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Achieving Air Quality Standards in the European Union

This paper develops a methodology to select a least cost mix of transport policy measures in different regions of the European Union to attain air quality standards by the year 2010. Two fundamental characteristics of air quality problems are addressed: their variation across regions and the interregional linkages resulting from ozone pollution. We propose a column generation approach to answer the question of which policies should be introduced where to arrive at a least cost solution for the Union as a whole satisfying the emissions reduction constraints. Our methodology can be applied to a wide range of environmental policy questions with a spatial dimension characterized by interdependencies across policy instruments and environmental processes. Improvements in vehicle technology are important for meeting air quality standards. Triggering such changes through economic instruments is attractive because this accommodates the geographical variation of air quality problems throughout the European Union. Different clean fuels are suggested for different regions. Taxation on road use also plays an important role in the mix of policies to curb air pollution. Furthermore, emissions reduction from nontransport sources are of major importance in all scenarios studied.