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Benefit-cost analysis of accelerated replacement of Hong Kong’s pre-Euro IV buses

  • Weiwen Leung EMAIL logo
Published/Copyright: September 14, 2013
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Journal of Benefit-Cost Analysis
From the journal Journal of Benefit-Cost Analysis Volume 4 Issue 3

Abstract

Hong Kong’s franchised buses contribute significantly to its high pollution levels, which in turn result in excess mortality and hospitalizations. I show that replacing all of Hong Kong’s pre-Euro IV buses with cleaner Euro V buses would save 1260 statistical lives, among other benefits. The expected net benefit of such a project is HK$26.4 billion under a discount rate of 3.5%. This result is robust to a discount rate of 10% and a mortality decrease of half of what is expected. This is one of the first studies to estimate the public health impact of air pollution from franchised buses in Hong Kong. The city can therefore consider conducting accelerated replacement of its franchised bus fleet. Given the strongly positive result, other Asian cities with ageing bus fleets could also conduct similar benefit-cost analyses.

Keywords: buses; Hong Kong; pollution
Corresponding author: Weiwen Leung, Singapore Management University – Economics, 90 Stamford Road Singapore, Singapore 178903, Singapore, Phone: +65 68280143, e-mail:

I am grateful to Tomoki Fujii, Euston Quah, Lee Kang Swee, Christopher Quek, Justin Goh, Luo Ruiyuan, Gerald Chan, and Graham Parkhurst for their help in one way or another. Without them, this paper would not have been possible.

  1. 1

    Oxides of nitrogen comprise mainly NO2 (nitrogen dioxide) and NO (nitric oxide).

  2. 2

    Also known as respirable suspended particles (RSP).

  3. 3

    Data on average bus speeds are unavailable. However, consider that the average car journey speed in 2011 was 20.1 km/h in Hong Kong Island, 24.2 km/h in Kowloon, and 40.2 km/h in the New Territories (Transport Department, 2012b).

  4. 4

    However, since pre-Euro buses are not affected by the accelerated replacement plan, the second half of the assumption is largely immaterial to the analysis.

  5. 5

    This was the only instance where, because I could not find an actual in-use emissions study, I used a theoretical study.

  6. 6

    For example, a Euro 4 bus emits around 9 g/km of NOx, and Euro 1 and 2 buses emit around double to three times that amount. In the actual Euro emissions table, Euro 1 and 2 buses emit around 2 to 2.3 times the amount of NOx per kWh consumed. Consider also PM10 emissions. A Euro 4 bus emits around 0.05 g/km, and a Euro 2 emits fourteen times that amount. In the actual Euro emissions table, Euro I buses emit eighteen times of PM10 per kWh consumed compared to a Euro IV bus.

  7. 7

    Yao et al. (2005) found that f-NO2 is <10% in the middle of tunnels. However, once the pollutants leave the tunnels, NO is oxidized by other molecules to form NO2.

  8. 8

    As an indication of how much this impact could be, a Netherlands study found that cardiopulmonary mortality was associated with living near a major road (excess risk 95%). The relationship with estimated ambient background concentration was less strong: an increase in pollution from the 5th to 95th percentile increased excess risk by 34% (Hoek, Brunekreef, Goldbohm, Fischer, & van den Brandt, 2002). Another study of Prague, Amsterdam, and Huddersfield found that at the street level, traffic volume had a major impact on NO2 concentration (Briggs et al., 1997). It is unfortunate that no such study has been done in Hong Kong.

  9. 9

    Inflation in 2012 was 4.7% without one-off government relief measures. The Hong Kong government releases two measures of inflation: with and without government one-off relief measures (mostly public housing rental waiver and electricity subsidies). I take the inflation rate without relief measures as a more accurate representation of cost increases.

  10. 10

    The “no scrap value” assumption could underestimate the benefits of the plan. Note there is little need to be concerned that buses would be more expensive if purchased later, as the average inflation rate (3.5%) is similar to the discount rate used (3.5%). Both figures will be justified in subsequent sections.

  11. 11

    Again, since the bus operators would have to purchase Euro V buses subsequently even without the accelerated replacement scheme, this sum need not be counted towards the scheme’s opportunity costs to society.

  12. 12

    The value of HK$27.4 million is only half of the US Environmental Protection Agency’s estimate; however, the difference in VSL between countries could be cultural, as studies of Asian countries tend to find lower VSLs compared to Western countries, even after adjusting for income.

  13. 13

    The average inflation rate between 2007 and 2012.

  14. 14

    It is unfortunate that the HEI (2010) study, whose single pollutant models formed my point estimates, did not report any multipollutant results. In addition, another Hong Kong based study that gave multipollutant estimates (Wong, Tam, Yu, & Wong, 2002a) only focused on increases in mortality for cardiovascular and respiratory diseases.

  15. 15

    Though this estimate is not significant at the 5% level, it is significant at the 10% level.

  16. 16

    This is the lower bound of the 95% confidence interval of the WHO’s point estimate of 4%, which comes from a single pollutant model. I am not using a multipollutant model as I cannot find any long-term multipollutant study of comparable reliability to that of the WHO’s. Stieb et al.’s estimate is not considered as it only refers to short term exposure.

  17. 17

    Multipollutant models that link pollution and hospitalizations are available [e.g., Wong et al. (2002c)]. However, since the project has a positive NPV even if there was no link between pollution and hospitalizations, it is not necessary to use Wong et al.’s (2002c) results.

  18. 18

    One may also wonder whether the differences between the values of the buses in 2026 (or a future year) under my plan and the existing plan should be considered. It should not because the opportunity cost to society, calculated in Section 5, has already taken this into account.

Appendix

Illustration of how reduction in NOx was calculated (Table 5)

NOx emissions from franchised buses before the replacement plan (number of buses in each Euro category multiplied by emissions per g/kWh):

65×8+1255×8+2652×7+1267×5+211×3.5+226×2=36,649 arbitrary units

NOx emissions after the replacement plan:

65×8+211×3.5+5400×2=12,058.5 arbitrary units.

Percentage reduction in NOx emitted by franchised buses: 67.1%.

Contribution of franchised buses to NOx: 2.48%.

Total percentage reduction in NOx: 67.1%×2.48%=1.66%.

Reduction in NOx density=1.66%×326=5.42 µg/m3

(cell in the top left hand corner).

The calculation process is similar for PM10.

Illustration of how reduction in NO2 was calculated (Table 6)

Decrease in NO2 density:

where Mr(X) refers to the relative molecular mass of molecule X, and fNO2 (more accurately, f-NO2) refers to the fraction of NOx released that becomes NO2.

Illustration of how reduction in mortality was calculated (Table 11)

How the top-left cell in Table 11 (reduction in mortality by 73 in each year from 2013 to 2015 due to reduction in NO2) was derived:

From 2013 to 2015, NO2 density decreases by 2.03 µg/m3 (Table 6).

Since a reduction in NO2 density by 10 µg/m3 is associated with a mortality decrease of 0.9%, and there were 39,900 deaths from natural causes annually in Hong Kong, the expected mortality decrease due to the plan’s effect on NO2 concentrations is around 0.18%.

Hence there would be a total of 72.8 statistical lives saved for each year from 2013 to 2015 due to the decrease in NO2.

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Published Online: 2013-09-14
Published in Print: 2013-12-01

©2013 by Walter de Gruyter Berlin Boston

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https://doi.org/10.1515/jbca-2013-0007
Keywords for this article
buses; Hong Kong; pollution

Articles in the same Issue

  1. Masthead
  2. Masthead
  4. A cost-benefit analysis of Tulsa’s IDA program
  5. Congressional modification of benefit-cost analysis as a vehicle for particularized benefits and a limitation on agency discretion: the case of the federal contract tower program
  6. Benefit-cost analysis of accelerated replacement of Hong Kong’s pre-Euro IV buses
  7. Accounting for systematic risk in benefit-cost analysis: a practical approach
  8. Benefit-cost analysis: government compensation vs. consumer tax model
  9. Comments
  10. The most appropriate discount rate
  11. The choice of the social discount rate and the opportunity cost of public funds
  12. Erratum
  13. Scitovsky reversals in benefit-cost analysis with normal goods
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