrail formation . It is not accurately known at
what degree of supersaturation additional aircraft water vapour would trigger
contrail formation. If we assume that in 70% of this ’critical’ flight time con-
trails are indeed formed (Fransen, 2001), then all radiative forcing from con-
2
trails (about 0.02 W/m , see Table 9) would occur during roughly 10% of
flight time. It is interesting to note that contrail formation depends largely on
9
These figures immediately indicate potential maximum contrail coverage if flight paths were
to span the entire qlobe.

February 2002
the number of aircraft kilometres flown, irrespective of aircraft size, while
other environmental effects are more dependent on fuel burn.
Table 8 also shows that in the future contrail formation might increase more
rapidly than fuel burn. This is due to a number of factors. Exhausts will
probably become cooler as a result of increased engine efficiency; a higher
percentage of flight time may take place in the upper troposphere; and the
number of aircraft km flown per kg fuel burnt will probably increase. This is
why in the reference scenario (2050) contrail formation is expected to in-
crease by a factor of about five, while radiative forcing from other impacts is
expected to increase by a factor of about four.
Additionally, the circumstances under which contrails form show some cor-
relation with those under which aircraft-induced cirrus clouds are formed.
However, knowledge about such additional cirrus formation from aircraft is
still very poor (IPCC 1999). We shall therefore not take additional cirrus for-
mation into account in our calculations.
3UHGLFWDELOLW\
Although it is beyond the scope of this report to assess mitigation measures,
an important reason for the particular attention afforded to contrails here is
that "contrail formation can be accurately predicted for given atmospheric
temperature and humidity conditions" (IPCC 1999, p.67). Contrails form
mainly in the upper troposphere at mid-latitudes, where the atmosphere is
sufficiently cold and humid (IPCC, 1999). By avoiding these regions, then,
contrails can – at least in part – be avoided. This would generally require
lower cruise altitudes in the subtropics and higher cruise altitudes in polar
regions. However, critical regions could also be avoided by means of hori-
zontal flight path deviation. The most important trade-off to be considered
when avoiding contrails is the NOX emission, which is much more critical at
higher than at lower altitudes.
5HJLRQDOYDULDWLRQVLQUDGLDWLYHIRUFLQJIURPFRQWUDLOV
Ice-supersaturated air masses prone to contrail formation are to be found in
the upper troposphere, typically at altitudes of 16 km in the tropics and 10
km at mid-latitudes. This figure of 10 km is a typical aircraft cruising altitude.
Besides, radiative forcing from an assumed 100% contrail coverage is high-
est in the tropics and lowest in polar zones (IPCC 1999, p.101). Finally, con-
trail formation in Asian zones and in the Southern Hemisphere is much lower
than in Europe and the US. Combining these factors, by far the greatest
amount of radiative forcing from contrails occurs in Europe and the United
States.
'LIIHUHQWLDWLQJIRUDVLWXDWLRQZLWKDQGZLWKRXWFRQWUDLOV
We conclude this section by distinguishing between the radiative forcing
caused by aviation in a situation with and without contrail formation. In doing
so, we make two important assumptions: that contrails are formed during
10% of flight time (as argued above) and that contrail formation is not corre-
lated with the other environmental impacts of aviation.
Table 9 shows the results for average flights.

February 2002
2
Table 9 Global average perturbation by aviation of the radiative balance, in W/m ,
differentiated for a situation with and without contrail formation, under the
assumptions stated below the table, based on 1992 data
perturbation due to average situation (with situations ZLWKRXW con- situations ZLWK
assumed 10 % prob- trails contrails
ability of contrails for (about 90% of flight time) (about 10% of flight
each km flown) time)
CO2 +0.018 +0.0162 +0.0018
O3 (from NOX) +0.023 +0.0207 +0.0023
CH4 (from NOX) -0.014 -0.0126 -0.0014
H2O +0.002 +0.0018 +0.0002
contrails +0.02 0 +0.02
sulphur aerosols +0.003 -0.0027 +0.0003
soot aerosols +0.003 +0.0027 +0.0003
WRWDO
IOLJKWNPEOQ
SHUIOLJKWNP

SLFR:P
This table is based on two main assumptions:

• contrails are formed during 10% of flight time, corresponding to 10% of flight kilometres (see text);
• the other climatic impacts of aviation emissions are not statistically correlated with contrail forma-
tion.
Based on a total of 20.7 billion flight kilometres [IPCC 1999, p.302].
From this table the important conclusion can be drawn that, under the two
key assumptions made, the contribution of the 10% of contrail-inducing flight
time is comparable to the 90% of flight time that does not lead to contrails.
We can convert the figures to units per average flight hour, assuming a lin-
ear relationship with flight kilometres. We then see that, under the given
assumptions, the total average climatic impact of a contrail-inducing flight
kilometre is about eight (8) times the WRWDO average impact of a flight kilome-
tre that does not induce contrails (11 vs. 1.4). For an average contrail-
inducing flight kilometre, the climatic impact of the contrail DORQH is about
eleven (11) times that of CO2 DORQH (0.02 vs. 0.0018). As already mentioned,
the factors of 8 and 11 apply to 1992 and do not include the highly uncertain
impacts of additional cirrus cloud formation.
A final important step is to take into account that "the amount of persistent
contrail cover may depend mainly on the number of DLUFUDIW triggering con-
trails and less on IXHOFRQVXPSWLRQ" (IPCC 1999, p.107, emphasis added). In
contrast, other environmental effects are related more directly to fuel con-
sumption than to number of aircraft. The factor of 8 therefore applies to av-
erage aircraft. Consequently, for aircraft burning more fuel than average (i.e.
large aircraft) this ‘contrail multiplier’ will be less than 8 and for aircraft burn-
ing less fuel than average (small aircraft) it will be greater. Average aircraft
emit about 22 kg of CO2 per km (IPCC 1999, p.302). Using the factor 11
presented above, this implies that the H[WUD climatic impact of an aircraft km
inducing contrails compared with the same km not inducing contrails is the
equivalent of 11 times 22 kg = about 240 kg of CO2 per aircraft km.
This implies that in order to assess the total climatic impact of an aircraft km
causing contrails we must calculate the climatic impact of the emissions of
that aircraft per kilometre, including the effects of NOX, sulphur and soot but
excluding contrails, and then add the climatic impact of 240 kg of CO2 per
aircraft km.

February 2002
Summarising, in this paragraph a relatively simple methodology has been
presented which makes it possible to differentiate the average IPCC figures
from Figure 9 for situations in which contrails are formed and for situations in
which they are not. Of course, several simplifying assumptions had to be
made in order to achieve such differentiation. We chose to do so because
contrails are such a ’binary’ phenomenon (either they are formed or not) and
their impact is relatively large.
The advantage of the differentiation presented in this section is that the ’av-
erage’ radiative forcing given in the IPCC report and summarised in Figure 9
and Table 8 is never actually achieved on an individual flight and is therefore
in fact always ’wrong’. The differentiated numbers probably come closer to
real flight situations.
*UHHQKRXVHJDVHPLVVLRQVUHGXFWLRQSROLFLHV
The global community has committed itself to tackling the climate issue in a
series of treaties. In Article 2 of the 1992 Framework Convention on Climate
Change, the ultimate objective is formulated as follows: "...to achieve stabili-
sation of greenhouse gas concentrations in the atmosphere at a level that
would prevent dangerous anthropogenic interference with the climate sys-
tem within a time-frame sufficient to allow ecosystems to adapt naturally to
ensure that food production is not threatened and to enable economic de-
velopment to proceed in a sustainable manner.“ The convention was signed
by 177 nations and entered into force in 1994.
In the Kyoto Protocol, subsequently adopted on 10 December 1997, the

general terms of the Climate Treaty are translated into concrete, binding
targets. Under the terms of the Protocol the most developed nations are to
reduce their greenhouse emissions by an average of over 5% by 2008-2012
compared with 1990/1995 levels. No firm targets have yet been set for de-
veloping nations, nor for international aviation and shipping. The Kyoto Pro-
tocol provides for the use of ‘flexible mechanisms’ such as emission rights
(tradable by countries that have pledged to reduce their greenhouse emis-
sions), JI (Joint Implementation) and CDM (the Clean Development Mecha-
nism). These mechanisms are designed to ensure that once the Kyoto pro-
tocol has been ratified an international market price for greenhouse emission
abatement will settle out.
In subsequent negotiations in Buenos Aires, The Hague, Bonn and Marra-

kech the Kyoto Protocol was further elaborated. Although the US retreated
from the protocol in March 2001, ratification has since come closer owing to
agreement being reached on 'sinks' and penalties. EU Member states have
committed to ratify the Protocol by Rio + 10 (second half of 2002). The future
will show whether the global community, including or excluding the US, will
finally be able to commit itself to the targets agreed upon in 1997 and take
appropriate measures to achieve them.
'DPDJHDQGSUHYHQWLRQFRVWDSSURDFK
In this section we assess the four options for valuing greenhouse gas emis-
sions presented in Section 3.3: the direct damage cost approach, the stated
and revealed preference approaches, and the prevention cost approach.

February 2002
'DPDJHFRVWDSSURDFK
Over the last decade a number of direct damage cost studies have been
performed (viz. Ayres/Walter 1991; Nordhaus 1991; Hohmeyer/Gärtner
1992). These studies aim to economically assess the balance of direct costs
and benefits of the impacts of climate change. In the course of time the level
of sophistication of socio-economic assessments of climate change impacts
has improved significantly and the studies have also come to include a
greater number of impact categories. We shall therefore use the results of
these studies as one of the inputs in our assessments.
Revealed preference (RP) methods, such as hedonic pricing (see Section

3.3) are not suitable approaches for valuing greenhouse gas emissions. The
impacts of these emissions are indirect, they occur on a global scale and in
the long term, and they will therefore not show up clearly in price differentials
for goods or services. Stated preference (SP) techniques require people to
be very well informed about the effects of the emissions in question. Given
the complex nature of the climate change problem, this is not something one
could reasonably expect from non-experts.
3UHYHQWLRQFRVWDSSURDFK
As we have seen, an alternative valuation approach becomes available once

emission ceilings have been established. In that case, extra emissions in
one place do not lead to extra damage but to extra costs to reduce emis-
sions elsewhere. The costs of extra emissions are then represented by the
marginal coats of prevention and/or abatement measures.
As discussed earlier, in the case of greenhouse gas emissions the global

community may commit itself definitively to targets that more or less fix ag-
gregate emission levels. These agreements do not currently cover interna-
tional aviation – nor, indeed, international shipping – although this might
become the case at some future date. In the case of aviation being included
in the agreements via a so-called ‘open trading system’, the costs of an extra
unit of CO2 emissions will be determined by the marginal reduction costs of
CO2 under the Kyoto Protocol. Besides, there is a possibility that the aviation
sector itself will adopt emission targets. In this case the aviation sector will
face a separate emission ceiling not necessary similar to the targets of the
Kyoto Protocol. We discuss both possibilities here.
3UHYHQWLRQFRVWEDVHGRQ.\RWRFRPSOLDQFHFRVWV
The most obvious approach would seem to be to take the equilibrium price
resulting from the Kyoto Protocol as an estimate of the shadow price of avia-
tion greenhouse emissions, for two reasons.
First, it is to be assumed that the international aviation and shipping sectors

will also somehow align themselves with the general commitments of the
industrialised nations. The ICAO is currently examining the scope of
charges, tradable emission rights and voluntary agreements for controlling
aircraft emissions. Whatever system is adopted, it should preferably value
the marginal cost of emission reduction in the aviation sector just as high as
in other sectors. Failure to do so would give rise to an economically ineffi-
cient situation. Without suitably stringent reduction targets on the part of the
aviation sector, expensive abatement measures would have to be taken
around the world with the sector still leaving various less costly control op-
tions unimplemented. If, conversely, the aviation sector is too stringent in the

February 2002
targets it adopts, the abatement measures involved may be more expensive
10
compared with other measures not implemented elsewhere .
Second, the global community has committed itself to targets vis-à-vis de-
sired (long-term) environmental quality, implying limits to global greenhouse
emissions LQFOXGLQJ aircraft emissions. Even if the aviation sector adopted
no restrictions at all, then, additional aircraft emissions would not ultimately
lead to increased levels of greenhouse gases. The only consequence would
be that other sectors and sections of the global community would be obliged
to adopt additional abatement measures. The price of these extra measures
will be the same as the aforementioned international equilibrium trading
11
price .
Although the share of aircraft emissions in global greenhouse emissions is

growing and by no means negligible, the international trading price for
greenhouse emissions is unlikely to be affected significantly by the aviation
sector entering the emissions market. Regardless of sectoral efforts, then,
the shadow price of aviation greenhouse gas emissions (per unit of CO2-
equivalent) will be close to the international trading price arising after ratifi-
cation of the Kyoto Protocol.
The reduction targets presented in the Kyoto Protocol are the result of politi-
cal compromise. They may be considered the best proxy for society's current
'willingness to pay' to reduce the risks attaching to climate change, until such
time as a new compromise is reached. They represent a first step towards
striking a balance between reduction costs on the one hand and the re-
maining damage and risks accruing from climate change on the other.
On the other hand, it will be clear that the Kyoto Protocol represents no more
than an interim target. As the IPCC's Third Assessment Report (Working
Group 1) states: "Reductions in greenhouse gas emissions and the gases
that control their concentration would be necessary to stabilise radiative
forcing. For example, for CO2, the most important anthropogenic greenhouse
gas, carbon cycle models indicate that stabilisation of atmospheric concen-
trations at 450, 650 or 1,000 ppm FXUUHQW FRQFHQWUDWLRQ DERXW SSP
DGGLWLRQ&( would require global anthropogenic CO2 emissions to drop be-
low 1990 levels, within a few decades, about a century, or about two centu-
ries, respectively, and continue to decrease steadily thereafter." However,
the IPCC makes no pronouncements on desirable emission reduction paths
or timeframes. In this study, we cannot estimate the impact of future agree-
ments on marginal prevention costs, as neither the agreements nor informa-
tion on measures are available.
Besides, it should be noted that the retreat of the US from the ‘post-Kyoto’
negotiations makes the prevention cost approach less credible, as this ap-
proach is based on an internationally agreed emission reduction target. On
the other hand, the US has stated that the Kyoto Protocol will remain "the
only game in town".
10
A system based on the same marginal emission reduction costs across the board will
probably lead to the aviation sector reducing its greenhouse emissions by proportionally
less than other sectors of society, because its abatement options are relatively expensive.
11
Many shadow prices for greenhouse gas emissions are reported in the literature, calculated
on the basis of estimates of the ensuing damage. As explained in Chapter 1, these figures
should not be used for the purpose of valuing aviation greenhouse emissions, but only to
establish global targets. Once such targets are in place, additional aircraft emissions no
longer lead to extra damage, but to additional compensatory measures.

February 2002
3UHYHQWLRQFRVWEDVHGRQVHSDUDWHHPLVVLRQFHLOLQJIRUDYLDWLRQ
,&$2&$(3)(6*
The ICAO Committee on Aviation Environmental Protection (CAEP) is cur-
rently evaluating the potential role of a range of market-based options
(MBOs) for limiting carbon dioxide emissions from the aviation sector. In
order to support the MBO Working Group 5, the ICAO CAEP Forecasting
and Economic Support Group (FESG) uses three tools for the analysis of the
12
MBOs: the FAA model , the AERO model and a specially developed model
(Stratus Consulting, 2001).
Among other aims, the AERO and Stratus Consulting models were used to
analyse the fuel tax level that would result if the following CO2 emission re-
duction targets were to be achieved:
• 25% reduction in emission growth between 1990 and 2010;
• 50% reduction in emission growth between 1990 and 2010;
• 5% reduction of 1990 emission levels.
Table 10 shows the estimated fuel levies required to achieve each of these
emission reduction targets. It should be noted that the Stratus Consulting
model assumed a far greater supply-side effect than the AERO model.
Table 10 Incentive levels at different CO2 emission reduction targets (expressed both
in EUR/litre fuel and EUR/tonne CO2; $ to FRQYHUVLRQUDWH
emission reduction Stratus Consulting AERO
scenario EUR/litre EUR/tonne CO2 EUR/litre EUR/tonne CO2
-25% of growth 0.06 23 0.19 76
-50% of growth 0.18 71 0.77 308
-5% of 1990 level 0.47 187 2.58 1,032
These results are illustrated graphically in Figure 10.
12
A spreadsheet model of the aviation sector developed by the Federal Aviation Administra-
tion of the USA.

February 2002
Figure 10 Marginal prevention costs in aviation sector for year 2010 under a ’closed’
CO2 trading system, or kerosene charge, following from Stratus and AERO
models
1200
PDUJLQDOSUHYHQWLRQFRVWV
(85WRQQH&2 1000
800 Stratus
AERO
600
400
200
0
0 100 200 300 400 500 600 700
&2HPLVVLRQVDYLDWLRQ07
(XURSHDQ8QLRQ
The European Union has adopted objectives and targets for environmental
quality in order to ensure that all citizens of the Union enjoy suitably satis-
factory environmental conditions. The EU has also agreed on “reduction
targets” for the Union as a whole, viz. the Kyoto commitment. Sector-specific
targets are still very much uncharted territory at the EU level, however, de-
spite most member countries having already adopted some kind of objec-
tives and targets specific for their own transport sector. In addition, setting
quantitative environmental targets for individual sectors may not serve cost-
effectiveness and fairness because there is no assurance that emissions will
be reduced in the cheapest possible way, and the marginal prevention costs
of individual sectors will differ.
A Joint Expert Group on Transport and Environment of the European Com-

mission has looked at the scope for setting environmental targets at the
sectoral level. The Expert Group reported to the Commission that, for rea-
sons of subsidiarity, objectives and targets that will bind Member States to
commitments at the sectoral level are unlikely to be agreed and are there-
fore not further discussed in their report. Given this position of the Expert
Group and the current early stage of the debate on setting sectoral environ-
mental targets, we conclude that it is unrealistic to expect introduction of such
targets at the EU level in the near future.
&RQFOXVLRQ
In this study we shall base estimates of CO2 shadow prices on assessments

arrived at in both damage cost and prevention cost studies. It should be
noted once again, however, that both methods have their pros and cons.
With the prevention cost method, applying a specific target for aviation may
have practical advantages and it ensures that aviation emissions will be
reduced. On the other hand, it may lead to higher costs (unless the target is
set at such a level that the marginal abatement costs are equal to those

February 2002
under the Kyoto Protocol) and involves the subjective choice of a specific
aviation target.
Therefore, in this study we have supplemented the CO2 damage estimates

with a prevention cost estimate based on the Kyoto target, although the
protocol represents an interim target only and the US has retreated from the
protocol. Note that this prevention cost assessment does not imply a judge-
ment as to whether or not the Kyoto target has been set ‘correctly’.
It is important to state that, for maximum economic and environmental effi-

ciency, in the approach adopted here all the relevant climate change impacts
of aviation must be valued using this shadow price, not just the six gases
included in the Kyoto Protocol. This means that the climate change impacts
of contrails, NOX emissions, etc. (see earlier sections) will also be included in
the valuation.
9DOXDWLRQRI&2HPLVVLRQV
In this section we review published estimates of the damage and prevention

costs associated with CO2 emissions. In Section 4.6.3 we draw conclusions
from these overviews. All values have been converted to RI
2YHUYLHZRI&2GDPDJHFRVWHVWLPDWHV
Here we present quantitative estimates of the marginal damage costs of

greenhouse gas emissions. Many studies into these damage costs calculate
the total economic costs (expressed as the annual percentage loss of world
GNP) that would arise if CO2 concentrations in the atmosphere were to rise
to twice their pre-industrial value, a figure taken because the IPCC assess-
ment of climate change focuses mainly on this value. Estimating damage
costs is highly complex and uncertain by nature, because of the major un-
certainties in dose-response relationships, especially in the long term, the
wide variety of possible impacts and the unpredictable additional risk of ex-
treme climatic response.
Of greatest interest in policy applications are generally the PDUJLQDO costs of

emissions, i.e. the costs associated with emission of one additional tonne of
CO2. In most studies a linear damage cost curve is assumed; in other words,
average damage costs are assumed equal to marginal damage costs. In
1995 Working group III of the IPCC reported on the basis of then available
estimates a range of between DQG SHUWRQQHRI&22 (converted to
13
of 1999 and emissions between 2000 and 2010). Since 1995 new cost
estimates have become available. The most important work in this respect is
that carried out under the ongoing ExternE project, launched by the Euro-
pean Commission in collaboration with the US Department of Energy in
1991, and evaluating the external costs associated with a range of different
fuel cycles. In the ExternE project a low and high value are recommended of
about DQG SHUWRQQHRI&22, respectively.
On the one hand, the wide range of marginal cost estimates (see Table 11)
reflects differences in methodology and scientific uncertainty. On the other,
13
The original range reported by the IPCC of $5 to $125 per tonne of carbon emitted between
1991 and 2000 has been translated to 1999 prices and adjusted for the fact that existing
studies generally yield estimates of social costs that increase with time.

February 2002
though, it reflects differences in political choices regarding issues of fairness
between generations and between geographical regions. This is illustrated
by the various rates at which future damage is discounted to obtain present
values. For example, damages having a value of LQ RQH KXQGUHG
years’ time will have a net present value of LIDGLVFRXQWUDWHRILV
employed, compared to just LIDGLVFRXQWUDWHLVWDNHQ:KLOHVRPH
economists deduce discount rates from actual savings and interest data,
other economists advocate lower discount rates on the basis of considera-
tions of intergenerational equity. To appreciate the importance of the dis-
count rate for damage cost estimates, consider Table 11, which shows the
various middle cost estimates found in the literature as a function of discount
rate.
Table 11 Middle estimates of marginal cost of CO2 emissions in often-cited

international literature, as a function of social discount rate; values in
per tonne of CO2 emitted between 2000 and 2010
Discount rate: 0% 1-2% 3% 5-6%
IPCC review (1995) 2-50

Ayres and Walter (1991) 10 – 12
Cline (1992, 1993) 50 4-9 3
Peck and Teisberg (1993) 4–5
Maddison (1994) 3
Fankhauser (1994) 17 3
Nordhaus (1991, 1994) 2
Plambeck and Hope (1996) 127 13 8

Nordhaus (1999) 2
ExternE project (1999) 20-56

Eyre et al. (1999) a 104 (47) 56 (24) 20 (7) 8 (3)
Tol (1999)
a
Eyre HW DO. and Tol estimates are for the period 1995-2004; in parentheses, estimates ex-
cluding HTXLW\ZHLJKWLQJ, a topic discussed in the text.
Although many commentators stress the uncertainties surrounding these

cost estimates, the reference is generally to the possibility of the true costs
being XQGHUestimated:
• Much debate focuses on the question of whether considerations of
intergenerational equity dictate that a ORZHU discount rate should be em-
ployed than 5-6%, a figure deduced from actual savings and interest
data. There is virtually no debate on whether a KLJKHU discount rate
should be used. In addition, related to the discount issue is the impor-
tance of the time scale considered: medium-term estimates based on
’only’ 30 years yield lower damage costs than long-term estimates for
14
100 years or even longer, certainly when low discount rates are used .
• The middle cost estimates do not include the risk of ‘climate catastro-
phes’ or ‘surprises’: theoretically conceivable effects with a low probabil-
ity but high social costs. It is these low-probability but high-consequence
scenarios that drive much of the international concern about climate
change. IPCC (2001) mentions the following examples of climate catas-
14
On the other hand, uncertainty grows with the time scale taken: the longer the period con-
sidered, the broader the uncertainty ranges of the results.

February 2002
trophes: significant slowing of the ocean circulation that transports warm
water to the North Atlantic, large reductions in the Greenland and West
Antarctic Ice Sheets, accelerated global warming due to carbon cycle
feedbacks in the terrestrial biosphere, and releases of terrestrial carbon
from permafrost regions and methane from hydrates in coastal sedi-
ments.
• Most studies provide only a first-order assessment of total global warm-
ing damage using a simple enumerative approach, viz. total damage as
the sum of individual damage categories. Some studies focus only on
individual consequences such as sea level rise (Ayres/Walter 1991) or
agricultural impacts (Cline 1991). Higher-order effects are not included.
For example, if global warming causes agricultural output to decline, no
consideration is given to higher-order effects such as economic losses in
the food industry or mass starvation. At the same time, though, the pos-
sibility cannot be completely excluded that the social costs of climate
change are ORZHU than expected (Mendelsohn HWDO., 1996).
Recently, a debate has started about the issue of equity-weighting, i.e. how
to aggregate the valuation of impacts across geographical regions that ex-
15
hibit major disparities in income. Equity weighting always increases cost
estimates.
2YHUYLHZRIµ.\RWR¶&2 SUHYHQWLRQFRVWHVWLPDWHV
In this section we present quantitative estimates for the marginal prevention

costs of greenhouse gas emissions under the Kyoto Protocol. The values
are based on the review of the international literature presented in Annex I.
The results are shown in Figure 11.
15
In short, equity weighting can be seen as the intragenerational counterpart of discounting.
Expected increases in income may constitute a reason for discounting costs arising in later
years. For the same reason, costs occurring in low-income countries may be valued higher
than costs occurring in high-income countries. For this debate, see Fankhauser et al.
(1997), Tol et al. (1996, 1999), Azar (1999), and Azar and Sterner (1996).

February 2002
Figure 11 Overview of marginal prevention costs of one tonne of CO2-equivalent under
the Kyoto Protocol, under several assumptions with respect to scale of trade,
mechanisms, and timeframe

120
W
Q
H
O
D
Y
L
X 100
T
H

2
&

H 80
Q
Q
R
W

U
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60

5
8 40
(

H
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U
S

Z
20
R
G
D
K
V
0
Regional Annex 1 Annex 1 + Annex 1 + Annex 1, Global Double 2020 2020
trade trade sinks 1/2*sinks CO2 only trade bubble Annex 1 global
trade trade
The ranges given by OLQHV represent the extremes found in the literature, those in the ER[HV the ranges
omitting the most extreme values found in the literature.
• regional trade: only trade ZLWKLQ EU, US and Japan permitted;
• annex 1 trade: JI (Joint Implementation) permitted (trade between all Annex I countries);
• global trade: JI + CDM (Clean Development Mechanism) permitted, to be considered a variant
with maximum use of Clean Development Mechanism;
• (1/2*)sinks: (half of) sinks may be used in addition to JI;
• CO2 only: infinite prevention costs of non-CO2 greenhouse gases;
• ‘double bubble’: trade permitted in two bubbles: one US/Japan/Australia, the other all other
Annex 1 countries. Lower value represents costs for the first bubble, higher for the second;
• 2020: Kyoto targets apply to 2020 as well.
From this figure the following conclusions can be drawn:

• the flexibility allowed under the Protocol goes a long way to explain the
variations in valuations found;
• the financial consequences of the EU policy statement that Parties
should strive to achieve 50% of their commitments by means of domes-
tic measures have not yet been studied;
• maximum flexibility would lead to valuations of below WRQQH &22-
equivalent, minimum flexibility to values about 10 times as high;
• stretching the Kyoto target to 2020 would increase reduction costs sub-
stantially. Stricter targets would obviously increase costs further.
&RQFOXVLRQVRQ&2YDOXDWLRQ
The principal conclusions to be drawn from this section are:

• there is major variation in the results of both damage and prevention
cost studies;
• in the damage cost estimates, the social discount rate is a very impor-
tant explanatory factor for these differences. Some deduce discount
rates from actual savings and interest data, while others advocate lower
discount rates on the basis of considerations of intergenerational equity.
The lower the discount rate, the higher the shadow prices found;
• in the prevention cost approach, the shadow price of emissions is de-
termined by ’autonomous’ developments such as economic growth, the

February 2002
reduction target and the costs of available and permitted measures. In-
cluding the aviation sector in the Kyoto protocol (’open trading system’)
would lead to much lower shadow prices than in the case of aviation
having to reduce emissions itself by a comparable percentage. For lack
of an agreed separate reduction target for aviation, we have chosen to
use the ’Kyoto’ compliance costs as a basis for prevention cost assess-
ment;
• the ranges of estimated damage and prevention costs are comparable:
from several WRURXJKO\ SHUWRQQHRI&22.
Eliminating the extreme estimates of several DQG SHUWRQQHRI&22,

in this study we shall use working values of SHUWRQQHRI&22 as a mid-
dle estimate and DQG LQVHQVLWLYLW\DQDO\VHV
9DOXDWLRQRI12[DQG+2HPLVVLRQV
Although the climatic impact of emitting one kg of NOX or water vapour can
vary substantially under local and regional atmospheric conditions, we have
chosen to work with globally averaged impacts of NOX and H2O emissions
from aircraft relative to the impact of CO2.
To arrive at a value for NOX and H2O, we must first establish the relative
emissions of CO2 and H2O.
Table 12 Overview of 1992 and 2050 scenarios from [IPCC, 1999] in terms of fuel,
CO2, NOX and H2O emissions, radiative forcing and the relative radiative
forcing impacts of these emissions
fuel CO2 H2O NOX
consumption
VLWXDWLRQ
1992 emissions (’NASA-1992’ scenario, 160.3 506 202 1.92

in Mtonnes)
radiative forcing (W/m2) 0.018 0.002 0.009
globally averaged radiative forcing 1
per kg of emission, relative to 1 kg of CO2 emission

VLWXDWLRQ
2050 emissions (’FESGa tech 1’ scenario), 471 1488 593 7.15

in Mtonnes)
radiative forcing (W/m2) 0.074 0.004 0.015
globally averaged radiative forcing 1
per kg of emission, relative to 1 kg of CO2 emission
From this table we can conclude that in the 1992 situation on average one
kg of water vapour emitted caused 0.28 times the radiative forcing impact of
one kg of CO2; for NOX this factor was 132. In the 2050 situation the relative
importance of CO2 has increased, leading to lower relative valuations of NOX
and H2O emissions.
Application of the 1992 multiplication factors from Table 12 yields the values
shown in Table 13.

February 2002
Table 13 Valuation of NOX and water vapour emissions, based on their relative
impacts compared with CO2 in 1992
Emission CO2 factor Valuation
(previous table) low medium high
CO2 ( WRQQH 1 10 30 50
NOX ( NJ 132 1.3 4.0 6.6
H2O ( WRQQH 0.28 2.8 8.3 14
&OLPDWHLPSDFWSHUDLUFUDIWW\SH
The final step is to calculate the external costs of different aircraft and flights,
as given in Section 3.4. We do so by multiplying the emission factors of the
different aircraft types from Section 3.4 by the values given in Table 13.
Table 14 Financially valued greenhouse gas emissions per aircraft-km, in

based on a shadow price of SHUWRQQH&22-equivalent
average case, contrails NPLQZKLFK12 NPLQZKLFK
during 10% of flight km contrails are formed contrails are formed*

40 seats, 200 km N.A.* 0.21 N.A.*
100 seats, 500 km 1.2 0.48 7.7
200 seats, 1,500 km 1.6 0.90 8.1
400 seats, 6,000 km 2.62 1.9 9.1
* It should be noted that on short trips it is highly unlikely that contrails will be formed during a
substantial proportion of flight time. These flights are generally at altitudes too low (temperatures
too high) for contrail formation, and no ’contrail’ figures are therefore presented for the 200-km
trip. Again we state that the figures that include contrail formation are only indicative and designed
primarily to illustrate the relative importance of contrail formation.
These figures can be translated to figures per passenger trip and per pas-
senger-kilometre. To this end we have employed the load factors presented
in Table 4 and the allocation to passenger and freight transport presented in
Annex V.
Table 15 Financially valued greenhouse gas emissions per passenger-km and per
(single) passenger trip, in EDVHG RQ D VKDGRZ SULFH RI SHU
tonne CO2-equivalent
Average case NO contrail formation contrail formation*
(contrails formed (90% of flight km) (10% of flight km)
during 10% of flight
km)
FWVSHU SHUSD[ FWVSHU SHUSD[ FWVSHU SHUSD[
pax.km single trip pax.km single trip pax.km single trip

40 seats, 200 km N/A N/A 1.0 2.1 N/A N/A.
100 seats, 500 km 2.1 8.9 0.72 3.6 11.5 57
200 seats, 1,500 km 1.1 16 0.61 9.2 5.5 82
400 seats, 6,000 km 0.60 35 0.43 25 2.1 126
(NB: Figures corrected for amount of freight transported.)

February 2002
The most important parameters determining the external costs of green-
house gas emissions are:
• Whether or not contrails are formed. The external costs of trips that do
cause contrails are substantially higher than those of trips that do not:
roughly a factor 5 to 15.
• The shadow price per tonne CO2-equivalent. Estimates may vary by a
factor 5, depending on the assumptions regarding the reduction target
and the permitted mechanisms.
In addition, the level of aircraft technology of course influences the specific

emissions per km and trip and thus external costs.
In quantitative terms, under the stated assumptions external costs are cal-
culated to lie within a range of 0.5 to 1 FW SHU SDVVHQJHUNLORPHWUH Ln-
creasing substantially, by a factor 5 to 15, during flight kilometres in which
contrails are formed. The external costs incurred during these kilometres
may rise to levels of one-third to one-half the price currently paid for flying
these kilometres.

February 2002
5 Valuing noise and air pollution
,QWURGXFWLRQ
In this chapter we treat the valuation of non-greenhouse gas emissions and

noise emissions having impacts at a local or regional level. More particularly,
we consider the valuation of noise emissions and emissions of NOX (oxides
of nitrogen), PM10 (fine particulate matter with a diameter of less than 10
microns), HC (hydrocarbons) and SO2 (sulphur dioxide). CO is not expected
to pose major problems in the future and is therefore not considered here.
First, in Section 5.2, we shall treat the valuation of noise emissions, moving
on in Section 5.3 to the valuation of the specified LTO emissions.
1RLVHQXLVDQFH
,PSDFWVRIQRLVHQXLVDQFH
Noise has been defined as ’unwanted sound’ and as such it reduces the
amount of the scarce good ’peace and quiet’, which is not generally traded in
16
the market . In addition, the costs of noise nuisance are not generally in-
cluded in the decision-making of the actor causing the nuisance. As such it
is an external effect. Transport noise is an extremely complicated case be-
cause of the large number of ’polluters’ and the large number of victims.
Typically, one can distinguish tree types of damages resulting from noise:
1 Nuisance effects, which make people want to pay for not being con-
fronted with noise.
2 Damage costs like health effects, currently the subject of numerous
studies.
3 Land use effects, a special form of adaptation or avoidance costs; in
many cases governments establish
FRUGRQV VDQLWDLUHV
around large
noise sources such as airports. This restricts optimal use of land, and
thus leads to costs, but does not reduce noise.
9DOXLQJQRLVHQXLVDQFH
1XLVDQFHHIIHFWV
Nuisance effects are valued in two ways:
• via ’hedonic pricing’ (HP) studies that reveal the impact of noise on
property prices. This has the advantage of potentially great accuracy;
• via ’stated preference’ (SP) techniques in which people are asked about
their willingness to pay for a quieter environment or their willingness to
accept more noise.
16
Schipper (1999).

February 2002
17
It is sometimes argued that the lower prices found in HP studies should not
be considered damage but rather a form of ‘compensation’ for people who
have chosen to live in the vicinity of an airport. Some people also argue that
airports increase property prices because people and firms are willing to pay
more for proximate access. Neither argument is sound.
Noise reduces the amount of the scarce good 'peace and quiet'. Therefore,
noise at a certain location will increase the cost of living at peaceful and
quiet locations, although the property at such locations does not provide any
additional benefits compared to a situation without noise. Therefore, noise
leads to a net decline of welfare and thus to social costs. These social costs
are external to the market as long as the parties causing them – airlines and
probably also air traffic control agencies – do not take them fully into account
in their decision-making.
The increase of property prices near airports results from the accessibility
benefits provided by airports. They are a perfect example of the benefits of
air transport being processed via market transaction in the economy, as
described in Chapter 2, but they provide no grounds for government inter-
vention.
$YRLGDQFHFRVWVODQGXVHHIIHFWV
Avoidance costs from noise nuisance come into play when governments
choose to limit direct noise damage and nuisance by implementing zoning
plans. In these FRUGRQVVDQLWDLUHV land use is restricted; for example, it may
18
not be permitted to build new houses . Such a FRUGRQ VDQLWDLUH leads to
welfare losses. It increases scarcities; it makes it impossible to make opti-
mum decisions on land use within this area and indirectly it also limits
choices elsewhere. The big difficulty in assigning a value to this loss of wel-
fare is the definition of the 'optimum' spatial planning that would have re-
sulted without the noise nuisance and attendant restrictions. Three Dutch
studies have tried to do just this for the case of Schiphol Airport, each in their
own way. These studies are described in Annex IV.
+HDOWKHIIHFWV
Noise has been shown to have potentially damaging effects on the stomach,
bowels, heart and blood circulation. A large number of qualitative and sev-
eral quantitative studies have been conducted, as described in Annex IV.
'RXEOHFRXQWLQJ"
An important question now is whether the four possible approaches are fully
complementary, or whether some results can be added without risk of dou-
ble counting.
First, let us consider the hedonic pricing and stated preference (HP and SP)
approaches to nuisance valuation. In principle, SP can also be used to value
the non-material damages of noise. However, in the case of aircraft noise it
is plausible that all the non-material damage experienced by people is re-
flected in property prices – except for the nuisance experienced by those
living elsewhere. As this last category is likely to be small, the HP method
and SP method are not complementary, i.e. the results cannot be added.
A second, more intriguing question is whether the nuisance costs may be

added to the welfare loss from indirect land use represented by the FRUGRQ
VDQLWDLUH. The answer is that they should be added. This is because the FRU
17
For example, by Hartog, J., ’Schiphol, feest voor columnisten’, ESB, 27-11-1998.
18
Zoning is also often implemented with an eye to public safety and air pollution. At most
European airports, however, noise targets are the most pressing issue.

February 2002
GRQ – although sometimes considered an instrument for SUHYHQWLQJ noise
nuisance – is in fact an instrument for DYRLGLQJ such nuisance. As such it
leads to avoidance costs that should be added to the damage to existing
property within the noise contours. As stated previously, these costs are not
directly visible as they are caused by the scarcity resulting from suboptimum
spatial planning. This can be illustrated by two examples.
Consider the case of the noise levels around a given airport increasing by
10%. If policies are consistent, this will lead to two things: more direct dam-
age to the houses in the current FRUGRQVDQLWDLUH and expansion of the FRU
GRQ, as more houses come to fall within the critical noise zone. Both mecha-
nisms will occur, at least in the long term. Consider, furthermore, the case of
a government opting to demolish houses that are heavily affected by aircraft
noise. In this case, both the decrease in direct damage costs and the in-
crease in opportunity costs of the FRUGRQVDQLWDLUH (these people need a new
house) should be taken into account. In other words: the people that lived in
the houses suffer less noise themselves, but raise the cost of living for peo-
ple outside the zone.
Third, external health costs should be considered. These can also be added
to the losses in property value, as these are two separate items. This can be
readily seen by following the marginal approach: more noise will lead both to
lower property values in HP studies and to higher external health costs in
health studies.
1RLVHHPLVVLRQVSHUDLUFUDIWW\SHDQGYDOXDWLRQ
Valuation of (marginal) noise is complicated because noise is itself a non-

linear phenomenon, its perception is certainly non-linear and its effects are
dependent on immission rather than emission. Assessment of the external
costs of noise is described in detail in Annex IV.
Estimates for the costs of nuisance have been derived primarily from
sources that use HP (hedonic pricing, revealed preference) techniques com-
plemented with sources that use WTP/WTA (willingness to pay/accept,
stated preference) approaches. WTP/WTA approaches seem to lead to
somewhat higher results than HP approaches.
The costs of indirect land use have been calculated for the case of Schiphol
Airport, combining several Dutch case studies on opportunity costs of the
land currently restricted by the airport. The ultimate conclusion is that in the
case of Schiphol the costs of indirect land use appear to be somewhat lower
than the direct costs of noise nuisance.
Although qualitatively there is abundant evidence of noise causing health

impacts, quantitative sources on the ensuing health costs are rather scarce.
The available quantitative sources have been used.
Finally, the results from all the different approaches have been combined,
leading to the following conclusions:
• it appears well possible to make narrow-range estimates of the total
external costs of airport noise. HP and WTP approaches supplemented
by health costs give a fairly consistent picture of the external costs of
noise from European airports;
• the biggest difficulty is the step from total costs to marginal costs per
aircraft type. Information on the shape of the cost curve as a function of
number of flights is not abundant. The available material suggests that

February 2002
marginal costs are lower than average costs. We have used an estimate
of 50%;
• finally, the relationships between aircraft size, aircraft technology and
external costs are hard to establish; airports worldwide use a very wide
variety of calculation methodologies. In this study, we have used the re-
lationships between aircraft size and noise nuisance used at Schiphol
Airport to establish noise charges there.
Following this methodology we arrive at the following estimates for the mar-
ginal noise costs from different aircraft equipped with fleet-average technol-
ogy and flying to and from airports located in areas with population densities
2
of 500-2,000 people per km (Table 16).
Table 16 Estimates of typical marginal external noise costs of different aircraft at large
European airports, in SHU/72IRUIOHHWDYHUDJHWHFKQRORJ\DLUFUDIW
per aircraft per seat per passenger
40 seater 180 4.5 9
100 seater 300 3 5
200 seater 600 3 4
400 seater 1,200 3 4
State-of-the-art technology aircraft are assumed to have about 3 dB(A) lower

noise emissions than today’s average aircraft, a halving of the noise level.
The external costs of noise emissions will therefore also be half as high. The
results are shown in Table 17.
Table 17 Estimates of typical marginal external noise costs of different aircraft at large
European airports, in SHU/72IRUVWDWHRIWKHDUWWHFKQRORJ\DLUFUDIW
per aircraft per seat per passenger
40 seater 90 2.2 4.5
100 seater 150 1.5 2.5
200 seater 300 1.5 2
400 seater 600 1.5 2
/72HPLVVLRQVRI12;30+&DQG62
(QYLURQPHQWDOLPSDFW
This section is devoted to the effects of aircraft emissions at ground level

and the first several hundred metres above ground level. It is not readily
feasible to define an altitude at which emissions no longer impact upon local
and regional air quality. For practical reasons we have chosen to take emis-
sions occurring during the landing and take-off cycle (LTO cycle: up to 3,000
ft = 905 m) as emissions that affect local and regional air quality. The LTO
cycle is also used for emission certification of aircraft engines.
Table 18 summarises the effects of the atmospheric emissions occurring in

the LTO cycle and covered by the present study. In the valuation of each
emission a distinction has been made between emissions released inside
and outside built-up areas. This has to do with the health effects of the emis-
sions, which are of course dependent on the size of the population exposed.

February 2002
Table 18 Environmental effects of atmospheric emissions covered by present study
Environmental and health effects
NOX acidification
eutrophication
summer smog (ozone) formation
health effects (via nitrate, ozone and NO2)
climate change (via ozone*)
PM10 health effects
HC summer smog (ozone) formation
health effects (via carcinogenic substances and ozone)
climate change (via ozone*)
SO2 acidification
health effects (via sulphate)
* Climate change effects of ozone are treated in the previous chapter.
9DOXDWLRQRILPSDFWV
Annex III contains an elaborate description of the literature on valuation of

the four emissions. In recent years much of the focus in valuing air pollution
has shifted to the direct damage cost approach via dose-response relation-
ships. The background to this development can be explained from the con-
clusions of the literature survey:
• knowledge about the damage costs of air pollution has improved vastly
in recent years. Progress has been particularly marked with respect to
the health effects of transport pollutants. Dose-response relationships
have been improved, as have dispersion models; in addition, the valua-
tion of (years of) life (lost) is now less controversial;
• improved knowledge of these health effects has led to rising valuations
of practically all emissions, to a better understanding of variation in cal-
culated values and thus to less spread of results once the factors behind
such variation are taken into account. For example, several studies
show that in an area like the inner city of Paris a gram of PM2.5 emission
leads to several RIKHDOWKGDPDJH ZKLOHLQVSDUVHO\ SRSXODWHGDUHDV
the figure is more like 7KLV VKRZV WKDW WKH SULFHV RI HPLVVLRQV
are very dynamic, depending on circumstance, and that, as scientific in-
sight grows, prices are more likely to increase rather than decrease;
• much of the focus with regard to health effects has shifted to ultra-fine
particles (PM2.5). Extensive analysis within the framework of the ExternE
programme and a 1990 WHO study, as well as US studies, shows ro-
bust and significant dose-effect relationships. As a result, air pollution
related costs from transport are dominated by the health effects of these
particles, which are quite consistent across the studies found. Although
aviation emits only limited amounts of these particles, we have included
them in our analysis;
• the most relevant health effects besides those of PM2.5 are those of NOx
and ozone;
• carbon monoxide, 1,3-butadiene, benzene and benzo(a)pyrene, other
suspect pollutants of the past, do not appear to give rise to significant
health effects. Either exposure or human sensitivity is relatively low;
• in contrast to the situation for human health effects, it remains difficult to
assign a financial value to impacts on biodiversity and forest health. It
should therefore be duly noted that the valuations cited in most studies
include several major ’items pending’ in this regard;
• KHDOWK GDPDJH costs alone already generally seem to be higher than the
SUHYHQWLRQ costs derived from the marginal costs of achieving SROLWLFDOO\

February 2002
agreed targets like the NECs (European National Emission Ceilings) un-
der the UN-ECE Convention on Long-Range Transboundary Air Pollu-
19
tion (LRTAP) . Given this phenomenon, as well as the progress made
on valuing health effects, the prevention cost methodology is becoming
less popular as a tool for emission valuation and air pollution cost-benefit
analysis.
From the synthesis of recent international literature in Annex III the following
estimates of shadow prices for the four pollutants have been derived.
Table 19 Overview of middle estimates from recent European literature for valuation
of NOX, PM10, HC, and SO2, based on damage costs, in SHU NJ
emitted
average urban rural
NOX 9 12 7
PM10 / PM2.5 150 300 70
HC 4 6 3
SO2 6 10 4
As the table shows, population density plays an important role in the range
of valuations found. This can be explained by the fact that the greater part of
the financial value of emissions consists of damage to human health, which
is of course highly dependent on population density.
Although the health impacts around Swedish and Norwegian airports, for
example, are less than those around Heathrow and Charles de Gaulle, for
example, we have chosen not to work with ’low’ and ’high’ estimates, in con-
trast to the estimates for greenhouse gas emissions. Large airports are gen-
erally located in fairly densely populated areas; the areas around Frankfurt,
Schiphol and Charles de Gaulle have densities of about 500-2,000 people
2
per km . We have chosen to use ’average’ values, as large airports are gen-
erally located neither in urban nor in rural areas.
/72HPLVVLRQVSHUDLUFUDIWDQGYDOXDWLRQV
The final step is to calculate the external costs of the different aircraft and
flights given in Table 6. We do so by multiplying the emission factors of the
different aircraft types from this table by the valuations given in Table 19.
Table 20 Financially valued LTO emissions from the four aircraft types with fleet-
average technology considered, in SHU/72F\FOH
NOX PM2.5 HC SO2 total per total per
aircraft passenger*
40 seater 10 20 3 0 33 1.6
100 seater 66 44 6 3 119 1.8
200 seater 186 44 6 5 241 1.6
400 seater 512 95 13 11 631 1.4
* Excluding emissions allocated to freight transported.
19
Theoretically, the marginal prevention costs necessary to achieve environmental
sustainability targets are equal to the marginal damage costs at the optimum.

February 2002
From the table the following conclusions can be drawn:
• NOX and PM2.5 emissions are the dominant factor in the value of aircraft
LTO emissions. NOX is important primarily because of the magnitude of
emissions, PM2.5 because of its relatively significant health impacts per
unit emission;
• the principal assumptions influencing external costs relate to population
density around airports and aircraft technology level (the latter especially
with respect to PM2.5 emissions). Both have been taken here as Euro-
pean averages for large airports;
• the external costs per passenger per LTO cycle are not very sensitive to
aircraft size, despite the higher load factor assumed for the larger aircraft
(65 vs. 80%). External costs thus vary between about DQGSHUSDs-
20
senger per LTO (i.e. per one-way trip) .
20
This is because large aircraft burn relatively more fuel during LTO and generally have
higher NOX emission indices than small aircraft. During LTO, small aircraft burn approxi-
mately 5 times as much fuel as during cruise, while for large aircraft this factor is about 10.

February 2002
February 2002
6 Synthesis of results
,QWURGXFWLRQ
In this chapter we combine the results of Chapters 4 and 5 to provide an

overall review of the external costs of air transport. First, we present and
discuss a summary graph of the marginal external costs per passenger-
kilometre due to noise, LTO emissions and climatic impacts. This graph is
based on the middle variant of this study: fleet-average technology and
valuation of the climatic impact of CO2 at SHUWRQQH:HWKHQPRYHRQ
to discuss the impact of different assumptions regarding level of technology
and valuation of climatic impact.
6XPPDU\RIDVVXPSWLRQVDQGYDULDQWV
So that the external cost figures presented in this chapter can be assessed
in their proper light, we shall here state once more the principal assumptions
and demarcations of scope on which they are based.
Valuations have been made for two different technology levels: ’fleet-
average’ and ’state-of-the-art’ technology, the latter with 20% lower fuel con-
sumption, 20% lower NOX and SO2 emission indices per kg of fuel burnt and
70% lower HC and PM10 indices per kg of fuel burnt.
The figures for LTO emissions and noise impacts are based largely on the
situation at large European airports. They are thus intended to represent a
typical average for marginal external costs at large European airports.
Three different valuations for a tonne of CO2 emissions have been used: a
middle estimate of SHU WRQQH DORZHVWLPDWHRI SHU WRQQH DQG D
high estimate of SHUWRQQH
The figures on climatic impact are intended to give an indication of the glob-
ally averaged marginal external costs of aircraft operations. The figures have
been differentiated for situations in which contrails are, and are not, formed.
This differentiation is based on three assumptions:
• the assumption that contrails are formed during 10% of flight time;
• the assumption that the climatic impacts of NOX and soot are not corre-
lated with contrail formation;
• the assumption that the climatic impact of contrail formation depends on
the number of aircraft-km flown, whereas other impacts are calculated
on the basis of fuel use and emission indices per kg of fuel used.
9DULDQWIOHHWDYHUDJHWHFKQRORJ\
In this section we present the external costs calculated under the assump-
tions stated in the previous paragraph for fleet-average technology and with
CO2 emissions valued at SHUWRQQHWKHPLGGOHZRUNLQJYDOXHDGRSWHG
in the present study.

February 2002
Figure 12 External costs in FWV SHU SDVVHQJHUNLORPHWUH IRUIOHHWDYHUDJH WHFKQRORJ\
and with CO2 emissions valued at WRQQH

100 seats, 500 km
200 seat, 1500 km
400 seats, 6000 km
0 2 4 6 8 10 12
PM2.5 CO2 + H2O
NOx
noise
From this graph and from the figures presented earlier we can draw the fol-
lowing conclusions:
• for aircraft flying distances of up to a few hundred kilometres, the exter-
nal costs of LTO emissions are dominant, especially noise costs. This
has the following background:
• on these flights the LTO phase forms a substantial part of the jour-
ney;
• these aircraft have relatively high noise emissions and relatively low
NOX emissions;
• over these distances aircraft do not reach cruise altitudes, where
contrails are formed;
• the longer the trip, the more climatic impacts predominate compared
with local and regional (LTO) impacts. For flights of over about 1,000
km, the external costs of climatic impacts exceed those of LTO impacts
(if no contrails are formed);
• the external costs of the climatic impacts of NOX emissions are approxi-
mately half those for CO2 and H2O; the share of NOX increases slightly
with increasing aircraft size and flight length;
• the question of whether or not FRQWUDLOV are formed is a factor weighing
heavily on the overall external costs of the climatic impacts of aviation.
Assuming that, on average, contrails are formed during 10% of flight
kilometres, the climatic impact of a contrail-causing aircraft-km is about
eight times as high as an aircraft-km not causing persistent contrails. It
should be stressed that:
1 the factor is based on the assumption that contrails are formed on
10% of global aircraft-kilometres;
2 the factor is a middle estimate of the globally averaged climatic im-
pact of contrails;

February 2002
3 there is a 67% probability that the true climatic impact of contrails is
between one-third and three times this middle estimate (IPCC 1999,
Figure 9);
4 scientific evidence on the climatic impacts of contrails is judged to be
’fair’ (IPCC 1999, Figure 9);
• given the fact that the process of contrail formation is scientifically fairly
well understood, it would be both attractive and feasible to develop
strategies to reduce or avoid contrail formation;
• we can also express the external costs calculated in this study as a per-
centage of ticket prices. If NO contrails are formed, total external costs
are around 5% of average ticket prices for a 6,000 km flight and about
20-30% of average ticket prices for a 200 km flight. Naturally, with high-
fare tickets this share will be lower, and with low-fare tickets higher;
• these percentages rise sharply for flights on which contrails are formed
during a substantial part of the journey. For example, the external costs
of flights during half of which contrails are formed amount to roughly 20
to 25% of the ticket prices paid for such flights.
9DULDQWVWDWHRIWKHDUWWHFKQRORJ\
In this paragraph we present the sensitivities of external costs to different

assumptions regarding aircraft technology and valuation of climatic impacts.
The assumptions are stated in Section 6.2.
Figure 13 External costs in FWSHUSHUSDVVHQJHUNLORPHWUHIRUVWDWHRIWKHDUWDLUFUDIW

technology and with CO2 emissions valued at WRQQH

100 seats, 500 km
200 seat, 1500 km
400 seats, 6000 km
0 2 4 6 8 10 12
PM2.5 CO2 + H2O
NOx
noise
From this figure it can be seen that external costs of local and regional im-
pacts (LTO phase) of aircraft with state-of-the-art technology are approxi-
mately half those for aircraft with fleet-average technology.

February 2002
In the case of no contrails being formed, the external costs associated with
climatic impact are also lower, owing to lower CO2, H2O, and NOX emissions.
The share of NOX emissions in the external costs of climate change is
slightly lower than in the case of fleet-average technology, as a result of the
20% lower NOX emission indices. Again, the share of NOX increases slightly
with increasing aircraft size and flight length.
The climatic impact of flight kilometres on which contrails are formed re-
mains essentially unchanged. What cannot be seen from the graph, how-
ever, is that kilometres flown with these new aircraft, with thermally more
efficient engines, will probably be associated with a somewhat higher prob-
ability of contrail formation than the 10% assumed for the fleet-average air-
craft. This is due primarily to the fact that more advanced engines have
cooler exhaust plumes, which condense more quickly.
2YHUYLHZRIRWKHUUHVXOWV
The variants with lower and higher valuations of climatic impact ( DQG
SHUWRQQH&22) are not shown here graphically. With these alternative
valuations the external costs of climatic impacts are 67% lower and 60%
higher, respectively, than in the baseline variant.
Concluding this main report, the figures for all the variants and respective
cost items are shown numerically in Table 21 to Table 23.

February 2002
Table 21 Overview of external costs as calculated in this study, with a shadow price for climatic impact of SHUWRQQH&22-equivalent
FOLPDWLFLPSDFWV ORFDOUHJLRQDOLPSDFWV WRWDO
CO2 + NOX contrails WRWDO noi- NOX PM10 HC SO2 WRWDO km w/o km with aver-
H2O via via (if any) km w/o km with aver- se contrails contrails age
O3 CH4 contrails contrails age

IOHHWDYHUDJHWHFKQRORJ\LQ SHUDLUFUDIWNP
50 seats, 200 km 0.16 0.11 -0.07 N/A 0.21 N/A 0.21 0.9 0.05 0.10 0.0 0.00 1.06 1.3 N/A 1.3
100 seats, 500 km 0.35 0.34 -0.21 7.2 0.48 7.7 1.20 0.6 0.13 0.09 0.0 0.01 0.84 1.3 8.5 2.0
200 seats, 1,500 km 0.62 0.72 -0.44 7.2 0.90 8.1 1.62 0.4 0.12 0.03 0.0 0.00 0.56 1.5 8.7 2.2
400 seats, 6,000 km 1.09 2.01 -1.22 7.2 1.87 9.1 2.59 0.2 0.09 0.02 0.0 0.00 0.31 2.2 9.4 2.9
IOHHWDYHUDJHWHFKQRORJ\LQ FWSHUSD[NP
50 seats, 200 km 0.81 0.57 -0.35 N/A 1.03 N/A 1.03 4.5 0.24 0.50 0.1 0.01 5.32 6.4 N/A 6.4
100 seats, 500 km 0.52 0.51 -0.31 10.7 0.72 11.5 1.79 0.9 0.20 0.13 0.0 0.01 1.25 2.0 12.7 3.0
200 seats, 1,500 km 0.42 0.49 -0.30 4.9 0.61 5.5 1.10 0.3 0.08 0.02 0.0 0.00 0.38 1.0 5.9 1.5
400 seats, 6,000 km 0.25 0.47 -0.29 1.7 0.44 2.1 0.61 0.0 0.02 0.00 0.0 0.00 0.07 0.5 2.2 0.7
VWDWHRIWKHDUWWHFKQRORJ\LQ SHUDLUFUDIWNP
50 seats, 200 km 0.13 0.06 -0.04 N/A 0.16 N/A 0.16 0.5 0.03 0.02 0.0 0.00 0.51 0.7 N/A 0.7
100 seats, 500 km 0.30 0.17 -0.11 7.2 0.37 7.6 1.09 0.3 0.08 0.02 0.0 0.00 0.41 0.8 8.0 1.5
200 seats, 1,500 km 0.49 0.49 -0.30 7.2 0.68 7.9 1.40 0.2 0.08 0.01 0.0 0.00 0.29 1.0 8.2 1.7
400 seats, 6,000 km 0.92 1.22 -0.74 7.2 1.40 8.6 2.12 0.1 0.05 0.00 0.0 0.00 0.16 1.6 8.8 2.3
VWDWHRIWKHDUWWHFKQRORJ\LQ FWSHUSD[NP
50 seats, 200 km 0.67 0.31 -0.19 N/A 0.79 N/A 0.79 2.3 0.15 0.12 0.0 0.01 2.55 3.3 N/A 3.3
100 seats, 500 km 0.44 0.26 -0.16 10.7 0.55 11.3 1.62 0.4 0.13 0.03 0.0 0.01 0.62 1.2 11.9 2.2
200 seats, 1,500 km 0.33 0.33 -0.20 4.9 0.46 5.3 0.95 0.1 0.05 0.00 0.0 0.00 0.20 0.7 5.5 1.1
400 seats, 6,000 km 0.21 0.28 -0.17 1.7 0.33 2.0 0.49 0.0 0.01 0.00 0.0 0.00 0.04 0.4 2.0 0.5

February 2002 - Draft -
CO2+ NOX contrails WRWDO noi- NOX PM10 HC SO2 WRWDO km w/o km with aver-

50 seats, 200 km 0.05 0.04 -0.02 N/A 0.07 N/A 0.07 0.9 0.05 0.10 0.0 0.00 1.06 1.1 N/A 1.1
100 seats, 500 km 0.12 0.11 -0.07 2.4 0.16 2.6 0.40 0.6 0.13 0.09 0.0 0.01 0.84 1.0 3.4 1.2
200 seats, 1,500 km 0.21 0.24 -0.15 2.4 0.30 2.7 0.54 0.4 0.12 0.03 0.0 0.00 0.56 0.9 3.3 1.1
400 seats, 6,000 km 0.36 0.67 -0.41 2.4 0.62 3.0 0.86 0.2 0.09 0.02 0.0 0.00 0.31 0.9 3.3 1.2
50 seats, 200 km 0.27 0.19 -0.12 N/A 0.34 N/A 0.34 4.5 0.24 0.50 0.1 0.01 5.32 5.7 N/A 5.7
100 seats, 500 km 0.17 0.17 -0.10 3.6 0.24 3.8 0.60 0.9 0.20 0.13 0.0 0.01 1.25 1.5 5.1 1.8
200 seats, 1,500 km 0.14 0.16 -0.10 1.6 0.20 1.8 0.37 0.3 0.08 0.02 0.0 0.00 0.38 0.6 2.2 0.7
400 seats, 6,000 km 0.08 0.16 -0.10 0.6 0.15 0.7 0.20 0.0 0.02 0.00 0.0 0.00 0.07 0.2 0.8 0.3
50 seats, 200 km 0.04 0.02 -0.01 N/A 0.05 N/A 0.05 0.5 0.03 0.02 0.0 0.00 0.51 0.6 N/A 0.6
100 seats, 500 km 0.10 0.06 -0.04 2.4 0.12 2.5 0.36 0.3 0.08 0.02 0.0 0.00 0.41 0.5 2.9 0.8
200 seats, 1,500 km 0.16 0.16 -0.10 2.4 0.23 2.6 0.47 0.2 0.08 0.01 0.0 0.00 0.29 0.5 2.9 0.8
400 seats, 6,000 km 0.31 0.41 -0.25 2.4 0.47 2.9 0.71 0.1 0.05 0.00 0.0 0.00 0.16 0.6 3.0 0.9
50 seats, 200 km 0.22 0.10 -0.06 N/A 0.26 N/A 0.26 2.3 0.15 0.12 0.0 0.01 2.55 2.8 N/A 2.8
100 seats, 500 km 0.15 0.09 -0.05 3.6 0.18 3.8 0.54 0.4 0.13 0.03 0.0 0.01 0.62 0.8 4.4 1.2
200 seats, 1,500 km 0.11 0.11 -0.07 1.6 0.15 1.8 0.32 0.1 0.05 0.00 0.0 0.00 0.20 0.4 2.0 0.5
400 seats, 6,000 km 0.07 0.09 -0.06 0.6 0.11 0.7 0.16 0.0 0.01 0.00 0.0 0.00 0.04 0.1 0.7 0.2

- Draft - February 2002
CO2+ NOX contrails WRWDO noi- NOX PM10 HC SO2 WRWDO km w/o km with aver-

50 seats, 200 km 0.27 0.19 -0.12 N/A 0.34 N/A 0.34 0.9 0.05 0.10 0.0 0.00 1.06 1.4 N/A 1.4
100 seats, 500 km 0.58 0.57 -0.35 12.0 0.80 12.8 2.00 0.6 0.13 0.09 0.0 0.01 0.84 1.6 13.6 2.8
200 seats, 1,500 km 1.04 1.19 -0.73 12.0 1.51 13.5 2.71 0.4 0.12 0.03 0.0 0.00 0.56 2.1 14.1 3.3
400 seats, 6,000 km 1.81 3.34 -2.04 12.0 3.12 15.1 4.32 0.2 0.09 0.02 0.0 0.00 0.31 3.4 15.4 4.6
50 seats, 200 km 1.35 0.95 -0.58 N/A 1.72 N/A 1.72 4.5 0.24 0.50 0.1 0.01 5.32 7.0 N/A 7.0
100 seats, 500 km 0.86 0.85 -0.52 17.9 1.20 19.1 2.99 0.9 0.20 0.13 0.0 0.01 1.25 2.4 20.4 4.2
200 seats, 1,500 km 0.70 0.81 -0.49 8.1 1.02 9.2 1.84 0.3 0.08 0.02 0.0 0.00 0.38 1.4 9.5 2.2
400 seats, 6,000 km 0.42 0.78 -0.48 2.8 0.73 3.5 1.01 0.0 0.02 0.00 0.0 0.00 0.07 0.8 3.6 1.1
50 seats, 200 km 0.22 0.10 -0.06 N/A 0.26 N/A 0.26 0.5 0.03 0.02 0.0 0.00 0.51 0.8 N/A 0.8
100 seats, 500 km 0.50 0.29 -0.18 12.0 0.61 12.6 1.81 0.3 0.08 0.02 0.0 0.00 0.41 1.0 13.0 2.2
200 seats, 1,500 km 0.82 0.81 -0.49 12.0 1.13 13.1 2.33 0.2 0.08 0.01 0.0 0.00 0.29 1.4 13.4 2.6
400 seats, 6,000 km 1.53 2.03 -1.24 12.0 2.33 14.3 3.53 0.1 0.05 0.00 0.0 0.00 0.16 2.5 14.5 3.7
50 seats, 200 km 1.11 0.52 -0.32 N/A 1.32 N/A 1.32 2.3 0.15 0.12 0.0 0.01 2.55 3.9 N/A 3.9
100 seats, 500 km 0.74 0.43 -0.26 17.9 0.91 18.8 2.70 0.4 0.13 0.03 0.0 0.01 0.62 1.5 19.4 3.3
200 seats, 1,500 km 0.55 0.55 -0.33 8.1 0.77 8.9 1.58 0.1 0.05 0.00 0.0 0.00 0.20 1.0 9.1 1.8
400 seats, 6,000 km 0.36 0.47 -0.29 2.8 0.54 3.3 0.82 0.0 0.01 0.00 0.0 0.00 0.04 0.6 3.4 0.9

February 2002 - Draft -
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SIKA, 1999, gYHUV\Q DY VDPKlOOVHNRQRPLVND NDO\OSULQFLSHU RFK NDON\O

YlUGHQ Sn WUDQVSRUWRPUnGHW, SIKA nr. 6, Stockholm (summary sent in a
memo by .nJHVRQ3
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Stratus Consulting, 2001, &RQWUROOLQJ JUHHQKRXVH JDV HPLVVLRQ IURP WKH

DYLDWLRQVHFWRU, Ries, H., J. Agras & J. Henderson, Boulder, Colorado
Tol, R.S.J., S. Fankhauser & D.W. Pearce, 1996 µ(TXLW\DQGWKH $JJUHJD

WLRQRIWKH'DPDJH&RVWVRI&OLPDWH&KDQJH’, in: N. Nakicenovic, W.D. PEW
Center on Global Climate Change, 1999, International emissions trading and
global climate change, Arlington, USA
Tol, R.S.J., 1999, 7KH 0DUJLQDO &RVWV RI *UHHQKRXVH *DV (PLVVLRQV, The
Energy Journal, 20 (1), pp. 61-81.
Umweltbundesamt, Berlin
• UBA 1991, $GYDQWDJHV RI HQYLURQPHQWDO SURWHFWLRQ &RVWV RI HQYLURQ
PHQWDOSROOXWLRQDQRYHUYLHZRIWKHUHVHDUFKSURJUDPPH&RVWVRIHQYL
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Van der Leun, J.C., et al., J. Photochem. Photobiol. B: Biol. 46. Elsevier
Science S.A., Lausanne, Switzerland
Verhoef, E.T. 1996, (FRQRPLF(IILFLHQF\DQG6RFLDO)HDVLELOLW\LQWKH5HJX

ODWLRQRI5RDG7UDQVSRUW([WHUQDOLWLHV, Tinbergen Institute, Amsterdam

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VROM, Dutch Ministry of Housing, Spatial Planning and the Environment,
The Hague
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WLRQ
- VROM, 2000,1DWLRQDO(PLVVLRQ5HJLVWUDWLRQ
WHO, World Health Organization, 1999 +HDOWK FRVWV GXH WR URDG WUDIILF
UHODWHG DLU SROOXWLRQ DQ LPSDFW DVVHVVPHQW SURMHFW RI $XVWULD )UDQFH DQG
6ZLW]HUODQG prepared for the World Health Organisation ministerial confer-
ence on environment and health, London, June 1999
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2]RQH'HSOHWLRQ*OREDO2]RQHDQG0RQLWRULQJ3URMHFW, Report No.44,
Geneva, Switzerland

February 2002
List of terms and abbreviations
(85 euro
FW euro cent
0 million euro
AERO Aviation Emissions and analysis of Reduc-
tion Options: model developed by Dutch
CAA
AERONOX EU project to study impact of NOx emissions
from aircraft at altitudes between 8 to 15 km
aerosols airborne suspension of small particles
anthropogenic caused or produced by humans
airside infrastructure infrastructure functioning primarily for airport
activity (aircraft and passenger handling,
etc.); airports also have subsidiary commer-
cial activities (hotels, shops, etc.) and inter-
face with landside infrastructure (roads,
railways, etc.)
ATC Air Traffic Control
background atmosphere the atmosphere remote from anthropogenic
or volcanic influences
black carbon graphitic carbon, sometimes referred to as
elemental or free carbon
block time the time elapsing from start of taxi out, at
origin, to end of taxi in, at destination
bunker fuels (international) fuels consumed for international marine and
air transportation
CAA Civil Aviation Authority
CAEP Committee on Aviation Environmental Pro-
tection: environmental committee of ICAO
CBA cost-benefit analysis
cirrus thin, high clouds composed mainly of ice
particles
contrail condensation trail: white line-cloud often
visible behind aircraft
CO2 carbon dioxide, the principal greenhouse
gas
CO2, high variant in this report, sensitivity analysis using a
high value for CO2 emissions (EUR 50 in-
stead of EUR 30 per tonne)
CO2, low variant in this report, sensitivity analysis using a low
value for CO2 emissions (EUR 10 instead of
EUR 30 per tonne)
CVM Contingent Valuation Method
distribution in this report, the extent to which costs and
benefits accrue to the same party; pricing
based on fair distribution may conflict with
optimum or efficient pricing

February 2002
Dp/F00 the ICAO regulatory parameter for gaseous
emissions, expressed as the mass of the
pollutant emitted during the landing/take-off
(LTO) cycle divided by the rated thrust
(maximum take-off power) of the engine
efficiency in economic theory and in this report, the
pursuit of optimum pricing based on mar-
ginal costs; cf. ‘distribution’ and ‘fairness’
emission Index the mass of material or number of particles
emitted per burnt mass of fuel (for NOX in g
of equivalent NO2 per kg of fuel; for hydro-
carbons in g of CH4 per kg of fuel)
energy efficiency ratio of energy output of a conversion proc-
ess or of a system to its energy input; also
known as first-law efficiency.
environmental cost financial value assigned to negative envi-
ronmental effects, based either on the costs
of losses or on the costs of prevention
external costs (of mobility) negative external effects of mobility as-
signed a monetary value
external effects (of mobility) effects not taken into account by users in
their transport decision; in this report, the
following are designated external effects:
noise nuisance, emissions, traffic accidents
(in part) and congestion
equity in economic theory and in this report, a sec-
ond pricing policy consideration alongside
efficiency
FAA United States Federal Aviation Authority
FESG Forecasting and Economic Support Group of
CAEP
greenhouse gas a gas that absorbs radiation at specific (in-
frared) wavelengths of the spectrum emitted
by the Earth’s surface and by clouds. At
altitudes cooler than surface temperature,
these gases emit infrared radiation. The net
effect is a local trapping of part of the ab-
sorbed energy and a tendency to warm the
planet's surface. Water vapor (H2O), carbon
dioxide (CO2), nitrous oxide (N2O), methane
(CH4) and ozone (O3) are the principal
greenhouse gases in the Earth’s atmos-
phere.
Green Paper in this report, the European Commission’s
Green Paper Towards Fair and Efficient
Pricing in Transport, 1995, a first step to-
wards a common framework for a European
transport pricing policy; see also ‘White Pa-
per’
H2O water (vapour)
HC hydrocarbons; in this report, all hydrocar-
bons
ICA intercontinental: aviation term

February 2002
internal costs (of mobility) social costs already passed on to users by
the market mechanism (i.e. already reck-
oned with in individual transport decisions)
and for which government intervention is
therefore inappropriate
IPCC Intergovernmental Panel on Climate
Change: worldwide scientific panel estab-
lished to coordinate international climate
change research and publication of results
Ke Kosten unit: Dutch method for aggregating
annual noise nuisance
Ke zone zone in which aggregate annual noise nui-
sance exceeds a given number of Kosten
units (Ke)
kerosene hydrocarbon fuel for jet aircraft
Landing/Take-Off (LTO) cycle a reference cycle for the calculation and
reporting of emissions, composed of four
power settings and related operating times
for subsonic aircraft engines [Take-Off -
100% power, 0.7 minutes; Climb - 85%, 2.2
minutes; Approach - 30%, 4.0 minutes;
Taxi/Ground Idle - 7%, 26.0 minutes]
LT long-term
LTO Landing and Take-Off: every flight move-
ment at an airport is associated with one
LTO cycle; at Dutch airports a flight move-
ment is counted as half an LTO cycle
Mach number aircraft speed divided by the local speed of
sound
marginal costs additional costs of one extra unit of mobility,
one extra vehicle, vessel or aircraft kilometre
MBO market-based option (levies or trading re-
gimes) for limiting the carbon dioxide emis-
sions of the aviation sector
MIT Massachusetts Institute of Technology
MSC Marginal Social Costs
MT medium-term
MTOW Maximum Take-Off Weight (aircraft gross
vehicle weight, GVW)
NOX generic term for oxides of nitrogen (NO,
NO2, NO3), which contribute to acid rain,
eutrophication and tropospheric ozone for-
mation and indirectly to global warming and
ozone layer changes
optimum (pricing policy) in this report, a pricing policy in accordance
with efficiency principles, i.e. based on mar-
ginal social cost
ozone a gas formed naturally in the stratosphere by
the action of ultraviolet radiation on oxygen
molecules; a molecule of ozone is made of
up three atoms of oxygen

February 2002
ozone layer a layer of ozone gas in the stratosphere that
shields the Earth from most of the harmful
ultraviolet radiation coming from the sun
passenger-km passenger-kilometre, unit of passenger
transport provision: one person moved one
kilometre
pax aviation term for ‘passengers’
pkm see 'passenger-km'
PM10 particles of soot less than 10µm in diameter;
practically all particles in exhaust fumes
pressure ratio the ratio of the mean total pressure exiting
the compressor to the mean total pressure
of the inlet when the engine is developing
take-off thrust rating in ISA (International
Standard Atmosphere) sea level static con-
ditions
-2
radiative forcing a change in average net radiation (in W m )
at the top of the troposphere resulting from a
change in either solar or infrared radiation
due to a change in atmospheric greenhouse
gas concentrations; perturbance of the bal-
ance between incoming solar radiation and
outgoing infrared radiation
relative humidity the ratio of the partial pressure of water va-
pour in an air parcel to the saturation pres-
sure (usually over a liquid, unless specified
otherwise)
RIVM (Netherlands) National Institute for Public
Health and the Environment
RLD Dutch Civil Aviation Authority
SO2 sulphur dioxide
social costs (of mobility) in principle all costs, i.e. internal costs, ex-
ternal costs and government expenditure
entailed by transport mobility. In this project,
with its policy focus, internal costs are not
relevant; for this reason ‘social costs’ here
designate the external part of government
expenditure and the external costs arising
from transport mobility
soot carbon-containing particles formed during
incomplete combustion processes
specific fuel consumption the fuel flow rate (mass per time) per thrust
(force) developed by an engine
ST short-term
stratosphere the stably stratified atmosphere above the
troposphere and below the mesosphere,
between about 10 and 50 km altitude, con-
taining the main ozone layer
tkm see 'tonne-km'
tonne-km tonne-kilometre, unit of freight transport
provision: one tonne moved over one kilo-
metre

February 2002
tropopause the boundary between the troposphere and
the stratosphere, usually characterised by
an abrupt change in lapse rate (vertical tem-
perature gradient)
troposphere the layer of the atmosphere between the
Earth’s surface and the tropopause below
the stratosphere (i.e. the lowest 10 to 18 km
of the atmosphere) where weather proc-
esses occur
vehicle-km vehicle-kilometre, unit of transport: one vehi-
cle moved over one kilometre
vkm see 'vehicle-km'
VOLY Value of Life Year lost: mortality valuation
method that takes life expectancy into ac-
count; generally leads to lower estimates
than the VOSL approach
VOSL Value of Statistical life: mortality valuation
method that uses a standard value for a
human life, irrespective of life expectancy;
generally leads to higher estimates than the
VOLY approach
WTA Willingness to Accept
WTA/WTP Willingness To Accept/Pay, method of valu-
ing negative external effects based on the
willingness of citizens to accept an increase
in or pay for a reduction of a certain amount
of environmental burden

February 2002
&(
CE
6ROXWLRQVIRU
Solutions for
HQYLURQPHQW
environment,
economy and
HFRQRP\DQG
technology
WHFKQRORJ\
Oude Delft 180

Oude Delft 180
2611 HH Delft
2611 HH Delft
The Netherlands
The Netherlands
tel: +31 15 2150 150
tel: +31 15 2 150 150
fax: +31 15 2150 151
fax: +31 15 2 150 151
e-mail:ce@ce.nl
e-mail: ce@ce.nl
website:www.ce.nl
website: www.ce.nl
External costs of aviation

Background report
Delft / Amsterdam
February 2002
Authors: Dings, J.M.W., R.C.N. Wit, B.A. Leurs, S.M. de Bruyn, M.D. Davidson
(CE)
W. Fransen (INTEGRAL Knowledge Utilization)
Foreword
Besides numerous benefits to citizens and companies, air transport also

brings undesired side-effects such as emissions and noise nuisance. Most of
these negative ‘external’ effects, as they are called, are currently not priced
or only to a limited degree. Consequently, the market place creates insuffi-
cient incentives to reduce these external effects.
The study ‘External costs of aviation’, commissioned by the German Um-

weltbundesamt, aims to contribute to the ongoing international process to
create market-based incentives to the aviation industry to reduce the envi-
ronmental impact of aviation. It does to by assessing, within margins as
small as possible, external costs of aviation.
The report at hand is a background report to the study ‘External costs of

aviation’. It contains four technical annexes.
The first annex, written by CE, contains an overview of the international lit-
erature on the valuation of greenhouse gas emissions.
The second annex, written Mr Fransen, describes the dependence of cli-

matic impact of aviation on the occurrence of contrails, and the dependence
of contrail formation on operational circumstances.
The third annex, written by CE, contains an assessment of international lit-

erature o the valuation of non-greenhouse gas emissions, such as NOX and
SO2.
The fourth annex, written by CE, contains a short description of the method-
ology by which emissions and noise are allocated to passenger and freight
transport in this study.
We gratefully acknowledge the support of the German Umweltbundesamt,

and in particular Mr Friedrich, Mr Huckestein, Mr Heinen and Mrs Mäder for
their always constructive comments and flexible and respectful attitude.
Needless to say, responsibility for the content of this report rests fully with
the authors.
Contents
Annex I
External costs of greenhouse gas emission
CE, Solutions for environment, economy and technology
Leurs, B.A., P.B. Klimbie, J.M.W. Dings, M.D. Davidson, R.C.N. Wit
Annex II
The contribution of contrail occurrence to climatic change induced by avia-
tion
INTEGRAL Knowledge Utilization
W. Fransen
Annex III
External costs of LTO emissions
Dings, J.M.W., B.A. Leurs, R.C.N. Wit
Annex IV
External costs of noise emissions
Dings, J.M.W., B.A. Leurs, S.M. de Bruyn, R.C.N. Wit
Annex V
Allocating costs to passengers, freight, and aircraft types
Dings, J.M.W.
&(
CE
6ROXWLRQVIRU
Solutions for
HQYLURQPHQW
environment,
economy and
HFRQRP\DQG
technology
WHFKQRORJ\
Oude Delft 180

Oude Delft 180
2611 HH Delft
2611 HH Delft
The Netherlands
The Netherlands
tel: +31 15 2150 150
tel: +31 15 2 150 150
fax: +31 15 2150 151
fax: +31 15 2 150 151
e-mail:ce@ce.nl
e-mail: ce@ce.nl
website:www.ce.nl
website: www.ce.nl
([WHUQDOFRVWVRIDYLDWLRQ
Annex I: External costs of

greenhouse gas emission
Delft, February 2002
Author(s): B.A. Leurs

P.B. Klimbie
J.M.W. Dings
M.D. Davidson
R.C.N. Wit
Contents
1 External costs of greenhouse gas emission 1

1.1 Methods for the valuation of CO2 1
1.2 Summary of results from prevention cost method 2
1.2.1 Every region it’s own 2
1.2.2 Emission trade between Annex-I countries 3
1.2.3 Global emission trading 3
1.2.4 Some other variants 3
1.3 Literature studied 4
1 External costs of greenhouse gas emission
0HWKRGVIRUWKHYDOXDWLRQRI&2
The methods for determining the price of CO2 (per kilogram), are the pre-
vention cost method and the damage cost method.
Below we will briefly describe these two methods and the most important
determinants of the differences between these methods. This knowledge is
useful when analysing the literature. After that we will judge both methods.
3UHYHQWLRQFRVWPHWKRG
The prevention cost method is based on the costs that must be made to
reach a predetermined goal. We distinguish two variants:
• one at which a emission reduction goal is enforced to the aviation sector
(‘closed system’);
• in a second possible variant the aviation sector will be included in the
Kyoto Protocol; in this variant the sector will have an own goals just like
the other Annex 1 Parties, but it will be free to trade emissions according
to the mechanisms of the Kyoto Protocol.
In the prevention cost method, the most important variables determining the
final shadow price are:
1 The reduction goal to be achieved.
2 The degrees of freedom in trade: is trade possible between Annex 1
countries or even world-wide?
3 The degrees of freedom in the use of 'flexible mechanisms' like emission
trade, the Clean Development Mechanism and Joint Implementation.
'DPDJHFRVWPHWKRG
Besides the prevention cost method, the literature also pays much attention
to the damage cost method. In this method it is tried to establish the regional
consequences of climate change, mainly higher water levels and shifts in
climatic zones. These changes in the ecosystem damage the economy.
The differences in literature sources that use this approach are mainly de-
pendent on differences in dose-response relationships. Also discount rates
play a large role, as damages will most occur in the future. Recalculating
damages to net present values implies use of an interest rate reflecting so-
cietal preferences of time. This is illustrated in Table 1.
Table 1 Sensitivity of damage costs estimates of CO2 for interests rates (IPCC 1996)
GLVFRXQW &2VKDGRZSULFHLQ SHUWRQQH
UDWH low high

2% 14 33
5% 1.4 3.3
Some other studies that use the damage costs method to value the damage
of CO2 emissions Nordhaus (1991, 1993) and Fankhauser (1994). Nordhaus
calculates in his studies costs of about WRQQH&22, Fankhauser arrives
at WRQQH&22.
7.700.1/External costs of aviation 1

February 2002, Annex I
In this study we will only use the prevention cost method to establish a CO2
price, and we will base our estimates on the Kyoto shadow price, for reasons
that have been explained in the main text.
&RQYHUVLRQUDWHVXVHG
In many cases we didn’t copy the exact results from the respective sources
for the following two reasons:
1 In some cases the results are given in the reduction of one tonne C and
in other cases in the reduction of one tonne CO2; we have decided to
present all numbers in prices per avoided tonnes of CO2. We have mul-
tiplied the prices of C with 12/44 where necessary, for the reduction of
one tonne C equals the reduction of 44/12 tonne of CO2.
2 In some cases the results are given in DQGLQVRPHFDVHVLQ867KH
basic year for the different data also varies. We’ve decided to convert all
values to :HKDYHXVHGWKHIROORZLQJFRQYHUVLRQWDEOH
Table 2 Conversion rates from $ to

\HDU &3,86 ([FKDQJHUDWHV 86
1990 105.4 1.40

1991 109.8 1.30
1992 113.1 1.44
1993 116.5 1.19
1994 119.5 1.25
1995 122.9 1.32
1996 126.5 1.28
1997 129.4 1.11
1998 131.4 1.19
1999 134.3 1.07
6XPPDU\RIUHVXOWVIURPSUHYHQWLRQFRVWPHWKRG
This paragraph presents the CO2-emission reduction costs found in the lit-
erature. A complete review follows later on in this annex.
The ranges of values we’ve found are presented into four variants:
1 First the variants where the different regions must reach their goal in
their own region without trade between the regions.
2 Then the variants where international emission-trading is permitted be-
tween Annex I countries.
3 Next a variants where global emission trading is permitted, in other
words the maximal variant of CDM.
4 We’ll finish with a few examples of values where sinks are permitted,
other greenhouse gasses can be reduced or explicitly not, agreement on
double-bubble, etc.
(YHU\UHJLRQLW
VRZQ
At first we’ll give the ranges for the different regions distinguished in the
models. Hereby we present the range in the case where the extreme values
are being ignored and, between brackets, the whole range.
It further concerns the costs involved for reaching the Kyoto-goals for every
region when all reductions must be made in own country.
2 7.700.1/External costs of aviation

Table 3 Every region on it’s own
5HJLRQ 0DUJLQDOUHGXFWLRQFRVWLQ SHUWRQQH&2
US 25 – 78 (17 – 105)
EU 40 – 83 (29 – 216)
Japan 29 – 177 (22 – 209)
Sources:
• for the US: 9 literature sources;
• for the EU: 8 literature sources;
• for Japan: 8 literature sources.
This table shows that in all probability the US can reach their goal in their
own country in the cheapest way. This is because of the relatively energy-
inefficient structure of the American economy, where with the help of energy-
savings and ‘good-housekeeping’ a lot of win-win measures can be taken.
Europe is already in a further stage of efficiency-increasing measures, which
makes it more expensive to take further measures.
(PLVVLRQWUDGHEHWZHHQ$QQH[,FRXQWULHV
When we study the price per avoided tonne CO2 when emission trading be-
tween Annex I countries is permitted, we find the following range of values:
±±
This range is based on the results of 10 literature sources.
In this scenario Joint Implementation is permitted, but the Clean Develop-

ment Mechanism is prohibited.
*OREDOHPLVVLRQWUDGLQJ
In the variant where global emission trading takes place to minimise the total
costs to reach the Kyoto-goals, more cheap measurements come available
resulting in a lower price.
In this situation there has been assumed that in all models the countries not
belonging to Annex I will have emission rights for the forecasted emissions
of that country in 2010. This results in an emission ceiling leading to a real
market. This variant can be seen as a upper-limit of the opportunities of the
CMG-model.
The ranges of values found are (between bracelets is the range without ex-
treme values:
±±
There were only 4 sources of literature presenting these results.
6RPHRWKHUYDULDQWV
,Q WKH OLWHUDWXUH DQDO\VHG ZH HQFRXQWHUHG VRXUFHV ZKLFK KDYH DVVHVVHG
VRPH H[WUD YDULDQWV %HORZ LQ EULHI WKH FKDUDFWHULVWLFV ZLWK FRUUHVSRQGLQJ
YDOXHV

Table 4 Results sensitive for assumptions
&KDUDFWHULVWLFV 'HYHORSPHQWVKDGRZSULFH 5HIHUHQFH
Annex I trade + counting all the sinks 22 -> 7 Annex I trade

Annex I trade + counting halve of the sinks 22 -> 14 Annex I trade
Annex I trade + infinite high costs for reduc- 22 -> 29 Annex I trade
tion CO2 gasses
Double-bubble 17 -> 9 (US, Jap. en Austr.) Annex I trade
17 -> 74 (rest OECD)
Each of these variants was presented by only one source of literature.
Next to these variants model calculations have been made at which the
goals of Kyoto have been extrapolated to 2020. We’ve presented the differ-
ences in the prices per avoided tonne CO2 in Table 5.
Table 5 Kyoto targets also apply to 2020

6RXUFH 3ULFHVLQHQ &KDUDFWHULVWLF
McKibben et al. (1999) 17 -> 31 Annex I trade

McKibben et al. (1999) 6 -> 10 Global emission trade
MacCracken et al. (1999) 22 -> 36 Annex I trade
The last two tables show that:

• fully counting of sinks lowers the price of CO2 with two thirds;
• counting halve the sinks lowers the price of CO2 with one third;
• infinite high costs for not-CO2 gasses raise the price of greenhouse gas-
ses with almost one third;
• the effect in implementation of double-bubble differs greatly between the
‘bubbles’;
• the extrapolation of the Kyoto-goals to 2020 causes higher reduction
costs, approximately 60% per tonne avoided.
/LWHUDWXUHVWXGLHG
The separate sources of literature that are found and analysed are pre-
sented below.
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GXVWU\OHYHO HPLVVLRQ WUDGLQJ WR UHGXFH JUHHQKRXVH JDVVHV UHVXOWV
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This study describes the results of model exercises with the PRIMES-model,
a partial balance model aimed at the energy markets within the European
Union.
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LQJ GHDOWZLWK7KLVVWXG\VKRZVFOHDUO\WKHFRVWDGYDQWDJHV RIWUDGLQJ WKDW
FDQEHUHDFKHG
7KHILYHVFHQDULR¶VDUH
• every member state reaches his own goal, without trading;
• every sector within a Member State reaches its reduction as is deter-
mined for every member state;

• ever member state reaches his own goal where trading between energy
producers is permitted;
• ever member state reaches his own goal where trading between energy
producers and the energy intensive industries is permitted;
• the European Union reaches the goal, where trading between all sectors
in all members states is permitted.
7KH FRVWV WR UHDFK WKH JRDOV RI WKH (8 YDU\ JUHDWO\ EHWZHHQ WKH GLIIHUHQW
VFHQDULR¶V7DEOHVKRZVDRYHUYLHZRIWKHVFHQDULR¶VDQGWKHPDUJLQDOUH
GXFWLRQFRVWVRIWKHODVWWRQQH&2QHHGHGWRUHDFKWKHJRDO
Table 6 Estimated price per avoided tonne CO2

Scenario Marginal reduction cost (in
$ 1995 per tonne CO2)
(I) Every sector within the member state same target as member state 108
(ii) Every member state has a target. 46
(iii) Trade between energy producers 39
(iv) Trade between energy producers and energy intensive sectors. 37
(v) Free trade within the EU 28
This shows that the Kyoto goal of the EU can be reached at relatively low
costs if a EU internal emission trading will be set up.
An important assumption in this modelling is that the transaction costs of a

emission trading system are set to zero.
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YRRUVHFWRUHQHQZHUHOGUHJLR¶V(FRQRPLFFRQVHTXHQFHVRIWKH.\RWR
SURWRFROIRUVHWRUVDQGZRUOGUHJLRQVQR'HQ+DDJ
In this paper the investigators have performed model calculations with the
model WorldScan. Goal of this paper was to map especially the economic
consequences of the Kyoto protocol, focused especially on the conse-
quences for energy exporting countries and developing countries.
WorldScan is a global general balance model, primarily to describe long
term developments. The quotes about the developments in the period 2008-
2012 must therefor be carefully interpreted.
The simulations are confined only to CO2 greenhouse gas and the basic
variant is given by the individual reaching of the different goals through the
different countries.
The possible cost lowering mechanisms as Clean Development Mechanism,

Joint Implementation and the usage of sinks can’t be simulated in World-
Scan.
Emission trading (between Annex I countries) can be simulated and serves

as an alternative variant. In this paper there are no trading limitation simu-
lated though, so in the alternative variant the emission reduction goal can be
reached fully by trade between other Annex I countries.
The results of the (two) simulated situations are summarised as follows.

Table 7 Results of the (two) simulated situations
0DUJLQDOUHGXFWLRQFRVWVLQ SHUWRQQH&2
5HJLRQ :LWKRXWHPLVVLRQWUDGH :LWKHPLVVLRQWUDGH
VS 40 15
Japan 29 15
Pacific OECD 32 15
EU 52 15
Eastern Europe 3 15
Former Soviet Union 0 15
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In this publication a overview is presented of the possibilities to reach the

emission reduction goal of the Netherlands domestically. An analysis of the
results shows that the measures that can and should be taken in the Neth-
erlands (the so-called “basic package”) are not the cheapest measures.
A similar analysis is performed by Dings et al. (1999) and this shows that the
most expensive measure in the basic package is unequal to the cheapest
measure in the extra package. Nevertheless we choose to consider the most
expensive measure of the basic package as the marginal costs of the last
measure needed in the Netherlands to reach the Kyoto goal.
The costs are roughly SHUWRQQH&22. However, this price concerns only
the domestic measures and can’t be used as a international price to reduce
one tonne CO2. It gives a good view of the possibilities to reach the Kyoto
goals domestically.
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This publication gives a estimation of the possibilities to reach cost savings

by the CDM. The table below presents the outcomes of a simple simulation,
where a perfect competition market is assumed.
This publication describes a trading system within the OECD, a system

where trading between Annex I countries is permitted and a global trading
system. This variant can be seen as the extreme variant of CDM.
This resulted in the following outcomes.
Table 8 Results of the simulation

7UDGHZLWKLQ 0DUJLQDOUHGXFWLRQFRVWVLQ SHUWRQQH&2
OECD 68
Annex I 21 – 35
Global 4.8 – 18

It has to be noticed that the lower prices in the range will approach the reality
the closest. The lower prices will be the result if the so-called ‘no regret’
measures will count for reaching the Kyoto goals. The ‘no regret’ measures
are the measure which will be economic profitable even without strict climate
policy.
This separation, between profitable and not-profitable, has been made ex-
plicit in this publication.
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With the so-called ‘Second Generation Model” the authors estimated the
marginal costs needed to reach the Kyoto goals. These marginal costs rep-
resent the costs per tonne CO2 of the last measure needed to reach the
goals. It has been done for 5 scenario’s:
1 All region comply with their Kyoto-goal, no trading.
2 Trading is permitted between Annex I countries.
3 Trading is permitted between Annex I countries and CDM is permitted.
4 Not-CO2 greenhouse gasses are taken into account.
5 ‘Sinks” are permitted in some degree.
Below the resulting prices per avoided tonne of CO2 for 2010. Between
brackets are the values resulting form the model for the year 2020, with the
assumption that the Kyoto goals in 2020 are still effective.
Table 9 Resulting prices per avoided tonne CO2 for 2010

0DUJLQDOUHGXFWLRQFRVWVLQ SHUWRQQH&2
E F G H
UHJLRQ VFHQDULR L LL LLL LY Y
Australia 36 (43)
Europe 40 (63)
US 51 (60) 22 (36) 8 (-) 29 (-) 7 (-)
Canada 106 (117)
Japan 139 (130)
a When there’s no expansion of the nuclear power capacity the marginal reduction costs in Europe
can reach up to
b If Eastern Europe will behave as a monopolist on the market of tradable emission rights, the
trading price for this scenario will be higher, namely
c This price was achieved by allocating non-Annex 1 countries emissions in the reference scenario
and subsequently apply global trade. A fictitious market is created, in which indeed scarcity of
emission reduction is achieved.
d This price is based on the assumption that the not-CO2 gases only can be driven back against
infinite high costs; when these gasses can be driven back for free, every region can reach their
Kyoto goal without costs and the resulting market price for CO2 will be zero. The price in the sec-
ond scenario is based on the assumption that the not-CO2 gasses can be driven back against
the same proportional costs as CO2 can be driven back.
e This price is based on the assumption that all sinks count for reaching the Kyoto-targets, while
further trading between Annex I countries is permitted. When only halve of the sinks are counted,
the trading price to $ 14.
Table 9 shows that the different assumptions of the filling-in of the Kyoto
protocol and its mechanisms have an important influence on the costs the
different regions have to make.
Trade between all countries to reach Kyoto targets gives FHWHULVSDULEXV the
lowest costs for reaching the goals, namely SHUWRQQH&22.

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PHDVXUHVDQGDGMXVWPHQWVLQVHYHUDOUHJLRQVDQGVHFWRULQDQLQWHUWHPSRUDO
HTXLOLEULXPPRGHO
In this study five scenarios are calculated:

1 Only the US fulfil the Kyoto goals.
2 All Annex I countries fulfil their Kyoto goals, trade is not permitted.
3 All Annex I countries fulfil their Kyoto goals, trade is permitted between
Annex I countries.
4 All Annex I countries reach their Kyoto goals, trade is permitted within
two trading blocks ‘other OECD’ and “other Annex I’, while there’s no
trade permitted between trading blocks.
5 Global trade is permitted where the developing countries not appearing
in the Kyoto protocol get their reference emissions assigned.
The model is not capable to consider the reduction of not-CO2 emissions as

well. This approach counts for more models treated in this annex and ig-
nores the relatively cheap reduction measures of other greenhouse gasses.
This model proclaims a strict climate policy in 2000, so the economic actors
have 10 years to anticipate on the policy and take action.
We present the resulting prices per avoided tonne CO2 in Table 10 for 2010
and 2020 (in
Table 10 Resulting prices per tonne of CO2 avoided

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UHJLRQ 6FHQDULR L LL LLL LY Y
Australia - 50 (64)
US 22 (27) 25a (29) 17 (31) 9 (19) 6 (10)
Japan - 32 (45)
rest of OECD - 73 (88) 74 (89)
a The difference between this price ($ 25) and the price of 23 in case of unilateral action by the US
(scenario 1) can be explained as follows: when all countries have to reduce their CO2 emissions
demand for oil and thus its price will decrease. It will be harder then to achieve the US reduction
targets;
b The difference between this price ($25) and the price of $23 in case of one-sided action by the
US (scenario 1) can be explained as follows: If all countries must push back.
De price that will result from global trade is about 6 WRQ&22 in 2010.
0DQQH$6DQG55LFKHOV7KH.\RWRSURWRFRODFRVWHIIHFWLYH
VWUDWHJ\IRUPHHWLQJHQYLURQPHQWDOREMHFWLYHV"LQ7KH(QHUJ\-RXUQDO
VSHFLDOLVVXH0D\S±
From this article it is hard to judge the assumptions made for modelling cli-
mate policy and the resulting costs.

Next prices are mentioned as marginal reduction costs in SHUWRQQH
CO2:
1 LQFDVHRI86XQLODWHUDOGRPHVWLFDFWLRQ
2 LQ FDVH RI WUDGH EHWZHHQ $QQH[ FRXQWULHV DQG DSSOLFDWLRQ RI
CDM.
3 LQFDVHRIFRPSOHWHO\JOREDOWUDGH
The difference between variants (ii) and (iii) the CDM potential assumed; in
variant (ii) the authors assume only 15% of total CDM potential can be ex-
ploited in practice. This reflects the complexity of CDM. In case of global
trade, the full potential of CDM can be exploited.
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WUDGLQJDQGJOREDOFOLPDWHFKDQJH$UOLQJWRQ86$
This report gives an overview of advantages of international emission trade

for reducing GHG emissions. The researchers assess differences between
various models used to assess the effects of GHG emission reduction.
Table 11 below offers an overview of marginal reduction costs as calculated

by various models. Reduction costs birth in case of regional and Annex 1
trade are calculated.
Table 11 Differences between models

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SGM EPPA GTEM G-Cubed OECD Green

region
Annex I trade
Annex I trade
Annex I trade
Annex I trade
Annex I trade
no trade
no trade
no trade
no trade
no trade
VS 51 22 56 49 105 35 17 10 44 19
Japan 139 22 177 49 209 35 71 10 22 19
Western 44 22 83 49 216 35 47 10 58 19
Europe
former Soviet 0 22 0 49 0 35 0 10 0 19
Union
Differences are caused by factors as previously described in this annex.
311/ 5HWXUQ WR 7KH FRVW RI PLWLJDWLQJ 8QLWHG 6WDWHV FDU
ERQHPLVVLRQVLQGHSRVWSHULRGQR311/
This publication gives a brief overview of possibilities to reduce costs to

achieve reduction targets. For fictive US targets are used instead of the
Kyoto targets. We will not discuss the results in detail, also because the re-
sults from the Second Generation model used have already been described
under MacCracken et al. (1999).

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Solutions for
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environment,
economy and
HFRQRP\DQG
technology
WHFKQRORJ\
Oude Delft 180

Oude Delft 180
2611 HH Delft
2611 HH Delft
The Netherlands
The Netherlands
tel: +31 15 2150 150
tel: +31 15 2 150 150
fax: +31 15 2150 151
fax: +31 15 2 150 151
e-mail:ce@ce.nl
e-mail: ce@ce.nl
website:www.ce.nl
website: www.ce.nl
Annex II: The contribution of contrail

occurrence to climatic change
induced by air traffic
Author(s): W. Fransen (INTEGRAL Knowledge Utilization)

7KHFRQWULEXWLRQRIFRQWUDLORFFXUUHQFH
WRFOLPDWLFFKDQJHLQGXFHGE\DLUWUDIILF
:LHJHU)UDQVHQ
February 2001
Postbus 37075
1030 AB Amsterdam
The Netherlands
phone : +31 (0)20 63 04 333

fax : +31 (0)20 63 04 344
e-mail : info@integral.nl
www : http://www.integral.nl
KvK :33.262.003
Integral Knowledge Utilization
2
7KHFRQWULEXWLRQRIFRQWUDLORFFXUUHQFHWRFOLPDWLFFKDQJHLQGXFHGE\DLUWUDIILF
3UHIDFH
The environmental effects of aviation give rise to concern on local and global scales.
The IPCC Special Report on Aviation and the Global Atmosphere indicates that in 1992
aviation contributed 2% to the anthropogenic CO2 emissions, about 1% of the anthropogenic
CO2 concentrations increase since pre-industrial times can be attributed to aviation and the
aviation-induced perturbation of the radiative balance is about 3.5% of the total anthropogenic
radiative forcing. Without changes in policies, the environmental impact of aviation is
expected to increase in the coming decades.
In order to support the development of policies to mitigate the environmental impact, the
German Umweltbundesamt commissioned CE Delft, the Netherlands, a study in order to
quantify, within the smallest possible range, external costs of aviation resulting from
emissions and noise..
Since estimates of the external costs will only be widely accepted if the environmental data
and relations underlying these costs are accurate and widely accepted, the relationship
between fuel use and emissions by air traffic on the one side and the associated climatic
changes on the other side should be given proper attention. It is within this framework that the
underlying study has been carried out.
W. Fransen
INTEGRAL Knowledge Utilization
IPCC, Aviation and the Global Atmosphere. A Special Report of IPCC Working Groups I and III in collaboration with the
Scientific Assessment Panel to the Montreal Protocol on Substances that Deplete the Ozone Layer. Penner, J.E., et al.,
Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA (1999).
3
4
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Emissions from aircraft fuel burn contribute to climate change by perturbing the
radiative balance of the Earth-atmosphere-system. All major constituents of aircraft exhaust
directly or indirectly perturb the radiative balance irrespective of flight conditions. However,
under specific meteorological conditions and depending on propulsion efficiency, emissions
of water vapour and aerosol precursors also lead to contrails and aircraft induced cirrus. This
adds to the climatic impact from aircraft emissions. In this study an estimate is given for the
relative contribution of contrail occurrence to the climatic impact by air traffic. This estimate
is represented in the following table:
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:P IRUWKHSDUWRI\HDUO\DQQXDOIOLJKWWLPH


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RIIOLJKWWLPH RIIOLJKWWLPH
∆(carbon dioxide) +0,0018 ∆(carbon dioxide) +0,016

∆(ozone) from NOx emissions: +0,0023 ∆(ozone) from NOx emissions: +0,021
∆(methane) from NOx emissions: –0,0014 ∆(methane) from NOx emissions: –0,013
∆(water vapour): +0,0002 ∆(water vapour): +0,002
∆(contrails): +0,0200
∆(sulfate aerosols) from SOx emissions: –0,0003 ∆(sulfate aerosols) from SOx emissions: –0,003
∆(soot aerosols) from C emissions: +0,0003 + ∆(soot aerosols) from C emissions: +0,003
+0,023 +0,026
WRWDOUDGLDWLYHIRUFLQJRI :PLVLQDFFRUGDQFHZLWK,3&&YDOXH
From the information presented in the table, it can be said that the climatic impact of the 10%
of air traffic leading to contrail occurrence is of the same order of magnitude as the 90% of air
traffic not leading to contrail occurrence. From the same information it can be concluded that
air traffic leading to contrails has on average a near eightfold climatic load compared with air
traffic that does not lead to contrail occurrence. This conclusion does not account for the
climatic impact of additional cirrus induced by these contrails which is likely to enhance the
climatic load.
5
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A simple definition of climate is the average weather. A description of the climate over a period (which
may be from a few years to a few centuries and for meteorological purposes is typically 30 years) involves the
averages of appropriate components of the weather over that period, together with the statistical variations of
those components. Thus defined, ‘climate’ as concept concerns
1) different meteorological components, such as wind, temperature, humidity, cloud coverage, precipitation, et
cetera;
2) different types of average values for these components, e.g., daily, monthly, seasonal or annual mean and
daily or annual cycle for a single location (e.g., De Bilt), an area (e.g., The Netherlands) or the globe; and
3) variations in these components at different time-scales, e.g., day-to-day and year-to-year variations, including
extremes (minima and maxima).
Fluctuations of climate occur at different time-scales, e.g., day-to-day, year-to-year and century-to-century, as a
result of natural processes; this is referred to as natural climate variability. In this perspective, climate change
refers to the difference between, for instance, one 30-year period and another 30-year period.
Climate change as it is currently in general being addressed within society, is that which may occur over the 21st
century as a result of human activities or that which has actually occurred during the past century as a result of
human activities. In this discussion, climate (change) has a broader scope and encompasses, for instance, sea
level (rise).
For the purposes of the UNFCCC the definition of climate change is “a change of climate which is attributed
directly or indirectly to human activity that alters the composition of the global atmosphere and which is in
addition to natural climate variability observed over comparable time periods”.
The climate change that is being addressed in WKLVUHSRUWFRQFHUQVJOREDOPHDQWHPSHUDWXUHFKDQJHDWWKH

(DUWK¶VVXUIDFH which may occur over the present and next centuries as a result of aircraft emissions. It is
acknowledged that the use of temperature change as a metaphor for climate change gives a first order estimate of
climate change only. However, given the aim of this report such a first-order estimate is sufficient.
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At some point in the early nineties ICAO, IPCC and WMO agreed to co-operate in
order to enlarge the knowledge with respect to the atmospheric effects of aircraft emissions
and to study the effect of possible (operational) measures to mitigate these effects. Since then,
their knowledge has increased rapidly as manifested by the IPCC Special Report on Aviation
and the Global Atmosphere (1999). Due to this better understanding, it is now possible to
provide policymakers with some basic information on the sensitivity of the Earth’s climate to
aircraft fuel use and resulting emissions. Moreover, the many specific studies which have
been carried out during the last decade allow us to make some distinction between the
different constituents of aircraft exhaust concerning the extent by which they perturb the
climatic system. Finally, theoretical considerations, satellite observations, in-situ
measurements and results from simulations with tracer and (chemistry-)climate models of
different complexity have increased enormously in number and make it possible to give some
indication of the dependence of the climatic effects of aircraft exhaust on the prevailing
meteorological conditions during cruise.
$LPRIWKHVWXG\
This study aims to give the reader an idea of the sensitivity of the climatic system to the
occurrence of aircraft induced clouds, known as ‘condensation trails’ or ‘contrails’.
For this, climate effects are linked to aircraft fuel use as well as to the concomitant emissions
by linearisation and averaging of many complex relationships between emissions and effects.
This is justifiable as long as globally averaged equilibrium situations are concerned. Features
of the atmospheric system and current state-of-the-art atmospheric science as encompassed by
tracer and (chemistry-)climate models substantially facilitate this approach. For instance,
many of the indirect relationships between emissions and effects are numerically represented
in physical and chemical models. As these models use well-defined and rather detailed
emission scenarios for their calculations of climate changes due to air traffic, the output of
these models is used to reach the objective of this study.
In accordance with the formal requirements as presented in the ‘Terms of Reference’ by the
Umweltbundesamt, the study has been based on literature only.
__________________________________________________________________________________________
([WHUQDOFRVWV are costs that are not properly addressed by markets, i.e., costs that do not fall on those parties whose
choices have caused them but on other parties or on society as a whole. A typical example of an external cost is the
degradation of the local environment by emissions and noise from transport.
7
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A change in average net radiation at the tropopause, because of a change in either solar or infrared
radiation, is defined as a radiative forcing. A radiative forcing perturbs the balance between incoming and
outgoing radiation. Over time climate responds to the perturbation to re-establish the radiative balance. A
positive radiative forcing tends on average to warm the surface; a negative radiative forcing on average tends to
cool the surface. As defined here, the incoming solar radiation or the contribution of CO2 in the atmosphere to
the Earth’s radiative balance is not considered a radiative forcing, but a change in the amount of incoming solar
radiation or the radiative effect of a change in the CO2 background concentration is.
IPCC (1999) has addressed the uncertainties in estimating aviation’s radiative forcing values with confidence
intervals and descriptions of the level of scientific understanding of the physical processes, models, and data (see
below). The interval and the quality-of-the-science descriptions are, to a large extent, independent measures
covering different aspects of uncertainty.
The confidence intervals define a likelihood range which is defined as the 2/3 probability range. The probability
range is meant to be symmetric about the mean value. More precise, the probability that the value is less than the
lower value is 16%, and the probability that it is less than the upper value is 84%. The range between the low
and the high value is equivalent to the ‘1-sigma’ range of a normal, i.e., Gaussian, probability distribution.
Derivation of these confidence intervals lies with the expert judgement of the scientists responsible for the values
given and include a combination of objective statistical models and subjective expertise (see, e.g., Fransen,
1995).
The confidence intervals given by IPCC combine uncertainty in calculating atmospheric perturbations to
greenhouse gases and aerosols with that of calculating radiative forcing. It includes, but is not solely based on,
the range of best values from different studies.
The radiative forcing uncertainties from different perturbations have been determined by different methods;
potential errors in individual components may not be independent of one another, and the error bars may not
represent Gaussian statistics. The uncertainty range for the total is assumed to represent a 2/3 probability range
as for the individual components. It is calculated directly from the individual components as the square root of
the sums of the squares of the upper and lower values.
Overall, addition of the best values for radiative forcing provides a single best estimate for the total. The
uncertainty ranges for individual impacts can be used to assess whether they are potentially major or trivial
components and to make a subjective judgement of confidence in the summed radiative forcing.
)LJXUH. Bar chart of radiative forcing from aviation effects in 1992. Best estimate (bars) and high-low 2/3
probability intervals (whiskers) are given. No best estimate is given for aircraft induced cirrus clouds; rather, the
dashed line indicates a range of possible estimates. The evaluations below the graph are relative appraisals of the
level of scientific understanding associated with each component.
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8
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RQFRQWUDLORFFXUUHQFH
Studies with chemical as well as radiative-balance models have used the data from
emission inventories that concern aircraft emissions for the situation in 1992 with respect to
latitude, longitude, altitude and time in order to calculate the radiative forcing by several
radiatively active constituents of aircraft exhaust. All emission inventories under
consideration were scaled to an annual fuel use of 160.3 Teragram. The perturbations of the
radiative balance have been assessed by IPCC (table 1). Taking the values presented in the
table 1, the present-day radiative forcing exerted by aircraft emissions is assumed to be 0,049
Watt per square metre.
3HUWXUEDWLRQRIWKH(DUWKUDGLDWLYHEDODQFHGXHWRSUHVHQWGD\DLUWUDIILF
∆(background concentrations of carbon dioxide CO2) +0,018

∆(background concentrations of ozone O3) via emissions of nitrogen oxides (NOx): +0,023
∆(background concentrations of methane CH4) via emissions of nitrogen oxides (NOx): –0,014
∆(background concentrations of water H2O) in the form of water vapour: +0,002
∆(cirrus clouds) induced by aircraft: positive (+), but no ‘best estimate’ given
∆(background concentrations of sulfate aerosols) due to emissions of sulfur oxides (SOx): –0,003
∆(background concentrations of black carbon aerosol) due to soot (C) emissions: +0,003 +
total radiative forcing: +0,049
7DEOHWDNHQIURP,3&&
Table 1 shows that many constituents present in aircraft exhaust directly or indirectly exert an
influence on the radiative balance. In all but the cloud cases this influence is exerted
continuously during any flight, be it that for some constituents the effects are more dependent
on the place where the emissions take place than for others. For instance, carbon dioxide
emissions perturb the radiative balance irrespective from when or where these emissions take
place. Nitrogen oxides on the other hand, enhance ozone formation in the upper troposphere
but may lead to lower ozone concentrations in the stratosphere.
Contrails and aircraft induced cirrus, however, only occur under specific meteorological
conditions. Conditions which favour contrail occurrence are restricted with respect to time
and place. Consequently, the radiative balance is not during every flight (continuously)
perturbed by the occurrence of (persistent) contrails and aircraft induced natural cirrus. As
this feature may be relevant in the discussion about external costs, it asks for a closer look at
the forcing ranges estimated by IPCC for the perturbation of the radiative balance by contrails
and aircraft induced natural cirrus.
9
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IPCC estimates concerning radiative forcing and climate change presented in the special report on
aviation and the global atmosphere (IPCC, 1999) have been based on calculations which have used values for the
situation in 1992 as input because for that year detailed information - LHZLWKKLJKUHVROXWLRQZLWKUHVSHFWWR
SODFHDQGWLPH - for fuel use, emissions and flight paths is available. As this report is the only comprehensive
assessment with quantitative information on radiative forcing and climate change by aircraft, it has been the
basis for this report. Consequently, WKHVLWXDWLRQLVWDNHQDVWKHSUHVHQWGD\VLWXDWLRQLQWKLVVWXG\.
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When the radiative forcing on the earth-atmosphere increases, for example due to increasing greenhouse
gas concentrations, the atmosphere will try to respond immediately by warming. ‘Try’ as the atmosphere is
closely coupled to the oceans, so in order for the air to be warmed by the enhancement of the greenhouse effect
(= increased radiative forcing), the oceans also have to be warmed. Because of their thermal capacity, this takes
decades to centuries.
In a hypothetical example where concentrations of greenhouse gases which have been steady for decades - LQ
UHDOLW\WKHVHFRQFHQWUDWLRQVIOXFWXDWH - suddenly rise to a new level and remain there, the radiative forcing would
also rise rapidly to a new level. This increased radiative forcing would cause the atmosphere and oceans to
warm, and eventually come to a new, stable, temperature. A commitment to this equilibrium temperature rise is
incurred as soon as the greenhouse gas concentration changes. But at any time before equilibrium is reached, the
actual temperature will have risen by only part of the equilibrium temperature change, known as the realised
temperature change.
The WHPSHUDWXUHFKDQJHVSUHVHQWHGLQWKLVUHSRUWFRQFHUQHTXLOLEULXPJOREDOPHDQWHPSHUDWXUHFKDQJHV
or committed temperature changes. In theory, these changes will ultimately occur under the condition that future
aircraft emissions will be as large as the present day emissions and a new radiative equilibrium is reached. This
implies that the results presented in this study apply to a situation in which future air traffic is assumed to show
the same emission patterns as today. In reality this will not happen: assuming an unaltered (relative) distribution
of emissions, higher emissions will lead to larger increases in radiative forcing and, thus, to larger temperature
increases; decreasing emissions to smaller temperature increases.
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In table 1 and figure 1 radiative forcing estimates for various aspects of aircraft-induced perturbations to
radiatively active substances are reported. One of the basic ideas behind these estimates is the validity of the
concept of radiative forcing as a quantitative predictor for climate change. It is implicitly assumed that
contributions from individual perturbations to the change in global mean surface temperature are additive, at
least to a first order approximation. The radiative forcing concept requires a constant climate sensitivity
parameter λ within the same model for different types and different magnitudes of radiative forcing. This is not
always the case (see, e.g., Hansen et al., 1997, and Ponater et al., 1998).
In this report WHPSHUDWXUHFKDQJHVDUHFDOFXODWHGE\PXOWLSO\LQJWKHYDOXHFDOFXODWHGIRUWKHUDGLDWLYH

IRUFLQJE\DLUFUDIWHPLVVLRQVZLWKDFOLPDWHVHQVLWLYLW\IDFWRURI&HOVLXVSHU:DWWSHUVTXDUHPHWUH. It
should be noted that calculations performed by recent climate models (IPCC, 1996) suggest a climate sensitivity
factor for climate change due to anthropogenic emissions at the Earth’s surface of about 0.8° C/Wm-2.
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10
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Condensation trails or contrails are line-shaped clouds, composed of ice particles, that are
visible behind the engines of jet aircraft during cruise. Contrails are a normal effect of jet
aviation. They often form in clusters within regions that are cold and humid . Depending on
the temperature, pressure and amount of moisture in the air at cruise altitude, contrails
evaporate quickly (if humidity is low, temperature is high or both) or persist and grow (if
humidity is high, temperature is low or both). In the latter case, newly formed ice particles
will continue to grow in size by taking up water (vapour) naturally present in the atmosphere
‘surrounding’ the aircraft flight path. The typical atmospheric residence time of a persistent
contrail is about one day (see below). This is substantially shorter than the atmospheric
residence times of greenhouse gases directly or indirectly emitted by aircraft which range
from weeks (ozone) to centuries (carbon dioxide).
Persistent contrail formation requires air that is supersaturated with respect to ice; ice
nucleation requires 30% supersaturation on the average. For persistent contrail formation 15%
of supersaturation with respect to ice is often enough as the additional water needed is emitted
by the aircraft in the form of vapour. This also explains the regions in which aircraft induce
persistent contrails but which are otherwise free of clouds.
Eventually, the line-shaped contrail may transform into a cirrus cloud. Bakan et al. (1993,
1994) assessed long-term changes of contrail cloud cover over Europe and the eastern part of
the Atlantic as well as contrail life-time from satellite data. They concluded that 2% of the
contrail areas, i.e., regions with a group of contrails and a typical diameter of thousand
kilometres, could be followed by satellite for less than about 6 hours, 62% for more than one
day and 24% for more than two days.
,PSOLFDWLRQVRIWKHUHODWLYHEUHYLW\RIFRQWUDLORFFXUUHQFH
An estimate of the percentage of annual air traffic fuel use actually responsible for the
perturbation of the radiative balance by contrails allows a distinction between situations with
and without contrail formation. Using the results by Gierens et al. (1999) that 13,5% of flight
time of commercial aircraft occurs in air masses that are ice-supersaturated with a mean
supersaturation of 15%, it is assumed here that in three quarter of this flight time persistent
contrails actually occur and that these contrails are responsible for the perturbation of the
radiative balance which the IPCC (1999, 2001) has estimated at 0.02 Watt per square metre.
Under the assumption that flight time relates linearly to flight kilometres, this implies that
10% of aircraft flight kilometres are responsible for the radiative perturbation by contrails.
__________________________________________________________________________________________
see, e.g., the aircraft contrails factsheet from EPA (2000) for a simple introduction into contrail formation
processes, or Schumann (1996) for an introduction into the physics behind contrail formation.
11
3UHVHQWGD\RFFXUUHQFHRIFRQWUDLOVDQGDLUFUDIWLQGXFHGFLUUXV
• Based on simple estimates, Ponater et al. (1996) calculate that 0.04% of the Earth’s surface is covered by
contrails, but as much as 0.56% of the area covered by frequently used flight routes.
• Sausen et al. (1998) obtained the actual present day contrail coverage by multiplying the calculated potential
contrail coverage of 16% with the fuel use according to the DLR inventory after normalisation (figures 2 and
3). The maximum cover is about 5% over the eastern part of the US; the annual global mean value is 0.09%.
• The visual inspection of satellite images of central Europe suggests that, on the average, 0.4% of the area is
covered by contrails when contrails are defined as high clouds that are line shaped (Schumann, 1990).
Similarly, Bakan et al. (1993, 1994) derived from seven years of satellite images of the Eastern Atlantic and
Western Europe region an annual mean contrail cover of about 0.5% with regional maxima in the North
Atlantic Flight Corridor of more than 2%. Both studies did not account for aged contrails which have grown
to such a large size that they are no longer line shaped, nor for other ‘natural’ clouds which have been
produced by water vapour and aerosols emitted earlier by aircraft. Hence the numbers provided should be
regarded as lower limits of contrail coverage.
ER[
3RWHQWLDOFRYHUDJHE\FRQWUDLOVDQGDLUFUDIWLQGXFHGFLUUXV
Humidity measurements by commercial aircraft show that - GXULQJIOLJKWVEHWZHHQ(XURSH1RUWKDQG

6RXWK$PHULFD$IULFDDQG$VLD – 13,5% of flight time was in air masses that were ice-supersaturated with a
mean supersaturation of 15% (Gierens et al., 1999). As a supersaturation of 15% is enough for persistent contrail
formation, these results imply that contrails potentially form during 13,5% of flight time. 7KLVYDOXHLVXVHGLQ
WKLVVWXG\. Similar results have been produced via independent methods.
• Contrail clusters observed in satellite data indicate that air masses which are cold and humid enough to allow
the formation of persistent contrails cover 10 to 20% of the area over mid-Europe and parts of the US. This
range is consistent with the fraction of air masses expected to be ice-supersaturated at cruise altitudes on
basis of the Schmidt-Appleman criterion. (Mannstein et al., 1999; Carleton and Lamb, 1986).
• Based on the ECMWF analyses for the years 1991 to 1994, Brockhagen (cited in Brasseur, 1998) found that
up to 6% of the area of the globe at cruise altitude pass the criteria for persistent contrails. This implies that if
aircraft were flying everywhere, 6% of the planet would be persistently covered by contrails.
• Using 11 years of ECMWF data, the coverage by air masses suitable for contrail formation is found to have a
global mean value of 16% by Sausen et al. (1998). Sausen concludes that since this value is comparable to
the global mean coverage of cirrus clouds, i.e., 23% over land and 13% over the oceans (Warren et al., 1986
and 1988, cited in IPCC, 1999), the amount of high cloud cover (persistent contrails, aircraft induced cirrus
and natural cirrus) could almost double if aircraft flew everywhere.
ER[
)LJXUH. Annual mean contrail coverage for the years 1983-1993 as obtained for two different statistical
methods by which the fuel consumption is weighed: linear (left panel) and square root (right panel) weighing.
Calibration produces a mean value of 0.5% for the region extending from 30° W to 30° E and from 35° N to 75°
N for both linear and square root weighing. Figure taken from Sausen et al. (1998).
12
If the situations with contrail formation (accounting for 10% of flight time) and without
contrail formation (90% of flight time) are applied to the IPCC estimates, the following values
are obtained:
3HUWXUEDWLRQRIWKHUDGLDWLYHEDODQFHLQ 3HUWXUEDWLRQRIWKHUDGLDWLYHEDODQFHLQ


GXULQJZKLFKFRQWUDLOVRFFXU GXULQJZKLFKQRFRQWUDLOVRFFXU
RIIOLJKWWLPH RIIOLJKWWLPH
∆(carbon dioxide) +0,0018 ∆(carbon dioxide) +0,016

∆(ozone) from NOx emissions: +0,0023 ∆(ozone) from NOx emissions: +0,021
∆(methane) from NOx emissions: –0,0014 ∆(methane) from NOx emissions: –0,013
∆(water vapour): +0,0002 ∆(water vapour): +0,002
∆(sulfate aerosols) from SOx emissions: –0,0003 ∆(sulfate aerosols) from SOx emissions: –0,003
∆(soot aerosols) from C emissions: +0,0003 + ∆(soot aerosols) from C emissions: +0,003
+0,023 +0,026
WRWDOUDGLDWLYHIRUFLQJRI :PLVLQDFFRUGDQFHZLWK,3&&YDOXH
WDEOH WDEOH
The calculation makes clear that contrails exert a large perturbation of the radiative balance
compared to all other perturbations by constituents of aircraft exhaust (except maybe nitrogen
oxides), both in an absolute sense (see table 1) as well as in a relative sense (this table). An
aircraft flying under meteorological conditions favouring contrail formation has an
environmental load which is per kilogram of fuel use about eight times larger than the load of
an aircraft flying in an area where the ambient conditions do not favour contrail formation.
This leads tot the conclusion that the climatic impact of the 10% of air traffic leading to
contrail occurrence is about the same as the 90% of air traffic not leading to contrail
occurrence.
It is acknowledged that breaking down a value with a large associated uncertainty range will
lead to values with a significantly larger uncertainty range. In the context of the study this has
been considered acceptable because the larger uncertainty range does not distract from the
idea that the radiative balance of the Earth’s atmosphere is very sensitive towards contrail
occurrence. Indeed, it can be argued from a more fundamental perspective that a larger
uncertainty range ‘per se’ does not imply that the ‘real value’ is larger or smaller than the
value calculated.
13
)LJXUH. Annual mean potential contrail coverage at various altitudes and as a total coverage for the layer
between 100 and 500 hectoPascal. Figure taken from Sausen et al. (1998).
)LJXUH. Seasonal variation of the present day contrail coverage obtained by weighing of fuel consumption.
Figure taken from Sausen et al. (1998).
14
$LUFUDIWLQGXFHGFLUUXV
Cirrus clouds are high-level clouds which occur as detached, white fibrous clouds, often with
a silky sheen. They naturally form high in the troposphere. Air traffic may induce (additional)
cirrus. Ageing aircraft exhaust, consisting of a mixture of soot and sulfate aerosols, may lead
to the nucleation of ice crystals and, hence, the formation of cirrus clouds in conditions where
no clouds would have formed in absence of air traffic (Kärcher et al., 1998). Aircraft may also
indirectly increase the occurrence of natural cirrus without any contrail formation through the
addition of water vapour, soot and sulfate particles. In addition, aircraft may either increase or
decrease this occurrence by inducing vertical motions and turbulent mixing. Finally, aircraft
emissions may change the properties of existing natural cirrus clouds. Soot emissions, for
example, have been found to double the ice particle concentration of already existing cirrus,
thereby changing their optical properties.
IPCC (1999) considers the status of understanding with respect to aircraft induced natural
cirrus as ‘very poor’. However it was able to assess a range of radiative forcing due to
‘additional aviation-induced cirrus clouds’ of 0 to 0.04 Watt per square metre. This is in line
with results by Meerkötter et al. (1999) who state that the indirect radiative forcing due to
contrail induced particle changes in natural cirrus clouds may be of the same magnitude as the
direct effect of additional high cloud cover from contrails.
As the formation conditions of persistent contrails and (aircraft induced) cirrus are related
(Sausen et al., 1998, and references cited therein), it can be said with some confidence that the
meteorological conditions favourable for contrail formation (temperature, relative humidity
and pressure) are comparable with the conditions favourable for cirrus formation. In other
words: there is a higher probability that additional cirrus clouds will form in areas where
contrails form than in areas where contrails do not form. The opposite does not seem to hold
though. Schröder et al. (2000) concluded that observations and model results suggest that
contrail formation is only weakly, if at all, affected by existing cirrus clouds.
15
16
5HIHUHQFHV
Bakan, S., et al., Towards a contrail climatology from NOAA-satellite images over Europe, Max-
Planck-Institut für Meteorologie, Report No. 118, Hamburg, Germany (1993).
Bakan, S., et al., Contrail frequency over Europe from NOAA-satellite images, Ann. Geophysicae 12,
962 (1994).
Brasseur, G.P., et al., European scientific assessment of the atmospheric effects of aircraft emissions,
Atmospheric Environment 32, 2329 (1998).
Carleton, A.M., and P.J. Lamb, Jet contrails and cirrus cloud: A feasibility study employing high-
resolution satellite imagery, Bulletin American Meteorological Society 67, 301 (1986).
EPA, Aircraft contrails factsheet, 430-F-00-005, Washington, United States (2000).
Fransen, W. (ed.), Probabilities of climatic change; a pilot study, Scientific report 95-08, ISBN 90-
369-2083-3, KNMI, De Bilt, The Netherlands (1995).
Gierens, K.M., et al., A distribution law for relative humidity in the upper troposphere and lower
stratosphere derived from three years of MOZAIC measurements, Ann. Geophysicae 17, 1218
(1999).
Hansen, J., et al., Radiative forcing and climate response, J. Geophys. Res. 102, 6831 (1997).
IPCC, Climate Change: The IPCC Scientific Assessment, Cambridge University Press (1990).
IPCC, Climate Change 1994: Radiative Forcing of Climate Change and an Evaluation of the IPCC
IS92 Emission Scenarios, Cambridge University Press (1995).
IPCC, Climate Change 1995: The Science of Climate Change, Cambridge University Press (1996).
IPCC, Aviation and the Global Atmosphere. Cambridge University Press (1999).
IPCC, Climate Change 2001: The Scientific Basis, Cambridge University Press (2001).
Kärcher, B., et al., Physicochemistry of aircraft-generated liquid aerosols, soot, and ice particles. 1.
Model description, J. Geophys. Res. 103, 17111 (1998).
Mannstein, M., et al., Operational detection of contrails from NOAA-AVHRR-data, Int. J. Remote
Sensing 20, 1641 (1999).
Meerkötter, R., et al., Radiative forcing by contrails, Ann. Geophysicae 17, 1080 (1999).
Ponater, M., et al., Simulating the global atmospheric response to aircraft water vapour emissions and
contrails: a first approach using a GCM, Ann. Geophysicae 14, 941 (1996).
Ponater, M., et al., Climate effects of ozone changes caused by present and future air traffic, Report
No. 103, Institute of Atmospheric Physics, ISSN 0943-4771, DLR, Oberpfaffenhofen, Germany
(1998).
Sausen, R., et al., A diagnostic study of the global distribution of contrails; Part I: Present day climate,
Theor. Appl. Climatol. 61, 127 (1998).
Schröder, F., et al., On the transition of contrails into cirrus clouds, J. Atmos. Sci. 57, 464 (2000).
Schumann, U., (Ed.): Air Traffic and the Environment; Background Tendencies and Potential Global
Atmospheric Effects. Lecture Notes in Engineering Volume 60, Springer Verlag (1990).
Schumann, U., On conditions for contrail formation from aircraft exhausts, Meteorol. Z., N.F. 5, 4
(1996).
$FNQRZOHGJHPHQWV
The author wishes to thank J. Beersma, R. van Dorland, E. Holm, A. Klein Tank, C. Maeder, R.
Sausen, P. Siegmund, M. van Weele and J. Wijngaard for valuable input and comments on a draft
version of this report.
17
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Solutions for
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environment,
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External costs of LTO emissions
Author(s): J.M.W. Dings

B.A. Leurs
R.C.N. Wit
Contents
1 External costs of LTO emissions 1

1.1 Introduction 1
1.2 Overview of findings 2
1.3 Full survey of literature 7
1 External costs of LTO emissions
,QWURGXFWLRQ
For the valuation of emissions other than CO2 different methods are used.
The aim of this annex is to survey the recent estimates of the valuation of
environmental effects of aviation. The effects that we have incorporated in
this survey are the following:
• NOx (in itself and via ozone);
• PM10;
• PM2.5;
• HC, volatile hydrocarbons;
• SO2;
• CO.
We have searched for studies that value these emissions. We have only
sought for valuation of ground level effects, for being able to value the envi-
ronmental effects of landings and take-offs (LTOs).
In this paragraph, we present the literature sources we have found with their
results. To the extent possible, we have also presented the main assump-
tions and important remarks.
We first present the overview of the findings in paragraph 1.2, with the main
conclusions we draw from them. In paragraph 1.3 we then present the full
survey. For some literature sources we had to make some additional calcu-
lations to arrive at a unit cost, i.e. a cost per kilogram pollutant. We have
presented our own calculations in separate text boxes in order to keep the
description of the sources as objective as possible.
The one modification we have done for each of the sources is in the cur-
rency, because different sources use different currencies and different base
years for these currencies. To provide a consistent overview we present all
figures in one currency, namely in 1999. For the conversion of the different
currencies we have used the following conversion table.
Table 1 Conversion factors from $ to e, CPI-numbers

<HDU &3,86 &3,(8 ([FKDQJHUDWH

86
1990 105.4 104.1 1.40

1991 109.8 108.4 1.30
1992 113.1 112.4 1.44
1993 116.5 116.0 1.19
1994 119.5 119.1 1.25
1995 122.9 121.8 1.32
1996 126.5 124.8 1.28
1997 129.4 126.8 1.11
1998 131.4 128.2 1.19
1999 134.3 129.6 1.07
1
This exchange rate is the end-of-year exchange rate.

February 2002, Annex III
In case the original numbers in the report are denoted in another currency,
we have given the relevant exchange rate.
2YHUYLHZRIILQGLQJV
4XDOLWDWLYHFRQFOXVLRQV
From the literature analyses, the following conclusions can be drawn:
• the knowledge about damage costs from other than greenhouse gas
emissions has been much improved the last years. Especially on the
area of health effects of transport pollutants much progress has been
made. Dose-response relationships have been improved, dispersion
models as well, and the valuation of (years of) life (lost) is subject to
much less controversy;
• the increase in knowledge on these health effects has led to increasing
valuations of practically all emissions, lead to a better understanding of
variations in valuations, and thus a lower spread of various results if the
factors behind the variations are taken into account. For example, sev-
eral studies show that in an area like the Paris inner city a gram of PM2.5
emission leads to several Euros of health damage, and that in sparsely
populated areas this is more something like 1 Euro cent. This shows that
prices of emissions are very dynamic depending on the circumstances,
and that with further scientific insight prices are more likely to increase
further than to decrease;
• much of the health effects focus has been shifted to ultra-fine particles
(PM2.5). Extensive analysis in the framework of the ExternE programme
and the WHO study of 1999 shows robust and significant dose-effect
relationships. As a result, air pollution related costs from road transport,
especially those of vehicles equipped with diesel engines, are dominated
by the health effects of these particles;
• the most relevant health effects besides those of PM2.5 come from ni-
trates and ozone;
• carbon monoxide, 1.3 butadiene, benzene, and benzo(a)pyrene, other
pollutants being suspected in the past, seem not to give rise to signifi-
cant health effects. Either exposure or human sensitivity is relatively low;
• it should be said, however, that possibilities to monetise values like
biodiversity and the health of forests, still fall rather short compared to
possibilities to value health effects;
• health GDPDJH costs alone already generally seem to be higher than
SUHYHQWLRQ costs that are based on the marginal costs of achieving SROLWL
2
FDOO\ agreed targets like the NECs . Due to this phenomenon, combined
with the progress made on the valuation of health effects, the prevention
cost methodology is becoming a less popular tool for emission valuation.
4XDQWLWDWLYHFRQFOXVLRQVSHUSROOXWDQW
In this paragraph we present the overview of estimates we have found. We
present the results in five tables.
We first present in four tables overviews of the values found per emission
(NOX, PM2.5, HC, and SO2). For every emission, results from damage cost
studies and prevention cost studies are distinguished. Furthermore, we try to
explain ranges and we present differences between valuations for emissions
emitted in urban areas and in rural areas.
2
Theoretically, marginal prevention costs that are necessary to achieve environmentally
sustainability targets are equal to marginal damage costs in the optimum).

In the fifth table the results are aggregated and averaged for use in this
study.
'DPDJHFRVWV
Recent (ExternE) insights come to damage cost estimates of 12 e/kg NOX,
which includes the damage of the ozone formed out of NOX. This value is an
average and varies between a presented range of 1.9–21 e/kg across the
European countries in the study. The range can mainly be explained by dif-
ferences in health impacts due to differences in exposed population.
The ExternE programme takes a wide range of impact categories into ac-
count:
• human health;
• crops;
• timber;
• building materials;
• ecological systems;
• non-timber benefits of forests.
Although the valuation of damage to ecological systems is uncertain, the
resulting marginal damage cost per kg NOX seems to cover most relevant
impacts.
Furthermore and the valuation of mortality is quite high. The value of a sta-
tistical life, which is used throughout ExternE, is e 3.2 million. This implies
that there is no distinction between a life lost, which would have otherwise
been lost 1 day later or a life lost, which might otherwise have lasted for tens
of years. Some people have therefor suggested to use the Value of Life
Years Lost, which presents the discounted value of the expected amount of
life years lost. If this valuation methodology were used, the average value
presented in ExternE would be lower.
IIASA et al. (1999b) present damage costs as well, in which they distinguish
estimates with the ‘Value of a Statistical Life’ methodology and the (lower)
estimate with the ‘Value of Life Years Lost’ methodology. The estimate using
the Value of Life Years Lost for mortality impacts is e 9, the other is 15 e/kg.
SIKA (1999) arrive at a marginal social cost of 9 e/kg NOX as well for the
Swedish case.
The last recent damage cost estimate for NOX is provided by COWI (2000)
and they make a distinction between damage in rural areas and in urban
areas. They arrive at 11 e/kg NOX in rural areas and 12 e/kg NOX in urban
areas.
3UHYHQWLRQFRVW
Recent work on the estimation of the prevention cost per kg of NOx can be
found in the studies, which were done by IIASA to calculate the costs of
achieving the NECs (National Emission Ceilings). The NOX ceiling implies a
55% reduction of NOX emissions in Europe in 2010, relative to 1990. Using
this ceiling as a basis, IIASA arrives at a marginal social cost of reducing
NOX of 4.7 e/kg.
The reduction target is the most important factor determining the marginal
cost in the prevention cost method. Ågren (1999) states that the National
Emissions Ceilings, although more ambitious than the targets proposed in
the so-called Gothenburg Protocol, still fall short of meeting the environ-
mental targets as set in the Fifth Environmental Action Plan. Those targets

are defined as the targets that need to be achieved in order to have no ex-
ceeding ever of the critical loads, for both human health and vulnerable
biodiversity. In order to achieve those ‘sustainability’ targets, the prevention
costs will most probably be higher than 4.7 e/kg.
Kågeson (1993) presents prevention costs for NOx as well and he arrives at
a marginal social cost of 4.8 NJ7KLVPDUJLQDOVRFLDOFRVWLVWKHUHVXOW
of calculating the cost of the last measure, which was needed to achieve a
50% reduction in NOx emissions in Europe in 2000, relative to 1985.
The level of NOX emissions did not change too much in Europe between
1985 and 1990, so we can conclude that the cost curves in Europe did not
change too much either. Kågeson notes that the targets he used to calculate
the marginal social costs needed to be seen as interim targets as well.
7RWDO
The conclusion is that with respect to NOX, the damage cost approach leads
to higher marginal social costs than the prevention cost approach based on
marginal costs to achieve politically established emission reduction targets.
This suggests that reduction targets should be stricter in order to achieve
maximum welfare. Therefore, we will base our final estimate of the NOX
emission value on damage instead of prevention costs. We also differentiate
for rural and urban effects.
Table 2 Overview of literature on the valuation of NOX emissions in LQFOXGLQJ

indirect damage via ozone
sources on average range rural urban comment
GDPDJHFRVWV
ExternE (1999) 12 0.9-21 mainly depends on population den-

ExternE transport 4-25 4-13 7-25 sity
(1999)
IIASA (1999b) 12 9.4-15 depends on valuation of life lost
SIKA (1999) 9 7.7-10 7.4 7.7-10 Swedish case, depending on popu-
lation
COWI (2000) 11 11 12 basis for estimate could not be
found
IVM (1999) 4.4 0.6-32 Dutch case, only health impacts via
nitrate and ozone
sources on
SUHYHQWLRQFRVWV
IIASA (1999a) 1.5-3.3 depending on scenario, targets

IIASA (1999c) 4.7 probably not sustainable
CE (2000) 5.5 5 7 based on Auto Oil standards
Kageson 4.8 1985-2000 reduction targets
30 30

'DPDJHFRVW
Because the most important determining factor of PM10 is human health we
only deal with the damage cost estimates. These damage costs crucially
depend on the amount of people living in a certain area. Two sources are
the most relevant for this study:
• the ExternE projects with its numerous spin-off reports;
• the WHO (1999) study used by INfras/IWW (2000) as this gives new
information about the dose-response relationships.

In ExternE, a practical approximation formula has been derived: the damage
cost of PM2.5 per kg is about equal to 10 + 122*population density (in 1.000
2
people per km ). One should, however, take care that transport is linked to
human activity, and that therefore most transport emissions are released in
areas that are more densely populated than the national average. For ex-
2
ample in the Netherlands with its 450 inhabitants per km the damage costs
are higher than 10+122*0.45 = 65. For example, IVM (1999) comes, on the
basis of the ExternE approach, to 130 e/kg, whereas Infras/IWW (2000)
comes to 174 e/kg. In the Paris city centre, the health costs of a kg of PM2.5
even amount to several thousand Euro.
As the relevant impact of PM2.5 emission is human mortality and morbidity,

and as scientific knowledge about the damage of PM10 emission has been
greatly improved, and dose-response relationships seem to be well-
established, the prevention cost approach seems not suitable any more for
the valuation of this emission.
Table 3 Overview of literature on the valuation of PM2,5 or PM10 emissions in e1999

VRXUFHRQ average rural urban comment
GDPDJHFRVWV
Infras/IWW 73-194 national averages across EU,

(2000) based on WHO study
ExternE trans- 18-200 200- depends mainly on population density, high
port (1999) 2000 value = Paris, low = Dutch average density
SIKA (1999) 85-915 Swedish case, high value = Stockholm
centre
COWI (2000) 24 90 basis for estimate could not be identified
IVM (1999) 130 18-150 200-942 PM2.5 from ’low source’ (transport), Dutch
case
* practically all transport PM emissions fall in the range of smaller than 2.5 micron; therefore
the ’2.5’ estimates seem to fit best the transport emission cost estimates.
92&+&
'DPDJHFRVW
For VOC/HC there exist not too many recent estimates. ExternE leads to
estimates of 4-9 e/kg. The higher estimates apply for cities like Stuttgart and
Barnsley. For the Paris city centre the value explodes to 33 e/kg. SIKA
(1999) presents for the Swedish case the same range of values many to
take urban effects into account: e 4-9. COWI (2000) presents a value of
2.7 e/kg.
3UHYHQWLRQFRVW
IIASA (1999c) calculates the marginal social cost of a kilogramme, but this
modelling is not too sophisticated, because most measures that reduce
VOC/HC, also reduce NOx. Therefor, in general all costs are allocated to
either one of the pollutants. This results in almost identical prevention costs
for VOC/HC as for NOx. The value IIASA (1999c) presents is e 4.6 per kilo-
gramme.
7RWDO
From the different estimates it seems best to use the value of e 4 as the
marginal social cost per kilogramme. The COWI estimate is lower than the
other two, and also Bleijenberg et al. (1994) presented an estimate of e 5.

Table 4 Overview of literature on the valuation of HC emissions in e1999
VRXUFHVRQ DYHU UDQJH UXUDO XUEDQ FRPPHQW
GDPDJHFRVWV DJH
ExternE transport 3.9-33 4 4-33 depends mainly on population density,

(1999) high value = Paris
SIKA (1999) 3.6-8.9 3.6 4.1-8.9 Swedish case, depending on popula-
tion density, 8.9 = Stockholm centre
COWI (2000) 2.7 2.7 2.7 basis for estimate not clear
VRXUFHVRQ
SUHYHQWLRQFRVWV
IIASA (1999a) 1.5-3.3 depending on scenario, targets

IIASA (1999c) 4.6 probably not sustainable
CE (2000) 5.5 5 7 based on Auto Oil standards
62
'DPDJHFRVW
Recent (ExternE) insights come to damage cost estimates of 8.5 e/kg SO2.
This value is an average and varies widely across the European countries in
the study. The presented range is e 1.5-15.5.
The resulting marginal damage cost per kilogram SO2 seems to cover all
relevant impacts. However, the damage to ecological systems is uncertain.
Other damage estimates come from IIASA (1999b), which presents e 3.5
per kilogram, and Kågeson (2000) who presents a value of e 3.3 as an ab-
solute minimum. The recent COWI-study (2000) calculates values for rural
areas (e 5.5) and urban areas (e 9.5).
Altogether, it seems that the ExternE-value in general is too high and from
the other studies we conclude that the value from Kågeson (2000) and IIASA
(1999) can be best used as the lower bound.
3UHYHQWLRQFRVWV
Recent work on the estimation of the prevention cost per kg of SO2 can
again be found in the studies, which were done by IIASA to calculate the
costs of achieving the NECs.
The estimate for marginal social cost of a kg of SO2 which we could derive
from IIASA (1999c) was 1.5 e/kg. This value is based upon the target set in
the National Emissions Ceilings. This target boils down to a 78% reduction
of SO2 emissions in Europe in 2010, relative to 1990.
It is important to note that this value seems very low, compared to the dam-
age cost estimates. An important factor determining the marginal cost using
the prevention cost method is the target. About this target Ågren (1999)
makes the following remark: the National Emissions Ceilings are more ambi-
tious than the targets proposed in the so-called Gothenburg Protocol, but
they still fall short of meeting the environmental targets, set in the Fifth Envi-
ronmental Action Plan. Those targets are defined as the targets that need to
be achieved in order to have no exceeding ever of the critical loads, for both
human health and vulnerable biodiversity.
In order to achieve those ‘sustainability’ targets, the prevention costs will

most probably be higher than 1.5 e/kg. Kågeson (1993) presents prevention

costs for SO2 as well and he arrived at a marginal social cost of e 1.6 per
kilogramme. This marginal social cost is the result of calculating the cost of
the last measure, which was needed to achieve a 60% reduction in SO2
emissions in Europe in 2000, relative to 1985.
However, Kågeson (1993) also calculated the marginal social cost of a re-
duction of 80% in 2000 relative to 1985. The value he found there was e 3.2
which is substantially higher, whereas this target still cannot be seen as a
sustainable level of SO2 emissions.
7RWDO
When we compare the results from damage cost studies and prevention cost
studies, the gap is fairly small. Both the damage cost estimates from IIASA
(1999b) and SIKA (1999) can serve as a lower bound, which is e 3 per kilo-
gramme. This value is quite similar to the highest prevention cost estimate.
Table 5 Overview of literature on the valuation of SO2 emissions in e1999 per kg

sources on average range rural urban comment
GDPDJHFRVWV
ExternE (1999) 8.5 1.3-16 variation across EU Member States

ExternE transport 6.8-8.5 10-50 mainly depends on population density
(1999)
IIASA (1999b) 3.5 depends on valuation of life lost
SIKA (1999) 3.3 3.3 Swedish case, minimum estimate
COWI (2000) 7 5.5 9.5 basis for estimate could not be identi-
fied
sources on
SUHYHQWLRQFRVWV
IIASA (1999a) 1.2 variations between countries, targets

IIASA (1999c) 1.5 0-5 probably not sustainable
CE (2000) 3 3 3 based on Auto Oil standards
Kageson (1993) 1.6-3.2 depending on reduction targets
Table 6 Overview of middle estimates from the recent European literature for the
valuation of NOX, PM10, HC and SO2, per kilogram emitted, based on dam-
age costs
average urban rural
NOX 9 12 7
PM10 / PM2.5 150 300 70
HC 4 6 3
SO2 6 10 4
)XOOVXUYH\RIOLWHUDWXUH
The following literature has been found on the valuation of emissions other
than CO2. For each source we shortly describe the method that is used, and
the assumptions that are made. Finally the results are presented.
,QIUDV,::([WHUQDO FRVWV RI WUDQVSRUW DFFLGHQW HQYLURQPHQWDO

DQGFRQJHVWLRQFRVWVLQ:HVWHUQ(XURSH8,&=ULFK.DUOVUXKH3DULV
Method: damage cost

The impacts that are distinguished are the following:
• human health;
• materials and buildings;
• agricultural crop losses;
• forest damages .
3
+HDOWK the method is based on WHO (1999), based on PM10 as the leading
indicator and a value of statistical life for people affected by air pollution of
PLOOLRQ 7KH UHVXOWV IURP WHO for Austria, France and Switzerland
were extrapolated by Infras/IWW by using the weighted PM10 and NOX emis-
sions in different countries. This is done as follows.
Infras/IWW extrapolated the health impacts found by WHO (1999) (PM10 as

leading indicator, countries Austria, France and Switzerland) to the EU
Member States. As for other countries data on PM10 concentrations are not
widely available Infras/IWW have followed an indirect approach. As NOX
emissions in all EU Member States are well known, they defined a correla-
tion between PM10 concentrations and PM10 and NOX emissions in France,
Austria and Switzerland, and use this correlation to establish PM10 concen-
trations for the other European countries considered. A correction for non-
exhaust PM10 emissions was necessary in order to properly fulfil this task.
[Addition by CE: dividing the health costs by transport particulate emission

estimates leads to an approximate health costs of approximately 100 SHU
kg of particulate emitted (urban/rural average for France, Austria and Swit-
zerland). An important factor behind the health impact of PM10 emitted is
population density; this amounts 107, 96 and 172, for France, Austria and
Switzerland respectively. As a first order estimate, one can put a population
density correction factor on the PM10 shadow prices, as exposure per unit of
emission is approximately linearly dependent on population density]
The health costs account for an average 81% of external costs from air pol-
lution in the countries under consideration.
&URS ORVVHV the costs that were computed for Switzerland (In-
fras/Econcept/Prognos, 1996) are used to calculate the same costs for other
European countries. The formula that is used is as follows:
&URSORVVHV 12X emissions/country area) * agricultural production

2
ZLWK >P /ton]
On average these costs amount to 1% of external costs from air pollution in

the considered countries.
%XLOGLQJGDPDJHV the methodology used to calculate these costs is similar

to the one used for crop losses. The costs computed in Infras/Econcept/
Prognos (1996) were scaled to other European countries using NOX expo-
sure levels and building surface. The exposition levels are estimated by di-
viding the emissions by the country area and the building surface is esti-
mated using population. The following formula results:
%XLOGLQJ GDPDJH NOx-emissions/country area) * building surface *

PPP
ZLWK >e/tonne].
3
This last category is only included in the sensitivity analysis.

On average these costs account for 18% of external costs from air pollution
in the considered countries.
Addition by CE: using the data on emissions as provided in the Infras/IWW

report for the EU-countries, we have calculated the average cost per kilo-
gram PM10 for the EU-countries. The average cost is equal to the marginal
cost, because the dose-response functions are linear: at a certain location,
each kilogram is assumed to have the same impact. This resulted in Table 7.
Table 7 Overview of average and marginal damage costs per kg of PM10 emission
&RXQWU\ e
0DUJLQDOVRFLDOFRVWLQ SHUNLORJUDPRI30
Austria 104
Belgium 143
Denmark 162
Finland 111
France 107
Germany 135
Greece 74
Ireland 109
Italy 129
Luxembourg 194
Netherlands 174
Norway 146
Portugal 73
Spain 78
Sweden 121
Switzerland 172
United Kingdom 140
From the table we see that the marginal social costs of PM10 in the Euro-
pean countries considered varies between 73 and 194 e/kg. The main vari-
ables determining this value are population density and society’s purchasing
power parties, mainly defined by income.
&RPSDULQJWKHUHVXOWVZLWKWKRVHIURPWKH([WHUQ(ERWWRPXSDSSURDFK
In Infras/IWW the authors also make a comparison between the top down
approach (WHO) and the ExternE bottom up approach. Infras/IWW states
that there are significant differences in these two approaches; WHO leads to
higher damage costs than ExternE. However, the study does not directly
compare unit values per kg of PM10 emission following from both method-
ologies.
Comparison by CE of bottom up and top down damage estimates per pas-
senger or tonne kilometre in the Infras/IWW study leads to the conclusion
that the top down values used by WHO are, on average, 2 to 3 times higher
than the bottom up values as estimated following the ExternE approach.
This conclusion is in line with the results of both studies as discussed in this
annex.
Infras/IWW explain this difference as follows:
• the dispersion models for health costs: Whereas the top down approach,
based on the WHO study (1999) uses a particulate based modelling, in-
cluding as well particulates from tyres and clutches, the ExternE model
(see above) is basing their models on exhaust emissions of transport
and dividing it into a regional and a local part;

• the adjustment of VSL for health costs: Whereas the WHO-study based
on a VSL of 1.4 Me, ExternE bases its assumptions on a VSL of 3.2
Me. The adjustment factors are different however;
• the building damages, based on estimations of a shortage of renovation
cycles or damages to cultural buildings are not considered explicitly
within the ExternE model. Their approach for material damages might
therefore be an underestimation.
Comparison of the health impacts with the two approaches shows that the
average values based on the WHO study are similar to the results of Ex-
ternE. The uncertainty can therefore not be explained by uncertainties in the
dose-response functions.
&2:,&LYLODYLDWLRQLQ6FDQGLQDYLD±DQHQYLURQPHQWDODQGHFR
QRPLFFRPSDULVRQRIGLIIHUHQWWUDQVSRUWPRGHV/\QJE\'HQPDUN
Method: damage cost

4
The damage cost categories that have been included are the following :
• morbidity;
• premature mortality;
• reduced farming and forestry yields;
• dirty and corroded buildings.
This study has calculated the marginal external costs of emissions. Using
dose-response relationships, they arrived at the following values.
Table 8 Damage costs estimates according to COWI (2000)

Pollutant Marginal social cost (in 1999) per kilogram
Rural area Urban area
NOX 11 12
particulates 24 90
HC 2.7 2.7
SO2 5.5 9.5
CO 0 0
There is no further information available on the specific functional form of the

dose-response relationships that were used.
&( 712 (DUO\ LQWURGXFWLRQ RI FOHDQHU SHWURO DQG GLHVHO IXHO LQ WKH
1HWKHUODQGV DQDO\VLQJ HPLVVLRQ UHGXFWLRQ SRWHQWLDOV DQG FRVW HIIHF
WLYHQHVV >
9HUYURHJGH LQWURGXFWLH YDQ VFKRQHUH EHQ]LQH HQ GLHVHO LQ
1HGHUODQG HHQ DQDO\VH YDQ HPLVVLHSRWHQWLHHO HQ NRVWHQHIIHFWLYLWHLW
@
.DPSPDQ%(-0:'LQJV5*HQVH(YDQGH%XUJZDO'HOIW
Method: overview of estimates of shadow prices used.
This study in general uses shadow prices used previously in (CE 1999) and
(CE 1997). The estimates for NOX, HC and SO2 are based on marginal pre-
vention costs based on (CE 1994) and for NOX and HC additionally on the
costs for complying with the newest EU vehicle emission and fuel standards.
With respect to PM10 emission a new damage cost estimate is used based
4
Damage to the global climate is also considered in this study, but we will go into that, in the
section on valuation of greenhouse gases.

5
on WHO (1999| and Infras/IWW (2000). CE (2000) is used additionally in
order to split the damage cost estimate for PM10 into a rural and an urban
component.
The following marginal social cost estimates are used in CE (2000).
Table 9 Marginal costs estimates used in (CE 2000), based on both damage and
prevention costs
Pollutant Approach Marginal social cost (in 1999) per kg
Rural area Urban area
NOx prevention 5 7
PM10 damage 35 – 70 150 – 300
HC prevention 5 7
SO2 prevention 3 3
(XURSHDQ&RPPLVVLRQ'*;,,([WHUQ(±([WHUQDOLWLHVRI(QHUJ\
KWWSH[WHUQHMUFHVRYHUYLHZKWPO%UXVVHOV%HOJLXP
Method: damage costs
Model: for each pollutant an impact pathway is defined. This means that for
each pollutant all possible impacts are taken into account, the exposure lev-
els are identified (how many people are exposed to what concentration for
example), the effects are modelled (how many people will die premature for
example) and these effects are valued (what is a life lost worth for example).
This approach has been followed for all different impacts as far as possible.
The methodology has thereafter been worked out for all EU-countries. The
study has focused on the production of energy in different forms. This means
that the values should be seen as values that arise for emissions at ground
level.
The impact categories have not all been taken into account, but the larger
ones have. In the eventual estimate of the damage the following cost cate-
gories arise:
• crops;
• timber;
• building materials;
• human health;
• ecological systems;
• non-timber benefits of forests.
Alternative techniques have been developed for valuation of the last three
‘goods’, the main ones being hedonic pricing, travel cost methods and con-
tingent valuation. For the other goods, it was possible to use the market
prices, for timber, crops and so.
5
This source is not included in the list of references, because it does not provide shadow
prices. It does however provide information on the effects of emissions of particulates on
concentration levels in rural and urban areas. Information in |CE 2000| has been used to
calculate the difference in marginal social costs in rural areas as opposed to urban areas.
This had led to a ratio of 4.5 which means that the marginal social cost in rural areas has
been found by dividing the value for urban areas by 4.5.

For each of the pollutants SO2, NOx (including the damage through ozone
formation), and PM10 the damage costs are identified.
On the ExternE website, the results are given for each country separately.
We will here present only the ranges found across Member States and the
average value found by applying a weighed average according to each
member state’s population.
We would like to emphasise that the damage costs, as given in ExternE are
strongly dependent on the exposure levels and thus strongly fluctuates not
only EHWZHHQ, but also ZLWKLQ countries.
Table 10 Damage costs across the EU Member States of NOX, SO2 and PM10
emissions according to the ExternE study
Pollutant Marginal social cost (in 1999) per kg
Medium estimate Range
NOx 12 2.1 – 21
PM10 14 2.1 – 198
PM2,5 23 high estimate: 75
SO2 8.5 1.1 – 16
,(5 ([WHUQDO FRVWVRIWUDQVSRUWLQ([WHUQ(ZLWKFRQWULEXWLRQVE\,(5

(768,90 $50,1(6/,((,1(5,6 ,()( (1&2,20,)3((('/5
(.212
In the transport section of the ExternE research several transport cases

have been researched. In this overview study some of these cases are
summarised in terms of MEUR per km driven. The values are shown in the
able below. Consequently, they are recalculated to units per kg of emission
by using emission factors as stated in the German case study (IER 1998,
Transport externalities due to airborne pollution in Germany - application of
the ExternE approach, Bickel, P. et al., Stuttgart, 1998), and modification
factors for these emission factors mentioned in the report.
Furthermore we assume that ozone damage is for 50% caused by HC emis-
sions and for 50% by NOX emissions.
This approach leads to the results in Table 11.

Table 11 Damage estimates (vehicle use only) for diesel passenger cars in
agglomerations, urban areas and extra-urban areas, given as ’best estimate’
in 1995 m vkm, and recalculated to 1999 NJRISROOXWDQW
agglom- urban areas extra-urban areas uncer-
erations tainty*
Paris Stuttgart Amsterdam Barnsley Stuttgart- Tiel
Mannheim
(motorway)
SULPDU\SROOXWDQWV
PM 2.5 534.09 50.43 78.60 97.40 18.77 29.50 B

SO2 0.93 1.12 0.71 0.80 0.60 0.32 A/B
CO 0.02 0.003 0.003 0.005 0.001 0.0004 B
Cancers 4.02 0.54 0.57 1.25 0.18 0.22 B
VHFRQGDU\SROOXWDQWV
Sulphates 0.59 0.82 1.30 0.63 0.68 1.10 B

Nitrates 18.18 9.14 2.70 2.82 7.24 3.80 B?
Ozone 1.29 0.96 0.90 0.93 0.78 1.20 B
GDPDJHFRVWVSHUNJRISROOXWDQW
PM2.5 4,800 640 620 560 240 180 B

NOX 26 17 5.7 7.4 14 4.7 B
SO2 54 14 11 20 9.1 7.2 B
HC 36 7.8 5.5 9.3 4.3 4.2 B
* A = high confidence (a factor 2.5 to 4); B = medium confidence (a factor 4 to 6); C = low confi-
dence (a factor 6 to 12); „?“ = evidence is weak
It can be seen that the majority of externalities is caused by PM2.5 and ni-
trate.
A study by NTNU/DNV (Environmental performance of transportation -a
comparative study, Magerholm Fet, A. et al., IØT-Report nr. 3/2000), is re-
ferred to ExternE damage costs functions expressed in EUR per kg of pol-
lutant per 1,000 inhabitants per square kilometre.
PM2.5: 10 + 122 * pop

nitrates:2.1 + 6.4 * pop
:RUOG +HDOWK 2UJDQL]DWLRQ +HDOWK &RVWV GXH WR URDG WUDIILF
UHODWHG DLU SROOXWLRQ DQ LPSDFW DVVHVVPHQW SURMHFW RI $XVWULD )UDQFH
DQG6ZLW]HUODQGSUHSDUHGIRUWKH:+2PLQLVWHULDOFRQIHUHQFHRQHQYL
URQPHQWDQGKHDOWK/RQGRQ-XQH
Method: damage cost
Model: establishing dose-exposure-response relationships between emis-

sions PM10 and human health effects.
This study uses a dose-response modelling exercise. The impact of emis-

sions of PM10 on human health is measured for Switzerland, France and
Austria. PM10 is not considered to be the only air pollutant, but from other
studies it seems to have the strongest correlation with health impacts and it
is used a indicator for urban air pollution.

The following health effects were included in the assessment:
• total mortality based on cohort studies ;
6
• respiratory hospital admissions;

• cardiovascular hospital admissions;
• chronic bronchitis in adults;
• acute bronchitis in children;
• restricted activity days in adults;
• asthma attacks in children and adults.
A potentially important health effect that is not included is acute mortality.
The dose-response modelling has been done according to the following im-
pact-pathway:
emissions FRQFHQWUDWLRQ H[SRVXUH immission KHDOWK UHVSRQVH

(mortality/morbidity) FRVWV
Some important remarks on the dose-response relationships are the follow-

ing:
• all air pollution-related health effects are only considered for the age
groups assessed by epidemiological surveys and above the lowest as-
3
VHVVHGH[SRVXUHOHYHORI JP PM10;
• WTP is used for monetary valuation;
• only PM10 has been assessed (the annual average concentration is
taken as an indicator for urban air pollution).
The monetary valuation used for (some of the important) health effects is as
follows:
• PLOOLRQSHUSUHYHQWHGIDWDOLW\WRWDOPRUWDOLW\FRVWV!LQFRXn-
tries);
• PLOOLRQSHUSUHYHQWHGFDVHRIFKURQLFEURQFKLWLVRIPRUELGLW\
costs);
• SHUUHVWULFWHGDFWLYLW\GD\DYRLGHGRIPRUELGLW\FRVWV
WHO states that the most recent empirical values for the willingness to pay
of a risk reduction of fatal road accidents applied is PLOOLRQ:+2FRr-
rects this value to PLOOLRQWRFRQVLGHUWKHORZHUZLOOLQJQHVVWRSD\RIWKH
higher average age class of air pollution related victims.
Unfortunately, the results are not recalculated into values per unit of emis-
sion. This was done by Infras and IWW (2000) as previously discussed.
6,.$gYHUV\QDYVDPKlOOVHNRQRPLVNDNDO\OSULQFLSHURFKNDON\O
YlUGHQSnWUDQVSRUWRPUnGHW6,.$QU 6WRFNKROP(summary sent in a
memo by .nJHVRQ3
&DOFXODWLRQYDOXHVXVHGE\6ZHGLVK6WDWH$JHQFLHV
LQWKHWUDQVSRUWVHFWRU
Method: damage cost
This memo provides the English summary of values used in Swedish trans-
7
port policy. The values have been calculated in SIKA (1999) . The values
6
Increase in premature mortality is only considered for adults older than 30 years of age.
Furthermore, the results from the cohort studies only detect long-term impacts, so acute
mortality is not included in the analysis.
7
The full reference of this publication is: SIKA, 1999, Översyn av samhällsekonomiska kalyl-
principer och kalkylvärden på transportområdet, SIKA nr. 6, Stockholm.

are agreed upon by the state agencies for the different modes of transport
(road, rail, water and air), the Swedish Environmental Protection Agency and
the Swedish Institute for Transport and Communications Analysis (SIKA).
They are used in cost-benefit analyses.
The values for NOX, SO2, VOC and PM10 are based upon the damage cost
method. The total damage arises from local damage, as well as regional and
global damage. The cost categories that have been included are the follow-
ing:
• human health;
• damage to forestry and crops;
• material damage.
For the calculation of total (marginal) damage cost the two values can be
added. The following table presents the ranges in regional values, local val-
ues and total values that are used in Sweden.
Table 12 Marginal damage costs for Sweden, based on SIKA (1999)

regional damage local damage* total
NOx 7.4 0.3 – 2.9 7.8 – 10
PM10 0 85 – 915 85 – 915
HC 3,6 0.48 – 5.3 4.1 – 8.9
SO2 2.1 1.2 – 26 3.3 – 28
* Mainly depending on population density; figures reflect differences between North-Sweden and
the Stockholm city centre
cJUHQ&*HWWLQJPRUHIRUOHVVDQDOWHUQDWLYHDVVHVVPHQWRIWKH
1(&'LUHFWLYH$LUSROOXWLRQDQG&OLPDWHVHULHV7 (%UXVVHOV
Method: prevention cost method
This study presents a critical review of IIASA et al. (1999a,b). This study
does not present new estimates for the marginal costs for each pollutants,
but it presents (lower) estimates for the total costs needed for meeting the
National Emission Ceilings (NECs) in the different EU-countries.
We will describe the main points of criticism under the heading of IIASA et
al. (1999a,b).
,,$6$ '10, DQG 5,90 D (FRQRPLF HYDOXDWLRQ RI D GLUHFWLYH RQ

1DWLRQDO (PLVVLRQ &HLOLQJV IRU FHUWDLQ DWPRVSKHULF SROOXWDQWV SDUW $
&RVWHIIHFWLYHQHVVDQDO\VLV/D[HQEXUJ$XVWULD2VOR1RUZD\%LOWKR
YHQ7KH1HWKHUODQGV
Method: prevention costs
Model used: RAINS (Regional Air pollution INformation and Simulation), fo-
cussing on NOx, SO2, NH3 and VOC. For these pollutants emission control
options are identified and costs have been determined. The associated costs
include investment-related and operating costs. All investments in emission
reduction are annualized using a discount factor of 4%.
Not all emission control options are incorporated in the model, only the major
ones for the economic activities that contribute the most. For NOx and VOC,
only the emission control options (and emissions) are given for stationary

sources. The omission of control costs of mobile sources introduces an un-
certainty in the results.
In the remainder of this description we focus on the emissions ceilings for 15

European countries (EU-15) and the corresponding abatement measures
and costs. IIASA et al. also present figures for non-EU-countries in Europe,
but these figures are not as reliable and do not show up in the summarizing
tables in the report.
Different scenarios have been used, with one central scenario in which the
emissions of different pollutants in the EU overall are reduced as follows,
compared to the emissions in 1990:
• NOx: -55%
• VOC: -60%
• SO2: -78%
These reductions are the results of minimising the costs to achieve environ-
mental targets. These environmental targets arise from the acidification and
ozone-exposure strategies that was also adopted in the UN/ECE Convention
on Long-range Trans-boundary Air Pollution, where for all areas a target of a
‘60% gap closure’ of excess sulphur deposition was established. However,
IIASA states (p. 96) that the targets used in its report will not be sufficient to
meet the environmental long-term targets (the no-damage levels) every-
where in Europe within the next one or two decades.
Three scenarios are used:

1 A base case 'central' energy scenario, which leads to a 9% increase of
CO2 emissions between 1990 and 2010.
2 A ‘low CO2' scenario’ which uses the agreements as set in the Kyoto
Protocol, which boils down to a cut in CO2-emissions by 7% in 2010
relative to 1990. This leads to a large reduction in abatement costs for
NOX and VOC, and a cut of 28% in overall costs to achieve the environ-
mental targets for NH3, NOX and VOC in Europe.
3 A ‘low NH3-scenario’ which is based on a 10% cut in livestock all over
Europe, following an expected change in the Common Agricultural Pol-
icy. This ‘new’ base case, which is purely hypothetical, results in lower
costs for SO2-measures. The effects on costs of measures to reduce
NOx and VOC are small.
Table 13 Derivation of DYHUDJH SUHYHQWLRQ FRVWV from IIASA (1999a) in three

scenarios (all figures relative to the reference scenario)
central low CO2 low NH3
NOX reduction (ktonne) 927 856 607
HC reduction (ktonne) 1,547 1,312 1,470
NOX + HC reduction costs (M 4,508 2,567 5,538
average NOX + HC prevention costs in NJ 2.2 1.5 3.3
SO2 reduction (ktonne) 1,050 1,368 827

SO2 reduction costs (M 861 994 782
average SO2 prevention costs in NJ 1.0 1.0 1.2

As we mentioned under the heading of Ågren (1999), the results of this
IIASA-study have been criticised. The main points of criticism in this study
are the following:
• the level of ambition is fairly low: although the environmental targets in
the central scenario have been strengthened in comparison with the
Gothenburg Protocol, the level of ambition is low compared to the first
reading of the European Commission. The targets are not sufficient to
achieve the objectives laid down in the Fifth Environmental Action Plan.
The long-term aim is that critical loads for both human health and vul-
nerable biodiversity should never be exceeded;
• the costs of achieving the NECs are overestimated because of:
• the energy scenario which serves as the input for the future emis-
sions is not based on meeting the agreements of the Kyoto Protocol;
• only end-of-pipe measures are included in the list of measures that
can be taken to achieve the environmental targets set, whereas fuel
switching and energy and transport efficiency measures have been
ignored. This method thus excludes measures that might be
achieved a zero cost;
• technological improvements (including cheaper technology) is not taken
into account.
Ågren (1999) presents no other average prevention cost estimates, but pre-
sents the cost consequences of and an alternative energy scenario, which
brings CO2 emissions in 2010 down with 15% relative to 1990. In this sce-
nario, the overall costs of meeting the NEC-directive come down from the
ELOOLRQVHH,,$6$DWR ELOOLRQ
,,$6$DQG$($7HFKQRORJ\E(FRQRPLFHYDOXDWLRQRIDGLUHFWLYH
RQ1DWLRQDO(PLVVLRQ&HLOLQJVIRUFHUWDLQDWPRVSKHULFSROOXWDQWVSDUW
%%HQHILW$QDO\VLV/D[HQEXUJ$XVWULD&XOKDP8QLWHG.LQJGRP
Method: damage cost
Model used: ALPHA, permits analysis of the effects of sulphur/nitrogenous

pollutants and ozone on public health, materials, crops, forests, ecosystems
and visibility.
Not all categories are quantified in detail, and so the authors emphasize that
the benefits, which are presented in the report, are a ‘subtotal’. For different
policy scenarios in order to achieve reductions in NOx, SO2, NH3 and ozone
the emission reductions and benefits are calculated.
The scenarios differ in targets set for the different pollutants.
The larger part of the benefits comes from lower mortality and morbidity. The
results therefor crucially depend upon the method used to value these health
impacts. Two possibilities are explored in this study, the Value of a Statistical
Life (VOSL) and the Value of a Life Year lost (VOLY).
The main difference between these two approaches is the fact that in the
case of VOSL each life year lost is valued at the same price, whereas the
VOLY-approach uses different values for a life year lost for a young adult
and a life year lost for an elder person.
The results for the different policy scenarios are almost identical when look-
ing at the damage cost per tonne NOX, SO2 and NH3 reduced. We therefor
only present the average for NOX and SO2 below.

Table 14 Marginal damage costs of NOX and SO2 found in IIASA (1999b)
Low estimate High estimate
(using VOLY) (using VOSL)
NOX 9.4 15
SO2 3.5 6.9
Ågren (1999) points out that the following benefits have not been quantified:
• less acidification of soil and water;
• less euthrophication;
• fewer effects on biological diversity;
• less long-term risk for lowered forest productivity;
• reduced direct health effects of NO2 and VOCs;
• less damage to historical buildings and monuments.
,,$6$ F )XUWKHU DQDO\VLV RI VFHQDULR UHVXOWV REWDLQHG ZLWK WKH
5$,16PRGHO/D[HQEXUJ$XVWULD
Method: prevention costs
Model used: RAINS (Regional Air pollution INformation and Simulation), fo-
cussing on NOX, SO2, NH3 and VOC. For these pollutants emission control
options are identified and costs have been determined. The associated costs
include investment-related and operating costs. All investments in emission
reduction are annualized using a discount factor of 4%.
This report presents for each country the marginal social costs to achieve
the environmental targets on acidification and ground-level ozone as put
down in the Seventh Interim Report to the European Commission. These
targets are the as follows for the EU as a whole:
• NOX: -55%
• VOC: -60%
• SO2: -78%
The marginal prevention costs can vary widely between countries (each
country has its specific environmental targets) and between economic sec-
tors. In Table 15 below we present two figures: an 'average' marginal pre-
vention cost and a range of marginal prevention costs. In both figures the
highest prevention costs across economic sectors are taken as a reference.
The ranges presented are ranges of these marginal costs across countries;
the 'average' figures represent the averages across these countries.
IIASA presents in table 1.7 of its report the following marginal prevention
costs.
Table 15 Marginal prevention costs according to IIASA (1999c)

Pollutant Marginal social cost (in 1999) per kg
Average over all countries Range per country over all sectors
NOX 4.7 0 – 13
VOC 4.6 0 – 11
SO2 1.5 0 – 5.0

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Method: damage cost
This literature survey attempts to estimate the benefits of environmental

policy for the Netherlands. In most cases the estimates are based on Euro-
pean studies on dose-response relations and other underlying data.
The following categories of potential effects are discerned:

• climate change;
• human health;
• material damage;
• agricultural damage;
• nature and biodiversity.
The emissions that are taken into account are PM10, PM2.5, NOX, and CO2.
For these emissions the impact on the different categories are determined
and monetised. The authors distinguish between ‘high sources’ and ‘low
sources’. Most industrial sources are considered ‘high sources’, whereas
transport is considered a ‘low source’.
Furthermore, the authors stress that the impact of a pollutant differs largely
between locations. Even for a small country like the Netherlands, this results
in a factor 10 difference between high and low estimates. However, in their
study they only present the value for an average location in the Netherlands.
For ‘high sources’, this average location is Amsterdam, for the ‘low sources’
the arithmetic average of emissions on different locations in The Netherlands
is used to ‘define’ the average location.
In the results, the distinction between ‘low’ and ‘high’ sources has been
made as follows: for low sources, i.e. mainly traffic, the particulate matter
emissions are taken as particulate matter with a diameter smaller than 2.5
micron (PM2.5). For high sources, the particulate matter consists of particles
with a diameter smaller than 10 micron (PM10).
The resulting marginal social costs that were found in IVM (1999) are pre-
sented below.
Table 16 Marginal damage costs found in IVM (1999)

Medium estimate Range
NOX (via nitrate) 2.9 0.4 – 21
NOX (via ozone) 1.6 0.2 – 11
NOX (total) 4.4 0.6 – 32
PM10 ('high source') 12 1.6 – 85
PM2.5 ('low source') 130 18 – 942
The most important benefits from environmental protection that IVM (1999)
finds are human health benefits. These benefits can be monetised following
different methods. The medium estimate in the table above and the associ-
ated range are determined with a fixed monetary value for the risk of pre-

mature death, specifically k IRUD\HDUUHGXFWLRQRIOLIHWLPHIURPDFXWH
mortality and k IRUD\HDUUHGXFWLRQRIOLIHWLPHIURPFKURQLFPRUWDOLW\
The authors note that the intervals presented, reflect uncertainties in atmos-
pheric dispersion, in numbers of exposed population and in exposure-effect
relationships. The authors have also compared their estimates with a num-
8
ber of international studies that go into the damages avoided by environ-
mental protection and they conclude the following from their comparison:
• the medium estimates for PM10 and NOX are similar with other interna-
tional sources;
• the medium estimate for PM2.5 is near the upper bound of the estimates
found in the international literature; this is mainly due to the fact that in
other studies the exposure-effect relationships for ‘low sources’ and thus
for PM2.5 are not modelled at the same level of detail as is done in Kuik
et al.
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This study draws heavily on CE (1994) and CE (1997) and therefor this
study is not worked out further.
Delucchi. M.A. 1996-1998, Report series 'The annualized social cost of mo-
tor-vehicle use in the United States based on 1990-1991 data', University of
California, Institute of Transportation Studies, 1996-1998:
• 1998, The annualized social cost of motor-vehicle use in the United
States 1990-1991, summary of theory, data, methods, and results; Re-
port #1 in the series, June 1998.
• 1997, The valuation of non-monetary externalities Report #9 in the se-
ries, June 1998.
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Method: damage costs
This study goes into the damage caused by NOX, VOC and diesel particu-
lates.
For the following categories the damage has been investigated for Germany
for the year 2010:
• health;
• materials and buildings;
• forests;
• crops and animals.
Finally, acute health impacts and damage to crops are valued in terms of
DYHUDJH damage costs per kg of pollutant. In Table 17 the results are shown.
8
Most of the sources they mention have been covered elsewhere in our overview of the
literature.

Table 17 Estimates of average damage costs of pollutants in Germany in 2010,
according to IWW et al (1998)
Pollutant Average social costs (in 1999) per kg
total of which health of which crops
NOx (via ozone) 0,23 0,16 0,07
HC (via ozone) 0,30 0,20 0,1
Diesel particulates* 37 (in urban areas) - -
* Based on Planco, Berücksichtiging wissenschaftlichter Erkenntnisfortschritte im Um-
weltschutz für die Bundesverkehrswegeplanung (BVWP, Schlussbericht im Auftrag des Bun-
desministeriums für Verkehr, 1995
Note: the study gives no indication on the base year used, but some figures suggest that all mone-
tary values are denoted in DM1995 and the exchange rate to the ECU used in the report itself
is one ECU to 1,85 DM. We use this value as well and correct for CPI developments between
1995 and 1999.
The estimates presented may serve as an underestimate for the marginal

damage per kg, because:
• not all impact categories have been monetised; only acute health dam-
age and damage to crops is included;
• the values present average instead of marginal damage costs.
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Overview of different damage estimates: the following ranges are taken from
IPPC (1996) in which the social costs of air pollution are mentioned to incor-
porate the second order benefits of CO2 reductions.
Table 18 Estimates of marginal damage costs of pollutants in IPCC (1996)

UK UN ECE* Norway US US
source Pearce Pearce Alfsen et al. Ottinger et Scheraga and
(1994) (1994) (1992) al. (1990) Leary (1994)
NOx 0.2 0.7 2.2 – 44 2.8 0.1 – 1.4
particulates 30 30 2.9 – 39 3.8 0.5 – 16
SO2 0.5 0.9 0.7 – 11 6.7 0.4 – 2.6
* Damage done by a tonne of UK emissions to Western and Eastern Europe, including UK (UN
ECE region)
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This study used health cost estimates from various sources from 1977 to
1990. Due to its lack of more recent estimates we do not consider this study.

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We do not go into detail for this study, because it is a similar study as the
one, which has been finalised in 2000. We therefor use the update (see In-
fras/IWW, 2000).
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Method: literature survey
This study provides an extensive survey of existing literature on the valua-

tion of the external effects that occur with transport. The literature deals with
WTP-studies, damage cost estimates and prevention cost estimates.
Table 19 Overview of marginal social costs estimates in (Bleijenberg et al., 1994)

Pollutant 0DUJLQDOVRFLDOFRVWLQ SHUNLORJUDP
Low Medium High

NOX 1.0 5.0 6.4
HC 1.9 5.0 7.3
SO2 0.43 1.0 3.7
In these values the results from IOO (1993) have not been included because
they were much lower than the values that other studies presented. This is
due to the fact that IOO (1993) has not put a value on the deterioration of
agricultural land, nature and forest land and leaves aside the damage to
buildings.
The following studies were included in this literature survey:

• Grupp, 1986;
• Quinet, 1990;
• Dogs and Platz, 1990;
• Klaasen, 1992;
• Teufel et al., 1993;
• Kågeson, 1993;
• Neuenschwander et al., 1992;
• Maibach et al., 1992.
We have not analysed these sources separately in our study, except for the
study by Kågeson (1993).
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This study has been included in the literature survey of IPCC (1996). We
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This study has been included in the literature survey by Bleijenberg et al.
(1994). We therefor do not present the results separately.
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Method: prevention cost
Environmental targets for SO2 and NOX have been established, denoted in
emission reduction in 2000 relative to levels in 1985. The targets are differ-
ent for the different European countries and for each country high and low
targets have been set.
IIASA has constructed national abatement curves and the resulting esti-
mates for the marginal social cost of SO2 and NOX have been calculated.
The following table presents the results for both pollutants and the different
targets.
Table 20 Marginal prevention costs according to Kågeson (1993)

Target Medium value Range
(relative to 1985)
NOx (including ozone) - 50% 4.8 3.2 - 6.4
SO2 - 60% 1.6 0.47 - 3.9
SO2 - 80% 3.2 0.47 - 21
1.2 - 5.89
Note: the value in the report are in DM1985; to arrive at 1999 we have used the following conversion
factors: 1 DM1985 equals 1,2 DM1993, exchange rate in 1993 is 1 '0 DQG HYHQWXDOO\ ZH KDYH
used the CPI to come from 1993 to 1999.
Kågeson also mentions that the marginal social cost for NOX is also applica-
ble for VOC. The IIASA model is not suit to capture targets for VOC sepa-
rately and construct the abatement cost curve. Therefor, Kågeson suggests
to use the value found for NOX simultaneously for VOC.
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This set of information sheets provides an overview of different costs (of en-
vironmental pollution) and benefits (of environmental protection) that arise in
Germany. Categories such as human health, biodiversity impacts, material
damage were included, but the costs and benefits have not been related to
units of pollution. Therefor, this study is not relevant to our research.
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tel: +31 15 2150 150
tel: +31 15 2 150 150
fax: +31 15 2150 151
fax: +31 15 2 150 151
e-mail:ce@ce.nl
e-mail: ce@ce.nl
website:www.ce.nl
website: www.ce.nl
External costs of noise emission

B.A. Leurs
S.M. de Bruyn
R.C.N. Wit
Contents
1 External costs of noise emission 1

1.1 Overview of studies 1
1 External costs of noise emission
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The effects of noise from transport are increasingly studied. Within this
study, we distinguish the following categories:
1 Effects on human well-being, which can be assessed via WTP/WTA
studies and via property price decrease (hedonic pricing) studies.
2 Effects on human health, of which knowledge is gradually coming avail-
able.
3 Effects on indirect land use; governments put restrictions on land that is
too heavily affected by noise.
The three effects can be added as higher noise levels in the long term lead
to lower property values, more health costs, and more indirect land use.
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There is an abundance of noise standards in Europe, and currently attempts
are being undertaken to establish EU-wide standards. Currently national
standards vary between 40 and 65 dB(A) for day-time noise (average: 52)
and 40 and 55 for night-time noise (46 average). Scientist on average rec-
ommend 50-55 dB(A) as threshold value for day-time noise, and 40-45
dB(A) as threshold value for night-time noise (Infras/IWW 2000).
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Method: two methods that have been used internationally are reviewed in
this study. These two methods are:
a the willingness to pay for different noise levels (WTP);
b the actual health risk of noise (damage cost method).
The first method measures the willingness to pay (WTP) for the reduction of
noise levels. These data on willingness to pay are given in relative terms, i.e.
relation to the income per capita. This results in linear relations between the
(acceptable) noise level and the per capita income. Infras/IWW reviewed 5
studies:
• Pommerehne (1986);
• Soguel (1994);
• Iten (1990);
• IRER (1993);
• Weinberger (1990).
For these studies the gradient is fairly similar: for each incremental dB(A) (on
average) 0.11% of per capita income is needed to compensate. Following
this approach, Infras/IWW concludes that for determining the total noise cost
not the marginal cost per dB (A) is crucial, but the ‘target level’. Below this
target level, no costs are put on the noise, above this level the cost in-
creases by 0.11% of per capita income per dB (A). The target level can be
estimated from the 5 studies, to be 50 dB (A), i.e. below this level no noise
cost is apparent. Infras/IWW have decided to take a more cautious target
level, namely 55 dB (A).

February 2002, Annex IV
Table 1 WTP per person per year per dB(A) reduced in DFFRUGLQJ WR
Infras/IWW (2000), for the case Germany
dB(A) 55-60 60-65 65-70 70-75 >75
WTP 47 142 236 331 425
Additionally Infras/IWW value the health effects of transport noise. Two

studies have empirically examined this relationship and the following table
presents the results.
Table 2 Increased risk of cardiac infarctions due to transport noise, according to 2

empirical studies
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(1993) Speedwell
Babisch et al. Berlin - +20% +70%
(1994)
Value used in +20% +30%
Infras/IWW
According to Infras/IWW the values found using the first method (WTP) and
the damage cost (for health) can be added.
The values that are given in Infras/IWW cannot be easily translated into
marginal cost per unit noise production, because noise is an ‘extremely local
phenomenon’ (Infras/IWW). Therefor, Infras/IWW give some decisive char-
acteristics for determining the marginal cost. These characteristics include
the time zone (day and night), the land use (rural, sub-urban and urban) and
traffic conditions (relaxed, dense). This exercise is necessary for each noise
source separately. Another important factor is the threshold level, which is
determined to be 55 dB(A) in this study. This means that the willingness to
pay for a reduction in noise at a level of 55 dB(A) is zero. This threshold
level is determined from a number of studies.
For the EU-countries, Switzerland and Norway (EUR17) this exercise is

done, which results in (total) noise costs of 0RIZKLFKFRPHV
from the WTP-approach and 41% from the health costs. Of this, air transport
contributes 0 RI ZKLFK FRPHV IURP WKH :73DSSURDFK DQG
38% from the health costs).
The amount of LTOs in 1995 in the EUR17 was 3.6 mln (table 82); the costs
per LTO are thus
The total number of passengers is 582 mln (167 mln domestic and 415 mln
international, table 82). Using a load factor of 50% for domestic and 65% for
international transport the amount of seat LTOs is 486 mln; the costs per
seat LTO then arrive at
Furthermore, Infras/IWW state that the best estimate of the amount of per-
sons exposed to different noise levels is provided in ECMT (1998).
On the estimation of noise damage from air transport, Infras/IWW states that
the marginal cost can be calculated by taking 30 – 60% of the average noise
cost.

Table 3 Breakdown of annual noise costs from aviation, according to Infras/IWW
(2000), in DQGUHFDOFXODWHGWRDYHUDJHFRVWVSHU/72DQGVHDW/72
country WTP health # LTOs # seat costs per costs per
costs (’000) LTOs LTO seat LTO
0 0 (’000)
Austria 20 23 71.6 6,524 601 6.6
Belgium 29 22 110.9 9,618 460 5.3
Denmark 10 7 118.7 11,629 143 1.5
Finland 13 14 56.5 5,968 478 4.5
France 161 119 498.7 69,829 561 4.0
Germany 300 311 720.7 90,726 848 6.7
Greece 12 8 60.9 8,701 328 2.3
Ireland 9 7 64.6 7,154 248 2.2
Italy 177 131 259.4 38,144 1,187 8.1
Luxembourg 2 1 18.3 931 164 3.2
Netherlands 446 146 145.4 19,154 4,072 30.9
Norway 4 1 132.1 14,273 38 0.4
Portugal 19 9 70.6 10,395 397 2.7
Spain 83 62 407.3 69,681 356 2.1
Sweden 7 2 144.1 14,882 62 0.6
Switzerland 24 24 154.1 16,521 311 2.9
United Kingdom 249 60 559.4 91,903 552 3.4
total 1,566 947 3593 486,032 699 5.2
Figure 1 Estimates of average noise costs in the EU per seat per LTO, based on
Infras/IWW (2000)
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The extremely high value in the Netherlands is due to the fact that the num-
ber of people in the Netherlands that are exposed to airport noise seems to
be overestimated.
Marginal costs are on average about 30-60% of this amount, according to

Infras/IWW.

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This study derived estimates of the marginal willingness to pay (MWTP) for
an aircraft ‘event’ (landing and take-off) for each aircraft type. They started
by adopting the NSDI value of around 0.6% per dBA found by Schipper
(1999). By applying this NSDI value to the average house price within the
Heathrow Airport 57dB(A) daytime contour and by multiplying for the number
of resident households, they were able to derive an estimate of overall
MWTP for a 1dB(A) Leq reduction in the area.
Table 4 The contour areas and populations of Heathrow Airport

Leq level (dB(A) area, km2 % change population (,000) % change
1998 1999 1998 1999
>57 163.7 155.6 -4.9% 341.0 331.6 -2.8%
>60 94.6 87.5 -7.5% 172.5 175.5 +1.7%
>63 55.4 53.9 -2.7% 82.2 91.2 +10.9%
>66 35.2 35.4 +0.6% 38.5 39.7 +3.1%
>69 28.8 21.9 -3.9% 15.5 13.8 -11.0%
>72 13.1 12.0 -8.4% 4.4 3.9 -11.4%
For comparison: the number of people within the 57 dB(A) contour of Schiphol is about 20,000.
Then, they converted this figure into a daily MWTP. In order to derive esti-
mates of MWTP for the reduction of a daily movement of each aircraft type,
they multiplied the impact on Leq (16-hr) of each aircraft type (derived from
noise certification data) by the daily overall MWTP figure. Table 5 shows the
resulting estimated noise damage costs per aircraft event and per LTO for
selected aircraft types (UK£ =
Table 5 Results: external costs in SHU DLUFUDIW HYHQW DQG SHU /72 SHU VHDW IRU
Heathrow Airport
type # seats SHU/72 SHUVHDW/72
A310 220 108 0.5

A340 320 246 0.8
B737-400 150 108 0.7
B747-400 420 538 1.3
B757 200 140 0.7
B777-300 350 172 0.5
B777 350 106 0.3
MD82 150 148 1.0
The resulting figures are rather low compared with the results of Schipper
(1999) and with the synthesis at the end of this annex, certainly when the
amount of people living within the 57 dB(A) contour is taken into account.
The results correspond with the lowest estimates of Schipper that are based
on the HP approach.
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Not relevant for our study, because this study only deals with the costs of
preventing noise damage. The study does not go into the desirable amount
of prevention, or the damage cost of noise.
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Subject: valuation of indirect land use by Schiphol Airport.

Method: opportunity cost
This study has estimated the marginal external costs of land-use through
different modes of transport. Among these modes is also aviation and
Bruinsma et al. (2000) have calculated the external cost of the indirect land
use around Schiphol Airport and other (regional) airports in the Netherlands.
As this study intends to fill up the gap of valuation of land use in the CE
study ’Efficient prices for transport’ CE was asked to deliver comments to a
draft version in June 2000. In cases these comments were not included in
the final report, we write them down here for clarity.
/DQGXVH
Around the airport there are FRUGRQV VDQLWDLUHV to restrict damage and nui-
sance, which generates costs in the form of depressed local property values.
The land would be more valuable if it were usable. This implies that even if
there is no actual noise nuisance or any off-site accident, there are still real
costs associated with noise emissions and the risk of accidents.
The study leads to the following conclusions concerning land use by Dutch
airports.
2
Table 6 Direct and indirect land use by Dutch airports, in km
direct indirect
built-up area rural area built-up area rural area
Schiphol - 26.8 8.4 222.8
regional airports -- ca 16.7 3.3 61.9
small airports - ca 5.5 5.7 114.8
total - 49 17.43 399.5
9DOXDWLRQ
The value Bruinsma et al. (2000) put on land-use has been calculated as
follows. First, they distinguish indirect land-use in urban areas and indirect
land-use in rural areas. We first go into the external cost of indirect land-use
in UXUDODUHDVthey calculate, after that we describe the external cost of indi-
rect land-use in XUEDQDUHDV they describe.
,I the restrictions on the land around Schiphol were to be abolished, a part of

the land would be used as a built-up area. Bruinsma et al. suggest that not
all land would be used for a new function, i.e. not all land would be used for
building houses, offices and so on. Bruinsma et al. assume that in non-built-
up areas 20% of the land will get a different function, i.e. a change from agri-
cultural area to built-up areas.

&RPPHQW &( RXU VWXG\ µ([WHUQDO FRVWV RI DYLDWLRQ¶ IRFXVHV RQ PDUJLQDO
FRVWVDQGVKRXOGWKXVFRQVLGHUPDUJLQDOFKDQJHV,WLVKLJKO\OLNHO\WKDWWKH
PDUJLQDOXVHRIODQGWKDWVXGGHQO\FRPHVDYDLODEOHIRUQHZIXQFWLRQVZRXOG
EHKLJKHUWKDQWKH'XWFKQDWLRQDODYHUDJH RI 7KH 1\IHU VWXG\

ILQGVWKDWDERXWNP FRXOGEHXVHGRUDERXW
The difference in property values between agricultural land and land that can
2
be built upon is estimated to be ƒ 50,- ( SURSHUW\SULFHSHUP for built-
2
up areas in the rural area) minus ƒ 5,- ( WKH SURSHUW\ SULFH SHU P for
agricultural area in the rural area). This boils down to a difference property
values of roughly SHU VTXDUH PHWUH +RZHYHU Bruinsma et al. do not
take this WRFDOFXODWHWKHH[WHUQDOFRVW EHFDXVHWKH\ DUJXH WKHUH LV D
large distributive effect due to which the economic costs of restricted land
use are much lower. They argue that therefor, one should not take the price
difference between agricultural land and built-up areas in the Netherlands,
but instead use the difference between the property price of built-up areas
RQ DQ DWWUDFWLYH ORFDWLRQ and the property price of built-up areas RQ D OHVV
DWWUDFWLYHORFDWLRQ. Arbitrarily they choose a price difference of
&RPPHQW &( WKH SULFH GLIIHUHQFH RI VKRXOG EH XVHG 7KH GLVWULEXWLYH
HIIHFW LV QRW UHOHYDQW IURP D QDWLRQDO ZHOIDUH SRLQW RI YLHZ 5HVWULFWLRQV WR
ODQGXVHDURXQGDLUSRUWVZLOOLQGHHGOHDGWRJUHDWHUGHPDQGIRUODQGLQRWKHU
DUHDV%XWWKHKLJKHUSULFHVWKDWUHVXOWIURPWKLVGRQRWUHIOHFWZHOIDUHJDLQV
DQGVKRXOGWKXVEHFRQVLGHUHGHFRQRPLFORVVHV
&RQVLGHUWKLVFDVH$SHUVRQEX\VD FRPSXWHUDWVKRS$+HZRXOG
KDYHERXJKWWKLVFRPSXWHUDWVKRS%LILWZHUH FKHDSHUWKHUH1RZWKH
FRPSXWHUIDOOVRXWRIWKHKDQGVRIWKHRZQHURIVKRS$VRWKDWWKHFOLHQWFDQ
QRWEX\LWWKHUHDQ\PRUH)RUWKHFOLHQWWKHZHOIDUHORVVLVRQO\ EXWIRU
VRFLHW\ZHOIDUHORVVHTXDOVWKHIXOO 7KHVDPHUHDVRQLQJKROGVWUXH
IRUODQGWKDWFDQQRWEHXVHGDW RQH SODFHDQGZLOO WKHUHIRU EH XVHG DW DQ
RWKHU7KHVRFLDOFRVWLVWKHQHTXDOWRWKHIXOOFRVWGLIIHUHQWLDORIPDLQO\DJ
ULFXOWXUDOODQGDQGEXLOWXSDUHDV
For the indirect land-use in XUEDQDUHDV, Bruinsma et al. the methodology is

roughly the same, but the figure are different. In case the noise zones of air-
ports lies within built-up areas, a functional change is only assumed to hap-
pen for 10% of the land (p.32). The value of land in built-up areas is esti-
2
mated at SHUP . Again Bruinsma at al. subtract the value of alternative
2
land of a built-up location ( DQG WKXV DUULYH DW D ORVV RI SHU P .
&RPPHQW&(DJDLQQRWWKHGLVWULEXWLYHHIIHFWLVUHOHYDQWEXWWKHVXEVWLWXWLRQ

HIIHFWZKLFKZRXOGEH SHUP DKLJKHUHVWLPDWH
Both comments by CE would lead to about a fivefold figure for the valuation
of indirect land use outside built-up areas and a 30% higher figure for the
value within built-up areas.
To arrive at the marginal social cost per vehicle kilometre the total external
costs are discounted to a yearly value (using the real interest rate, 4%, as a
discounting factor) and this yearly value has afterwards been allocated to the
different types of aircraft.
Bruinsma et al. calculate from these assumptions, coupled to the amount of

indirect land-use around the airports the following marginal social cost for
indirect land-use by airports. The presentation of the marginal social cost for
indirect land-use is given per person- or tonne-kilometre. The total annual
costs of indirect land use cannot be directly derived from the report; close
analysis suggests an annual cost of 0 &RUUHFWLRQ RI WKHVH ILJXUHV E\
CE leads to an estimate of 0SHUDQQXP

Table 7 Overview of costs from indirect land use of Schiphol Airport, according to
Bruinsma et al., and after modifications by CE

7\SHRIDLUFUDIW 0DUJLQDOVRFLDOFRVWLQ FWSHUSHUVRQWRQQHNLORPHWUH
Opportunity cost, Opportunity cost, Total opportunity

urban area rural area cost
DFFWR%UXLQVPDHWDO
aircraft, 150 kilometres 0.08 0.38 0.44

aircraft, 1,500 kilometres 0.01 0.03 0.04
aircraft, 6,000 kilometres
- passenger transport 0.00 0.00 0.00
- goods transport 0.00 0.02 0.02
DIWHUPRGLILFDWLRQVE\&(

aircraft, 1,500 kilometres 0.01 0.13 0.14
aircraft, 6,000 kilometres
- passenger transport 0.00 0.02 0.02
- goods transport 0.00 0.08 0.08
6(2 8QLYHUVLWHLW YDQ $PVWHUGDP 7KH VKDGRZ SULFH RI QRLVH IURP
DYLDWLRQLQ'XWFK'HVFKDGXZSULMVYDQJHOXLGKLQGHUGRRUYOLHJWXLJHQ
QRW SXEOLVKHG SUHOLPLQDU\ UHVXOWV SUHVHQWHG DW 5/'UHVHDUFK GD\V
0DUFKUGODWHUSXEOLVKHG DV&KDSWHU LQ % %DDUVPD 0RQH
WDU\ 9DOXDWLRQ RI (QYLURQPHQWDO *RRGV $OWHUQDWLYHV WR &RQWLQJHQW
9DOXDWLRQ7KHOD7KHVLVQR$PVWHUGDP
Method: non-preference method, implicit valuation through well-being

evaluation measured with the use of questionnaires.
This study aims to estimate the effects on well-being from aircraft noise and
to find shadow prices both for the social costs of noise nuisance and for iso-
lation (which can be perceived as the costs of noise reduction).
First well-being is formulated as being dependent on a number of variables,

among them family situation, income, age, noise nuisance and several other
living conditions, such as the isolation of the houses where people live in.
Sample data have been obtained using questionnaires for over 16,000
households, of which almost 3,400 responded. The estimations show that
well-being is enhanced by the amount of income he or she earns and ham-
pered by aircraft noise, as expected. Subsequently the study investigates
equivalent levels of well-being for different levels of noise nuisance. In other
words: the study investigates how much LQFRPH a person would require in
order to bare a higher level of noise. This gives the implicit shadow price for
noise nuisance. By comparing this implicit price for houses with or without
isolation and implicit price for isolation is obtained.
The Well-being evaluation method hence determines an implicit shadow

price for the environmental good by DVVXPLQJ that an increase in noise can
be traded off against a higher income.
The results of this approach can be given as follows.
1
All ‘types’ deal with passenger transport, except for the ‘6,000 km’ category aircraft that also
carry freight.

Table 8 Shadow prices due to the increase of the noise level of 10Ke (monthly
compensations in WRDFKLHYHDVLPLODUOHYHORIwell-being)
category of house Isolation initial noise level
20 Ke 30 Ke 40 Ke
House of OLYLQJFRVWVSP no 53 33 23
House of OLYLQJFRVWVSP no 162 99 70
House of OLYLQJFRVWVSP yes 8.1 5.0 3.5
House of OLYLQJFRVWVSP yes 25 15 11
By subtracting the results from the investigation for houses with isolation
from those without isolation, an implicit shadow price can be found for isola-
tion. So the implicit shadow price of isolation for a house of laying
in the zone of 20 Ke is about PRQWKO\ ,QWHUHVWLQJ LV PRUHRYHU WKDW LQ
this study the additional loss in income due to an increase in aircraft noise
diminishes with higher levels of initial aircraft noise: the authors interpret this
as an evidence of diminishing marginal disutility as known in the economic
literature.
Table 9 Overview of results of SEO (1999)

Ke-value corresponding # households* average monthly total annual com-
lower limit Lden dB(A) value compensation per pensation ( 0
(approx.) household (
> 20 Ke > 49 134,705 52
> 25 Ke > 51.5 49,052 35 21

> 30 Ke > 54 10,041 31 3,7
> 35 Ke >56.5 5,086 28 1.7
> 40 Ke >59 3,511 21 0.88
* These numbers do nor correspond very well figures presented elsewhere in this annex; the cause
is not clear.
1<)(56FKLSKROVHDRIVSDFH>
6FKLSKRO]HHYDQUXLPWH
@%UHXNHOHQ

Aim: to establish costs of indirect land use due to cordon sanitaire.
Nyfer calculates that completely moving Schiphol to another location would

2 2
imply that finally about 80 km of land (out of the total 258 km of the cordon
sanitaire) would become available for other functions. This is a net figure
including all current water, infrastructure, and recreational areas, and in-
cludes reservations for rural activities. The value is well consistent with the
estimate of Bruinsma et al (2000), but is criticised in a report by the Dutch
CPB ’Towards a more efficient environmental policy’, 2000) stating that the
real value should be about one third lower. For our purposes, from this
2
amount the direct land use of Schiphol (27 km ) should be subtracted, lead-
2
ing to a net figure of about 30 km of usable land currently made unavailable
by the cordon sanitaire. NYFER estimates the net present value of this land,
2
based on an average rise in land prices of SHUP , to be about 0WR
2
48 per km depending on the economic scenario. The net present value of
2
30 km would then amount to 0WR 02QDQDQQXDOEDVLVGLs-
count rate 4%) this is WR mln per annum

+DPHOLQN 3 7KH FRVW RI QRLVH IURP DYLDWLRQ D KHGRQLF SULFH
VWXG\ IRU WKH 6FKLSKRO UHJLRQ >
'H NRVWHQ YDQ JHOXLGKLQGHU GRRU
YOLHJYHUNHHU HHQ KHGRQLVFKH SULMVVWXGLH YRRU GH UHJLR 6FKLSKRO
@
.8%&('HOIW
Method: hedonic pricing
This study used two different approaches, of which one has finally been
published.
$SSURDFKEDVHGRQ1',VIURPLQWHUQDWLRQDOOLWHUDWXUH
Based on the arithmetic average of 29 primary international hedonic pricing
studies, it was concluded that the average fall in house prices (NDI, Noise
Depreciation Index) per Ke additional noise exposure on top of 20 is 0.0036.
This means that for each additional Ke, the value of a house will drop by
0.36%. It should be noted that the 29 studies are based on a variety of dif-
ferent noise units and conversion to Ke was therefore necessary. Once con-
verted, the results of the 29 studies were remarkably consistent. They
yielded 26 NDIs of between 0.17 and 0.63. Three studies had outliers of
1.06, 1.12 and 1.36. The arithmetic average of the 26 ‘low’ NDIs was then
multiplied by the numbers of dwellings within different Ke zones at Schiphol,
their value and a social discount rate of 4%.
Table 10 Review of dwelling numbers in different Ke zones in 1990

> 65 Ke 40 – 65 Ke 35 – 40 Ke 30 – 35 Ke 20 – 30 Ke total
average Ke 65 52,5 37,5 32,5 25
(average dB(A)) 71.5 65 58 55 51.5 )
Ke above cut-off 45 32,5 17,5 12,5 5
# houses 1990 53 7,012 8,025 36,229 189,908
deprec. ( KRXVH 13,608 9,828 5,292 3,780 1,512
deprec. 1990 ( 0 1 69 42 137 287 536
# houses 1999 (approx.) 40 6,000 7,000 18,000 92,000

deprec. ( KRXVH 34,020 24,570 13,230 9,450 3,780
deprec 1999 ( 0 1 147 93 170 348 759
The average price of a house in the Schiphol area in 1990 was about
LQLWZDVDERXW 7KXVZHDUULYHDWDQDSSUR[LPDWH
depreciation of house prices of 0 LQ DQG 0 LQ 7KH
latter figure has been multiplied by a 10% discount rate to convert it to an
annual amount, in between the 5 and 15% values used in ECMT (1998).
This yields a shadow price for the impact of noise at Schiphol of eM 76 per
annum. We emphasise that this is merely an initial estimate.
$SSURDFKQHZDVVHVVPHQWRIKRXVHSULFHV
Hamelink conducts a hedonic pricing study on houses located in Amstelveen
and Aalsmeer, nearby Schiphol Airport in the Netherlands. The study con-
tains a model describing the sales price of houses in general with variables
such as floorspace, number of rooms, year of construction, garden, proximity
to the centre, etc. By collecting data from real estate agencies on sales, data
have been gathered for 1997 on all houses sold in the two vicinities. By
adding variables on noise levels stemming from airplanes to these data, the
study can estimate the loss in real estate prices due to noise pollution.

Two measures for noise are examined in this study: Kosten-eenheden (Ke),
a Dutch measure which (in short) measures noise levels outdoors weighted
by the time of the day, and the LAeq-night, a weighted measure for noise
levels indoors at night. Both measures are calculated measures for noise
nuisance and are difficult to connect directly to international measures, such
as dB(A).
The sample in this study consists of all houses sold in 1997 in the two vicini-
ties, 796 in Amstelveen and 81 in Aalsmeer. The study finds no significant
effect of noise on house prices for lower levels of noise, measured in Ke. For
higher levels of noise (40-55Ke) there exists a significant negative effect on
house prices in Amstelveen (which has the most observations). For lower
levels of noise (below 40Ke), this study finds no significant influence on the
sale prices. Also for the nuisance because of the night flights, the study finds
a significant negative effect on house prices in Amstelveen. For the smaller
sample of houses sold in Aalsmeer, the study finds no significant effects.
The depreciation in real estate prices because of living in the 40-55Ke zone
is equivalent to almost 10% of the house prices ( DW DQ DYHUDJH
price of 7KH GHSUHFLDWLRQ LQ SULFHV EHFDXVH RI QXLVDQFHV Ee-
cause of night flights consists of about 9% (
The study finds that the total depreciation of house prices due to Schiphol
Airport noise was 0 IRUDOO KRXVHV ZLWKD QRLVHORDG RYHU Ke, and
0IRUDOOKRXVHVZLWKDQLJKWWLPHORDGRIRYHULAeq. The 0LV
well consistent with the figure in Table 10, ( 0JLYHQWKHIDFWWKDWLQ
this table calculations take place with about 30% higher house prices. This
0LVPRVWSUREDEO\DQXQGHUHVWLPDWLRQEHFDXVHWKHODUJHVWDPRXQWRI
damage costs is found among households that suffer less than 40 Ke.
The conclusion can be drawn that 0 VHHPV D UHDVRQDEOH HVWLPDWH RI

annual costs of losses of house values die to the noise of Schiphol Airport.
6FKLSSHU < 0DUNHW VWUXFWXUH DQG HQYLURQPHQWDO FRVWV LQ DYLD
WLRQDZHOIDUHDQDO\VLVRI(XURSHDQDLUWUDQVSRUWUHIRUP)UHH 8QLYHU
VLW\$PVWHUGDP
Method: literature survey, meta-analysis, mainly on hedonic pricing studies,

statistical analysis of noise nuisance
Schipper presents an overview of 32 case-studies on the social costs of air-

craft noise, mainly expressed in housing prices. The vast majority of them
are hedonic price studies; only 2 studies have used the CVM method.
The hedonic price studies show that the Noise Depreciation Index (NDI), an
internationally used standard which shows the price elasticity of noise nui-
sance (in dB(A)), in general moves between the 0.5 to 0.75%. This indicates
that every dB(A) additional noise exposure results in a loss of property val-
ues of 0.5-0.75%.
Schipper then asks himself the question whether the results of these 30 he-
donic price studies are so homogenous that the results can be transferred to
other locations. For this he conducts a ‘meta-analysis’ on the results of these
studies, which is a modern tool to answer such questions. His results show
that there is no homogeneity in the results: i.e. the figure of 0.5-0.75% is not
consistent without taking into account location specifics (such as income
levels, average size of houses, etc.). Subsequently, Schipper identifies two

types of variables which explain the variation in the NDI: location specific
variables such as the average price of houses near the airport; and study
specific variables which explain the differences in methodology of the stud-
ies conducted. In general, the study specific variables have more influence
on the NDI estimate than the location specific variables. Studies that have
not been published in scientific journals tend to find higher NDIs and the dis-
covered NDIs tend to become lower over time. This latter result is somewhat
surprising as one would expect that increasing scarcity of ‘silence’ would
result in a higher NDI over time. The most important thing, however, is that
the estimate for the NDI which, given all differences in study methodologies,
are consistent with the data, is 0.48%: lower than the sample mean of the
2
studies involved .
Schipper compares his estimates of the NDI from hedonic price studies with
the results from WTP-studies and finds that the results from WTP-studies in
general show higher external costs than hedonic price studies.
Subsequently, Schipper conducts a statistical analysis in which OECD data

on the number of people living within certain noise contours nearby airports
3
are regressed on the aircraft movements round a number of OECD-airports .
Schipper defines noise nuisance as the difference between the exposed
noise levels and the background noise. He does not take into account noise
nuisance lower than 57 dB(A) Leq.
His results show that the noise nuisance per person increases significantly
with the aircraft movements at an airport and diminishes over time. This lat-
ter effect may reflect technological improvements in aircraft engines. At this
place we only present the estimates for the more recent years, which have a
value of 3.9 person-Leq per ACM as a basis. By applying his results to the
previous results from the hedonic pricing studies, the cost estimates of an
aircraft movement are estimated.
Table 11 Noise costs per aircraft movement (ACM) in 1995 $&0 IURP Schipper
(1999), taken for data after 1985, not differentiated for aircraft type of popu-
lation density
Hedonic pricing, avg. house price of 1,028
WTP in the USA 4,771
It should be noted that the differences between various aircraft are quite substantial. So will a
Boeing 747-200 result in more than ten times higher noise costs than a Boeing 757-200. Finally,
it should also be noted that these results are averages from the selected European airports. The
total external costs per ACM is of course mainly influenced by the amount of houses located
nearby the airport and their respective prices.
2
However, this figure of 0.48% is not significant. Nevertheless, Schipper uses it subsequently
in his study. It should also be noted that such meta-analysis, as conducted by Schipper, are
not free of problems. Many studies have not reported their data, as the authors had not ex-
pected that their studies could be the object of another studies dealing with their results.
See van den Bergh and Button (1999).
3
These data can be found in the Environmental Data Compendia of 1987 and 1993 from the
OECD. The airports which have been taken into account are: Copenhagen, Paris, Frankfurt,
Dusseldorf, Munchen, Hamburg, Amsterdam, Rotterdam, Maastricht, Oslo, Geneve, Zurich,
London and Manchester.

The WTP results refer here to a study of Feitelson et al. (1996) which pre-
sented cost estimates using willingness to pay for a certain number of air-
ports in the US. It is interesting to notice that the hedonic pricing studies
come to estimates 4 to 20 times lower than those in the WTP studies.
Schipper claims that this may be due to the fact that WTP estimates include
non-use values or recreational values and the non-committing character of
questionnaires through which the WTP is established which results in a
much steeper marginal external cost curve.
Table 12 Noise costs per aircraft movement (ACM) in 1995 ECU/ACM from the
average European airport from Schipper (1999), differentiated according to
aircraft types, and expressed in SHU /72 SHU SDVVHQJHU FDSDFLW\ RI WKH
aircraft
aircraft type capacity ECU 1995 per take-off SHUVHDW/72
(pax) average range average range

B737-300 150 555 152-2,577 8 2-37
B757-200 200 150 41-697 2 0.4-7
B767-300 275 297 81-1,380 2 0.6-11
B747-400 420 1170 320-5,430 6 2-28
It can clearly be seen that the valuations per passenger capacity per LTO
(=trip) are much lower for the newer aircraft types considered (i.e. B757 and
B767).
(&07 (IILFLHQW WUDQVSRUW IRU (XURSH 3ROLFLHV IRU LQWHUQDOLVDWLRQ

RIH[WHUQDOFRVWV(&072(&'3DULV)UDQFH
Method: literature survey
ECMT in their literature survey find no evidence against the assumption that
the average and marginal costs of noise changes, measured on the dB (A)
scale are equal. This means that the actual noise level does not influence
the marginal social cost.
The literature survey is based on a couple of hedonic pricing studies, in

which the income characteristics and property prices of houses are used to
arrive at an estimate for the social cost of noise. For comparison purposes
ECMT has converted all values into a lump-sum value. For this purpose,
yearly estimates have been converted to a lump-sum estimate by assuming
that persons live in a house for 50 years. Taking a shorter or longer time pe-
riod does not influence the results substantially. The following studies and
corresponding results are presented in ECMT (1998).

Table 13 Summary of studies cited in ECMT (1998)
6WXG\ /XPSVXPYDOXHIRUD 5HPDUNV
G%$QRLVHUHGXFWLRQ
LQ
Soguel (1994) 1,044 5% discount

384 15% discount
231 25% discount
Colins and Evans (1994) 209 Apartment value: 32,000
771 Semi-detached house, garden: 60,200
1,185 detached house: 113,000
Levesque (1994) 809 house value: 44,700
Uyeno et al. (1993) 733 house value: 110,250
From these hedonic pricing estimates, ECMT calculates a shadow price per
dB(A) of SHUSHUVRQRU SHUKRXVHKROGSHU \HDU:KHQXVLQJWKLV
value for other countries and sites it is necessary to adjust the figure for Pur-
chasing Power Parities and house values, although the income elasticity of
noise valuation is stated to be fairly low.
ECMT furthermore calculates the total costs from transport noise in different
European countries by estimating the amount of people living in certain
noise bands, i.e. the amount of people that is exposed to a certain level of
noise. Noise levels under 50 dB (A) are not valued in monetary terms. The
estimate for each of the transport modes under consideration is fully based
on the amount of people that are exposed to a certain noise level of a certain
transport mode. The external noise cost per kilometre can then be calcu-
lated, because there is no evidence from empirical studies that average
costs and marginal costs are not equal.
ECMT also presents another method to estimate the external costs of noise
from different transport modes. This involves a ‘top-down’ approach in which
the total noise costs from transport in a country are expressed as a percent-
age of GDP. These estimates only concern noise from road transport and
ECMT has also estimated the total external cost from rail transport. Unfortu-
nately, the total external noise costs from air transport are not calculated in
ECMT.
,QVWLWXWIU9HUNHKUVZLVVHQVFKDIW.RVWHQGHV/lUPVLQGHU%XQ
GHVUHSXEOLN'HXWVFKODQG8%$)%(ULFK6FKPLGW9HUODJ%HUOLQ
*HUPDQ\
Method: combination of damage cost, prevention costand willingness to pay
The study uses different methods to estimate the social cost of traffic in
Germany. However, the cost estimates have not been related to a certain
reduction in noise and therefor it is not possible to estimate, in the scope of
our study, the social cost per certain noise unit, which can be translated to
other airports.
4XDOLWDWLYHVXPPDU\RIWKHOLWHUDWXUH
To arrive at a common estimate for external costs from these studies is far
from straightforward. Nevertheless, this literature survey can come up with
some results:
1 Studies that have estimated the costs of road transport proved not to be
useful for estimating aircraft noise because the hindrance from aircraft

noise has a typical peak intensity, largely absent in road transport noise,
which can be described as a more general ‘humming’. Proost et al.
(1999) have shown that this effect is so substantial that we do not rec-
ommend to use figures from road transport to evaluate aircraft noise.
This implies that the studies from Proost et al. (1999) and Bleijenberg et
al. (1994) are not useful for this study.
2 External costs have been estimated different in most of the studies. This
is mainly due to the different valuation approaches that have been cho-
sen. Approaches that are dominant are either the hedonic price method
4
(HPM) or the contingent valuation method (CVM). The disadvantage of
the hedonic price method is that it assumes that the true value of exter-
nal costs may be underestimated. Schipper (1999, p39) concludes that
the revealed preference techniques (as hedonic pricing) are only able to
uncover a part of the total economic value of environmental goods. For
example: the loss in recreational values for non-habitants nearby air-
ports is not counted in hedonic pricing studies. The disadvantage of the
contingent valuation method is that this method does not involve a real
but a hypothetical transaction. As the filling in of questionnaires has no
binding force, the answers may not reflect true market prices. Further-
more the results may be influenced by the amount of people who, under
no circumstances, are willing to live nearby the airport. Such unwilling
persons may influence the housing market, as housing prices may fall
due to a lack of demand for houses nearby airports. Especially when
taking into account the happiness of people living nearby airports, as in
SEO/Baarsma (1999/2000), an underestimation of the true value of
damage may occur.
3 Closely connected to the various methods that have been used for ex-
ternal costs, there exists different definitions of external costs in the vari-
ous studies. ECMT (1998), Schipper (1999) and Hamelink (1999) have
emphasized the loss in property values. SEO/Baarsma (1999/2000)
have emphasised the costs of foregone well-being and Infras/IWW has
emphasised the general costs (willingness to pay) and the damage costs
of reduced health.
4 The disturbance from noise has been measured differently in most
studies. The three most used measures of noise are the Leq, the Ldn
and the Ke. The day-night average noise level, or DNL, is a 24-hour av-
erage (expressed in decibels). Night-time noise, between the hours of
10:00 p.m. and 7:00 a.m. is weighted, i.e., given an additional 10 deci-
bels to compensate for sleep interference and other disruptions caused
by loud night-time noise. (The symbol for DNL that often appears in
noise monitoring systems is Ldn.) The community noise equivalent level,
or CNEL, is similar to the DNL except that it includes an approximate 5
dB "penalty" for evening noise (7 p.m. to 10 p.m.), in addition to the 10
dB penalty for night-time noise. (The symbol for noise equivalent level
that often appears in noise monitoring systems is Leq.). The Kosten-
eenheden (Ke), finally, is a Dutch measure for aircraft noise, which gives
the cumulative yearly weighted noise levels. For each time of the day, a
different weighting factor is attached to the maximum dB(A) noise levels
of an aircraft that passes by. Nightly passages are in this way 5 times
more counted than the passages during rush hours. The Ke units cannot
4
The HPM establishes a value for external costs through the revealed preferences in associ-
ated markets: the price for houses do not only contain components for the quality of the
house but also the quality of the environment in which the house is located. Noise nuisance
will hence be translated in a lower value of the house than on grounds of the quality of the
house could be expected. The contingent valuation method establishes a value for external
costs through expressed preferences, for example, with the use of questionnaires. Typical
questions are then: “how much compensatory money would you need in order to accept
that an airport is located nearby your house”.

be recounted into Ldn or Leq without going into details for every pas-
sage that has occurred during a year. This is due to the different calcu-
lation methods and to the fact that the Ldn and Leq estimates refer to
5
average noise, while the Ke refers to maximum noise levels. As an ex-
tremely rough, and preliminary estimate one may state that the relation-
ship is Leq dB(A) = 39+0.5*Ke. In reality there is no linear relationship
between Ke and Leq.
5 The minimum level of noise under which no external effects can be ex-
pected differs between the studies. While ECMT (1998) has assumed a
minimum level of 50 dB(A), Infra/WWW (2000) has estimated that the
minimum level is 55 dB(A) and Schipper (1999) has used a minimum
level of 57 dB(A). SEO/Baarsma (1999/2000) have taken a minimum
level of 20 Ke (i.e. about 49 dB(A). These substantial differences matter
for the estimation of the total external costs.
6 Also the shape of the external damage function is ambiguous from the
various studies. Bruinsma et al. (2000) and Schipper (1999) assumed
linear marginal cost functions. But SEO/Baarsma (1999) found concave
marginal cost functions (i.e. decreasing marginal costs for higher levels
of disturbance), and also Infras/IWW state that marginal costs of noise
are generally 30-60% of average costs.
7 Finally, the slope of the external cost function can be estimated to lay in
between 0.4-0.75%. This implies that every dB(A) increase in noise lev-
els result in an increase in external costs by 0.4-0.75%. Schipper (1999)
is the only study, which has attempted to compare various results of the
slope of the external cost function, and he arrives at a figure of 0.48%
(though it is not significantly different from zero).
4XDQWLWDWLYHVXUYH\RIWKHOLWHUDWXUH
(VWLPDWHVRIH[WHUQDOFRVWVIURP6FKLSKRO$LUSRUW
Noise damage costs from Schiphol Airport are quite extensively studied. In
this paragraph we will show a synthesis of the studies considered earlier in
this annex.

The Dutch government has launched a study project in which during five years both the Ldn
and the Ke estimates will be produced for a period of five years to establish a comparison of
Dutch figures for aircraft noise with internationally comparable measures.

Table 14 Overview of annual external noise cost estimates results for Schiphol Airport
source external cost esti- remarks
mate ( 0yr)
HVWLPDWHVZLWK+3+HGRQLF3ULFLQJDSSURDFK
Hamelink (1999) ca 76 NDIs from literature

approach 1
Hamelink (1999) ca 68 primary HP research
approach 2
HVWLPDWHVZLWK&90VWDWHGSUHIHUHQFHDSSURDFK
SEO (1999) 88 WTA, compensation

Infras/IWW 446 all Dutch airports, WTP, we suspect that exposure data
have been overestimated.
HVWLPDWHVRIFRVWVRILQGLUHFWODQGXVHGXHWR
FRUGRQVDQLWDLUH
Bruinsma et al, ca 45 indirect land use from ’cordon sanitaire’, no time path
after correction
Nyfer (1999), after ca 14-58 indirect land use from ’cordon sanitaire’, based on NPV
correction time path 2000-2030
HVWLPDWHVRIKHDOWKFRVWV
INFRAS/IWW 146 all Dutch airports, we suspect that exposure data have
been overestimated
30 indicative correction for health costs from noise from
Schiphol Airport
HVWLPDWHVRIWRWDOH[WHUQDOFRVWVRU
sources mentioned 100-200 indicative minimum and maximum estimates of external

costs from noise from Schiphol Airport
These results show that

• except the Infras/IWW study, CVM and HP approaches show approxi-
mately the same order of magnitude;
• the annual costs as a result of the ’cordon sanitaire’ seem to be some-
what lower than the damage cost estimates;
• the annual costs resulting from the CVM approach of SEO are the high-
est values found. This is in line with the conclusions by Schipper (1999);
• the total external costs from noise at Schiphol are about twice as large
as the costs that are derived from HP studies.
Based on the methodology for distribution of external costs across different

aircraft types from CE (1999) this leads to the following noise costs for dif-
ferent aircraft types.
Table 15 Average noise costs per aircraft type per LTO at Schiphol Airport, based on
0RIWRWDOH[WHUQDOQRLVHFRVWVDQGRQWKHDOORFDWLRQPHWKRGRORJ\
in (CE, 1999)
MTOW maximum capacity typical noise SHU/72 /72VHDWDYDLODEOH
(tonnes) payload (seats) dist. (km) factor average marginal*

10 3.9 30 150 0.3 140-270 5-9 2-4
50 11 100 500 1.0 450-910 5-9 2-4
70 17 130 1,500 1.3 570-1,130 4-9 2-4
280 48 240 6,000 2.5
1,100-2,300 4-8 2-4
* Marginal costs calculated as 50% of average costs, based on Infras/IWW (2000)
&RPSDULQJ6FKLSKROZLWKRWKHUDLUSRUWVFRQVLGHUHG
The number of inhabitants within a radius of 25 km from Schiphol (1,965
2 2
km ) is about 1.8 million people, or about 900 people per km . About 8% of
this circle is North Sea.
With respect to Charles de Gaulle Airport, within a circle of 25 km radius,
more than one half of the city of Paris will be covered (2 million people). The
2
other 75% of the virtual circle adds another 1.8 million people (900 per km ).

This leads to an estimation of 3.8 million people living within 25 km of Char-
2
les de Gaulle Airport, or about 2,000 per km .
Frankfurt Airport: the Rhine-Main region, covering major cities like Frankfurt,
Mainz and Wiesbaden, has 4.8 million inhabitants. The Rhine Main region is
2
surrounding Frankfurt Main airport and is about 11,000 km , which means
2
that the average number of inhabitants is about 431 per km .
It can be concluded that Schiphol has a medium position from the point of
population density. At Charles de Gaulle the density is about twice that of
Schiphol, at Frankfurt it is about half.
0DUJLQDOFRVWVRIH[WUDDLUFUDIWPRYHPHQWV
• the external costs of noise per aircraft type per LTO are dependent on
aircraft size (MTOW), and even more on aircraft technology level;
• in this study we will base our estimate for the marginal costs on half that
of average noise costs (total external costs divided by number of LTOs);
• external costs of noise per LTO are, within a given technology level,
more or less linearly dependent on aircraft size in terms of maximum
payload, and number of seats (not for freight).
Estimates for the marginal external costs of noise per seat per LTO vary
between DQG GHSHQGLQJRQYDOXDWLRQPHWKRGRORJ\DLUFUDIWWHFh-
nology, and number of people affected. See Table 16.
Table 16 Overview of estimates of external noise costs per seat LTO

range average average or mar- explanation
estimate ginal costs?
IWW/Infras 0.4-30 5.2 average low = Norway average
(2000) high = Netherlands average
average = EU average
Pearce and 0.3 marginal B777, Heathrow
Pearce (2000)
1.3 B747-400, Heathrow
Schipper (1999) 2-37 8 marginal B737-300, depending on in-
come & location
0.4-7 2 B757-200
0.6-11 2 B767-300
2-28 6 B747-400
CE (2001) 4-9 average figures apply to Schiphol, to all
(estimate in
this annex) aircraft sizes, to average tech-
nology level
• medium estimates for marginal costs, for an airport with an EU average

population density, arrive at about SHUVHDW/72IRUDLUFUDIWZLWKIOHHW
average technology.
U. S. Standards
$GGLWLRQDOOLWHUDWXUHXVHG
Feitelson, E.I., R.E. Hurd, R.R. Mudge (1996). The impact of aircraft noise
on willingness to pay for residences. 7UDQVSRUWDWLRQ5HVHDUFK' 1-14.

&(
CE
6ROXWLRQVIRU
Solutions for
HQYLURQPHQW
environment,
economy and
HFRQRP\DQG
technology
WHFKQRORJ\
Oude Delft 180

Oude Delft 180
2611 HH Delft
2611 HH Delft
The Netherlands
The Netherlands
tel: +31 15 2150 150
tel: +31 15 2 150 150
fax: +31 15 2150 151
fax: +31 15 2 150 151
e-mail:ce@ce.nl
e-mail: ce@ce.nl
website:www.ce.nl
website: www.ce.nl
Allocating costs to passengers,

freight, and aircraft types

Contents
1 Allocating costs to pax, freight, and aircraft types 1

1 Allocating costs to pax, freight, and aircraft
types
In this annex it is discussed how external costs of aircraft movements will be

allocated to passenger and freight, in cases both passengers and freight are
transported.
Table 1 The characteristics of the four different types of aircraft or market segments,
as the case may be, and the distribution of LTO numbers (Landings and
Take-Offs, flight movements divided by 2) for scheduled and charter flights
to and from airports in the Netherlands in 1997 for these segments
typical distance MTOW maximum capacity utilisation number of freight
a
(km) (tonnes) payload (pax) (%) pax (tonnes)
(tonnes)
c
200 km 17 4.5 40 50% 20 0
500 km 50 12 100 65% 65 1
1,500 km (EU) 110 24 120 70% 140 2
b
6,000 km ICA 397 72 400 80% 330 25
a
Maximum Take-Off Weight (empty weight + fuel + load)
b
ICA: Intercontinental
c
This segment of the market, as regards characteristics relevant to this study, (MTOW, use of
energy, distance, level of capacity utilisation) is defined such that it is representative of domestic
flight traffic.
All four types of aircraft have been considered for passenger transport. It can
be seen that the difference in freight carried between the four is very large.
The freight carried varies in the order of 1 tonne for the small types and 17.5
tonnes for the large ones. It is evident from this that most freight is carried in
these large aircraft, which generally fly between continents. The average
distance for KLM and Lufthansa freight transport, for instance, is about 6,000
km.
Allocation to passengers and freight

For the calculation to be correct, external costs must be allocated to freight
and passengers. In aviation it is usual to allow 100 kg per passenger. How-
ever, for this study we must view allocation in a broader perspective. It is
evident that what are known as full freighters have a much higher payload
(total maximum permissible load) than those known as combis. Thus the full
freighter version of the 747-400 has a payload of 129.1 tonnes, whereas the
’combi’ version (which can carry 410 passengers) only has a payload (freight
plus passengers at 100 kg per person) of 72.2 tonnes. This means that ulti-
mately exactly the same aircraft loses a great deal of its total load capacity if
it has to be fitted for passengers. Correct allocation requires that the mass of
all facilities required for passenger transport be allocated to the passengers.
This then results in a representative mass of (129,100 – 72,200)/410 + 100 =
240 kg for one passenger and his or her facilities.
This improved allocation does not affect total costs, but it does mean that air
freight is less heavily affected than would have been the case with an allo-
cation of 100 kg per passenger, whilst passenger transport is affected more

February 2002, Annex V
heavily. Thus for an ICA flight carrying 320 passengers and 25 tonnes of
freight it means that the passenger/freight ratio becomes 75/25 instead of
56/44. This adjusted allocation has little effect on passenger transport in
smaller aircraft: 100, 97 and 95%, respectively is allocated to passengers
instead of 100, 93, 89%, respectively.
A consequence therefore of this allocation method is that it now makes no

difference in principle to the outcome for freight transport whether a full
freighter or a combi is used.
Allocation to aircraft types

This project requires that the costs for infrastructure and noise nuisance be
allocated ‘top-down’ to the four types of aircraft. This was done with weight-
ing factors, which were derived from the current charges for the various
types at the airports. For infrastructure costs this means a strong correlation
between MTOW and the number of passengers. For noise the proportion of
fixed charges was used which Schiphol levies on aircraft over 20 tonnes
where airlines do not/cannot submit any dimensional data. These fixed
weighting factors depend on (the power of 2/3 of) MTOW and on what is
known as the ‘k factor’ which indicates in which noise class an aircraft is
placed in the absence of further information. The same k factor is assumed
for all three aircraft types of MTOW over 20 tonnes. For the smallest aircraft
(200 km, 17 tonnes MTOW), a weighting factor has been derived based on
the prescribed formula for such small aircraft based on the current level of
charging of ca. e 10 and the expected future increase is estimated at 30% of
that for aircraft of 50 tonnes MTOW. See Table 2.
Table 2 Allocation factors for charges and infrastructure and noise nuisance costs
type of aircraft infrastructure costs weighting factor noise costs weighting factor
40 seat 200 km 1 0.3
100 seat 500 km 5 1.0
200 seat 1,500 km 10 1.7
400 seat 6,000 km 25 3.2
It appears that allocation of noise to different aircraft types is practically line-

arly dependent on the number of seats per aircraft.

February 2002, Annex V

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TEXTE

ENVIRONMENTAL RESEARCH OF THE

Research Report 299 96 106

On behalf of the Federal Environmental Agency

Account number 4327 65 - 104 at the

At the same time please direct your written order to the

The publisher does not accept responsibility for the

Publisher: Federal Environmental Agency (Umweltbundesamt)

Edited by: Section I 3.1

Berlin, June 2003

The present study on ‘External costs of aviation’, commissioned by the Ger-

We gratefully acknowledge the support of the German Umweltbundesamt,

2 Economic benefits and external costs 13

3 Financial valuation of environmental impacts 21

4 Valuing greenhouse gas emissions 31

List of terms and abbreviations 73

7.700.1 / External costs of aviation 1

The aim of the present study is consequently to quantify – within ranges as

Figure 1 Environmental impacts of aviation considered in this report

2 External costs of aviation / 7.700.1

There are two fundamentally different approaches to estimating marginal

A second - fundamentally different - approach, is the so-called SUHYHQWLRQ

7.700.1 / External costs of aviation 3

Figure 2 Overview of marginal prevention costs of one tonne of CO2-equivalent under

4 External costs of aviation / 7.700.1

Under these assumptions, we have differentiated between the climatic im-

An advantage of the differentiation made is that the ’average’ climatic impact

7.700.1 / External costs of aviation 5

6 External costs of aviation / 7.700.1

40 seats 200 km External costs in -cts per pax.km

local/regional impacts (LTO)

Figure 4 External costs in FW SHU SDVVHQJHUNLORPHWUH VWDWHRIWKHDUW DLUFUDIW

40 seats 200 km External costs in -cts per pax.km

local/regional impacts (LTO)

7.700.1 / External costs of aviation 7

8 External costs of aviation / 7.700.1

Air transport brings numerous benefits to both citizens and companies. It

In addition, though, air transport brings a number of undesired side-effects to

This main report was written by authors at CE and is based on a background

The aim of this report is to quantify – within as narrow ranges as possible –

7.700.1 / External costs of aviation 9

This report is limited in scope to a quantification of the principal external

Figure 5 shows the impacts of aviation covered by this report.

Figure 5 Environmental impacts of aviation considered in this report

Chapter 2 is a broad discussion of the theoretical context of this study, with

10 External costs of aviation / 7.700.1

Actual valuation of environmental effects takes place in Chapters 4 and 5,

As already mentioned, an elaborate background report is also available

The following annexes are contained in the background report:

7.700.1 / External costs of aviation 11

The chapter consequently starts with a little economics, which is then

7.700.1 / External costs of aviation 13

Examples of technological external costs include the costs of air pollution,

A clear example of a technological external EHQHILW of air transport is plane-

14 External costs of aviation / 7.700.1

7.700.1 / External costs of aviation 15

The valuation of external effects will be discussed in Chapters 3 to 5.

In this study we restrict ourselves to a consideration of the following negative

16 External costs of aviation / 7.700.1

Figure 4 External costs in FW SHU SDVVHQJHUNLORPHWUH VWDWHRIWKHDUW DLUFUDIW

p.m.: SURPHPRULD’item pending’

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