Major new report from Deloitte argues air pollution remains a huge drag on growth and tackling it can unlock massive economic and health gains
We tend to think of smog as an historic problem, in industrialised economies at least. It is the stuff of London pea-soupers, Los Angeles neo noir films from the 1970s, and Asia's fast-growth mega-cities. But smog and associated pollutants are not a thing of the past, in fact they are a clear and present danger, blamed for over 400,000 premature deaths in Europe each year.
That is one of the stark messages from a major new report from consultancy Deloitte released at an event in Brussels today, which details how a comprehensive strategy to tackle smog across Europe would unlock €183bn of savings for EU citizens by 2030.
The report, entitled Clean Air Challenge, was backed by InnoEnergy, the sustainable energy focused innovation agency developed by the European Institute of Innovation and Technology. It is framed as a response to the European Commission's own figures, which suggest smog may account for as many as one in every 10 premature deaths globally, and is set to cost the EU €475bn between 2018 and 2025 - equivalent to 2.9 per cent of average annual GDP.
Irena Pichola, partner and leader of sustainability consulting for Central Europe at Deloitte, said dangerous levels of air pollution were still too easily ignored. "We must not forget that poor air quality affects people differently. For instance, there are huge regional variances in the causes and effects of smog, with most Western European smog coming from transportation, while heating produces the most pollution in the East," she said. "But, as mentioned in the report, wherever you look, the young are among the most affected. With an increase of 100 units of PM comes a reduction of average life expectancy of around 2.3 years among children by age five."
The scale and breadth of the air pollution challenge is remarkable. The report details how health impacts are remarkably long-lived and can mar an entire generation. "During the Great London smog, inhabitants were exposed to extreme levels of pollution for only four days, yet 60 years on, the surviving cohort (population by age) was two per cent smaller than was to be expected," it states. "Moreover, those who had not died tended to suffer from persistent, premature diseases - leading to discernably reduced employment opportunities, working hours as well as skills and knowledge."
And it is not just health impacts. The report details how those cities experiencing the worst smog are afflicted by a range of indirect impacts, including difficulty attracting employees, lower levels of innovation and productivity, lower incomes, and "a drag on human capital growth, resulting from extensive negative health impacts - this in turn results in elevated short and long term sick leaves, as well as lower levels of education, reducing productivity and GDP".
Diego Pavia, CEO at InnoEnergy, said the wide range of impacts demanded a response from businesses and governments. "It is shocking that in this day and age, smog should still pose such a risk to the health of our communities," he said. "Putting the huge economic cost to one side, there is no reason, with the technology that is becoming available to us, that citizens should not be able to breathe clean air."
The question then is what are those technologies and how can they be rolled out?
The report undertakes one of the most comprehensive assessments to date of the sources of air pollution and the potential improvements on offer from a range of clean technologies. It proposes that investment is focused on four key 'clusters': Electromobility, smart public transport systems, smart buildings, and distributed generation and storage. It then projects the roll out of clean technologies in these areas under a 'conservative' scenario where they secure a 10 per cent market share by 2025 and an 'ambitious' scenario where they command a 25 per cent share.
The report then models a range of economic outcomes under each scenario, detailing the impact on economic net present value against a business as usual scenario. It finds that all scenarios deliver net benefits, but the reductions in smog and running costs that will result from the more ambitious roll out of clean technologies would result in the largest net economic gains. "According to our simulated conservative Scenario, European citizens might be able to pocket an extra €183bn between 2018 and 2025 - the an equivalent of 1.2 per cent of the forecasted GDP in the EU-28 in 2018," the report states, adding that it "should be underlined that even the lowest outcome means a non-negligible net effect - a reality which drives our call for comprehensive anti-smog action".
The technologies and policies highlighted by the report will be familiar to anyone who has tracked the growing debate on how to tackle air pollution. It emphasises the importance of smart public transport services, electromobility and other forms of alternative fuel vehicles, arguing that "making use of alternative fuels allows us to limit, or even fully eliminate the direct emission of certain air pollutants, while at the same time yielding energy savings". It also stresses that action is required beyond transport, through green heat systems, smart grids, energy efficiency upgrades, and even thermal energy storage.
However, it warns that simple GDP growth across Europe will not tackle the problem of air pollution "by itself" and as such targeted policy measures are required. "In general, the government can play a key role in creating a fertile environment for innovation, by investing in the foundations for innovation and by helping overcome barriers," the report states. "These targeted policy instruments need to fit a broader enabling framework, including polices which create skilled workers, a sound business environment, and strong governance."
As such it puts forward around 20 different policy recommendations across the four technology focus areas, as well as general policy recommendations such as improved pollution monitoring, education programmes to engage people with clean technologies, and an overarching sustainable growth strategy. More specifically, it puts forward a raft of proposals including steps to consider tighter emissions standards, reform urban planning rules to enable smart and electromobility, modernise bus fleets, mobilise investment through public-private partnerships, and consider enhanced building efficiency standards.
Pavia said InnoEnergy would now step up efforts to build on the report's findings. "At InnoEnergy, we like to tackle problems head-on and this is no exception," he said. "Not only are we making available further research to better understand the issue and identify practical solutions, but we are also actively seeking opportunities to offer investment and wider support to ambitious businesses with passion and a plan to put a stop to smog."
However, the report is clear that business innovation alone, while welcome, is unlikely to tackle the smog crisis on its own. Once again the onus is firmly on governments to finally recognise that action on air pollution will deliver net economic gains and deliver truly comprehensive strategies that can really make smog a thing of the past.
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