National Fuel Quality Standards Regulation Impact Statement 1 ...

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.