National Fuel Quality Standards Regulation Impact Statement 1 ...

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Total benefits 851 2,802 3,524 > 3,410 Benefit/Cost ratio 1.16 1.41 - 3.26 1.63 NET BENEFITS 119 798 - 1,914 1,359 >1.86 - >2.77 1,577 - 2,180 Notes: Adapted from NSW EPA (1999) and Review Report (2000). Option A based on EPA scenario 1, Option B based on EPA scenario 5 and Review Scenario 2, Option C based on EPA scenario 3, Option D based on Review Scenarios 3 and 4 with benefit estimates based on EPA scenarios 3 and 5. All figures in Present Values discounted at 7% over 20 years. Figures may not add due to rounding. 5.3 COSTS OF THE PREFERRED OPTION The costs of implementing national fuel quality standards under Commonwealth regulation are borne mainly by the refining industry and consumers. Impacts on all parties are outlined in greater detail below. The Review of Fuel Quality Requirements for Australian Transport March 2000 (known as the Fuel Quality Review) commissioned by Environment Australia and undertaken by Coffey Geosciences Pty Ltd provides the best available estimate of the costs of the proposed new fuel standards to the refining industry. However, as outlined in Section 5.5.2, due to the differences between the Commonwealth proposal and the scenarios analysed in the Fuel Quality Review, the costs are likely to be overestimated. The cost of Option D given in Table 5.1 is overestimated because it includes investment already made by one refiner. It is envisaged that the fuel quality standards for petrol and diesel will fall somewhere between the levels modelled under scenarios 3 and 4 of the Fuel Quality Review - not full harmonisation with Euro 4 fuel standards as estimated below. The Review estimated that costs to the refining industry of full harmonisation with Euro 4 fuel standards would be: - $1320 million (M) in capital investment over the period to 2008 ($185M on average per refinery); and - $136M pa in operating costs, an average of $17M pa per refinery from 2005. These estimates equate to column D of Table 5.1 but have not been discounted to incorporate Net Present Values as presented in the Table. Allowing a capital charge at 20% per annum, the average extra capital plus operating costs for local refining of Euro 4 fuels would be 1.5c/l for Euro 4 diesel and 1.1c/l for Euro 4 petrol. Under the Commonwealth proposal, Euro 4 diesel would be produced from 2005/6 and full specification Euro 4 petrol would be produced, at the earliest, from 2008.
It is probable that these increased costs of production would be passed on to consumers as increased fuel prices. It is expected that any fuel price changes would be experienced in the 2005 to 2008 period, given the proposed tighter sulfur specifications from 2005. Economic analysis conducted as part of the Fuel Quality Review, using a General Equilibrium Model, estimated that a 1% increase in fuel prices would cause minor economic impacts such as an increase in the Consumer Price Index (less than 0.02%) and a fall in real wages (0.08%). It should be noted that this level of price increase currently occurs under fluctuating fuel prices caused by changes in the cost of crude oil. 5.4 BENEFITS OF THE PREFERRED OPTION The benefits of Commonwealth regulation to implement national fuel quality standards flow from avoided health costs occasioned by improvements in urban air quality resulting from reduced pollutant emissions. Although difficult to quantify, the flow on benefits would include reduced greenhouse gas emissions over the longer term. It is estimated that from 2000 to 2019, avoided health costs will amount greater than $3,410M. The analysis does not include other benefits such as investment opportunities, visual amenity, export potential, or avoided infrastructure damage. The inclusion of estimates for these effects would increase the overall benefits. This assessment is based on work performed by the NSW Environment Protection Agency, which formed the basis of the Regulation Impact Statement on New Australian Design Rules for Control of Vehicle Emissions, December 1999. The NSW EPA work draws on a number of Australian and overseas studies including the Victorian Transport Externalities Study conducted by the Victorian EPA and the Bureau of Transport and Communications Economics, the National Environment Protection Measure on Ambient Air Quality, and assessments by the World Health Organisation and the US Environment Protection Authority. The benefit estimates associated with the NSW EPA data were gained through the use of the dose-response technique. This approach examines the relationship between an increase in one or more pollutants and the number of individuals in the population who are affected, and the severity of this impact. A monetary value of this physical impact is then estimated with reference to data on the cost of medical treatment and the cost to employers of lost worker productivity through illness and associated lost working time. Australian cost data are used where possible, with international studies used for comparisons and to provide the dose-response functions for some pollutants. Air pollutant emissions The Fuel Quality Review found that there would be substantial reductions in pollutant emissions following harmonisation with European emissions and fuel standards (Euro 3 and then Euro 4). For some pollutants, reductions of up to 60% in emissions were predicted over a 20-year period from 2000.
Page 1 and 2: 1 Introduction National Fuel Qualit
Page 3 and 4: Table 2.2 Greenhouse gas emissions
Page 5 and 6: of fossil fuels. Another significan
Page 7 and 8: interactions with the terrestrial a
Page 9 and 10: enhance the quality of conventional
Page 11 and 12: Summary A business as usual approac
Page 13 and 14: 500ppm limit on the sulfur content
Page 15 and 16: protection to all Australians where
Page 17 and 18: 4.5.1 Advantages and Disadvantages
Page 19 and 20: The Commonwealth proposal for fuel
Page 21: Table 5.1: Net Benefits of adopting
Page 25 and 26: direct injection. It is claimed tha
Page 27 and 28: that modelled in the Fuel Quality R
Page 29 and 30: egion. It would appear that Euro 2
Page 31 and 32: taking into account the objectives
Page 33 and 34: sulfur for both petrol and diesel a
Page 35 and 36: Auto-Oil Programme (1995) Informal
Page 37 and 38: FORS (1997) LPG In-service Vehicle
Page 39 and 40: ______ (1999) Air Emissions Invento
Page 41 and 42: Table A3.2 Regular unleaded petrol
Page 43 and 44: Table A3.3: Premium unleaded petrol
Page 45 and 46: APPENDIX 2: Summary of Assessment o
Page 47 and 48: APPENDIX 4 LIST OF STAKEHOLDERS * A
Page 49: * NRMA * NSW Cabinet Office * Premi

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