Guidance

Air quality appraisal: damage cost guidance

Updated 2 March 2023

This guidance details the process for assessing the air quality impact of a policy or project.

The quality of the air can have an impact on:

  • human health
  • productivity
  • wellbeing
  • the environment

The mortality burden of the air pollution mixture (based on both particulate matter (PM2.5) and nitrogen dioxide (NO2)) in the UK, is equivalent to 29,000 to 43,000 deaths at typical ages. Where relevant you must factor the effects on air quality into policy making.

There are various methodologies for air quality appraisal. As well as the impact pathways approach (IPA), changes in air quality may be appraised using:

  • damage costs (a set of monetary impact values per tonne of emission)
  • activity costs (monetary value per KWh energy used)

This guide sets out the various methodologies for appraising air quality.

The IPA is the best practice approach to valuing changes in air quality. This approach uses atmospheric modelling to estimate the impact of changes in the ambient concentrations of air pollutants for a range of outcomes.

The full IPA is more resource and time intensive. It needs you to estimate:

  • emissions
  • dispersion
  • population exposure
  • outcomes

The Department for Environment, Food and Rural Affairs (Defra) have developed ‘damage costs’ to enable proportionate analysis when assessing relatively small impacts on air quality.

Damage costs are a set of impact values, measured per tonne of emission by pollutant, which are derived using the more detailed IPA. These values estimate the societal costs associated with small changes in pollutant emissions. Combine them with emission change forecasts to provide an approximate valuation of the aggregate impacts of a policy.

This guidance explains how to apply the 2023 damage costs. The IPA provides more detail on the underlying methodology and how the damage costs have changed since the last update.

1. Damage costs

Damage costs are produced for 5 pollutants:

  • nitrogen oxides (NOx)
  • particulate matter (PM2.5)
  • sulphur dioxide (SO2)
  • volatile organic compounds (VOCs)
  • ammonia (NH3)

Table 1 sets out the latest damage cost values for air quality appraisal. The values shown are cost per tonne (£/t) national averages. which is a subset of the overall range of damage cost values found in Annex A.

1.1 Table 1: 2023 damage cost values (2022 prices)

Pollutant emitted 2023 Damage costs (£/t) national averages latest figures
NOx 8,148
SO2 16,616
NH3 9,667
VOC 172
PM2.5 74,769

Damage costs are provided for a range of different sources for NOx and PM. To select the relevant damage costs for your policy, consider various factors such as location, source of emissions, sector and so on.

1.2 Part A: sector damage costs

Part A processes refer to emissions from large industrial processes. These emissions are particularly variable, depending on the population affected and the size of the chimney. In the case of NOx and PM, damage costs are provided for a breakdown of Part A sector emissions. This allows a more detailed analysis of air quality in large industrial processes.

There are 9 different categories of Part A sector emissions. You can find the relevant damage cost category for your analysis using Table 2. To identify the correct category, use the average population density and the height of the stack for the industrial installation.

1.3 Table 2: part A categories

Average population density (persons per km squared) Stack height is less than or equal to 50m and all small point Stack Height more than 50m, but less than or equal to 100m Stack height more than 100m
less than or equal to 250 Category 1 Category 4 Category 7
More than 250, but less than or equal to 1000 Category 2 Category 5 Category 8
More than 1000 Category 3 Category 6 Category 9

2. Applying the updated damage costs

Use this step-by-step guide, along with the damage costs toolkit, if you want to apply damage costs.

Email [email protected] if you require the toolkit in an accessible format.

2.1 Step 1: identify and quantify the change in emissions

Estimate the impact on emissions from the change in activity at their source. The relationship between the activity and pollution produced is known as the ‘emissions factor’. For example, the emissions factor for road traffic is the amount of pollution produced per vehicle distance travelled.

Estimates of emissions factors are developed by the National Atmospheric Emissions Inventory (NAEI), presented in their Emissions Factor Database.

Adjust your PM10 emissions to PM2.5, and then monetise this value using the PM2.5 damage costs. You can find a list of adjustment factors for different sectors, based on the ratio between these emissions in the NAEI, in Annex A.

2.2 Step 2: identify which damage cost values to use

The updated damage costs give national values but, depending on the nature of the policy, it may be more relevant to use a sector-specific damage cost. For example, this may be a transport average for NOx or an industry average for PM.

2.3 Step 3: convert damage cost values to relevant base year prices

The damage cost values presented in the third column of Table 4 are in 2022 prices. You must account inflation by using the Gross Domestic Product (GDP) deflator, adjusting the values to the price base year for the project appraisal (that’s the year in which all costs and benefits are being accounted).

2.4 Step 4: calculate benefits for each year

Use the adjusted damage costs to estimate the impact of a change in emissions for each year of the appraisal period. Multiply the expected change in emission figures from Step 1 (in tonnes) by the adjusted damage cost figures from Step 3 in each year to get the annual benefit.

2.5 Step 5: discount benefits across the period of the policy appraisal and calculate total present value

To calculate the annual present value of air pollution, multiply the undiscounted value of impacts for each year (calculated in Step 4) by the relevant annual discount factor, where:

  • 0.015 is the 1.5% discount rate (in line with HMT’s Green Book guidance)
  • t is the number of years into the future that value is from the base year (year 0)

Discount factor = 1/(1+0.015)t

Present value = valued benefit x discount factor

The base year should be the current year in which the appraisal is being carried out.The discount factor for the base year is 1, and the following year (year 1) the discount factor is 0.985. The total present value is the sum of the present value of impacts in all appraisal years.

2.6 Step 6: sensitivity analysis

In addition to the central damage cost estimates, use low and high damage cost estimates for sensitivity analysis – see ‘Ricardo’s Technical Appendix’ for an explanation of how these are calculated. Repeat steps 3 to 6 using the high and low sensitivity damage cost values to generate present values of impacts for those sensitivities.

These sensitivity values do not account for all uncertainty. This is because the low and high sensitivities are based on the inclusion of different health impact pathways, and differences in the valuation of a life year (not other sources of uncertainty).

There’s also a potential overestimation of PM impacts through the damage costs. This is because air pollutants are typically emitted in mixtures, so there’s likely to be a degree of overlap between NOx and PM. While the NOx damage costs are adjusted for this within the damage cost values (a 40% adjustment factor has already been applied to the CRF in the NO2 chronic mortality pathway and NO2 morbidity pathways), there is no such adjustment factor available for PM emissions. So, the PM damage costs do not account for the potential confounding effect of other correlated pollutants.

Recognise this overestimation when using PM damage costs when reporting your results. For more information, see the impact pathway guidance.

3. Worked example

This is an example policy to show how the impact of NO2 is calculated for this hypothetical policy measure.

3.1 The hypothetical policy

A measure aimed at improving the efficiency of vehicles is to be introduced, where:

  • one of the expected benefits of implementing this measure is the reduction of NOx emissions as well as other pollutants (for example PM emissions)
  • this measure is being assessed for 10 years
  • the scheme is expected to reduce emissions of NOx by 12 tonnes per year until 2025 and 3 tonnes per year thereafter compared to a ‘do nothing’ scenario
  • the price base year for appraisal is 2020
  • the discounting year is 2023

3.2 Step 1: identify and quantify change in emissions

Table 3 shows the level of change (here a reduction we show in absolute values) that is expected in this hypothetical example.

If you’re quantifying the impacts of PM10, convert your emissions to PM2.5 using the conversion factors set out in Annex A.

3.3 Table 3: level of change in NOx emissions (t)

Year NOx emissions reduction (tonnes)
2023 12
2024 12
2025 12
2026 3
2027 3
2028 3
2029 3
2030 3
2031 3
2032 3

3.4 Step 2: identify which damage cost values to use

For this example, we’ve used the NOx road transport damage cost.

3.5 Step 3: convert NOx damage costs to base year

The price base year for the appraisal is 2020 in this case, so the damage costs will need to be adjusted to the new price base using GDP deflators (these are likely to change over time, see TAG Data Book).

Multiplying the ratio of the index values for 2020 (123.41) and 2022 (126.92) - so, 123.41 / 126.92 = 0.972361 - by the damage cost value, gives a rebased value of £11,360.

3.6 Table 4: change in emissions (t), appropriate damage cost (£) and rebased damage cost

Year NOx emission reduction (tonnes) NOx damage costs road transport Damage costs rebased to 2020
2023 12 £11,682 £11,360
2024 12 £11,682 £11,360
2025 12 £11,682 £11,360
2026 3 £11,682 £11,360
2027 3 £11,682 £11,360
2028 3 £11,682 £11,360
2029 3 £11,682 £11,360
2030 3 £11,682 £11,360
2031 3 £11,682 £11,360
2032 3 £11,682 £11,360

3.7 Step 4: calculate benefits for each year

Multiply the price year adjusted damage cost values by the change in emissions (tonnes) for the corresponding years.

3.8 Table 5: calculating the total annual benefit of the change in emissions

Year NOx emission reduction (tonnes) Damage costs rebased to 2020 Total benefit
2023 12 £11,360 £136,320
2024 12 £11,360 £136,320
2025 12 £11,360 £136,320
2026 3 £11,360 £34,080
2027 3 £11,360 £34,080
2028 3 £11,360 £34,080
2029 3 £11,360 £34,080
2030 3 £11,360 £34,080
2031 3 £11,360 £34,080
2032 3 £11,360 £34,080

3.9 Step 5: discount benefits across the period of the policy appraisal to calculate total present value

Table 6 shows the present values for the hypothetical policy scenario.

The total present value of air quality impacts can then be calculated as the sum of present values across the appraisal period. For this example, the central estimate of the present value is £621,217 over the 10-year appraisal period.

3.10 Table 6: total discounted benefits of the change in emissions

Year NOx emission reduction (tonnes) Total benefit Total discounted benefit
2023 12 £136,320 £136,320
2024 12 £136,320 £134,306
2025 12 £136,320 £132,321
2026 3 £34,080 £32,591
2027 3 £34,080 £32,110
2028 3 £34,080 £31,635
2029 3 £34,080 £31,168
2030 3 £34,080 £30,707
2031 3 £34,080 £30,253
2032 3 £34,080 £29,806
Total 57 £647,520 £621,217

3.11 Step 6: sensitivity analysis

Table 7 shows how the net present value is calculated for the high sensitivity damage cost values.

For the same hypothetical policy, the high estimate of the present value is £2,389,016. Repeat the same for low sensitivity.

3.12 Table 7: total discounted benefits - high sensitivity

Year NOx emission reduction (tonnes) NOx damage costs road transport - high Damage costs rebased to 2020 Total benefit Total discounted benefit
2023 12 £44,927 £43,687 £524,247 £524,247
2024 12 £44,927 £43,687 £524,247 £516,500
2025 12 £44,927 £43,687 £524,247 £508,867
2026 3 £44,927 £43,687 £131,062 £125,337
2027 3 £44,927 £43,687 £131,062 £123,484
2028 3 £44,927 £43,687 £131,062 £121,659
2029 3 £44,927 £43,687 £131,062 £119,862
2030 3 £44,927 £43,687 £131,062 £118,090
2031 3 £44,927 £43,687 £131,062 £116,345
2032 3 £44,927 £43,687 £131,062 £114,626
Total 57 £449,270 £436,870 £2,490,175 £2,389,017

4. Activity costs

When you do not know the changes in pollutant emissions but do know the change in fuel, apply ‘activity costs’ (rather than the damage costs) to estimate the impact of air quality.

Activity costs are associated with specific fuel types (for example coal, gas, biomass) and rural to urban classification (for example, small urban, rural, inner conurbation) in pence per kilowatt hour (p/KWh).

Activity costs are also given for the transport sector in pence per litre consumed, by vehicle type (for example petrol car, rigid HGV diesel and LGV petrol) and urban to rural classification (for example central London, urban big and transport rural).

These costs are published by the Department for Business, Energy and Industrial Strategy (BEIS) as part of the ‘Energy Use and Greenhouse Gas Emissions Supplementary Guidance to the Green Book’. The costs are listed in ‘Data tables 1 to 19: supporting the toolkit and the guidance’, specifically tables 14 and 15 (BEIS aligned the price base with other values within this workbook).

The UK has a number of legally binding pollutant limits to manage the risks to health and the environment set out in Annex B. Consider whether your policies are likely to result in a breach of any legal limits. If they are, take mitigating action to prevent a breach and include the cost of any emission reductions (known as ‘abatement costs’) to ensure the legal limits are attained.

Assess any health impacts using the impact pathway or this damage cost approach. The ‘do something’ emission is the level of emissions after the abatement action has been put in place.

Consider appropriate abatement measures and understand the potential costs involved, including whether there are local issues to take into account. If you need help quantifying abatement measures, contact Defra [email protected].

Defra has previously published separate guidance on abatement costs when appraising policies that needed to take account of legal concentration limits. This section supersedes that guidance.

6. Annex A: updated 2023 damage costs

The following tables show the full set of updated damage cost values, in 2022 prices, alongside the low and high sensitivities. In tables 9 and 10 the final column also displays the conversion factor required to estimate impacts of PM10 emissions.

6.1 Table 8: updated national damage costs (2022 prices)

Pollutant emitted Central damage cost (£/t) Damage cost sensitivity range (£/t): low Damage cost sensitivity range (£/t): high
NOx £8,148 £1,567 £30,282
SO2 £16,616 £6,615 £43,850
NH3 £9,667 £3,727 £26,172
VOC £172 £104 £309
PM2.5 £74,769 £29,631 £212,839

6.2 Table 9: updated PM part A sector damage costs (2022 prices)

Pollutant emitted Central damage cost (£/t) Damage cost sensitivity range (£/t): low Damage cost sensitivity range (£/t): high PM2.5/PM10 conversion factor
PM2.5 part A category 1 £8,583 £3,386 £ 23,231 0.822
PM2.5 part A category 2 £31,972 £12,619 £86,835 0.807
PM2.5 part A category 3 £155,496 £61,402 £424,674 0.785
PM2.5 part A category 4 £3,537 £1,396 £9,616 0.803
PM2.5 part A category 5 £6,712 £2,655 £18,716 0.709
PM2.5 part A category 6 £17,707 £6,996 £48,650 0.762
PM2.5 part A category 7 £1,581 £624 £4,307 0.795
PM2.5 part A category 8 £3,224 £1,273 £8,807 0.783
PM2.5 part A category 9 £7,834 £3,110 £22,721 0.596

6.3 Table 10: updated PM source sector damage costs (2022 prices)

Pollutant emitted Central damage cost (£/t) Damage cost sensitivity range (£/t): low Damage cost sensitivity range (£/t): high PM2.5/PM10 conversion factor
PM2.5 industry (area) £76,354 £30,677 £251,116 0.383
PM2.5 commercial £59,509 £23,426 £156,656 0.961
PM2.5 domestic £84,629 £33,307 £222,144 0.978
PM2.5 solvents £106,415 £42,166 £302,369 0.651
PM2.5 road transport £84,548 £33,533 £242,761 0.622
PM2.5 aircraft £76,064 £30,015 £206,048 0.819
PM2.5 offroad £53,014 £20,860 £138,750 0.995
PM2.5 rail £56,685 £22,338 £151,089 0.894
PM2.5 ships £24,027 £9,460 £63,399 0.947
PM2.5 waste £72,008 £28,359 £190,532 0.932
PM2.5 agriculture £28,654 £11,946 £129,361 0.176
PM2.5 other £85,253 £33,594 £227,104 0.897
PM2.5 road transport Central London £472,656 £187,305 £1,344,541 0.647
PM2.5 road transport inner London £450,215 £178,418 £1,281,130 0.647
PM2.5 road transport outer London £246,942 £97,937 £708,775 0.623
PM2.5 road transport inner conurbation £167,746 £66,522 £480,962 0.626
PM2.5 road transport outer conurbation £104,833 £41,578 £301,005 0.622
PM2.5 road transport urban big £96,592 £38,306 £277,068 0.625
PM2.5 road transport urban large £78,835 £31,261 £225,880 0.628
PM2.5 road transport urban medium £63,766 £25,284 £182,555 0.630
PM2.5 road transport urban small £52,114 £20,663 £149,131 0.631
PM2.5 road transport rural £31,972 £12,683 £92,012 0.616
PM2.5 rail transport Central London £428,863 £168,846 £1,130,506 0.953
PM2.5 rail transport inner London £421,032 £165,762 £1,109,872 0.953
PM2.5 rail transport outer London £238,024 £93,712 £627,528 0.952
PM2.5 rail transport inner conurbation £145,530 £57,296 £383,629 0.953
PM2.5 rail transport outer conurbation £77,259 £30,421 £203,985 0.944
PM2.5 rail transport urban big £81,071 £31,920 £213,881 0.949
PM2.5 rail transport urban large £78,163 £30,793 £207,664 0.910
PM2.5 rail transport urban medium £52,508 £20,679 £138,921 0.933
PM2.5 rail transport urban small £39,677 £15,641 £106,243 0.871
PM2.5 rail transport rural £26,771 £10,555 £71,762 0.866

6.4 Table 11: updated NOx part A sector damage costs (2022 prices)

Pollutant emitted Central damage cost (£/t) Damage cost sensitivity range (£/t): low Damage cost sensitivity range (£/t): high
NOx part A category 1 £3,103 £1,029 £9,377
NOx part A category 2 £4,203 £1,146 £13,935
NOx part A category 3 £8,467 £1,602 £31,603
NOx part A category 4 £2,842 £1,001 £8,296
NOx part A category 5 £3,155 £1,034 £9,591
NOx part A category 6 £4,356 £1,162 £14,569
NOx part A category 7 £2,757 £992 £7,942
NOx part A category 8 £3,021 £1,020 £9,036
NOx part A category 9 £3,307 £1,050 £10,222

6.5 Table 12: updated NOx source sector damage costs (2022 prices)

Pollutant emitted Central damage cost (£/t) Damage cost sensitivity range (£/t): low Damage cost sensitivity range (£/t): high
NOx industry (area) £8,635 £1,619 £32,298
NOx commercial £16,583 £2,469 £65,232
NOx domestic £12,881 £2,073 £49,893
NOx solvents £14,796 £2,278 £57,829
NOx road transport £11,682 £1,945 £44,927
NOx aircraft £11,268 £1,901 £43,208
NOx offroad £7,881 £1,539 £29,175
NOx rail £8,650 £1,621 £32,364
NOx ships £3,877 £1,111 £12,584
NOx waste £8,477 £1,603 £31,645
NOx agriculture £3,810 £1,104 £12,306
NOx other £3,678 £1,090 £11,759
NOx road transport Central London £63,051 £7,433 £257,783
NOx road transport inner London £60,239 £7,132 £246,132
NOx road transport outer London £33,064 £4,229 £133,527
NOx road transport inner conurbation £22,630 £3,115 £90,291
NOx road transport outer conurbation £14,408 £2,236 £56,220
NOx road transport urban big £13,341 £2,122 £51,800
NOx road transport urban large £11,013 £1,874 £42,151
NOx road transport urban medium £9,054 £1,664 £34,037
NOx road transport urban small £7,545 £1,503 £27,782
NOx road transport rural £4,921 £1,223 £16,908
NOx rail transport Central London £56,456 £6,729 £ 230,452
NOx rail transport inner London £56,808 £6,767 £231,905
NOx rail transport outer London £33,029 £4,228 £133,370
NOx rail transport inner conurbation £20,580 £2,899 £81,784
NOx rail transport outer conurbation £11,902 £1,973 £45,820
NOx rail transport urban big £11,763 £1,959 £45,244
NOx rail transport urban large £10,649 £1,841 £40,624
NOx rail transport urban medium £7,817 £1,539 £28,886
NOx rail transport urban small £6,230 £1,371 £22,305
NOx rail transport rural £4,554 £1,192 £15,357

7. Annex B: national air quality objectives

Unless stated otherwise the below data applies to all of the UK.

7.1 1,2-butadiene air quality objectives

Objective Concentration measured as Date to be achieved and maintained thereafter European obligations
2.25ug/m3 Running annual mean 31 Dec 2003 n/a

7.2 Benezene air quality objectives

Applies to Objective Concentration measured as Date to be achieved and maintained thereafter European obligations
UK 16.25ug/m3 Running annual mean 31-Dec-03 n/a
England and Wales 5ug/m3 Annual average 31-Dec-10 5ug/m3
Scotland and Northern Ireland 3.25ug/m3 Running annual mean 31-Dec-20 n/a

7.3 Carbon monoxide air quality objectives

Objective Concentration measured as Date to be achieved and maintained thereafter European obligations
10mg/m3 Maximum daily running 8 hour mean/ in Scotland as running 8 hour mean 31 Dec 2003 10mg/m3

7.4 Lead air quality objectives

Objective Concentration measured as Date to be achieved and maintained thereafter European obligations
0.5ug/m3 Annual mean 31 Dec 2004 0.5 µg/m3
0.25ug/m3 Annual mean 31 Dec 2008 n/a

7.5 Nitrogen dioxide air quality objectives

Objective Concentration measured as Date to be achieved and maintained thereafter European obligations
200ug/m3 not to be exceeded more than 18 times per year 1 hour mean 31 Dec 2005 200ug/m3 not to be exceeded more than 18 times per year
40ug/m3 Annual mean 31 Dec 2005 40ug/m3

7.6 Nitrogen oxides air quality objectives

Objective Concentration measured as Date to be achieved and maintained thereafter European obligations
30ug/m3 Annual mean 31 Dec 2000 30ug/m3

7.7 Ozone air quality objectives

Pollutant Objective Concentration measured as Date to be achieved and maintained thereafter European obligations
Ozone 100ug/m3 not to be exceeded more than 10 times per year 8 hour mean 31 Dec 2005 Target of 120ug/m3 not to be exceeded more than 25 times per year averaged over 3 years
Ozone: protection of vegetation and ecosystems Target value of 18,000ug/m3 based on AOT40 to be calculated from 1 hour values from May to July and to be achieved, as far as possible, by 2010 Average over 5 years 01 Jan 2010 Target value of 18,000ug/m3 based on AOT40 to be calculated from 1 hour values from May to July and to be achieved, as far as possible, by 2010

7.8 Particulates (PM2.5) exposure reduction air quality objectives

Applies to Objective Concentration measured as Date to be achieved and maintained thereafter European obligations
UK (except Scotland) 25ug/m3 Annual mean 12 Jul 2005 Stage 1 Limit - 25 μg/m3 / Stage 2 Limit - 20 μg/m3
Scotland 12ug/m3 Annual mean 12 Jul 2005 Stage 1 Limit - 25 μg/m3 / Stage 2 Limit - 20 μg/m3
UK urban area Target of 15% reduction in concentrations at urban background Annual mean Between 2010 and 2020 Target of 20% reduction in concentrations at urban background

7.9 Particulates (PM10) air quality objectives

Indicative 2010 objectives for PM10 (from the 2000 Air Quality Strategy and 2003 Addendum to the Air Quality Strategy) have been replaced by an exposure reduction approach for PM2.5 (except in Scotland).

Applies to Objective Concentration measured as Date to be achieved and maintained thereafter European obligations
UK 50ug/m3 not to be exceeded more than 35 times a year 24 hour mean 31 Dec 2004 50ug/m3 not to be exceeded more than 35 times a year
UK 40ug/m3 Annual mean 31 Dec 2004 40ug/m3
Scotland 50ug/m3 24 hour mean 31 Dec 2010 50 μg/m3 not to be exceeded more than 35 times a year
Scotland 18ug/m3 Annual mean 31 Dec 2010 40 μg/m3

7.10 Polycyclic aromatic hydrocarbons air quality objectives

Objective Concentration measured as Date to be achieved and maintained thereafter European obligations
0.25ng.m-3B[a]P As annual average 31 Dec 2010 1ng/m3

7.11 Sulphur dioxide air quality objectives

Objective Concentration measured as Date to be achieved and maintained thereafter European obligations
266ug/m3 not to be exceeded more than 35 times per year 15 minute mean 31 Dec 2005 n/a
350ug/m3 not to be exceeded more than 24 times per year 1 hour mean 31 Dec 2004 350ug/m3 not to be exceeded more than 24 times per year
125ug/m3 not to be exceeded more than 3 times per year 24 hour mean 31 Dec 2004 125ug/m3 not to be exceeded more than 3 times per year
20ug/m3 Annual mean 31 Dec 2000 20ug/m3
20ug/m3 Winter average 31 Dec 2000 20ug/m3