Sensitivity analysis

The method for regionalising and projecting the external costs of LAP as described in Section 5.2 includes some key assumptions. Their impact on the results is tested in a sensitivity analysis.

5.3. Results ______________________________________________________________________________________________________________

125 Sensitivity cases are developed based on three major assumptions as described in Table 19 for all three scenarios. The results of the sensitivity analysis are presented in Table 20 for the time period 2060.

Table 19: Description of the sensitivity cases Case Description

WTP The threshold for classifying regions as being either developed or developing is changed from a per capita GDP of US$2010 16000 to 10000 (PPP). In this case, only ASIAPAC, CE-NASIA, INDIA and SSAFRICA remain in the developing category.

POPDENS_L The threshold of classifying a region as being densely populated is set to 100 people/km² instead of 400 people/km².

POPDENS_H The threshold of classifying a region as being densely populated is set to 1000 peo-ple/km² instead of 400 people/km².

UPLIFT_L The inter-temporal elasticity for the GDP per capita growth is set to 0.7 instead of 0.85.

UPLIFT_H The inter-temporal elasticity for the GDP per capita growth is set to 1.0 instead of 0.85.

Classifying CHINAREG, EEUR, LAC and MENA as being developed (WTP case), i.e. applying an income elasticity of WTP 𝛼 of 0.08 for these regions, results in higher external costs due to LAP emissions for all three scenarios: +17%, +15% and +13% for Modern JAZZ, Unfinished SYM-PHONY and Hard ROCK, respectively. The regions listed above have lower GDP per capita values than EU31. Thus using 𝛼 = 0.08 in the exponent of the ratio of the respective GDP per capita and the GDP per capita of EU31 leads to higher unit value transfer values than in the BASE case, to higher starting values for the adjustment factors and – ceteris paribus – to higher external costs.

The major contributor to the external costs is CHINAREG. As this sensitivity case changes the income elasticity of CHINAREG, the region also changes most regarding the external costs.

The change of the population density threshold to 100 (POPDENS_L) and 1000 people/km² (POPDENS_H) for the calculation of the population density factor has low influence on the ex-ternal costs due to LAP emissions, i.e. the exex-ternal costs of LAP emissions stay almost the same.

One reason is that this factor only differs between 0.70 and 1.76, 0.80 and 1.24, and 0.83 and 1.52 for the 100, 400 and 1000 people/km² threshold (Appendix, Figure 86). The second reason is that the population density factor is only applied to the first period, i.e. it only changes the starting values but not the further developments.

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Table 20: Sensitivity of the results for the 15 major LAP emissions regarding key assumptions in Modern JAZZ, Unfinished SYMPHONY and Hard ROCK by region and by pollutant in 2060

Modern JAZZUnfinished SYMPHONYHard ROCK

The change in the inter-temporal elasticity for the GDP per capita growth 𝛽 has a strong impact on the external costs of LAP emissions. When applying the two elasticities recommended by Bickel et al. [101], i.e. 0.7 (UPLIFT_L) and 1.0 (UPLIFT_H) instead of the NEEDS recommendation of 0.85, the contributions of all regions shrink and grow, respectively.

5.4. Discussion ______________________________________________________________________________________________________________

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5.4. Discussion

5.4.1. Insights from the case study

The annual external costs due to LAP emissions are substantial for all three scenarios: They amount to US$2010 1.57, 0.816 and 1.01 trillion in 2060 in Modern JAZZ, Unfinished Symphony and Hard ROCK, respectively, which corresponds to 0.5%, 0.3% and 0.7% of the GDP in the cor-responding scenario and time period. The annual external costs due to GHG emissions are esti-mated to be equivalent to an additional 0.2%, 0.2% and 0.7% of the respective GDP in the three scenarios in 2060. The favourable performance of Unfinished SYMPHONY regarding LAP and GHG emissions reported in Chapter 4 (represented by CO2, GWP, TA, FE, PMF, and POF indica-tors) is confirmed by the external cost assessment. Despite the increase in global GDP by a fac-tor of four by 2060 and the corresponding increase in the specific external costs of the various pollutants, the total external costs are lower than in the other two scenarios. The Hard ROCK scenario however is found to have higher LAP and GHG emissions but lower total external costs than Modern JAZZ. This seemingly contradictory result is mainly driven by the difference in global GDP growth from 2010 to 2060, which amounts to 136% in Hard ROCK compared to 394% in Modern JAZZ.

Among the analysed LAP, NOx, PM2.5 and SO2 are found to be the most important contributors to the external costs with 95%, 92% and 96% of the external costs related to LAP in 2060 in Modern JAZZ, Unfinished SYMPHONY and Hard ROCK, respectively. For the GHG emissions, CO2

makes the most important contribution with 85%, 80% and 86% of the external costs related to GHG emissions in the three scenarios in 2060.

The application of the proposed approach for regionalisation and projection of external costs of LAP results in particularly strong external cost increases for developing regions such as ASIAPAC, CENASIA, CHINAREG, INDIA and SSAFRICA over the time horizon considered. These regions not only face large increases in their GDP per capita and in their urbanisation rate, but also significantly emit LAP. This leads to the result that these regions bear large shares of the external costs, namely 73%, 61% and 61% of the global external costs related to LAP emissions in 2060 in Modern JAZZ, Unfinished SYMPHONY and Hard ROCK, respectively. The developed regions, AUSNZL, BRAZIL, CANMEX, EU31, JPKRTW, RUSSIA and USA, bear smaller shares of the global external costs, namely they decrease from 75% of the global external costs related to LAP

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emissions in 2010 to 26%, 29% and 28% in Modern JAZZ, Unfinished SYMPHONY and Hard ROCK, respectively.

Overall, the progress of developing world regions in terms of GDP and urbanisation not only results in increased energy demand and related pollutant emissions by the energy system pro-cesses, but also in increased specific external costs. CHINAREG seems to be the only one of the developing regions able to break the trend of increasing external costs by peaking in total pri-mary energy demand and by phasing out coal and associated LAP emissions. Overall, an Unfin-ished SYMPHONY type of world not only allows for economic development in terms of GDP per capita, but it is also favourable regarding external costs from LAP and GHG emissions.