Report No: AUS0002513 Steering Towards Cleaner Air: Measures to Mitigate Transport Air Pollution in Addis Ababa September 2021 The World Bank © 2021 The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved This work is a product of the staff of The World Bank. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. Because the World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution is given to this work. Attribution—Please cite the work as follows: “Grutter, Jurg, Wenyu Jia, and Jian Xie. 2021. Steering Towards Cleaner Air: Measures to Mitigate Transport Air Pollution in Addis Ababa. Washington, DC: The World Bank.� All queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. i Table of Contents Abbreviations and Acronyms ................................................................................................................ iv Acknowledgement ................................................................................................................................. vi Executive Summary .............................................................................................................................. vii 1. Introduction ...................................................................................................................................... 1 2. Overview of Air Pollution Issues ..................................................................................................... 6 3. Identification of Potential Transport Mitigation Measures .............................................................. 9 4. Evaluation Criteria for Potential Mitigation Options ..................................................................... 15 5. Low-Sulfur Fuels ........................................................................................................................... 16 6. Emission Standards for New Vehicles ........................................................................................... 20 7. Inspection and Maintenance of Vehicles ....................................................................................... 24 8. Fuel Efficiency Standards .............................................................................................................. 30 9. Vehicle Retrofits with Emission Control Equipment..................................................................... 33 10. Vehicle Age Restriction and Scrapping Programs ....................................................................... 36 11. Restricting Diesel Vehicles .......................................................................................................... 43 12. Promoting Low-Carbon Vehicles ................................................................................................ 46 13. Public Transport, Non-Motorized Transport, and Transit Demand Management Measures ....... 49 14. Summary and Conclusions........................................................................................................... 54 References ............................................................................................................................................. 61 Figures Figure 1: Spatial Expansion of Addis Ababa .......................................................................................... 2 Figure 2: Type and Age of Registered Vehicles in Addis Ababa in 2020 .............................................. 2 Figure 3: Transport Snapshots ................................................................................................................ 3 Figure 4: PM2.5 Levels in Ambient Air in Addis Ababa, 1998-2018 ...................................................... 4 Figure 5: Impacts of Air Pollution .......................................................................................................... 6 Figure 6: Steps towards Cleaner Fuels and more Stringent Vehicle Emission Standards .................... 16 Figure 7: Ethiopia Vehicle Exhaust Emission Standards ...................................................................... 20 Figure 8: Actual Emissions of Standard Urban Euro II and Euro III Buses (Indexed) ......................... 23 Figure 9: Existing Roadworthiness Test Centers .................................................................................. 24 Figure 10: Impact of Emission Control Tests on Actual Vehicle Emissions for Gasoline Cars ........... 28 Figure 11: Past and Proposed Passenger Car GHG Emissions Standards in Various Countries .......... 30 Figure 12: Relationship Between Vehicle Age and Annual Distance Driven in India ......................... 37 Figure 13: NOx Emissions for Cars ...................................................................................................... 41 Figure 14: E-Bus Ecosystem and Influencing Factors .......................................................................... 47 Figure 15: Overlapping Routes among Anbessa, Sheger and Mini/Midi Buses ................................... 50 ii Figure 16: Public Transport and NMT in AA ....................................................................................... 51 Tables Table 1: Comparison of Vehicle Emission Mitigation Options ............................................................ 13 Table 2: Relationship between Fuel Quality and Emission Standards (Euro Standards) ..................... 17 Table 3: Environmental Impact of Reducing Sulfur Levels in Fuels (year 2020) ................................ 18 Table 4: Cost-Benefit (Direct) of Low-Sulfur Diesel (2020)................................................................ 18 Table 5: Euro 2 to 6 Standards for Passenger Cars (g/km) ................................................................... 20 Table 6: Euro II to VI Standards for HDVs and Diesel Engines (g/kWh) ............................................ 21 Table 7: Impact of Vehicle Emission Standard for 2020 emissions (in tonnes) ................................... 21 Table 8: Incremental Vehicle Cost of New Emission Standard Compliance (US$ per vehicle) .......... 21 Table 9: Cost-Benefit (Direct) of Vehicle Emission Regulations (for 2020) ....................................... 22 Table 10: Vehicle Emission Inspection Approaches ............................................................................ 25 Table 11: Impact per DPF-Retrofitted Euro III Bus in Ethiopia ........................................................... 34 Table 12: Cost-Benefit per DPF-Retrofitted Euro III Bus in Ethiopia (2019 USD) ............................. 34 Table 13: Estimated Annual Average Degradation Percentage for PM2.5 and NO2.............................. 36 Table 14: Environmental Impact of Replacing Pre-Euro Trucks and Buses with Euro IV units.......... 39 Table 15: Cost-Benefit of Vehicle Scrapping ....................................................................................... 39 Table 16: Vehicle Emission Standards for Passenger Cars in EU (Petrol and Diesel) ......................... 40 Table 17: Environmental Benefits of Electrification ............................................................................ 47 Table 18: Assessment of Mitigation Measures ..................................................................................... 55 Table 19: Prioritized Mitigation Measures ........................................................................................... 59 iii Abbreviations and Acronyms AA Addis Ababa AACATB Addis Ababa City Administration Transport Bureau AAEPGDC Addis Ababa Environmental Protection and Green Development Commission AAHB Addis Ababa Health Bureau ADB Asian Development Bank ASA Advisory Services and Analytics program AQM Air Quality Management AQMP Air Quality Management Plan BAU Business as Usual BC Black Carbon BRT Bus Rapid Transit CAA Clean Air Asia CAGR Compound Annual Growth Rate CBD Central Business District CDM Clean Development Mechanism CO2e Carbon Dioxide Equivalent COC Certificate of Conformity COPERT Computer Program to Calculate Emissions from Road Transport CRGE Climate Resilient Green Economy Strategy DOC Diesel Oxidation Catalysts DP Development Partners DPF Diesel Particle Filter EEA European Environmental Agency EF Emission Factor EFCCC Federal Environment, Forest and Climate Change Commission EIRR Economic Internal Rate of Return EPA Environmental Protection Agency FIRR Financial Internal Rate of Return EPSE Ethiopian Petroleum Supply Enterprise ESA Ethiopian Standard Agency FTA Federal Transport Authority GDP Gross Domestic Product GHG Greenhouse Gas G/KWh Gram per Kilowatt Hour GVW Gross Vehicle Weight GWP Global Warming Potential HDV Heavy Duty Vehicle ICCT International Council on Clean Transportation IEA International Energy Agency IM Inspection/Maintenance IMF International Monetary Fund LCV Light Commercial Vehicle LMIC Lower to Middle Income Country LRT Light Rail Transit MMT Million Metric Tons MOT Ministry of Transport NELDEP National Environmental Law Development and Enforcement Programme NMT Non-Motorized Transport iv OBD On-Board Diagnostics OECD Organization for Economic Co-Operation and Development OEM Original Equipment Manufacturer PM Particulate matter ppm parts per million RDE Real Driving Emissions SCC Social Cost of Carbon SOV Single Occupancy Vehicle SSATP Sub-Saharan Africa Transport Program TCO Total Cost of Ownership tCO2e Tonnes of Carbon Dioxide Equivalent TDM Transit Demand Management TOD Transit Oriented Development TRANSIP Transport Systems Improvement Project TTW Tank-To-Wheel µg/m3 Micrograms per Cubic Meter Air UNEP United Nations Environment Programme UNFCCC United Nations Framework on Climate Change Convention VOC Volatile Organic Compounds WHO World Health Organization WRI World Resources Institute v Acknowledgement This report is one of the outputs of the World Bank Advisory Services and Analytics (ASA) Program “Ethiopia: Air Quality Management and Urban Mobility.� This ASA is in collaboration with Environment, Transport, Urban, and Health sectors within the World Bank, the Government of Ethiopia, and Development Partners (DP). The ASA is under the general guidance of Ousmane Dione (Country Director for Ethiopia), Doina Petrescu (operations Manager for Ethiopia), Iain Shuker (Practice Manager, Environment, Natural Resources and Blue Economy (ENB) Global Practice), and Maria Marcela Silva (Practice Manager, Transport Global Practice) at the World Bank. The ASA was conducted by a team led by Jian Xie (Sr. Environmental Specialist) and Wenyu Jia (Sr. Urban Transport Specialist), and composed of Tamene Tiruneh (Sr. Environmental Specialist), Bereket Belayhun Woldemeskel (Municipal Engineer), Fatima Barry (Health Specialist), Lelia Croitoru (Environmental Economist, Consultant), Sarath Guttikunda (AQM Specialist, Consultant), Jurg Grutter (Transport Specialist, Consultant), Zenebe Tilahun Abayneh (Transport Specialist, Consultant), and Worku Tefera (AQM Specialist, Consultant). Michelle Anne Winglee (Climate Change Specialist), Caroline Anitha Devadason (Health Specialist, Consultant), Kimberly Worsham (Environmental Specialist, Consultant); Christopher Arthur Lewis (Environmental Specialist, Consultant) also participated in either early or late phrases of the ASA program. The report was prepared by Jurg Grutter, Wenyu Jia, and Jian Xie, with inputs from Lelia Croitoru, Sarath Guttikunda, Tamene Tiruneh, Zenebe Tilahun Abayneh, and Christopher Arthur Lewis. This report benefitted from the participation and support of government officials and experts from various Ethiopian government agencies and institutions, particularly the Federal Environment, Forest and Climate Change Commission (EFCCC), Ministry of Transport (MoT), Federal Transport Authority (FTA), Ministry of Health (MoH), National Meteorology Agency (NMA), Addis Ababa Environmental Protection and Green Development Commission (AAEPGDC), Addis Ababa City Administration Transport Bureau (AACATB), Addis Ababa Vehicle and Driver Registration and Authorization Authority, Addis Ababa Health Bureau (AAHB), Ethiopia State Petro Company (ESP), and Addis Ababa Institute of Technology (AAIT). It also benefitted from regular discussions and consultations with representatives and experts from a group of international organizations actively working on air quality management in Addis Ababa, such as C40 Cities, United Nations Development Programme (UNEP), U.S. Embassy and EPA’s Clean Air Catalyst Program and Environmental Defense Fund, East Africa GEOHealth Hub, and Surface Particulate Matter Network (SPARTAN). The authors would like to thank Paul Jonathan Martin, Martin Heger, Rodger Gorham, Fiona Collin, James Robert Markland, Sameer Akbar, and Marius Vismantas of the World Bank for their valuable comments and suggestions. Special thanks also go to the participants of the consultation workshops, held virtually in March, April, and June 2021, for their review and discussions on the findings and results of studies and technical reviews of the ASA. Ross Hughes helped coordinate within World Bank’s county management unit. Esther Bea and Sofia Said provided administrative and logistic assistance to the program. Demetra Aposporos provided editorial assistance and Guomeng Ni provided infographic design. vi Executive Summary 1. The urban transport sector is a major contributor to air pollution in Addis Ababa (AA). Major air pollutants in AA are, comparable to other cities, PM2.5, NOx, and SO2, as well as CO2 as a leading greenhouse gas. The emission inventory developed by the World Bank ASA estimated the transport sector contributed 29% of PM2.5 emissions and more than 90% of NOx and CO2, respectively. Air pollution results in multiple negative environmental, health and economic impacts. The health impact analysis under the World Bank ASA also concluded that exposure to ambient PM2.5 in Addis Ababa causes approximately 1,600 premature deaths a year with stroke, heart disease, and lower respiratory infections among the leading causes of PM2.5-related mortality. This impact is equivalent to $78 million in economic cost, or 1.3% of AA’s GDP in 2019. It is imperative that transport identifies and acts on air quality management measures toward reducing ambient air pollution. The objective of this report is to assess mitigation options for transport air emissions and provide policy recommendations for transport air pollution control in AA. Figure ES- 1: AA Spatial Expansion 2. Addis Ababa is at the forefront of urbanization and motorization in Ethiopia. The city has spatially expanded three-fold in the past two decades, from 99 km2 to 284.9 km2 (see Figure ES-1). This increase in space has decreased urban density in AA – from 17,000 people per km2 of built-up area in 1987 to 13,000 in 2017. The city's rapid growth has drastically increased the demand for motorization. The city's registered vehicle count increased by 40% in the past five years alone, reaching 630,000 vehicles in 2020 and accounting for nearly 50% of all registered vehicles in Ethiopia. Motorization is posing huge challenges for AA in many respects. 3. Existing approaches for addressing motorization by expanding main roads and accommodating vehicle growth has not effectively improved accessibility, and instead has generated negative externalities. An integrated, comprehensive management of motorization which includes transport air quality management is needed. In AA, 54% of the population walks and 31% rides public transit, yet the city has low accessibility; only 17% of jobs can be reached within one hour via public transport, and only 15% on foot. Walking can be dangerous, too: studies by the World Health Organization (WHO) and the government show AA has disproportionately high pedestrian fatalities for the country and also for Africa. In addition to the exacerbation of road fatalities, rapid motorization also worsens traffic congestion, increases greenhouse gas (GHG) emissions, deteriorates local air quality, and results in health impacts and economic costs. 4. Air pollution problems from the transport sector in AA are characterized by high-sulfur fuels, lack of emission standards, ineffective and unenforceable emission inspections, an aging vehicle fleet, and increasing emissions. Ethiopia currently imports 500ppm sulfur diesel and 10ppm sulfur gasoline, allowing for operation of Euro 3/III vehicles. Emission inspection, while mandatory, detects smoke and carbon monoxide only without setting any threshold. Therefore, it neither influences the pass/fail decision for the inspection nor enforces any emission reduction requirements. Most registered vehicles are over 10 years old, including buses, passenger cars and light duty vehicles, many of which are not subject to emission control under current practice (see Figure ES-2). The mini- and midi-buses vii (named as Bus1 in Figure ES-2) are mostly old and lack vehicle emission controls. Should the current growth trend continue at 8% a year, over the next decade, AA would expect to have 1.3 million vehicles. Even a more conservative estimate, which assumes vehicle growth at the GDP growth rate, projects 900,000 vehicles in AA by 2030. In these scenarios, the level of vehicle emissions would exponentially grow in proportion to vehicle numbers, increasing at least 50% and possibly over 100%. Figure ES- 2: Average Fleet Age of Registered Vehicles in AA (2020) 5. Continuing Business-as-Usual (BAU) management of motorization and air quality will further degrade air quality in AA, threatening the city's livability and ability to grow. At a country level, Ethiopia's Climate Resilient Green Economy Strategy (CRGE) estimates that national emissions from transport will grow from around 5 Mt CO2 equivalent (CO2e) in 2010 to 41 Mt CO2e in 2030. In AA, the transport sector is one of the top three contributors to PM2.5, along with residential and industry sources. As shown in Figure ES-3, the transport sector – including urban transport, aviation, and roads – contributes 29% of PM2.5 emissions, 71% of SO2, 97% of NOx, and 96% of CO2 (see Figure ES-3). Because transport emissions are normally small in size, airy and tend to stay in ambient air, the source apportionment study conducted for this report found ambient PM2.5 concentrations can be as high as 35%. If the city doesn’t change course, transport air pollution in AA will have profound local and national impacts. 6. Transport emissions also contribute to GHG emissions and reducing transport emissions will generate global climate co-benefits. Given the importance of vehicle emissions to climate change, Ethiopia can learn from other countries that have implemented measures to reduce GHG emissions and leapfrog to newer and cleaner transport technologies. Furthermore, co-benefits exist between local pollution control and climate change at a global level, as increased particle emissions damage air quality and increase Black Carbon (BC) emissions. Scientific assessments of BC emissions and impacts found that they are the second most important emission that drives climate change, second to CO2. 7. The Government of Ethiopia and the City Government of AA have conducted studies on air pollution problems to identify measures for reducing vehicle emissions. The documents, reviewed during this study, include but are not limited to: the Air Quality Management Plan (AQMP) prepared in 2021 by the AA Environmental Protection and Green Development Commission (AAEPGDC), with the support of the US Government; the 2016 Greenhouse Gas Emissions Inventory Report by C40 Cities; Motorization Management in Ethiopia, prepared by the World Bank in 2017; an Air Quality Policy and Regulatory Situational Analysis (UNEP, 2018); an Electric Bus Study (World Resources Institute and Lucy Partners); and multiple urban transport studies by the AA City Government. viii Figure ES- 3: Multi-Pollutant Emissions Estimate for Addis Ababa Airshed (Year 2018) 8. Ongoing urban transport investment and policy work in AA will come to fruition in the short- term and contribute to the mitigation of emissions and air pollution. AA is working with the World Bank to modernize public transport and traffic management systems, and with the French Development Agency to develop the first Bus Rapid Transit line, all of which will be operationalized in 2-3 years. The city also built its first dedicated bike lane in 2020. Meanwhile, several key studies covering comprehensive transport development, paratransit transformation, and other strategic areas will inform AA’s policies and priority actions that contribute to the management of motorization and air pollution. 9. Potential mitigation measures in the AA transport sector were identified, based on the review of studies, plans and ongoing interventions, assessment of local context, consultation with relevant government agencies, and review of international experiences. This process of identification also aligns with the urban transport policy framework – Enable, Avoid, Shift and Improve (EASI) – recommended by the Sub-Saharan Africa Transport Policy Program (SSATP): • “Enable� refers to establishing efficient governance, regulations, and integrated development, • “Avoid� refers to improving the efficiency of the transport system by reducing vehicle trips, • “Shift� refers to shifting from high-emitting transport modes and vehicles and promoting low- emitting modes and vehicles, and • “Improve� refers to reducing vehicle emissions per unit of output and improving fuel quality. Table ES-1 below lists the nine potential mitigation options chosen for further analysis. These mitigation options can be further categorized into three clusters: (i) standards, (ii) vehicle measures, and (iii) public transport. Under each option group there are varied, inter-connected measures. Among them, most have been identified in studies from the government and development partners. Only two options – vehicle retrofits with emission control equipment and restricting sales of diesel vehicles – are proposed as new measures from this study, as they have been implemented successfully in other countries and ix have potential applicability for Ethiopia. This report focuses on air quality with the aim of providing a deeper understanding of mitigation measures and local applicability. In addition, some measures could serve to support the broad urban transport and motorization management agenda. Table ES- 1: Comparison of Vehicle Emission Mitigation Options Category Option Proposed Options with Abbreviated Name Group No. 1 Low-sulfur fuels Vehicle emission standards for newly registered Fuel and vehicle emission 2 vehicles standards 3 Maximum emission levels for in-use vehicles (I/M) 4 Fuel economy or CO2 emission standards 5 Vehicle retrofits with emission control equipment Maximum vehicle age for imports and in-use 6 vehicles Vehicle measures Ban on import and new registration of light diesel 7 vehicles Promote low-carbon vehicles (electric and hybrid 8 vehicles) Improve public transport/non-motorized transport Public transport measures 9 (NMT)/transport demand management (TDM) 10. Potential mitigation options are assessed and prioritized based on the following criteria: (i) efficacy and environmental impact relative to reducing local air pollutants and GHG emissions in AA; (ii) efficiency expressed in terms of economic cost-benefit and social impact; (iii) implementation complexity, relating to the technical feasibility and implementation capacity of a measure. While social acceptance and political consideration are also critical to the evaluation of mitigation measures, they would require broad-based surveys or public consultation in Addis Ababa, which couldn’t be done as part of this study during the COVID-19 pandemic. 11. Economic costs of transport air pollution emissions and benefits of emission reduction are estimated for the mitigation measures. An International Monetary Fund (IMF) publication (IMF, 2014) calculated the cost of pollutants based on local pollution at the ground level and the impact on health and costs caused by each pollution type in Ethiopia. The greater risk of mortality or, more precisely, the cost of premature death is also valued economically based on stated preference studies performed by the Organization for Economic Co-Operation and Development (OECD). By taking Ethiopia's economic cost of PM2.5, NOx, and SO2 from the IMF work, the study then updated unit costs to their USD equivalent (US$) as of 2019 according to the GDP per capita of Ethiopia. The following costs per ton of air pollutant were used in the study: US$4,014 per ton of PM2.5 emitted, US$132 per ton of SO2 emitted, and US$28 per ton of NOx emitted. Social costs of carbon (SCC) are also adopted to estimate the economic damages associated with an increase in CO2 emissions. Valuating the economic damage of CO2 emissions is complex and depends on discount rates. The Asian Development Bank (ADB) reported a unit value of US$36 per ton of CO2e in 2016 prices for emissions, which increases by 2% annually in real terms to reflect the potential of increasing marginal damage of global warming over time. Updated to 2019 real USD and including the annual increase results in around US$40 per ton CO2e for 2019. 12. The following table briefly summarizes the results of the analysis. A detailed summary table is presented in Chapter 14. x Table ES- 2: Summary of the Assessment of Mitigation Measures Group of Air pollution impact GHG impact Overall assessment and recommendation Options • Direct: strong SO2 1. Low-sulfur reduction; small fuels: PM2.5 reduction; no • Current level: 500ppm Introduction of NOx impact • A pre-condition for most other measures 50ppm (stage 1) • Indirect combined No impact • Euro 4 fuel (50ppm) recommended; Euro 5 and 10ppm with vehicle fuel (10ppm) not recommended yet due to (stage 2) diesel. emission costs regulations: see below 2. Emission • Current level: none but primarily Euro 2 standards for vehicles newly • The recommended new emission standards registered • Direct: large can only be implemented together with low- vehicles (used reduction in all sulfur fuels. or new units): pollutants • Euro 4 emission standard for new or used Euro 4 No impact • Measure requires vehicles recommended once 50ppm sulfur equivalent low-sulfur fuels as fuel is available (stage 1) and Euro 6 pre-condition • Euro 6 level not recommended yet due to equivalent higher costs than benefits (stage 2) • Euro 3/5 standards not recommended due to marginal benefits compared to Euro 2/4 • Current: no standards and enforcement • Recommended: establishing maximum levels for in-use vehicle emission controls Low impact due to including measurement procedures and 3. Maximum limited vehicle equipment standards, and strengthening the emission levels degradation and process of integration of emission testing in for in-use complexity of No impact road-worthiness tests with appropriate vehicles (I/M): effective quality control and enforcement measures implementation & enforcement • In-use vehicle inspection cannot be used to determine the vehicle emission standard. It serves only to identify gross polluters significantly in excess of prescribed limits • Small impact if no fuel switch • Highly negative if 4. Fuel this results in Financial incentives for low-emission economy or dieselization Moderate impact vehicles should be designed in a fiscally CO2 emission • Positive impact if neutral manner standards switch towards electric vehicles (EVs) Small increase in 5. Vehicle fuel consumption retrofits with Not recommended due to highly negative Significant reduction but reduction of emission cost-benefit relation and high implementation of PM2.5 Black Carbon: control complexity total small equipment reduction 6. Maximum Vehicle age is not an • GHG • Age is not an adequate proxy and is not vehicle age for adequate proxy for emissions of correlated well with emissions imports and in- vehicle emissions and HDVs are not • Emission standards are the appropriate use vehicles, as a stand-alone related to age parameter to limit vehicle emission eventually measure could xi combined with increase emissions as • Small age • Scrapping programs are not recommended scrapping vehicle deterioration deterioration due to very high costs with limited benefits programs rates are lower than • Car GHG changes of emission emissions standards (a 10- or more related to even 20-year-old CO2 standards Euro 4 vehicle has than to vehicle lower emissions than age a brand-new Euro 2 unit) 7. Ban on • Highly recommended due to immediate import and new Marginal High reduction of impact and simplicity registration of increase to PM2.5 and NOx • Petrol cars are a cost-effective alternative to light diesel neutral diesel units vehicles High reduction per 8. Promote low- vehicle but low High impact due • Recommended for urban buses carbon vehicles impact due to low to low carbon Requires a more in-depth evaluation and an e- (hybrids and levels of vehicle grid factor of mobility strategy across multiple sectors EVs) renovation and low Ethiopia vehicle numbers Potentially • Recommended measures to ensure a 9. Improve Results in mode shift results in a high sustainable low-emission transportation public and has a high reduction of system transport/NMT/ potential to reduce GHG emissions • Priority on implementing ongoing TDM local pollutants due to modal interventions and policy recommendations shift from studies and plans 13. A set of high-priority measures are recommended. These measures, as framed under SSATP’s urban transport policy approach of Enable, Avoid, Shift and Improve, represent all three categories of mitigation options covering fuels, vehicles, public transport and non-motorized transport, and reflect the government’s priorities and ongoing investments. They are: (i) introducing 50ppm diesel fuel, combined with Euro 4/IV vehicle emission standards or equivalent, which is a high priority for the government; (ii) fostering public transport and NMT measures, if possible, combined with transport demand measures and transit-oriented development. This is also consistent with the government’s priorities, as AA City administration recently announced an initiative to add 3,000 buses. Public transport, at today’s 31% mode share, carries high passenger volume and results in significantly lower GHG emissions per passenger-kilometer than private means of transport. Due to usage of diesel buses public transport is also a major source of local pollutants. Moreover, without increasing the efficiency and attractiveness of public transport, running public transport as-is will not result in mode shift and air quality improvement. Measures such as operational improvements and restructuring to allow for replacement of minibuses with larger units on heavy demand routes are the most relevant in terms of air quality improvement; (iii) establishing maximum in-use vehicle emission levels and measurement procedures and strengthening the integration of emission testing in road-worthiness tests with quality control and enforcement measures. These measures are being developed by the Federal Transport Authority; and (iv) introducing a ban on import of all diesel vehicles with less than 3.5t gross vehicle weight (GVW), including new and second-hand vehicles. Heavy duty diesel vehicles such as trucks or buses with more than 3.5t GVW are still permitted. At present, 36% of registered vehicles in Ethiopia are diesel. Even with the best available diesel technologies, the real-world performance of diesel engines results in high PM and NO2 emissions. xii It is important to note that these four priority recommendations are mutually supportive, therefore a coordinated implementation across these four priorities will maximize the effect of air quality reduction from the transport sector. 14. Medium-priority measures recommended: (i) promoting hybrid and electric vehicles with fiscally neutral instruments and other policies; (ii) integrating emission inspection including data access and sharing in vehicle roadworthiness test centers; and (iii) limiting the age of in-use fossil buses used for public transport in urban areas as a measure to speed up renovation of the public transport fleet and to incentivize a switch to electric units. While Ethiopia as a country has adequate power generation resources, Addis Ababa’s power infrastructure is facing severe capacity constraints. The deployment of e-mobility, especially electric buses, requires the backing of supporting power infrastructure. A recent World Resources Institute (WRI) study recommended AA conduct research on electric buses around power demand, battery disposal and specific infrastructural needs; this study recommended a multisector e-mobility strategy development involving the energy sector and feasibility design for pilot deployments in the short term. 15. Other measures are considered low priority and not recommended at this stage. Some non- recommended options are: (i) fuel efficiency standards, due to high complexity and potential dieselization of the vehicle fleet and a subsequent increase in air pollution; (ii) vehicle scrapping programs, due to their highly negative cost-benefit; (iii) vehicle retrofit programs with diesel particle filters, due to their considerable technical complexity and highly negative cost-benefit ratio; and (iv) age limitations for the import of new or second-hand vehicles, due to them not being an adequate proxy for vehicle performance. The correlation between vehicle age and vehicle emissions only exists in countries with advanced vehicle emission regulations. In Ethiopia, used as well as new vehicles arrive from different parts of the world. Second-hand vehicles made in Europe since 2006 comply with Euro 4/IV and with Euro 6/VI for vehicles since 2015, while new heavy-duty vehicles assembled locally in Ethiopia may only meet emission standards of Euro 0. Therefore, introducing an age limitation for importing vehicles may not be effective in Ethiopia at this time. 16. The recommended priorities from this study are further screened for implementation timeframe using magnitude and rapidity of impacts. Short term measures are expected to have an impact within 1-2 years after implementation; medium-term with an impact within 3-5 years; and long- term with a significant impact within more than 5 years. Table ES-3 highlights the identified short-term and mid-term measures. Various policy analysis and feasibility studies would be needed to implement the short- and mid-term measures. For example, in the case of deploying e-mobility, electric buses require the backing of a charging network and upgrading substations. The WRI study categorized AA as a “stage zero� country with no policy, target, or implementation of electric buses, therefore an e- mobility strategy that assesses power demand, battery disposal and specific infrastructural needs and the design of a demonstration project have been identified as key next steps. In June 2021, the Ministry of Transport established a national e-mobility steering committee, a strategic step forward toward promoting e-mobility. Table ES- 3: Proposed Short- and Mid-Term Measures Short-Term Measures Mid-Term Measures 1. Introduce 50 ppm diesel fuel, combined • Promote hybrids and EVs with fiscally with Euro 4/IV vehicle emission standards neutral instruments and other policies. or equivalent. - Short-term work can start with developing 2. Improve public transport and NMT, a multi-sector e-mobility strategy and combined with transport demand measures understanding power infrastructure and transit-oriented development (short- investment to support e-mobility. xiii term action, to be sustained through long • Integrate emission inspection including data term). access and data sharing for vehicle 3. Establish maximum in-use vehicle emission roadworthiness test centers. levels and measurement procedures and • Limit the age of in-use fossil buses for urban strengthen the integration of emission public transport to speed up public transport testing in road-worthiness tests with quality renovations and incentivize switching to control and enforcement measures. electric units. 4. Ban import and new registration of diesel passenger cars and light commercial vehicles with less than 3.5t gross vehicle weight, however continue to allow heavy duty diesel vehicles such as trucks or buses. 17. Maximizing financial resources to implement priority measures. Critical to the implementation are financing and implementing the recommended mitigation measures in a sustainable way. AA can explore a variety of potential financial sources from the public sector, private sector, and development partners. Adoption of some market-based instruments such as user pay systems (i.e., road pricing, parking fees) and vehicle taxes can be gradually introduced or expanded. As a first step toward applying the user-pay concept, the city is implementing a pilot paid parking management and on-street payment system. It is also mobilizing the private sector to bring in 3,000 buses. The privately run vehicle inspection centers in AA could leverage resources to step up quality control and strengthen the integration of emission testing, including data sharing; taxi and paratransit associations could be the driving force in upgrading vehicle fleets, with cleaner fleets to attract more riders, and be part of the optimized public transport network. At the national level, Ethiopia imposes several taxes with varying rates for imported vehicles. These vehicle import taxes could be optimized to promote the importation of cleaner vehicles, for example, by reducing taxation levels on hybrid and electric vehicles and increasing taxation levels on pure fossil fuel vehicles. 18. Next steps. The formulation of implementation strategies for the recommended measures would require continued collaboration with the national government and city administration on the political and institutional fronts and necessitate an in-depth assessment on policy reforms, institutional set-up, capacity building, fiscal impact, and implementation procedures. In addition, social acceptance and equity associated with the mitigation options should be well understood to support implementation strategies. 19. The study faces some limitations and more quantitative analyses should be done to advance the transport air pollution control agenda in AA and in Ethiopia. Lack of data, a common situation in many developing countries including Ethiopia, has limited the depth of quantitative analysis. As the study was entirely conducted during the COVID-19 pandemic, the inability to conduct field trips and in-person discussions with stakeholders has also constrained the in-depth assessment of the local situation. Therefore, the assessment has been done with limited available local data, and the cost-benefit assessment intends to give an indication or first approximation. It is also impossible to derive an abatement cost curve to guide the implementation of mitigation measures in detail. Specific measures, such as electric vehicle promotion, would require much more comprehensive and technical assessments and feasibility studies to assess their financial and technical viability for AA. xiv 1. Introduction Objective and Structure Through its investment projects and Advisory Services and Analytics (ASA) programs, the World Bank has been supporting the Government of Ethiopia in environmental and natural resource management and implementation of its Climate Resilience and Green Economy Strategy. AQM is one of several areas on which the Bank is providing analytical and advisory support to the Government of Ethiopia. The objectives of the World Bank’s “Ethiopia: Air Quality Management and Urban Mobility� ASA are to assist the Government of Ethiopia and the Addis Ababa City Administration in deepening their understanding of ambient (outdoor) AQM through analytical studies focusing on Addis Ababa (AA) and transport air pollution control and develop policy recommendations and a roadmap for institutional strengthening and physical investments in AQM. The objective of this report, as one of the deliverables of the ASA, is to assess mitigation options for transport emissions for AA in the Ethiopian context and recommend priority measures for short- and mid-term actions that are applicable for AA. The formulation of potential mitigation options builds upon a review of relevant development strategies and ongoing initiatives of the Federal and AA governments and development partners (DPs), an understanding and consideration of Ethiopian and international experience, an analysis of Addis Ababa’s source apportionment including vehicle emissions conducted for this ASA, and consultations with relevant stakeholders. Proposed mitigation measures and recommendations have been discussed with the government agencies in charge of urban transport and environmental protection. Development Context Ethiopia is undergoing rapid urbanization and is poised to absorb one third of the country’s population into urban areas within the next decade. For the country, urban population is conservatively estimated to increase 3.8% per year, from 15 million in 2012 to 42 million by 2037, according to the 2019 Ethiopia Urbanization Review. If not managed properly, cities will struggle to provide jobs, infrastructure, and services, and run the risk of reduced productivity and economic growth. Addis Ababa, the capital city, is at the forefront of urbanization and motorization. The city’s economic growth has led to population migration and urban expansion. Its population grew at 3.7% a year compared to the national average population growth of 2.3%. While the official estimate today is 4 million, the actual population could be much larger. Meanwhile, the city expanded threefold spatially in the past two decades, from 99km2 to 284.9km2. Urban density decreased, from 17,000 (people/km2 built-up area) in 1987 to 13,000 in 2017 (see Figure 1), and the city lost substantial greenspace to development, with its share dropping from 20% to 5% during the same time. This rapid growth and expansion have drastically increased the demand for motorization. The number of registered vehicles in the city increased by 40% in the past five years. The city’s registered vehicle stock reached 630,000 in 2020, accounting for nearly 50% of all registered vehicles in Ethiopia (1.2M). If no action is taken and the growth continues at 8% annually, AA would at least expect 1.3 million vehicles by 2030. Even a conservative estimate, which assumes vehicle growth aligned with the GDP growth rate as done for the source apportionment study, projected 900,000 vehicles in AA by 2030. Meanwhile, most registered vehicles are at least 10 years old, as shown in Figure 2.1 In Ethiopia, like many LMICs, used vehicle imports make up most of the vehicle stock and are an important part of their 1 Age statistics could be misleading if they are not based on annual vehicle taxation since old vehicles are not removed from the system, i.e., the figures just measure the cumulative number of vehicles registered at least once. Refer to Chapter 10 “Vehicle Age Restriction and Scrapping Programs� for more information. 1 economy (World Bank, 2021b). A 2017 World Bank study pointed out the main markets that exported vehicles to Ethiopia (see Chapter 2) and raised the concern of safety and environmental externalities. Figure 1: Spatial Expansion of Addis Ababa Figure 2: Type and Age of Registered Vehicles in Addis Ababa in 2020 Note: MUV – Multi purpose vehicle; Bus 1 – mini/midi bus; Bus 2 – standard bus; and HDV/LDV – heavy/light duty vehicle Multi-faceted transport challenges abound in Addis Ababa. The approach to addressing transport problems – predominantly by expanding main roads and accommodating vehicle growth – has not resulted in the desired improved accessibility outcomes and on the contrary have produced negative externalities. Based on a few technical analyses under the World Bank-financed Transport Systems Improvement Project (TRANSIP) and other analytics, AA exhibits low accessibility indicators, with only 17% jobs reachable in one hour via public transport and 15% via walking in a city where the majority of the population walks or rides public transit. The city has disproportionately high fatalities for pedestrians (Figure 3), worsening congestion from lax traffic management and lack of a hierarchical road network, and transport infrastructure that is highly vulnerable to flooding and climate change. The transport sector – including urban transport and aviation – generates 29% of PM2.5 and more than 90% 2 of CO2 in ambient air in the city. Vehicle growth in the next decade will pose huge challenges for AA in all areas – traffic congestion, road fatalities, degrading air quality, calling for an integrated, comprehensive management of motorization which includes the management of transport air quality. Figure 3: Transport Snapshots Source: Mode Share: Addis Strategic Transport Development Plan; Accessibility: WB Multi-sector ASA; Road Safety: WHO, MOT’s TRANSIP First Bi-annual Report. The BAU approach to transport emission management will further degrade air quality in AA and threaten the city’s livability and growth potentials. High sulfur levels in fuel, an aging vehicle fleet, and poor road conditions all contribute to emissions (see Figures 4 and 5). While AA plans to develop a Bus Rapid Transit (BRT) network, it will take years to complete and to have an impact on transport emissions. According to Ethiopia’s Climate Resilient Green Economy Strategy (CRGE), the increase in road passenger-km travelled in Ethiopia is forecasted at an annual rate of 8.3-9.1 percent growth and total passenger transport in passenger-km in Ethiopia is expected to increase from 40 billion in 2010 to 220 billion in 2030, driven by strong urbanization. If business continues as usual, emissions from motor vehicles will increase from 5 tons of CO2 in 2010 to 41 tons in 2030. There is very limited data on ambient air quality monitoring in AA. Of the three existing PM2.5 monitors, one is with the Addis Ababa University and the other two with the United States Embassy at the Embassy and the International School. Only the US embassy monitoring data is publicly available online. For this air quality management (AQM) ASA, the team conducted apportionment analysis of AA’s airshed and found that the annual average PM2.5 level in ambient air is more than double WHO’s guideline of 10µg/m3 and has worsened over time (Figure 4). The transport sector is one of the top three contributors to PM2.5 pollution in AA, along with residential and industry sources. PM2.5 is considered the most relevant indicator for air quality and is of particular concern to human health. It can pass the barriers of the lung, enter the bloodstream, and destroy the integrity of the blood-brain barrier, thus causing premature mortality as well as respiratory, cardiovascular, and neurological diseases. 3 Figure 4: PM2.5 Levels in Ambient Air in Addis Ababa, 1998-2018 Unit: µg/m3 Source: World Bank, 2021a Managing transport emissions can help to reduce air pollution, improve public health, and boost quality of life while providing climate co-benefits through the reduction of GHG emissions. Currently, the city of Addis Ababa is taking steps to prepare an Air Quality Management Plan (AQMP). The draft AQMP (being prepared in a collaboration between the AAEPGDC and the U.S. State Department and Environmental Protection Agency) has identified a lack of basic information and analytical work on ambient air quality monitoring and source apportionment. This ASA supports the ongoing AQM planning efforts in Addis Ababa and intends to deepen analyses in key areas to develop and prioritize AQM measures and investment options. The AAEPGDC has expressed its need for World Bank support to implement its AQM Plan. The Federal Environment, Forest and Climate Change Commission (EFCCC) has also requested World Bank assistance with air pollution control. In the recent 2020-2030 National Environmental Law Development and Enforcement Programme (NELDEP), the EFCCC identifies a lack of accurate monitoring and pollution measurement, inefficient transportation, low quality fuel, increased vehicle use, and ineffective enforcement as key contributing factors to air pollution. Planned mitigation measures include development of baseline data and improved monitoring equipment, low-carbon transportation solutions, and provision of technical support. Currently, the World Bank is working with the city government and the MoT on the implementation of TRANSIP which targets infrastructure investment, institutional strengthening, capacity building and strategic technical assistance, some of which are directly connected with air quality management. Thus, this ASA provides a strong business case for AQM and will share knowledge on vehicle emission analysis with the MoT and Addis Ababa Transport Authority. Ongoing Urban Transport Sector Investment Efforts As motorization is growing at a fast pace, it is evident that AA will require large-scale investment in urban transport to meet the growing demand for mobility and accessibility, and curb the negative externalities associated with urbanization and motorization. The AA government is working towards 4 this goal, with a DP-financed transport portfolio of on-going/past projects totaling $282 million. The following highlight some of the key investments. TRANSIP, financed by the World Bank, is investing in public transport and urban corridor traffic management in AA to implement (i) Anbessa Intelligent Transport System (ITS), under procurement, (ii) Anbessa Workshop Machinery and Bus Purchase, under procurement, (iii) Corridor 1 with integrated multimodal design, under final design, (iv) citywide traffic signal/ITS system including the first modern Traffic Management Center, under final design, and (v) Integrated Driver Licensing and Vehicle Registration System through the Federal Transport Authority with Phase I in AA which would also integrate vehicle IM centers, under final design. Bus Rapid Transit (BRT Line 2), financed by the French Development Agency, is the first BRT line of 17km that will cross the city from North to South. Infrastructure construction is ongoing. Traffic Management Center financed by the city of AA is under construction and expects to connect with the timeframe of TRANSIP’s ITS supply and installation in the next two years . This will set up a system for gradual implementing and scaling up of intelligent traffic management. There are also multiple technical assistances in varying stage of development, covering NMT, road safety, public transport, mass transit and others, and aiming to formulate policies and strategies to guide the development of an equitable, clean and sustainable urban transport system in AA. 5 2. Overview of Air Pollution Issues Air Pollution Impacts The most common air pollutants, also known as criteria pollutants, are Carbon Monoxide (CO), Lead (Pb), Ground-level Ozone, Particulate Matter (PM), Sulfur Dioxide (SO2), and Nitrogen Dioxide (NO2)2. Ground-level Ozone is not emitted directly into the air but is created by chemical reactions between Oxides of Nitrogen (NOx) and Volatile Organic Compounds (VOC) in the presence of sunlight. In the transport sector, lead and SO2 emissions are related to fossil fuel use from vehicles and are controlled through the use of unleaded gasoline and through limits on sulfur levels in fuels, primarily diesel. The other air pollutants3 are regulated through exhaust emission standards. Poor air quality is detrimental to health and vehicle emissions are an important source of pollutants. However, global warming has resulted in CO2 emissions also being considered within vehicle emission regulations. Air pollution has multiple negative social and economic impacts (Figure 5). Scientific research shows that air pollution has a great impact on our health. Children, the elderly and poorer people are particularly vulnerable. Harmful effects caused by air pollution include premature mortality, respiratory and cardiovascular diseases and breathing difficulties. Poor air quality reduces quality of life and causes significant health and environmental costs which need to be borne by society. Figure 5: Impacts of Air Pollution Source: Xie et al., 2021 Poorer people are disproportionally affected by air pollution, as they tend to be located closer to its sources (Mitchell, 2003). At the same time, they contribute less to the air pollution problem as they do not own private cars. Recent studies also revealed that women are affected more by poor air quality than men (Clougherty, 2010). Air pollution and climate change adversely affect vegetation and wildlife, reducing biodiversity and endangering species. Climate change also poses serious risks to the built environment, for example, due to more frequent weather extremes. Air pollution increases the maintenance and cleaning costs of 2 https://www.epa.gov/criteria-air-pollutants 3 In the case of ground-level ozone, VOCs and NOx are regulated. 6 buildings affected by particulates and NOx emissions, which cause discoloration and higher vulnerability to weathering. The health impacts of the six major pollutants are further briefly described below (EPA, 2015). Particulate matter (PM) may be emitted directly or may be formed in the atmosphere by transformation of gaseous emissions such as SOx, NOx, and VOCs. The PM10 distinction represents inhalable particles small enough to penetrate deeply into the lungs. The fine fraction of PM10 called PM2.5 is formed chiefly by combustion processes. Harmful health effects are caused primarily by fine particles and include premature mortality, aggravation of respiratory and cardiovascular diseases, decreased lung function and exacerbation of allergic symptoms. Children, older adults, individuals with pre-existing heart and lung diseases and persons with lower socioeconomic status are the groups most at risk. PM2.5 can also have detrimental development effects such as low birth weight and increased infant mortality due to respiratory causes. Diesel units are the major source of vehicle PM2.5 emissions. Ground-level ozone poses a risk to human health, in contrast to the stratospheric ozone layer that protects the Earth from harmful wavelengths of ultraviolet solar radiation. Short-term exposure to ground-level ozone can cause a variety of respiratory health effects, decrease capacity to perform exercise and increase susceptibility to respiratory infection – potentially resulting in premature mortality. Exposure to ambient concentrations of ozone can aggravate respiratory illnesses such as asthma or bronchitis and can result in permanent lung tissue damage. The major source of vehicle emissions resulting in ground-level ozone are NOx emissions and Non-Methane Hydrocarbon emissions. The health impact of SO2 is primarily related to increased breathing difficulty, increased respiratory issues in children and older adults and increased risks for people with asthma. The major source of vehicle SO2 emissions is from diesel fuel. Exposure to NO2 is associated with respiratory-related health effects, especially among asthmatic children and older adults. The major source of vehicle NOx emissions today is from diesel vehicles. Lead accumulates in bones, blood and soft tissues. Lead exposure can affect development of the central nervous system in young children resulting in neurodevelopmental effects including lowered IQ and behavioral problems. Lead caused by vehicle emissions comes from the combustion of leaded gasoline. Due to elimination of lead in gasoline in Ethiopia, vehicle emissions are no longer a cause of lead pollution. Exposure to CO reduces the blood’s capacity to carry oxygen, which can affect the body’s ability to respond to the increased oxygen demands of exercise or exertion. At-risk populations are generally those with respiratory diseases, and those in prenatal or elderly life-stages. The major source of vehicle CO emissions is from gasoline vehicles. Linkage between Local Air Pollution and Climate Change Local air pollution has strong linkages with GHG emissions and climate change as a number of air pollutants in vehicle emissions also belong to GHGs. Given the importance of vehicle emissions in climate change, GHG emission regulations and/or fuel economy standards have been put in place by various countries including Brazil, Canada, China, the EU, India, Japan, Mexico, South Korea, and the USA.4 Fuel-efficient vehicles have lower fuel usage related emissions (lead and SO2), however not necessarily lower outputs of other pollutants. A link between pollution control and climate change mitigation exists for particle emissions. Increased particle emissions result not only in worse air quality but also in higher Black Carbon (BC) emissions. A scientific assessment of BC emissions and impacts found that they are second to CO2 in terms of climate forcing. On a mass-equivalent basis, BC is on 4 http://www.theicct.org/info-tools/global-passenger-vehicle-standards 7 average 2,700 times more effective than CO2 in causing climate impacts within 20 years, and 900 times more effective within 100 years (Bond, 2013, World Bank, 2014). Air quality can be improved by reducing ultrafine diesel exhaust particles and BC, thereby also reducing short-lived climate pollutants.5 5 This is commensurate with a strategy followed, for example, by the Climate and Clean Air Coalition (CCAC) formed by the United Nations Environment Programme (UNEP). 8 3. Identification of Potential Transport Mitigation Measures This chapter provides a review of key government documents and study reports in order to understand the current situation and needs for air pollution control measures in AA and Ethiopia. It also draws global experience in urban transport with relevance to air quality management in AA’s transport sector. A Review of Government Plans and Documents on Air Quality Management Addis Ababa Air Quality Management Plan (AQMP) (Addis Ababa Environmental Protection and Green Development Commission, 2021) was developed under a partnership between the Addis Ababa Environmental Protection and Green Development Commission, with support from the United States Environmental Protection Agency, the United States Embassy in Addis Ababa and UN Environment. The AQMP focuses on reducing PM and other air pollutants in the AA region. It documents dieselization and aging vehicle fleets in AA and finds the city’s vehicle taxation policy effective to encourage usage of public transport instead of private transport means. The city’s light rail system, opened in 2015, should reduce dependence on buses and reduce public transport emissions. However, the magnitude of the impact has not been assessed. The AQMP states that there are standards for vehicle exhaust emissions for smoke and CO, established by the Ethiopian government under the EFCCC and codified within the Transport Authority to measure compliance (Addis Ababa Institute of Technology, 2012). However, vehicle emissions enforcement is not yet happening at the time of the planning process. Reasons for non-enforcement are not identified, although the AQMP recommends adding vehicle emission testing equipment to testing stations. The AQMP conducts no further analysis on whether hardware will resolve the enforcement problem. Other measures taken by the government include a change in vehicle taxation favoring the import of newer vehicles, a ban on motorcycles on city streets and a ban on commercial vehicles in AA during the daytime to reduce congestion and thereby improve fuel efficiency. The AQMP states that Ethiopia recently banned the import of vehicles older than a specific manufacturing date, without indicating which date. It implies that these measures are positive for air quality without providing evidence for this assumption. No results are shown for the (assumed) impact of the measures nor their cost-benefit. The AQMP also mentions that policies are being drafted regarding vehicle emission standards and that biofuel blends (ethanol-gasoline and bio-diesel) shall be promoted. It considers, based on interviews and a review of studies, that air quality enforcement and compliance is relatively low and will require additional capacity building. Key recommendations of the AQMP include (i) enhancement of education and outreach on air pollution issues to increase awareness of the problem; (ii) establish vehicle emission standards for AA; (iii) enforce monitoring and enhance local authorities’ vehicle emission monitoring capabilities. The report mentions that AA standards should then be aligned with national standards. It is unclear, however, how city vehicle emission standards can effectively be enforced beyond vehicles used for public transportation or if this is at all a feasible regulatory policy. The AQMP discusses mitigation measures for vehicle emission standards, aging of vehicles and enhancing local capabilities. However, it is unclear if the vehicle emission standards mentioned refer to type-approval or in-use standards. No linkage of fuel qualities and emission standards is discussed. The report does not make a quantification of potential impacts or their cost-benefit. The lack of enforcement is touched on various times regarding vehicle emission control. Implicitly, hardware support (vehicle emission testing equipment), training and capacity building are assumed to resolve this problem. Addis Ababa 2016 Greenhouse Gas Emissions Inventory Report was prepared by C40 Cities (C40 Cities, 2020). It summarizes city-wide GHG emissions and states that 78% of GHG emissions in AA in 9 2016 came from the transport sector. The C40 report states that 58% of vehicle emissions (more precisely, road-based vehicles) are from diesel and 42% from petrol but also that 87% of GHG emissions are from diesel and 13% from gasoline. The report states that high emissions are due to the presence of older vehicles, however no justification or proof is delivered for this judgement or hypothesis. Emissions are calculated based on a top-down fuel sales approach. It is unclear how from such an approach a statement can be justified methodologically to blame vehicle age for high emissions. Annex 2.1 lists emissions per vehicle category with data on annual mileage and specific fuel consumption, taken without further discussion from the Ministry of Transport’s National Transport GHG Emissions Inventory of 2018. Specific fuel consumption data at least seem to be a gross estimate or assumption and can be questioned. For large buses, a fuel consumption of 17 liters per 100km is assumed (standard values are 35-45 liters per 100km for large urban buses, see e.g., (EEA, 2020)). For small trucks up to trailer trucks fuel consumption of 20 liters per 100km is assumed. Land Rovers are assumed to have a fuel efficiency comparable to normal cars, with petrol vehicles being more efficient than diesels. Such estimates are surprising and not in line with standard measurement-based data. The report states that the emission inventory is critical to inform decision-makers how to mitigate emissions. It is unclear how the progression is made from the emission inventory to mitigation actions. The inventory can be a monitoring tool and could be used to assess and calculate the impact of potential mitigation actions. However, this was not done in this report. Also, the report numbers for the transport sector are based on top-down fuel consumption values – for mitigation action calculations, detailed and sound bottom-up estimates are required. AA City Air Quality Policy and Regulatory Situational Analysis (UNEP, 2018) includes measures to increase fossil fuel economy preventive maintenance, vehicle fleet efficiency measures, hybrid vehicles and biofuels. It proposed key policy recommendations for short term (1-2 years), mid-term (3-5 years), and long-term (>5 years). Addis Ababa City Transport Sector Environment Pollution Control Strategy (2020-2029) (Addis Ababa City Administration Transport Bureau, 2021) focuses on AA’s road transport system. Following a rapid assessment of existing condition in relation to emission level and impacts, it called out that vehicle emissions are major sources of environmental contamination in the inner-city environment. The report then formulated high-level strategic directions covering vehicle emission control, climate resilient infrastructure, promoting environmentally friendly vehicles and sustainable transport modes, and coordination and capacity, within which it highlighted promoting cleaner fuels, TDM, green transport, NMT infrastructure, freight transport management, inter-agency planning and implementation, integration at policies, strategies, and legal framework and institutional capacity. Global Fuel Economy Initiative (GFEI) report (Addis Ababa Institute of Technology, 2012) discusses measures such as the establishment of the light rail, the setting of fuel efficiency standards, the promotion of biofuels, the adoption of hybrid and electric vehicles and a shift from road to rail for freight, with the latter being identified as the single largest impact measure. The report states that the fuel economy of vehicles in Ethiopia is relatively bad due to the prevalence of old vehicles. This resembles a self-fulfilling prophecy, as the fuel economy values of the report are not based on measurements but on European Drive Cycle data and by applying an annual fuel-economy degradation factor for each vehicle category based on interviews with vehicle owners. These degradation curves are not in line with measurements as incorporated, for example, in the European emission models. In addition, interviews with owners to assess fuel efficiency are notoriously unreliable. Per this logic, if the (non-proven) assumption is strong fuel economy degradation related to vehicle age, the conclusion is that the vehicle age is responsible for poor fuel economy. The conclusion of the report that old second- hand vehicles are the cause of bad fuel economy in Ethiopia is therefore an assumption and not a proven fact. The suggested ban on old vehicles to reduced fuel usage is not based on a scientific assessment. The promotion of biofuels to reduce GHG emissions is suggested without taking into consideration the 10 potentially considerable upstream emissions caused by biofuels which can, especially in the case of direct and indirect land-use change, result in biofuels having significantly higher total GHG emissions than fossil fuels. Studies on Motorization Management and Urban Transport Motorization Management in Ethiopia (World Bank, 2017) lays out some motorization policies that could be implemented by the government of Ethiopia. The report mentions that the market for used trucks from Europe has dried out, since even used trucks are now Euro IV or higher and these can’t tolerate the high sulfur level in diesel in Ethiopia. It points out that this market has been replaced with the import of new Euro 0 engines and local assembly, which shows implicitly that new vehicles can be far more polluting than old imported second-hand vehicles. Second-hand cars are mostly from Europe, Japan and the Middle East. The report points out that the sulfur level of imported fuel was 2000ppm, but the country planned to lower the sulfur content diesel by 2018 – it has done so now. The report’s recommendations include (i) entry filters for vehicles entering Ethiopia focused on vehicle safety, tailpipe emissions and fuel economy; (ii) redressing the trends towards diesel cars, light vehicles and larger engines all of which led to negative impacts; (iii) adopting in-use vehicle emission inspection using a motor vehicle information management system and the establishment of I/M centers focusing on smoke opacity tests for diesel vehicles and unloaded tests for non-OBD compliant equipment. The I/M program shall be complemented with visual and instrumental spot-checking enforcement programs, a mechanics’ training and certification program and a quality assurance program for genuine vehicle parts to be used in maintenance shops; (iv) establishing standards for vehicle emissions and fuel quality as well as vehicle safety and fuel economy. For vehicle emission standards, the primary importance of fuel quality is pointed out; and (v) promoting motorization management with priority to public transport and NMT. The report states the importance of standards as opposed to age limitations. It also stresses the importance of a clear pathway of tightening standards. Standards recommended are Euro IV once the fuel quality is available and the ban of two-stroke engines for road-transport. The report recommends assessing pathways for fuel economy standards and points out the option of vehicle electrification, especially two-wheelers and buses as well as other urban vehicles. With regard to motorization management, the report promotes policies to foster public transport and NMT, restrict the import of vehicles based on tailpipe emissions and crash-worthiness, incentivize the import of vehicles with improved fuel economy, including assessment of the potential to leapfrog to EVs, limit use of vehicles as they degrade by establishing performance-based conditions (e.g. vehicle emissions, age, safety conditions), and by suppressing implicit subsidies for car usage, e.g. through a parking pricing program. Development of mass transit systems is mentioned as a plausible policy to reduce emissions and fuel usage. The possible impact in terms of emission reductions is modelled for mass transit systems. The relative emission impact of a Euro III vehicle compared to a current vehicle is shown in the report, without modelling the actual emission impact on Ethiopia. The impact of a CO2-based light vehicle policy is shown based on Ethiopia’s average engine size – assuming the UK impact without modelling the actual impact on Ethiopia based on local vehicle structures. The report does not further address the increased dieselization and hugely negative air quality impact this policy led to in Europe. The possible impact of a parking policy is modelled by assuming a 5% mode shift away from passenger cars based on data from Romania. It is unclear why data from Romania should be relevant for Ethiopia. AA Electric Bus Case Study (World Resource Institute and Lucy Partners) provides a brief assessment on the opportunities and constrains for developing e-bus in AA. It identified Addis Ababa is categorized as a stage zero country with no policy, target, or implementation of electric buses and there was limited information on the development of electric buses (e-buses) on a country level. It formulated two 11 recommendations (i) researching on electric buses around power demand, battery disposal and specific infrastructural need in order to demonstrate economic, technical, and environmental viability, and (ii) prioritizing approval from the parliament on detailed action plans and strategies on clean transportation policies. AA NMT strategy 2019-2028 (AA City Administation Transport Bureau, 2018) has targets for cycling tracks to be constructed, which would potentially result in a mode shift and reduced emissions. The report points out that measures are required to reduce congestion, promote fuel efficiency and invest in sustainable urban transport. The report also recommends updated vehicle emission standards, appropriate infrastructure for I/M, an age restriction on imported used vehicles, incentives for the purchase of new vehicles and/or cleaner vehicles and a scrappage program for old polluting vehicles. AA Bus Network Optimization (AA City Administation Transport Bureau, 2020) analyzed the existing Anbessa, Sheger and Mini/Midi buses routes and revealed a significant overlap of routes leading to different modes competing for the same passengers and each undercutting other revenues. This network inefficiency also caused traffic congestion and risks for road safety. It noted that due to poor quality of public transport services, people are moving to private modes as income rises. The study further proposed scenarios to optimize existing public transport routes including all public transport modes and suggested that routes with lower demand and limited road width be operated by mini/midi buses from the demand perspectives. However, the study did not formulate implementation strategy nor reform approach to the mini and midi bus sector. Findings of this study informed the Mayor’s initiative calling for a 3,000-bus fleet expansion in October 2020. AA Institutional and Policy Reforms in the Provision of Public Transport Service (AA City Administation Transport Bureau, 2020) recognized that the informal public transport sector remains as one of the core components of the public transport system in AA and laid out rationales to improve the sector through upgrading service and fleet, improving labor conditions and integrating into the public transport system. It proposed three types of approaches for the transformation of informal public transport systems: (i) displacement of informal modes of transportation with new formal mass transit modes such as light rail transit (LRT) and bus rapid transit (BRT); (ii) gradual hybrid transformation on a corridor-by-corridor basis to mass transit options, requiring the formalization of operators through the creation of operating companies; and (iii) reorganizing informal modes through upgrading the informal fleet and introducing regulations for operations and business structure. The City’s Transport Bureau is currently evaluating the proposed scenarios to formulate an actionable implementation plan. Relevant Global Experience in Urban Transport This section documents the relevant experience and measures undertaken globally that have been demonstrated as beneficial and effective not only for improving urban transport but also for air quality management from the transport sector. Public Transport reduces travel by private vehicles, resulting in fewer vehicle miles of travel and reduced emissions. An analysis done by the American Public Transport Association estimated that in the US, the existing public transport reduces CO2 emissions by 37 million metric tons annually and saves an equivalent of 4.2 billion gallons of gasoline annually (or 11 million gallons of gasoline per day). A single person, commuting alone by car, who switches a 20-mile round trip commute to existing public transportation, can reduce their annual CO2 emissions by 4,800 pounds per year.6 Non-Motorized Transport (NMT) generally refers to walking and bicycling. NMT presents multiple benefits: it is an affordable transportation mode, shifts travel behaviors from driving, and is the greenest 6 www.apta.com 12 mode. Non-motorized transport does not emit greenhouse gas emissions, nor local air pollutants. Every increase in NMT therefore leads to a direct decrease in emissions. Transportation Demand Management (TDM) refers to applications for transport congestion relief and vehicle emission mitigation, typically through reducing vehicle trips and efforts to increase multi- modalism in transportation systems. In a way, TDM strategies are less about suppressing vehicle ownership; instead, the focus is on shifting user behaviors from single-occupancy-vehicle (SOV) use to cost-effective and greener modes, i.e., public transport and NMT, and reduce excessive congestion and emission. Vehicles stuck in congestion produce considerably more local pollution and carbon dioxide per mile than free-flowing traffic. Transit Oriented Development (TOD) refers to a mix of commercial, residential, office and other uses centered around or located near a public transport station. Dense, walkable, mixed-use development near transit attracts people to travel via NMT and mass transit and reduces vehicle use. Other benefits include capturing land value for transport financing and creating vibrant communities. Potential Mitigation Measures Upon the review of government studies and global experience in urban transport that contributes to air quality management, the study identifies and formulates potential mitigation options. These options also align with the overarching urban transport policy framework - Enable, Avoid, Shift, and Improve – recommended by the World Bank’s Sub-Saharan Africa Transport Policy Program (SSATP)7: • “Enable� refers to establishing efficient governance, regulations, and integrated development, • “Avoid� refers to improving the efficiency of the transport system by reducing vehicle trips and reducing emissions, • “Shift� refers to shifting from high emitting transport modes and vehicles and promoting low emitting modes and vehicles, and • “Improve� refers to reducing vehicle emissions per unit of output, improving fuel quality and related aspects. From the above reviews, nine potential mitigation options are thus identified for further analysis. These can be further categorized into three groups: (i) standards, (ii) vehicle measures, (iii) public transport. Under each group, there are varied, inter-connected measures. See Table 1 below. Table 1: Comparison of Vehicle Emission Mitigation Options Category Option Proposed Options with Abbreviated Name Group No. 1 Low-sulfur fuels Vehicle emission standards for newly registered Fuel and vehicle emission 2 vehicles standards 3 Maximum emission levels for in-use vehicles (I/M) 4 Fuel economy or CO2 emission standards 5 Vehicle retrofits with emission control equipment Maximum vehicle age for imports and in-use 6 vehicles Vehicle measures Ban on import and new registration of light diesel 7 vehicles Promote low-carbon vehicles (electric and hybrid 8 vehicles) Public transport measures 9 Improve public transport/NMT/TDM 7 https://www.ssatp.org/topics/urban-mobility. 13 All options except for vehicle retrofits with emission control equipment and restricting the sale of diesel vehicles have also been identified in previous government plans, strategies, and study reports. The two new options have been added as various other countries have implemented them successfully and with potential applicability for Ethiopia. Various Ethiopian reports also included biofuels. Biofuels themselves will not have a major impact on air quality as their use doesn’t impact vehicle emission standards. Their impact on GHG emissions depends on the type of biofuel used and requires a life-cycle assessment including direct and indirect impacts on land-use change. This assessment has not been conducted in the present report and would require a separate in-depth analysis. 14 4. Evaluation Criteria for Potential Mitigation Options As the scope of this report is on transport air pollution control, the study aims to assess and provide a deeper understanding of the potential mitigation measures identified in the previous chapter. This chapter introduces the evaluation criteria. The assessment of mitigation options conducted in the study applies the following criteria: efficacy, efficiency, technical feasibility and implementation complexity, as detailed below. Based on the applications of these criteria, a ranking of mitigation options is made in terms of priority and feasibility. • Potential impact on local air quality and pollutants. This relates to the efficacy and the environmental impact of the measures. • Potential GHG impact. This also relates to the efficacy and the environmental impact of the measures. • Economic cost-benefit. This relates to the efficiency, financial sustainability and social impact of the measures. • Complexity of implementation. This relates to the technical feasibility and the implementation capacity of the measures. Magnitude of impact and rapidness of impact are then applied to identify short-, mid- and long- term measures. The impacts are classified as short term (within 1-2 years); medium-term (within 3-5 years) and long-term (significant impact more than 5 years after implementation). The economic cost of emissions is calculated by assigning a monetary cost to emissions of PM2.5, NOx, and SO2. The economic costs of air pollutants for Ethiopia are taken from a publication of International Monetary Fund (IMF, 2014). All values are converted to 2019 USD by updating the GDP per capita of Ethiopia (PPP approach) based on data from the World Bank. The costs of pollution calculated by the IMF are based on local levels of pollution at the ground level and the impact of this type of pollution on health and costs in Ethiopia. These impacts are based on a population’s exposure to contamination, and pollutants’ effects on mortality risks using the World Health Organization's dose response functions to concentration. The greater risk of mortality or more precisely, the value of premature death, is valued economically on the basis of stated preference studies performed by the OECD. The following costs are used: US$ 4,014 per ton of PM2.5 emitted, US$132 per ton of SO2, and US$28 per ton of NOx. The global warming externality cost is expressed through the social cost of carbon (SCC). SCC is an estimate of the economic damages associated with an increase in CO2 emissions. Valuing the economic damage of CO2 emissions is complex and very much dependent on discount rates. ADB reports a unit value of US$ 36 per ton of CO2e in 2016 prices for 2016 emissions, increasing by 2% annually in real terms to allow for the potential of increasing marginal damage from global warming over time (ADB, 2017).8 Updating the values to 2019 real US$ and including the annual increase results in an SCC of around US$40 per ton CO2e for 2019. The measure of increasing fossil fuel prices has not been included. Ethiopia has just removed its annual fuel subsidy of $800 million.9 While higher fuel prices do favor fuel efficient technologies and promote public transport, the actual short and long-term impact of such measures is debated with widely differing values of fuel price elasticity. 8 Based on a review of empirical estimates of the global social cost of carbon reported by the IPCC. 9 thenationalnews.com, July 8, 2021: Ethiopia ends fuel subsidy and moves to stabilize food prices. 15 5. Low-Sulfur Fuels All fuel in Ethiopia is imported. Since 2018, Ethiopia has shifted to importing 500ppm sulfur diesel and 10ppm sulfur gasoline. These fuels allow for operation of Euro 3/III vehicles. Ethiopia currently imports 4.2 MMT of fuels, a figure that is increasing by 10% each year. Among this, 2.5 MMT are diesel fuel, 0.6 MMT petroleum, and the rest is aviation fuel and light fuel oil for industrial use. All types of fuel are imported primarily from Kuwait (65%). Purchase contracts allow for a change of sulfur levels in the short term. The Ethiopian government currently subsidizes fuels by 15%. There is an interest from the government to further reduce the fuel sulfur content to 50 ppm. AAEPA noted that the high sulfur content of the tailpipe measurement directly correlates with the high sulfur level in gasoline sold in the Ethiopian market. The additional cost associated with shifting to low-sulfur fuel is estimated to be 4-5 billion Ethiopian Birr a year, however, there are concerns about affordability and equity. Meanwhile, the Kuwait refinery indicated they may lower sulfur level at a short notice. No evaluation has been conducted to date. Policy Description Lead and SO2 emissions are related to fossil fuel usage by vehicles and are controlled through the usage of unleaded gasoline and through reducing sulfur levels in fuels. Other air pollutants are regulated through exhaust emission standards of vehicles. However, compliance with emission standards is dependent on availability of the appropriate fuel quality. Cleaner fuels are key to reducing transport emissions and achieving clean air. The following figure shows the sequencing of steps for establishing cleaner fuel use. Figure 6: Steps towards Cleaner Fuels and more Stringent Vehicle Emission Standards Clean fuels are a prerequisite for cleaner vehicles. Vehicle emission standards can technically only be as stringent as the fuel standard, as high sulfur levels will damage the pollution control devices of vehicles. Vehicle emission standards are thus tied to fuel standards of the same numeration – with the exception of Euro 5 fuel, which is used for Euro 5 and 6 vehicle emission standards. Introducing tighter vehicle emission standards without adequate fuel is a waste of resources and will not reduce pollution. The policy sequencing is thus clear: low-sulfur fuels first, and then more stringent vehicle emission standards (see table below). While the second step cannot be made prior to the first one, low-sulfur 16 fuels alone will also not resolve the problem, i.e., the benefits of low-sulfur fuel are limited if no stringent vehicle emission standards are enforced. Table 2: Relationship between Fuel Quality and Emission Standards (Euro Standards) Vehicle Emission Corresponding Fuel Specification Sulfur Limit of Fuel in ppm Standard Euro 1/ Euro I --- --- Euro 2/ Euro II Euro 2 500 for diesel; gasoline not specified Euro 3/ Euro III Euro 3 350 for diesel and 150 for gasoline Euro 4/ Euro IV Euro 4 50 for diesel and gasoline Euro 5/ Euro V Euro 5 10-15 for diesel and gasoline Euro 6/ Euro VI Euro 5 10-15 for diesel and gasoline To achieve clean air, it is imperative to get sulfur out of fuels. Sulfur is a pollutant directly, but more importantly, sulfur prevents the adoption of major pollution control technologies. Again, advanced emission control technologies are required to reduce PM, NOx and hydrocarbon emissions. Low-sulfur fuels (<50 ppm) allow for the usage of diesel particle filters with approximatively 50% control efficiency, as well as selective catalytic reduction to control around 80% of NOx emissions. Near-zero sulfur fuels (<10 ppm) allow for the use of NOx absorbers, and thereby more fuel-efficient engine designs and control of around 90% of NOx emissions in gasoline and diesel vehicles. In addition, particulate filters achieve their maximum efficiency with near-zero sulfur fuels.10 Advanced particulate control technologies such as diesel particulate filters are also very effective at reducing black carbon emission, an important added co-benefit. The dominant adverse environmental result of desulfurization is that removing sulfur from fuel results in slightly increased upstream CO2 emissions at refineries because hydrodesulfurization involves the release of relatively small amounts of CO2 and consumes additional energy. The impact, however, is lower than the GHG reduction from the usage of new vehicle technologies and reduced BC. Local standards for fuels or vehicles are not considered as practical and economical as vehicles do not only circulate locally but nationally and people could tank their cars outside the city. If low-sulfur fuels would not be sold at a lower price than high sulfur fuels, then usage of low-sulfur fuels would be limited and misfuelling would occur. Providing low-sulfur fuels which have a higher cost at a lower selling price require relative subsidies of low-sulfur fuels which again can result in fuel alteration at filling stations. If low-sulfur fuels are not available outside certain areas, vehicles with more advanced emission standards will not be able to tank adequate fuel outside the city, thereby gradually destroying their emission control equipment. Policy Impact The direct environmental benefit of low-sulfur fuels is the reduction of SO2 emissions. Lowering the sulfur content of fuels will make existing gasoline vehicles run cleaner by slightly decreasing emissions of CO, HC, and NOx. Sulfur reduces the conversion efficiency of gasoline vehicle catalytic converters for CO, HC and NOx. Reduction levels, however, highly depend on driving conditions and vehicle technologies – with larger reductions at high speed and with advanced vehicle technologies. In diesel vehicles, reducing the sulfur contents of fuel reduces sulphate PM emissions. Sulfur directly increases the production of PM2.5. With a diesel sulfur content of 500 ppm, sulphates make up around 15% of diesel PM2.5 emissions (CCAT, 2016). In the US, for example, a PM reduction of 14% for heavy-duty trucks was reported after decreasing sulfur content in diesel from 400 to 50 ppm. In Europe, studies 10 https://walshcarlines.com/pdf/Costs%20and%20Benefits%20of%20Low%20Sulfur%20Fuels.pdf 17 showed a near-linear relationship between particulates and diesel sulfur level. For each 100ppm reduction in sulfur levels, PM decreased 0.16% in light duty vehicles and 0.87% for HDVs. A reduction from 500 to 50 ppm sulfur in diesel would therefore result in a PM reduction of around 4% for HDVs (ADB, 2003). The UK Transport Research Laboratory (TRL) estimated that a reduction of diesel sulfur content from 50 to 10 ppm would reduce a maximum of 10% of PM emissions from HDVs with Euro III engines (TRL, 2014). The carcinogenic and toxic effects of PM emissions can also be significantly reduced, as lower sulfur content reduces the prevalence of ultrafine particles. In addition, SO2 emissions can lead to secondary particle formation, or particles that form in the ambient air. The EPA model for the USA predicts, for instance that 12% of the SO2 emitted in urban areas is converted in the atmosphere to sulphate PM (Blumberg, et al. 2003). Even with existing vehicle stocks, introducing low-sulfur fuels has a clear positive impact on pollutants, primarily on primary and secondary PM concentrations in urban areas. Fuel sulfur reduction alone delivers significant health benefits. The full benefits of cleaner fuels are realized, however, when low-sulfur fuels are combined with appropriate vehicle emission standards. The measures together create a far larger impact: for example, Euro VI trucks emit 95% less PM than Euro II units, whilst just changing the sulfur contents of diesel fuel will “only� result in a 4-14% reduction from Euro II Heavy Duty Vehicles. In 2020, Ethiopia imported 2.5 MMT of diesel. The following table shows the calculated sulfur and PM2.5 reductions for Ethiopia based on reducing the sulfur level of diesel from its current level (500ppm) to lower sulfur diesel. This data indicates that SO2 emissions from transportation can be reduced by 90% with 50ppm fuel and by 98% with 10ppm fuel. Table 3: Environmental Impact of Reducing Sulfur Levels in Fuels (year 2020) From Euro 3 to Euro 4 fuel From Euro 3 to Euro 5 fuel Impact (500 to 50ppm sulfur) (500ppm to 10ppm sulfur) SO2 reduction in tons 2,247 2,447 PM2.5 reduction in tons 251 629 Source: Authors The GHG impact depends on the crude oil source and the refinery efficiency. PM2.5 reductions result through BC to a reduction of around 150,000 tCO2e moving to 50ppm sulfur fuel and 350,000 tCO2e moving to 10ppm sulfur fuel. However, upstream additional energy usage of refineries to produce low-sulfur fuels will offset these GHG benefits at least partially. Economic Cost-Benefit The economic cost of reducing the sulfur content of fuels to 50ppm is estimated at 0.4 cents USD per liter of diesel, which is in line with the estimate of EPSE. Further reduction to 10ppm is estimated to cost another 0.4 cents per liter of diesel. It can therefore be expected that, including distributor mark- up, fuel costs at the pump will increase by 1-2 cents per liter with ultra-low-sulfur fuels. The following table shows the estimated incremental cost and benefit of the measure. Table 4: Cost-Benefit (Direct) of Low-Sulfur Diesel (2020) Parameter Euro 3 to Euro 4 fuel Euro 3 to Euro 5 fuel (10 ppm) (50ppm) Incremental diesel fuel cost 12.8 MUSD 23.7 MUSD Emission reduction benefit 1.3 MUSD 2.8 MUSD Source: Authors. The cost-benefit just relying on the impact of reduced emissions due to fuel quality alone is negative; the measure only makes sense if it is combined with more stringent vehicle emission standards. 18 Complexity and Risk Low-sulfur fuel requirements are simple and have no risk. According to EPSE, Ethiopia imports all fuels and supply contracts and fuel specifications can be changed at least on a twice-yearly basis. As Ethiopia has no fuel refineries, this change will not result in capital expenditure but rather in an increased fuel import bill (see above). Fuel quality control is considered an important issue to ensure that procured fuels comply with national standards and have not been altered either at the refinery, during transport, or at pump stations. Random controls should be performed of import lots as well as at pump stations. This will also ensure that fuels are not blended, e.g., with kerosene. Conclusions The measure is simple and has an immediate direct, albeit limited, impact. It should be introduced in the short term and is a prerequisite for improvements in vehicle emission standards, which are in turn related to a large number of proposed mitigation measures. Combined with tighter vehicle emission standards, low-sulfur fuel requirements are considered a priority measure. Ethiopia recently removed its annual fuel subsidy of $800 million which will lead to a moderate increase of fuel prices.11 Higher fuel price favors fuel efficient technologies and promotes public transport. With regard to the geographic coverage of this measure, this study recommends it be implemented nationwide, not limiting to AA. Local standards for fuels or vehicles are not practical and economical as vehicles do not only circulate locally but nationally. 11 thenationalnews.com, July 8, 2021: Ethiopia ends fuel subsidy and moves to stabilize food prices. 19 6. Emission Standards for New Vehicles The current Ethiopia vehicle emission standards are placed within the standards for industrial pollution control and provide only two parameters – smoke and carbon monoxide (see Figure 9). The standards do not make any distinctions based on vehicle categories and fuel type, and are not enforced at the moment (UNDP, 2018). Additionally, there are no minimum thresholds for PM2.5 and GHG emissions. The 2018 UNDP report urged Addis Ababa to develop specific vehicle exhaust emission standards and regulation. Currently, Addis Ababa is working toward the development of emission standards for in- use vehicles, though the timeline is unclear at this stage. Figure 7: Ethiopia Vehicle Exhaust Emission Standards Parameter Maximum permissible limit Measuring method Smoke 40% or 2 on the Ringlemann Scale To be compared with Ringlemann Chart during engine acceleration mode at a distance of 6 meters or more Carbon Monoxide Emission Standards Under idling conditions: Non dispersive New Vehicles Used Vehicles infrared detection through gas analyzer. 4.5% 6% Source: The Provisional Standards for Industrial Pollution Control, 2003 Policy Description Vehicle emission standards are for vehicles newly imported to the market to ensure that it complies with a given emission level when built (originally manufactured). Such standards are expressed in g/km or g/kWh. They ensure a vehicle’s certain emission level with caveats for durability of emission control equipment. At present, Ethiopia does not produce vehicle engines nor vehicle emission systems. Vehicle emission standards are designed as “type approval� tests for new vehicles, meaning that the testing is done only on one or a sample of identical vehicles for which the manufacturer receives a type of approval certificate covering all vehicles produced of that model. As discussed above, Ethiopia could potentially enforce the emission standard Euro 3/III by importing fuels that are already Euro 3 specifications. In combination with this measure, tighter vehicle emission standards reduce pollutants, though only have a marginal effect on fuel efficiency and GHG emissions. The following table shows the maximum permitted emission levels for Euro each emission standard. Table 5: Euro 2 to 6 Standards for Passenger Cars (g/km) Vehicle Category CO HC HC+NOx NOx PM Gasoline cars Euro 2 2.2 --- 0.5 --- --- Euro 3 2.3 0.2 --- 0.15 --- Euro 4 1 0.1 --- 0.08 --- Euro 6 1 0.1 --- 0.06 0.005* Diesel cars Euro 2 1.0 --- 0.7 --- 0.08 Euro 3 0.64 --- 0.56 0.5 0.05 Euro 4 0.5 --- 0.3 0.25 0.025 Euro 6 0.5 --- 0.17 0.08 0.005* * Particle Number (PN) per km (6.0*10^11) applicable to diesel engines and gasoline direct injection engines. Source: ICCT, 2013, Appendix B; Euro 5 is not included as this standard is overjumped by many countries due to its very limited impact; Euro 6 vehicles require Euro 5 fuels 20 Table 6: Euro II to VI Standards for HDVs and Diesel Engines (g/kWh) Vehicle Category CO HC NOx PM Euro II 4.0 1.1 7.0 0.1512 Euro III 2.1 0.66 5.0 0.1 Euro IV 1.5 0.46 3.5 0.02 Euro VI 1.5 0.13 0.4 0.01 Source: ICCT, 2013, Appendix B; Euro V is not included as this standard is overjumped by many countries due to its very limited impact; Euro VI vehicles require Euro 5 fuels By moving from Euro 2/II (the current average emission standard of vehicles imported to Ethiopia) to Euro 4/IV, emissions can be reduced by 50% on average for NOx and by 70% for PM2.5. Moving from Euro 2/II to Euro 6/VI, the reductions are 95% in NOx and 99% in PM2.5. Policy Impact The impact of the measure is not immediate, as the regulation would only apply to newly registered vehicles (be they second-hand or brand-new vehicles). Existing vehicles would continue to operate, so the impact of the measure depends on vehicle growth and replacement rates. The standards should be applied with equal thresholds to all newly imported vehicles, including used as well as new units. The most appropriate moments to apply the standard are when the vehicle is introduced to the country (or assembled in the country) and the first time it is registered. In a simplified manner, the long-term impact (once the large majority of currently operating vehicles are replaced) of a vehicle emissions standard is the difference between the current average emission standards (estimated at Euro 2/II) and Euro 4/IV or 6/VI. Table 7: Impact of Vehicle Emission Standard for 2020 emissions (in tonnes) Pollutant Euro 4/IV Euro 6/VI PM2.5 reduction per annum 4,400 6,220 NOx reduction per annum 58,000 111,000 GHG impact 2,570,000 3,920,000 Source: Authors; Benefit based on switching from Euro 2/II to Euro 4/IV and from Euro 2/II to Euro 6/VI i.e., the incremental benefit of changing from Euro 4/IV to Euro 6/VI is the difference between the 2 columns e.g. for PM2.5 1,820 tonnes. Economic Cost-Benefit To evaluate the attractiveness of vehicle standards in economic terms, incremental vehicle costs are compared with the economic benefits of reduced emissions. The following table shows the estimated incremental vehicle costs to adjust to Euro 4/IV and thereafter to Euro 6/VI for diesel passenger cars and HDV. Table 8: Incremental Vehicle Cost of New Emission Standard Compliance (US$ per vehicle) Vehicle category Euro 2 to 4 Euro 2 to 6 Passenger Car 400 2,500 HDVs 1,000 6,000 Source: lowest value of ICCT, 2016a (worldwide), ICCT, 2015a (China), ICCT, 2013 (India), TNO, 2006 (EU); for annualization a lifespan of 20 years for passenger cars and 30 years for trucks is assumed. 12 As of October, 1998. 21 The following table shows the same cost-benefit calculation both with and without the additional incremental cost of low-sulfur fuels. Table 9: Cost-Benefit (Direct) of Vehicle Emission Regulations (for 2020) Unit: million US$ Parameter Euro 2 to Euro 4 Euro 4 to Euro 6 emission emission standard standard Incremental fuel cost 11.8 11.8 Incremental vehicle cost 10.9 55.2 Total cost 22.7 67.1 Fuel benefit 1.3 1.5 Emission vehicle standards 19.3 8.8 benefit GHG benefit due to reduced 103 53.9 BC13 Total benefit excl. GHG 20.6 10.3 Total benefit incl. GHG 122.3 65.5 Source: Authors. The introduction of Euro 4 fuels and emission standards in Ethiopia has costs comparable to its benefits including only local pollution costs and is highly beneficial including also the GHG benefits. The introduction of Euro 5 fuels and the Euro VI emission standard on the other hand is currently not justified from a cost-benefit perspective. Complexity and Risk Emission standards are enforced or controlled through type-approval testing. Type approval tests are complex, costly, and require high investment. Therefore, most countries without a domestic car manufacturing industry do not conduct type approval testing but only require imported vehicles have the appropriate documentation stating their conformity with established standards – e.g., through a Certificate of Conformity (COC). Switzerland, for example, does no type approval testing of vehicles with COC documentation. Ethiopia can simply establish that all vehicles imported to the country must comply with the respective Euro standard or equivalent. The regulation could thereby state that equivalent regulations can be applied from the PR China, India, the US, or Japan.14 Importers of vehicles would need to provide the appropriate documentation showing that the vehicle complies with the EU or equivalent standard. Standards between countries are not exactly equivalent but very similar – in terms of issues like emissions levels, OBD requirements or deterioration factors for components – and can therefore be treated as “in principle equivalent.� By taking this approach, the complexity and risk of emissions standards are marginal. With this approach, for the newly imported vehicles, the control procedure applied is a documentary review. The measure entails marginal risks due to document forging which do not go beyond the risks for any other commercial transaction. For in-use vehicles, Addis Ababa is currently working on the maximum emission levels for IM, though the timeline is unclear at this stage. When and if in effect, it needs to be supported by an effective emission inspection system that is yet to be established in Ethiopia. Establishing such a system would require a complex set of policy and infrastructure interventions, including regulation and supervision, capacity development, system integration and data sharing, and enforcement. 13 At US$40 of social cost per tonne of carbon. 14 The EU standards serve also as base, amongst others, for the Chinese and the Indian standards. 22 Conclusions The measure is simple. Its impact has a medium- to long-term horizon, as only newly imported vehicles will be subject to the standard and vehicle replacement rates are low. In the meantime, new fuels must be imported (selling multiple standards of fuels is not recommended, since people can choose to purchase the more polluting and cheaper fuel even if their vehicle requires a low-sulfur fuel). The recommendation is to introduce Euro 4 fuel (50ppm sulfur diesel) and establish the Euro 4/IV vehicle emission standard for all newly registered vehicles in Ethiopia, including 2nd hand as well as brand new vehicles. The repair and maintenance of Euro 4/IV vehicles are no big step compared to the Euro 2/3 fleet already in Ethiopia and a secondary spare parts market for Euro 4 is available worldwide. The introduction of ultra-low-sulfur fuels and the emission standard Euro 6/VI is currently not recommended, as the overall cost-benefit for ultra-low-sulfur fuel and the emission regulation Euro 6/VI is clearly negative concerning local pollution costs. Introducing tighter vehicle emissions could only be justified if it includes the social cost of carbon and correspondingly lower BC and GHG emissions. Ethiopia could already introduce the Euro 3/III emission standard without changing fuels, as it already imports 500ppm sulfur diesel. However, the Euro III standard has in practice shown to have only marginal benefits compared to the Euro II standard (the same holds true comparing the Euro IV with the Euro V standard). The figure below shows, for example, actual Tier 3 emissions of Euro II urban standard buses versus Euro III and Euro IV equivalents. It indicates only marginal improvement between Euro II and III and a large change from Euro II to IV. In actual emissions, switching from Euro II to Euro III means a 4% reduction of NOx and no change in terms of PM2.5, while switching from Euro II to IV reduces NOx emissions by 46% and PM2.5 emissions by 78%. Introducing the Euro III emission standard is therefore not recommended. Figure 8: Actual Emissions of Standard Urban Euro II and Euro III Buses (Indexed) Source: COPERT model (EEA, 2020), based on standard urban bus 15-18t, average speed of 15km/h, 50% load factor and 0% gradient. Euro II emissions: NOx 14.73 g/km and PM2.5 0.27 g/km 23 7. Inspection and Maintenance of Vehicles Currently, the government requires all vehicles to undergo annual roadworthiness tests which includes emission testing. The roadworthiness centers are outsourced to the private sector and all registered vehicles in Addis Ababa must realize the annual inspection. While inspection is mandatory, the current roadworthiness test focuses on safety and not on emissions: • Emission inspection results are paper print based. There is no digital system for data accessing and sharing to inform policies • There are no maximum emission levels established. Thus, while emission levels are measured and reported, they do not influence the pass/fail decision for the inspection. Figure 9: Existing Roadworthiness Test Centers Source: World Bank TRANSIP Project. Under the World Bank financed Transport Systems Improvement Project (TRANSIP), the Federal Transport Authority (FTA), in its Phase I rollout in Addis Ababa, will implement driver licensing and vehicle registration. As part of this implementation, FTA will integrate the existing inspection centers, which would allow FTA and Addis Ababa to establish a system and obtain the inspection data results. This Phase I in Addis Ababa is expected to rollout in 2022 and operationalize by December 2023 based on the current schedule. A full integration of emission inspection testing into the roadworthiness test is under planning including the establishment of adequate maximum emission levels. Policy Description Emission control of in-use vehicles is a policy made to ensure that vehicles remain compliant (within normal degradation levels) with the original emission standards for which they were certified. They aim to ensure that maintenance is made appropriately and identify high emitters and require them to make repairs. Integrating emission testing within the overall roadworthiness test, as currently done, is recommended. Inspection/Maintenance (I/M) policies for vehicle emissions have been enforced in many countries in the past with mixed results. The core elements of more successful programs have been identified as: 24 • A comprehensive public awareness program to make people aware of benefits of implementing IM. • Roadside apprehension or remote sensing programs for vehicles which have slipped through the system. • Effective enforcement with controls to prevent corruption. • Quality assurance, covert auditing and quality control. • The car service industry has the know-how and equipment to make adequate repairs. • Frequency of controls are related to vehicle age and usage. • Ability to ensure that all vehicles participate. In many countries, emission controls are linked together with roadworthiness tests, thus increasing convenience for users, reducing inspection costs and improving acceptability. Emission inspections are carried out either by authorized private garages that also repair vehicles (e.g., originally in Switzerland or the UK) or by test-only centers (private or public). The following table lists the core inspection system types used. Table 10: Vehicle Emission Inspection Approaches Vehicle Approach Countries Advantages Disadvantages category applied (examples) Idle test for CO UK, Costa Rica, Simple, low cost, fast; Cannot measure NOx and potentially China in > 80% can partially identify emissions and HC15 of provinces, outliers & malfunction potential fault of India, Korea of catalysts; for CO, oxygen sensors; no (rural areas), reasonable correlation good correlation of Thailand, Japan, with type-approval test HC idle values with Indonesia, (not for HC); typical loaded type-approval Vietnam cost per vehicle <5 values; relatively USD; error of gross approximation commission low (i.e., of actual emission Gasoline few vehicles which are levels; errors of vehicles in fact performing well omission can be fail test)16 significant (i.e., vehicles pass test which should not pass it) Loaded test Korea (urban Good correlation with Costly; takes more (acceleration areas), Mexico, type-approval test i.e., time; requires trained simulation 20% of Chinese low error of omission staff; typical cost per mode, e.g., provinces, & commission; vehicle > 15 USD IM240) Singapore reflects emission status well Snap UK, Korea, Low cost, typically < Can result in engine acceleration India, China, 5-10 US$/vehicle; damage; unreliable if Diesel Thailand, Japan, simple and fast test not performed well vehicles Indonesia, (i.e., test results are Vietnam sensitive to test conduction); 15 In some countries only CO; some countries also include for control purposes CO 2; some countries conduct the test idle and under increased revolutions with no load (e.g. at 2,500rpm). 16 This was basically an issue in the late 1980s but has been resolved in the meantime through vehicle adaptations. 25 correlation with type- approval not very good; can be circumvented easily Loaded test with Singapore, Results are more Expensive and dynamometer or Chile17 reliable than snap difficult to perform; free-rollers acceleration can result in accidents using engine (free roller with brake engine brakes); typical cost > 50 US$ for HDVs and > 25 US$ for light vehicles Sources: author’s compilation; see also ICCT, 2015b and ICCT 2013b, CAA, 2016. The idle test as well as the snap acceleration tests are the most widely used and are useful as crude indicators for serious engine malfunctions. High smoke emissions are often caused by poor maintenance or by deliberate engine tampering to coax more power out of an engine beyond its rated capacity, resulting in over-fueling and excess smoke emissions. The hypothesis underlying the establishment of inspection systems is that: • appropriate maintenance is required to maintain an emission system, which will otherwise degrade rapidly, • a significant share of vehicles has a system malfunction, which would result in very high emissions, and • inspection systems can identify vehicles that have problems and owners will repair their vehicles or scrap them. The validity of these hypothesis is, today more than ever, questioned, if there is no effective regulation and supervision on the equipment performance and human maneuverer. Deterioration of Vehicles and Resultant Emission Increase In the time of carbureted vehicles, emission malfunction was a common and well-known problem. The fuel/air mixture would not be optimal – either by design or degradation – and a simple maintenance and adjustment could reduce emissions significantly. However, an overwhelming majority of vehicles today, including in Ethiopia, have electronic injection and control. The air/fuel mixture is thereby electronically controlled. Degradation would thus occur if systems malfunction. Therefore, it is important to know what the average degradation factor is. The COPERT model used by the EU standard uses deterioration factors which are based on laboratory tests and a very small sample of Euro 3 and 4 vehicles with limited high mileage ranges. Deterioration rates derived from more than 110,000 records collected over the past thirteen years from on-road emission remote sensing in Zürich/Switzerland, however, show that deterioration rates for gasoline vehicles are much lower than assumed so far with no evidence of high emitters (Borken-Kleefeld, et al., 2015). Degradation will probably be even less of a problem in the future as Euro 6 standards ask for longer periods of guaranteed emission performance and durability of emission control parts of vehicles, thus reducing degradation and reducing the share of high emitters. The deterioration of the emission control systems takes place gradually over an observed lifetime of up to twenty years. No significantly higher frequency or elevated levels of high emission events was found over time, thus ruling out an increased share of vehicles with dysfunctional emission control equipment. As technology advances, the potential impact of inspection programs could be somewhat limited and continuously decrease with new vehicle 17 Commercial vehicles; only Santiago; partial load with dynamometer. 26 technologies. The durability of emission controls has much improved since Euro 1 technologies. Deterioration is still an issue; however, simple idle tests do not prove effective for a better tuning of the emission control system. Given that vehicles with broken emission controls seem to be very rare, idle tests might also not be necessary for finding those cars. Well-managed on-board diagnostics (OBD) perform equally well. Inspection Systems and Identification of High Emitters Errors of omission should be as infrequent as possible to avoid high emitting vehicles passing emissions tests. Errors of omission depend, however, not only on test procedure but also on test execution and the potential for cheating. The following points need to be observed. • Idle gasoline tests have a relatively high error of omission level due to the test itself. • Snap-on diesel tests have a regular level of errors of omission due to the test itself but a high level of errors of omission due to incorrect test application. This is a very common problem and can result from lack of training and know-how or be intentional. • Inspection systems are prone to cheating. People whose vehicles would fail have a motivation to cheat, especially those in need of a major repair and therefore investment. Cheating practices observed in many countries include intentional wrong measurement procedures (especially in diesel vehicles), adjustment of vehicles used for control purposes in tests (especially diesel vehicles), registration of false data (from emission equipment or use of different test or control vehicles), fake pass certificates, use of fuel additives (especially for diesel vehicles), etc. Some of the fraud possibilities can be reduced through more intense controls of inspection centers – e.g., through direct data transmission, digital recording, web-based real-time transmission of inspections, usage of covert auditing, etc. However, all of these controls are expensive, and can be circumvented again as experience in places like Mexico City has shown.18 Other aspects cannot be controlled easily, such as preparing a vehicle only for inspection purposes by, for instance, adjusting diesel engines with a lower fuel intake-ratio to reduce smoke and “re- adjusting� the same engine again after inspection to allow for more power. Appropriate controls require on-road measurements or remote sensing. The former are very costly, require trained staff, equipment and adequate frequency. Virtually no country has implemented this on a wide scale. Costa Rica practiced these controls quite intensively for some years in the nineties with support from a Swiss clean air project, but results were mixed and the program was downscaled. Remote sensing is used in more countries, but basically in a monitoring context and not to identify and track high emitters. Usefulness of Emission Inspections In summary, inspection systems are useful in theory. In practice their impact seems to be limited, whilst they absorb significant resources. For example, routine idle emission tests in Switzerland have not resulted in measurable emission reductions of inspected vehicles (Borken-Kleefeld, et al., 2015). To check on the potential influence of emission controls, the on-road emission rates from cars which had not been inspected were compared with inspected cars. If inspection has a positive influence on emissions, then you would expect that cars “with inspection� have lower emissions than cars of the same age “without inspection.� The figure below compares the on-road unit emissions from Euro 3 and Euro 4 gasoline cars with and without technical inspection, with the result that there is no statistically discernible positive influence of the technical inspection on CO or NOx emissions. Emission testing therefore did not improve emission tuning. As there is not a significant share of vehicles with broken 18 In Mexico City digital camera software was hacked to, for example, transmit images of different cars than those inspected. 27 emission control systems, which would stand out as high emitters, the simple idle test during routine inspections does not result in a measurable emission reduction. Figure 10: Impact of Emission Control Tests on Actual Vehicle Emissions for Gasoline Cars Source: Borken-Kleefeld, 2015, figure 5; w = with emission inspection; no = without emission inspection The international trend concerning I/M is clearly a reduction of emission inspections based on testing and increased reliance on OBD systems that register the emission situation of a vehicle during operation and report emission system malfunction. OBD systems also register the date of any malfunction and display a sign on the vehicle dashboard. Car owners can be fined for not repairing their vehicles based on the date the warning appeared. This approach can be combined with a roadworthiness test. Since 2013, Switzerland and California have eliminated regular emission inspection of vehicles and have fully gone to OBD checks. As a temporary measure, from a technical viewpoint, measurements could be conducted of vehicles without OBD equipment. Policy Impact To determine the potential impact of an I/M policy, assumptions need to be made concerning the actual prevalence of high emitting vehicles, the probability that they will be repaired, and the level of emission reduction that can be achieved. For an economic assessment, incremental costs of improved inspection (accruing to all tested vehicles), as well as the repair costs for vehicles, need to be considered. In the assessment herein, the time invested in vehicle inspection and repair and the eventual earnings loss (in case of taxis or HDVs) of vehicle owners has not been taken into consideration. Complexity and Risk While I/M measures are relatively simple, the clients of the inspection center can try to circumvent the system and put pressure on the inspectors not to perform measurements correctly. Enforcement is critical with I/M systems. Current vehicle emission regulations are not enforced in Ethiopia (Addis Ababa Environmental Protection and Green Development Commission, 2021). The experience with government oversight at privately run centers is in general better than with government-owned facilities. Also, test-only centers have proven to be a more effective approach than allowing testing centers to also realize maintenance and repairs.19 Covert audits and regular online checks are important to ensure that diesel vehicles are adequately tested. Without adequate testing, no 19 However, this approach also comes with the drawback that maintenance and repair shops need to also have testing equipment. 28 impact will occur. The higher test fail rate of vehicles will not be very popular and must be well explained to the public. Also, the system requires that mechanical workshops can repair the vehicles adequately to reduce their emissions. This might require some effort to train mechanical workshops. Also, it is clear that even a good inspection system will not prevent vehicles that visibly pollute from circulating, as many vehicles, especially diesel units, will only be adjusted for testing and will be thereafter re-adjusted to gain power. Therefore, on-road spot controls will additionally be required to ensure that emission testing is done properly and that vehicle owners maintain and repair their vehicles. Integrating vehicle emission testing in roadworthiness inspection, as is currently being done in Ethiopia, is economically and technically considered the most appropriate approach. Conclusions The impact of an I/M system occurs in the short term as it relates to in-use vehicles. The appropriate setting-up of a system requires considerable time, effort, and a complex set of interventions covering regulation, quality control, data sharing, and enforcement. Without ensuring the integrity of an inspection system, the practical impact would be limited due to relatively low degradation of vehicles over time and the many ways to circumvent the systems to not make necessary repairs. Ethiopia has established roadworthiness centers for safety reasons, is already monitoring the vehicle emissions and is in the process of establishing maximum in-use vehicle emission levels. The monitored data can thereby serve to establish the maximum pass levels for emissions. This shall then be integrated into the general pass/fail decision of the roadworthiness test. This is an appropriate approach in line with what is done in many countries and can be supported in terms of establishing adequate in-use vehicle emission levels, standards and procedures on testing as well as the design and establishment of a quality control and enforcement system including on-road controls. Apart from establishing appropriate in-use vehicle emission levels, designing and implementing a quality control and enforcement system will ensure that emission controls are performed adequately and result in high- level emitters being identified correctly to ensure that corrective actions are being taken by the vehicle owner. This includes the establishment of randomized on-road spot checks by an independent 3rd party. As the integration of I/M into vehicle inspection is a priority to the government, these measures are key to ensuring impact and should be prioritized. 29 8. Fuel Efficiency Standards At present, there are no vehicle fuel efficiency standards in Ethiopia. AAEPA did a preliminary analysis on the fuel economy (km/liter) of the vehicles; and the Ethiopian Standard Agency (ESA) recently initiated the policy development related to road vehicles fuel enhancements, emission reduction devices, and performance requirements. Policy Description Most OECD countries and a few non-OECD ones (notably China) have introduced standards to promote fuel efficiency and/or CO2 emission reductions of passenger cars and light duty vehicles.20 Some countries, such as USA, Japan and China have also introduced them for trucks. Some countries regulate fuel efficiency, whilst the majority implement CO2 standards related to tank- to-wheel (TTW, or in-use emissions) of vehicles. CO2 standards allow comparison of the GHG effect of various fuels, e.g., natural gas, diesel, or gasoline-powered vehicles. Many European countries, except for Switzerland, have followed a strategy to promote diesel vehicles, as they expected them to reduce CO2 emissions. However, they did not consider that this comes at the cost of increasing NOx and PM emissions and thereby also BC which is a strong climate agent. Standards typically require a minimum level of fuel efficiency as an average across a class of vehicles (e.g., corporate standards like those of the EU, or fleet averages such as Australia’s). Most standards are based on vehicle attributes, with the fuel economy adjusted by either vehicle weight (e.g., Europe, Japan, China, South Korea) or vehicle size (e.g., in the US). A major flaw of weight-based systems is that there is no incentive for manufacturers to reduce vehicle mass since a higher mass or larger size is rewarded with a more lenient standard. However, the US system of using size also has its flaws as vehicle manufacturers tend to increase vehicle size beyond what is required to get more lenient standards. The figure below shows past and proposed car GHG emission standards of different countries. Figure 11: Past and Proposed Passenger Car GHG Emissions Standards in Various Countries Source: ICCT, 2013b 20 See e.g., IEA, 2012. 30 Impact The overall impact of fuel efficiency standards is surely positive. However, it also has its downsides. The policy controls GHG emissions per unit of distance and not total GHG emissions of vehicles. If small cars are used less than large cars, then the impact of implementing the policy decreases, as no weighting of performance standards based on car usage is made. Importers of high-powered and high- CO2 cars get an incentive to concurrently subsidize the import of small, cheap low-emission cars to avoid penalties. Depending on income elasticities of different groups of car buyers (e.g. wealthy car buyers with low price elasticity for large cars versus poorer car buyers with high price sensitivity for cheaper cars) this can result in additional cars imported to a country due to the policy.21 The intention of the policy is to push manufacturers to produce more efficient cars. On the other hand, car buyers generally prefer fuel-efficient vehicles. As a minor vehicle importer, Ethiopia will not be able to influence manufacturers. Ethiopia putting its own domestic CO2 standard in place has serious challenges, including: • Establishing the metric: The choice is between fuel/energy usage and CO2 emissions. If CO2 emissions are picked, shall the trade-off with potentially higher PM and BC be considered or not? If yes, how? And if not, then lower GHG emissions might be traded off for higher air pollution levels. • Establishing the methodology: Options include absolute emissions or emissions relative to size or weight. Different countries use different adjustment formulae. These are not based on physical laws and prone to lengthy debate. • Target level: The target level per average vehicle of the chosen metric needs to be established. For CO2 emissions, this requires an understanding of the current CO2 emissions of vehicles circulating in Ethiopia and expected BAU emissions of these vehicles. • Institutional structure: Ethiopia has no vehicle manufacturers. Importers would need to be the responsible compliance party which means that they need to be few and well organized. A specific problem is thereby the individual import of vehicles. • Penalty: The level of penalties to be applied needs to be fixed and to whom and when penalties are levied. The penalty would be for non-compliance – i.e., for each gCO2/km surpassing the target for the average of imported vehicles. The penalty must be high enough to create the incentive to import lower emitting cars. Given the small domestic market for vehicles in Ethiopia, its high heterogeneity (e.g., a considerable fraction of small and low-powered urban vehicles whilst for inter-urban routes larger SUVs and pick- ups are preferred; large share of HDVs), the high complexity of establishing and implementing a CO2- based performance standard as well as its uncertain impact, promoting low-GHG efficiency vehicles based on technology standards or proxies is recommended. Useful technology proxies are hybrid, plug- in hybrid and electric vehicles. In all CO2 performance schemes adopted worldwide, these technologies are clearly dominant among low-CO2 vehicles. Therefore, using these technologies as simple proxies will ensure lower average CO2 emissions per car while avoiding complex regulatory systems. Through these proxies, all vehicle categories could also be targeted and not only passenger cars. This is further discussed in the chapter on electric vehicles. 21 Despite the attempt to disincentivize their purchase, the same amount of large “gas-guzzlers� are imported by wealthy customers as in baseline scenarios, as these customers are not price elastic; to avoid penalties importers also bring in subsidized small cars which are picked up by less wealthy customers. The total CO 2 emitted might thus be more than in the baseline as more cars are on the street. This whilst at the same time the average CO2/km drops. 31 Complexity and Risk As mentioned in the previous chapter the complexity of fuel efficiency standards is high. The impact occurs only in the long-term, as the measure only affects newly registered vehicles. Regulations for second-hand vehicles are also difficult as these do not necessarily have the required data. Conclusions A policy based on fuel efficiency or CO2 performance standards is not recommended for Ethiopia due to its complexity in establishment and the limited potential impact. It is, however, recommended to foster low-carbon vehicles with a focus on hybrid and electric vehicles. These technologies have a proven GHG and pollutant reduction rate. 32 9. Vehicle Retrofits with Emission Control Equipment Policy Description For diesel engines, in essence two PM exhaust retrofit technologies have proven to be successful: Diesel oxidation catalysts (DOCs) and diesel particle filters (DPFs).22 DOCs can reduce PM emissions by 20-30% if used with low-sulfur fuels (less than 150ppm at a minimum, better if less than 50ppm sulfur). They cannot, however, reduce BC.23 DOCs should not be used with high-sulfur fuels as this can dramatically increase the emissions of the smallest and most damaging particles.24 Due to fuel requirements and the only fractional reduction gained, this chapter does not consider DOCs as a mitigation measure. Diesel engines cause significant fine particle emissions, resulting also in Black Carbon (BC), which again is a major source of global warming. Diesel Particle Filters (DPFs) are the technology of choice to reduce fine particle as well as BC emissions. DPFs are equipped on Euro VI and some Euro V vehicles. Various countries have also embarked, however, on programs to retrofit existing vehicles with DPFs, mainly HDVs and non-road mobile machinery (e.g., construction machinery). For example, Santiago de Chile25 has realized a retrofit of around 3,000 urban buses with DPFs, a measure also popular in other highly polluted cities. DPFs work with 50ppm sulfur diesel, albeit only at around 50% of the control efficiency, and require 10ppm sulfur diesel to work at full potential. Other important aspects which need to be considered for a retrofit program are: • Installation of DPFs can be complicated. They are not conducted by the vehicle manufacturer but by the filter manufacturer and require adjustments in the engine management. In some cases, the DPF can result in engine damage and engine fires. • DPFs can only be installed without major problems in Euro III engines onwards. • DPFs need regular professional maintenance to avoid getting clogged. In case of improper or inadequate maintenance, the engine can be harmed and the DPF will no longer work. In 20% of the buses assessed randomly in Santiago the DPF had a malfunction and did not work properly. • DPFs will cause about a 3% increase in fuel consumption. This offsets part of the GHG reduction from reduced BC emissions. DPF retrofits are done only on large HDVs, not on passenger cars and light commercial vehicles, due to equipment and installation costs. Policy Impact The maximum reduction efficiency of the DPF is estimated at 50% with 50ppm sulfur fuel and at 90% with 10ppm sulfur fuel. A malfunction rate of 20% needs to be included in emissions estimations. Malfunctions eliminate 50% of benefits, resulting in a 10% lower total PM reduction. DPF installation makes most sense in urban buses, as PM reductions make the most impact in urban areas due to population density. A retrofit of Euro III buses could be conducted in Ethiopia, as these buses have the technical specifications required. The following table shows the pollution impact per retrofitted bus. 22 Flow-through filters require significant maintenance and have resulted in frequent failures due to PM build- up. This technology is therefore not included. Also, see Kholod, 2015. 23 Blumberg, 2003; Client Earth, 2013, 24 DOCs increase the oxidation rate of SO2, leading to an increase in sulphate nanoparticle emissions. 25 See e.g., SDC, 2011, 33 Table 11: Impact per DPF-Retrofitted Euro III Bus in Ethiopia Reduction per urban bus with 50 ppm diesel With 10 ppm diesel PM2.5 per annum in kg 6 11 PM2.5 lifespan in kg 61 109 GHG impact per annum in tons (CO2e) 1.5 4.6 GHG impact lifespan in tons 15 46 Source: Authors; based on Euro III bus traveling 65,000km per annum and remaining lifespan of 10 years; PM2.5 reduction includes efficiency rates of DPF and failure rates; GHG calculation includes BC impact and additional fuel consumption. Cost-Benefit The assessment of retrofits’ economic impact needs to take equipment into consideration, including installation investment, incremental maintenance, and additional fuel costs. The total lifetime cost of the DPF is around USD 8,800 per vehicle including annual maintenance costs. Additionally, a small incremental fuel cost arises. The following table shows the cost-benefit ratio of installing DPFs. Table 12: Cost-Benefit per DPF-Retrofitted Euro III Bus in Ethiopia (2019 USD) Reduction per urban bus with 50 ppm diesel With 10 ppm diesel Economic benefits per annum 85 226 Cost equipment per annum 880 880 Incremental fuel costs per annum 313 313 Total incremental cost 1,193 1,193 Source: Authors It is clear that this measure is not cost-effective with 5 time (10ppm diesel) to 14 time higher costs (50ppm diesel) than benefits. Complexity and Risk The impact of retrofits occurs in the short-term, as it can be realized with Ethiopia’s existing vehicle fleet. However, as a prerequisite, it requires the availability of 50ppm or 10ppm sulfur diesel. Ethiopia currently has 500ppm sulfur in its diesel supply and can thus not currently apply this measure. The policy is considered complex. Multiple DPF manufacturers exist and not all produce high-quality filters. Therefore, quality assurance and certification need to be provided by an independent entity. Installation and maintenance of equipment is challenging and requires skills currently not available in Ethiopia. The government needs to ensure that vehicles equipped with DPFs maintain them adequately, otherwise the filter will not retain its original level of effectiveness. Various conditions thus need to be fulfilled to avoid the risk of the measure not resulting in a positive impact. Overall, the risk of a DPF policy is considered high. Emission standards that require DPFs generally mandate OEM (Original Equipment Manufacturer) installment, including warranty and durability tests by the manufacturer. This results in fewer problems with such equipment. Retrofits are far riskier and prone to malfunction. Conclusions In numerous European cities as well as in places such as Santiago de Chile, urban buses have been equipped with DPFs. However, the experience of other cities, including Bogota and Mexico City, with retrofitting DPFs has been negative or mixed. Whilst DPFs do have an impact on PM2.5 concentrations and can reduce them compared with a BAU scenario, the impact is not very significant since DPFs are only feasible on large HDVs. HDVs also generally circulate outside Ethiopian cities, making the health impact of DPFs less significant. The highly negative economic cost-benefit relationship, the high policy complexity, and the high risk of malfunction result in a clear recommendation to not implement this 34 policy. At 500ppm, the current sulfur level of diesel in Ethiopia is also too high to make this option technically viable. 35 10. Vehicle Age Restriction and Scrapping Programs Policy Description Vehicle age restrictions are often made for buses and taxis operating in urban areas. Replacing these vehicles has a much higher impact on reducing emissions than targeting private cars as they have a higher mileage and operate in urban conditions. Voluntary schemes to retire old vehicles include scrappage programs that give an incentive to turn in old vehicles. Scrapping programs have been favored by car manufactures as the initiatives allow them to sell more cars. It is therefore not surprising that many scrappage programs have been put forward by governments during recessions, using environmental arguments to justify them. Limiting vehicle age has following potential impacts: • Faster vehicle renovation, thus increasing the use of vehicles with new technologies and lower emissions. • Fewer vehicle deterioration problems, and problems caused by wear and tear and lack of maintenance. Older vehicles require more intense maintenance, but owners are also less likely to invest in them. This results in an increasingly poor vehicle operating state and higher emissions than designed level. However, mass monitoring of vehicles has shown that deterioration of gasoline vehicles seems to be minor, especially concerning CO and NOx.26 NOx unit emissions from gasoline cars deteriorate exponentially with vehicle mileage, doubling about every 115, 125, 180 and 220 thousand km for Euro 1 to Euro 4 technologies respectively. Euro 4 gasoline cars now seem to have consistently low NOx unit emissions over their lifetime. No deterioration of PM and NOx emissions from HDVs was found in Europe based on Dutch and German data (Rexeis et.al., 2005). Table 13: Estimated Annual Average Degradation Percentage for PM2.5 and NO2 Vehicle category Degradation factor Average annual degradation at year 10 factor after year 10 Passenger cars / taxis (gasoline) 1.85% 6% Passenger cars / taxis (diesel) 1.6% 15% HDVs 0% 0% Source: Gasoline car based on Borken-Kleefeld, 2015, table 2; diesel car based on EEA, 2016; HDV based on Rexeis, 2005 • Limiting vehicle lifetime would result in slightly fewer vehicles used, due to higher annualized vehicle cost (since investment can be spread over less useful time). However, the impact would be marginal if the vehicle age limit is not very restrictive (with restrictive defined as a maximum age of 10 years or less). • The policy would result in higher upstream emissions since useful vehicle lifetime is reduced, resulting in faster vehicle turnover and a corresponding increase in vehicle manufacturing emissions. If only the commercial lifespan is restricted this impact would be non-existent or marginal. The implicit assumption of vehicle age restrictions is that older vehicles result in higher emissions than new vehicles i.e., that there is a correlation between vehicle age and vehicle emissions. This assumption is true if we are looking at a region with the most advanced emission regulations. However, this assumption is not valid if, as is the case in Ethiopia, used as well as new vehicles arrive from different regions and do not need to comply with vehicle emission standards. In Ethiopia (World Bank, 2017) 26 Based on Borken-Kleefeld, 2015 36 new locally-assembled vehicles are Euro 0 HDVs, while second-hand vehicles from Europe are since 01/2006 Euro 4/IV, since 01/2011 Euro 5/V and since 09/2015 Euro 6/VI i.e. a 10-year old second- hand vehicle imported from Europe is Euro 5 with significantly lower emissions than many brand-new vehicles imported to the country which come with Euro 2/3 specifications.27 The difference between Euro 2/II and 4/IV is, dependent on the pollutant factor 2 to 7. The overall emissions impact of restricting vehicle age is often over-estimated, especially for private vehicles. The older the vehicle, the lower the average annual distance driven. New vehicles are driven more due to higher convenience and reliability as well as lower operating costs. A clear negative correlation between vehicle age and annual mileage driven can be observed in all countries (see example below for India; the relation is similar in other countries such as USA, Germany, UK, and Costa Rica) 28 Replacing an old vehicle with lower annual mileage with a new vehicle will result in increased vehicle usage and mileage and therefore in additional emissions. The vehicle might have lower emissions per unit of distance, but this is, at least partially, offset by a higher mileage. The result can be higher total emissions than without the policy. This is true of private vehicles, but of less concern for commercial vehicles which operate primarily in response to client demand. Figure 12: Relationship Between Vehicle Age and Annual Distance Driven in India Source: Goel R., 2015 Voluntary programs to remove old vehicles from roads include scrappage programs that give an incentive to turn in old vehicles. Scrappage programs for trucks and buses have been used in the US (e.g. the National Clean Diesel Campaign, which spent around 9,000 US$ per truck; the Carl Moyer program in California spent around US$ 28,000 per truck), Russia (2015, incentive of US$ 10,000 per large truck), China (incentive of around US$ 1,500 for a small bus or truck and US$ 3,000 for a large bus/truck),29 Mexico (incentive of up to 15% of replacement cost of a vehicle; for buses up to US$ 8,000), Chile (incentive from US$ 8-24,000 per truck) or Colombia.30 Mexico’s program (begun in 2003) had the following characteristics: 27 Concerning degradation of vehicle emissions over time see chapter 7.1 28 See US-DOT, 2011; Bundesministerium für Verkehr, Bau und Stadtentwicklung, 2010; Department for Transport, NTS 0903; Grütter, 2016 29 China has since implemented maximum age limits for buses and trucks. Urban public bus age limits are in general 8 years, and 15 years for trucks. 30 Kholod, 2015; ICCT, 2015b 37 • The scrapped vehicle needed to more than 10 years old and be in operation for at least one year prior to scrapping. • The incentive offered was the value of the old vehicle, 15% of the replacement cost, or a fixed amount of around US$ 5,000 for a small truck, US$ 8,000-12,000 for a large truck and US$ 6,000 for a standard bus. • The program was complemented with other financial options such as credits and guarantees for new vehicles including preferential interest rates. However, participation in the program was limited. In particular, small companies did not participate as they also have limited credit access and the incentive provided was not sufficient. Chile’s program (begun in 2009) has the following characteristics: • The replaced vehicle needs to be more than 20 years old and in good working condition, validated with annual safety and emission verification documents. • The incentive offered is around 1.2-2 times the resale value of the truck and around 1/3rd of the price of a new unit (US$ 8-24,000 per truck depending on size). However, as with Mexico, participation in the program is limited, particularly for small companies. Core elements for well-designed scrapping programs for trucks and buses include:31 • Replacement vehicles must be as clean as possible – e.g., Euro VI vehicles or hybrid/electric units to ensure a significant impact on emissions. • Replaced vehicles should be high-emitting ones. This would imply targeting the oldest vehicles. At the same time, it’s critical that subsidies are not provided for vehicles which are already abandoned or not in regular operation. Very old vehicles will in general only be used scarcely. As a trend, the older the vehicle the lower the mileage driven and the lower the remaining lifespan. Therefore, whilst the impact per km of replacing a very old with a new vehicle is the largest, the total impact is lower, as the old vehicle is not driven as much as a newer one. To ensure that a scrapped vehicle is still used, owners should provide proof of registration, insurance and maintenance for the last 12 months. • Bus scrapping programs could be tailored based vehicle capacity, striving to replace not only older vehicles but also to replace small units with larger one. The emission factor per passenger- km of a large bus is significantly lower than that of a medium or small bus. For example, a minibus with an average load factor has GHG emissions of around 43 gCO2 per passenger per kilometer (/pkm) whilst a standard bus emits around 25 gCO2/pkm; i.e., 40% less32. The Mexico program, for example, asks for retirement of 2 minibuses and replacement with 1 standard size bus (12m). Colombian scrapping programs implemented when introducing Bus Rapid Transit (BRT) systems required scrapping of multiple small and medium units for each new bus (e.g., 7 scrapped buses for each new unit for Transmilenio Bogota phase I). • The incentive must be sufficient to make it attractive, i.e., more than the market value of the replacement vehicle and sufficient to incentivize the owner to procure a new vehicle. However, it need not be a requirement that the purchaser of the new vehicle receiving the subsidy be the owner of the retired vehicle. In Colombia, the bus operators that participated in the scheme bought old vehicles on the market to turn them in to the scrapping program. Which incentive to be applied will depend on country circumstances. However, a mixture of grant and loan is frequently used to incentivize procurement of new vehicles. 31 See, for example, ICCT, 2015b. 32 Based on passenger capacity of 15 and 80 passengers, respectively, and 50% occupation rate; fuel consumption based on EEA, 2016 for Euro II units. 38 • Support policies might be required to nudge vehicle owners. These can be policies that restrict use of old and polluting vehicles in urban areas. Colombia successfully used such support policies in its bus scheme: new operating contracts for companies were linked with procurement of low-polluting vehicles combined with scrappage of multiple old units. The cost of new vehicles and scrapping of old ones was thereby included in the cost calculations that determine the per-km tariff paid to bus operators. Complimentary fiscal policies can also be very helpful. For instance, relating vehicle taxes to emission standards and charging considerably more for a high-emitting vehicle than for a low-emitting one, thereby making vehicle replacement financially attractive. It must be ensured that traded-in vehicles are not used anymore. Cost-effective means to avoid further engine usage includes destroying engines by running them with a sodium silicate solution in place of oil or by drilling holes into the engine block and manifold. Policy Impact For emission reduction calculations, the following assumptions are made: • The pre-Euro I emission standard is used for replaced vehicles and Euro IV for new ones. For vehicle scrapping, it is assumed that scrapped vehicles will be the country’s oldest and therefore pre-Euro technology. This also applies to the estimated fuel consumption. • Average distance driven and usage is the same for replaced and replacement vehicles. The following table shows the environmental benefits of the measure. Table 14: Environmental Impact of Replacing Pre-Euro Trucks and Buses with Euro IV units Vehicle category PM2.5 reduction kg/a NOx reduction kg/a GHG reduction t/a Urban bus 56 720 17 HDVs (16-32t) 12 206 5 Source: Authors. The environmental impact assumes as a prerequisite that 50ppm sulfur fuel is available. If not, new vehicles would be Euro III standard with much lower environmental benefits. Cost-Benefit The following table shows the cost-benefit of a potential scrapping program or age limitation of existing vehicles for urban buses and HDVs. Table 15: Cost-Benefit of Vehicle Scrapping Parameter HDV 16-32 t Urban Bus Economic benefits per annum 246 908 Annualized incremental investment cost 1,000 1,250 Source: Authors; based on remaining commercial lifespan of 10 years per vehicle. The cost-benefit relation for both vehicle segments is negative. The additional cost can be fiscally neutral or fiscally negative. If the country regulates the maximum vehicle age and offers no scrapping incentive, then the full cost is born by vehicle owners and not by the country. The fiscal impact would be minimal (slightly lower revenues from vehicle tax and fuel tax due to a smaller number of vehicles). In the case of not applying scrapping policies but just regulating the entry of new vehicles, no fiscal incentive needs to be provided. Vehicles would be slightly more expensive, which would have a negative welfare impact on citizens, but the reduced number of vehicles in operation would have a positive impact on energy usage and emissions. 39 Complexity and Risk Scrapping Policies The measure is relatively easy and straightforward to control. It does involve an authority which checks that vehicles are retired and not used anymore and are eventually scrapped. However, this can be managed through an annual registration of vehicles. The risk of the measure is essentially political. Without providing a financial incentive this will mean that car ownership becomes more expensive and the cost for freight and passenger transport might increase due to higher average annual vehicle cost. Therefore, most countries which have introduced such measures have given a financial incentive for car owners to scrap their vehicles. However, this creates a significant fiscal burden and does not correspond to the polluter pays principle. Also, it would mean a transfer of resources from poorer to wealthier segments of society as latter are the predominant car owners. Vehicle Import Restrictions This measure is easy to implement. While some countries did implement vehicle age restrictions, the study analyzed the situation of vehicle manufacture and import in Ethiopia and found that some new vehicles locally assembled or imported from some regions may have lower emission standards than that of second-hand vehicles imported from Europe with emissions meeting the standards of EURO IV or above (see Table below). The following table shows the introduction of vehicle emission standards for date of first registration33 in the EU. There is no correlation between age and vehicle emissions, but a correlation between vehicle emission standard and emissions. For example, if someone imports a brand-new vehicle from Dubai, it is Euro 4 with 0 age. This vehicle is worse than a 10-year-old vehicle (Euro 5a) sold in Europe. If Ethiopia has Euro 2 required for new vehicles, it will receive brand new Euro 2 vehicles from manufacturers. These vehicles with 0 age are, in terms of emissions, far worse than second-hand imports from Europe or Japan which are all at least Euro 4. Table 16: Vehicle Emission Standards for Passenger Cars in EU (Petrol and Diesel) Standard Date of 1st Registration Euro 3 01/2001 Euro 4 01/2006 Euro 5 01/2011 Euro 6 09/2015 Source: https://www.dieselnet.com/standards/eu/ld.php Conclusions The impact of scrapping is short-term. Vehicle import requirements by age or other criteria have medium-term impact, as vehicles are only replaced gradually. Scrapping Policies Scrapping incentives are very costly and have limited impact due to following factors: • Old vehicles brought in for scrapping might have not been being used anymore or only used very little, and thus only causing limited emissions. A new vehicle acquired with money received from scrapping will however ply the streets continuously. 33 First registration date is the date of entry into service; this date is one year after the emission standard is applied to new type approvals. 40 • Vehicle owners are incentivized to procure a new vehicle with money received from scrapping. This will result in additional mileage driven as new vehicles have a higher mileage. • Paying for scrapping can create a fiscal burden and favor richer segments of society that have access to vehicles, whilst the incentive is paid for by everybody through tax revenues, i.e., the measure tends to have a negative distributional impact. Overall, incentives for scrapping vehicles are not considered an appropriate policy due to their limited impact on pollution, negative distributional impact and potential to create more traffic. Also, such policies do not adhere to the polluter pays principle. For commercial vehicles, especially buses, it has been a policy used in many BRT programs, especially in Colombia, as a way to avoid conflicts with existing bus operators and to force them into new well-organized transport companies. In such a context, the policy might be justified. The policy has also a relatively limited impact on emissions and a negative cost-benefit. Vehicle Import Age Restrictions As seen in the chapter on I/M, environmental degradation of vehicles is a minor factor in pollution. If import restrictions are purely related to the vehicle age in absence of requiring certain vehicle emission standards, they will only have a marginal impact on GHG emissions and pollutants as: • Vehicles do degrade annually, but especially for gasoline vehicles, this degradation is minor. For diesel units, the influence of maintenance is far larger than the degradation effect (see the chapter on I/M). • New vehicles are not inherently more efficient than old ones. HDVs especially have had the same fuel consumption and GHG emissions since Euro I. • Vehicle emissions are related to an emission standard and not age. A 10-year-old Euro V vehicle will have lower emissions than a brand new Euro II unit. Usage of the vehicle age as proxy for emissions is vastly misleading. In Ethiopia based on (World Bank, 2017) new local assembled Euro 0 HDVs are sold while previously second-hand Euro II vehicles were sold. The following graph compares emissions of a 10-year-old Euro 4 car against emissions of a new Euro 1, 2 or 3 car. Ten-year-old second-hand Euro 4 passenger cars clearly have lower NOx emissions than same-size brand new Euro 1 or Euro 2 cars. The same holds true for PM2.5 emissions.34 Age is clearly not a good proxy for emissions to determine what vehicles (new or second-hand) should be sold in Ethiopia. Figure 13: NOx Emissions for Cars 0.8 0.7 0.6 0.5 g/km 0.4 0.3 0.2 0.1 0 petrol car NOx diesel car NOx new Euro 1 new Euro 2 10-year old Euro 4 Source: New vehicle emission levels based on (EEA, 2019), vehicle degradation factor Euro 4 from (FOEN, 2019) 34 See Emissions deterioration – the Cinderella of vehicle emissions measurement (ricardo.com). 41 In summary, Ethiopia is at a stage in its motorization process where it is might be more effective to focus on new vehicles rather than vehicle turnover. Neither scrapping or limiting vehicle age for the import of vehicles or for in-use vehicles is considered an appropriate and cost-effective policy for reducing vehicle emissions. It might be a useful policy for road safety, but not for effective emission reductions. 42 11. Restricting Diesel Vehicles Policy Description The proposed policy is to restrict the use of diesel vehicles to heavy trucks, buses and mobile machinery. Under the policy, no more diesel passenger cars, taxis and light vehicles up to 3.5t would be registered in Ethiopia, regardless the vehicle emission standard, age or if the vehicle is new or 2nd hand. Instead of diesel-powered vehicles, gasoline or electric units are available with the same characteristics. This policy is justified based on the following grounds: • A large share of transport emissions in Ethiopia are caused by diesel vehicles. The air pollution in urban areas is nearly entirely caused by diesel vehicles. They are therefore the main target group to address to achieve clean air. • Introducing low-sulfur diesel and adopting strict vehicle emission standards reduces diesel-related air pollution. However, this projection is based on the values recorded when performing the standardized vehicle type approval test. For diesel cars, actual emission values, especially of the critical pollutants PM2.5 and NO2 are significantly higher than reported values due to following factors: ▪ Car manufacturers do not necessarily comply with standards; they may circumvent the system and cheat – and not only in the well-known Volkswagen emissions cheating scandal. The trustworthiness of type approval tests is therefore very limited, even if results are reported by third parties, as car manufacturers can apply political pressure on weak environmental authorities. ▪ Reports from the International Council on Clean Transportation (ICCT) as well as others show that under actual driving conditions vehicle emissions are still significantly higher, including for Euro 6 vehicles, than the type-approval values. Average on-road NOx emissions from Euro 6 diesel passenger cars have been reported to be a factor of 7 higher than type-approval figures, with some vehicles emitting 25 times higher values than the ones reported.35 The latter is not surprising, as for type-approval tests, normalized conditions are used with vehicles conditioned and adjusted in a manner different from actual road usage (e.g. components are eliminated from the car, no AC is used, special wheels, tires and fuels are used, etc.). The type-approval certification also does not capture real-world operating conditions of engines concerning torque and speed. Even with the introduction of the RDE (Real Driving Emissions) standard differences of a factor of 4 still persist. ▪ In cold start conditions pollution control devices work far less effectively. This condition is prevalent in urban areas where driving distances are short and engines operate primarily under cold driving conditions. Cold engine emissions for PM are more than three times higher than engines operating at high temperatures.36 ▪ Establishing adequate vehicle maintenance and vehicle inspection programs is far more complex and costly for diesel than for gasoline engines. The snap-on test used for diesel engines has limited reliability and depends essentially on how the test is performed. Controls are very easily circumvented and on-road controls are costly and complex. Therefore, I/MIM programs often fail with diesel vehicles. ▪ Maintenance of diesel engines is far more critical and complex than gasoline ones. This often results in far higher actual emissions than if vehicles were maintained well. The required emission control devices including DPFs for Euro 6 standards require regular specialized maintenance. For NO2 reduction most vehicles use an additive. If the DPF is not maintained properly or if the additive is not added to the engine, the engine will continue to work and 35 ICCT, 2016a, Figure 1. 36 EEA, 2016, Table 3-47. 43 deliver power but the emissions will skyrocket, reaching Euro II levels. Therefore, actual emissions of Euro VI vehicles, if badly maintained, can be comparable to Euro II engines. Even with a strict enforcement and control system, random roadside checks performed in Santiago have shown that emission control equipment of diesel engines is often not working properly (Grütter, 2015). Based on all of the above, the “clean diesel� slogan is nothing more than a marketing effort. Diesel vehicles are dirty and will continue to pose major challenges in the future. Even with the best available diesel technologies, the real-world performance of diesel engines results in high PM and NO2 emissions, creating air pollution and health problems. This fact is increasingly being recognized worldwide: • A senior EU expert has called the EU’s diesel-vehicle emissions policy an almost complete failure and pointed out that absolute NOx emissions of diesel vehicles under real driving conditions have hardly changed despite all regulations (Walsh, 2017). • The UK government’s Chief Medical Officer has called for a phase -out of diesel vehicles, since they cause tens of thousands of deaths each year.37 • Due to serious air pollution, Oslo banned all diesel vehicles on municipal roads for a period of time in January 2017. This was due to very high levels of smog caused by NO2 emissions. The ban was levied only on diesel vehicles and on all Euro categories. • The Institute for Public Policy Research indicated in a report released in 2016 that it is likely that diesel cars must be completely phased out on London’s roads over the next decade to reach compliance with safe and legal levels of air pollution (Pinner et.al, 2016). Ethiopia would not be the first or only country to restrict usage of diesel. Diesel passenger cars and light commercial vehicles are not essential. Any diesel car could be replaced with an equivalent gasoline car. The US, the largest car market in the world, has less than 3% diesel passenger cars and SUVs.38 Bolivia, a landlocked country with low vehicle use and in a comparable economic situation to Ethiopia, has banned the importation of diesel vehicles with less than a 4,500cc engine. Brazil banned diesel cars in the 1970s. It is therefore obvious that there is no technical requirement to use diesel, except for HDVs. Policy Impact The impact of restricting diesel vehicles is calculated based on the effect of all passenger cars and taxis being replaced with gasoline units. Based on Ethiopia’s 2020 emissions, if only gasoline cars were circulating, emissions would decline by nearly 600 tons of PM2.5 and 3,500 tons of NOx – equivalent to 10% lower PM2.5 and 3% lower NOx emissions from the transport sector. Economic Cost-Benefit At current relative fuel prices, customers in Ethiopia choose to use diesel cars, except for very small models. This is due to diesel being subsidized relative to gasoline (the sale price of diesel is currently US$0.45/l and gasoline US$0.52 /l; applying the same tax rates per unit energy for diesel and gasoline, diesel should be more expensive at the pump than gasoline). The indirect subsidy of diesel thus results in an excessive dieselization of passenger cars, similar to what occurred in large parts of Europe in the past, with resultant negative air quality impact. From an economic perspective, diesel cars are more expensive to purchase and more expensive to maintain (if properly maintained). They only make economic sense for very high-mileage drivers (due to lower fuel usage) and in countries such as Ethiopia where diesel is relatively subsidized compared to gasoline. 37 http://www.telegraph.co.uk/news/2016/12/30/diesel-cars-should-phased-stop-pollution-deaths-says-chief- medical/ 38 http://www.bbc.co.uk/news/world-us-canada-34329596 44 It is expected that the fiscal impact of diesel restrictions would be neutral. Slightly lower vehicle import tax revenues (due to the lower price of gasoline vehicles) are offset through slightly increased fuel sales revenues (due to increased fuel use and higher petrol prices). Complexity and Risk The measure is simple and easy to manage. It requires a regulation stating that after a certain date, the importation and sale of diesel-powered light vehicles will not be permitted. Medium and heavy vehicles could still be diesel powered. Existing diesel vehicles would still be allowed to operate and could still be re-sold as used vehicles but no new light diesel vehicles could be imported. The risk of the measure is potentially a certain resistance from car dealers and importers who prefer diesel models. However, for all light vehicle applications, gasoline versions are available with comparable specifications and at a lower investment price. Conclusions The recommended measure is to ban the import of diesel passenger cars and light commercial vehicles. This policy would not be applied for HDVs, including buses. The measure has a medium-term impact as it affects newly introduced vehicles and not the existing vehicle stock. This measure’s implementation is recommended. The environmental benefits are obvious – and in practice probably much higher due to actual on-road emissions of diesel cars being far higher than stated emissions under controlled (and manipulated) testing. Diesel should be restricted to vehicles where alternatives are currently lacking or are very costly, i.e., HDVs. For light vehicles, petrol alternatives are available. Petrol vehicles are environmentally far better than diesel vehicles, even with the most stringent regulations, and come at a comparable total cost of ownership. Even considering climate aspects, diesel vehicle use is not justified: vehicles emit less CO2 due to better fuel efficiency but emit far more BC due to PM2.5 emissions. 45 12. Promoting Low-Carbon Vehicles Ethiopia as a country has adequate power generation resources and capacity. This presents an opportunity to pursue low-carbon vehicles including electric buses. However, the situation analysis on Addis Ababa presented a different picture. The city’s existing power infrastructure is facing severe capacity constraints. Power lines and transformers were built for a much smaller population size and economic scale. As the city rapidly urbanizes, the growing demand far exceeds electricity supply. The lack of maintenance of power infrastructure further aggravates an unstable supply of electricity. The deployment of e-mobility, especially electric buses (e-bus), requires the backing of supporting power infrastructure. In the case of e-vehicles, the charging network will require investment in upgrading substations. For example, according to WRI’s Addis Ababa electric bus case study, in developing the Light Rail, four substations were built to directly receive power from the national grid. The WRI study further noted Addis Ababa is categorized as a stage zero country with no policy, target, or implementation of electric buses, and recommended AA conduct research on electric buses around power demand, battery disposal and specific infrastructural needs. In June 2021, the Ministry of Transport established a national e-mobility steering committee which is a strategic step forward toward promoting e-mobility. Policy Measure Low-carbon vehicles potentially include those running on biofuels, gaseous fuels, hybrids and electric units. Biofuels can be used by any vehicle. Their advantages and disadvantages in terms of emissions as well as sustainable development are not in the scope of this report. Gaseous fuels (CNG, LPG, LNG), whilst having advantages in terms of NOx and PM2.5 emissions for models prior to Euro VI, have only a limited advantage in terms of GHG emissions essentially due to high energy use and methane slip emissions. Also, such vehicles require a different fuel infrastructure and are therefore not included in this report. This chapter focuses on hybrid, plug-in hybrid and electric vehicles. Hybrid and electric trucks are not yet widely commercially available. Pilot series have been produced, such as electric trucks. Some companies are testing limited numbers of such trucks, but they are not yet at a commercial stage. The main problems are increased costs and that cargo space is taken away for battery sets. The trend is towards small electric trucks for urban deliveries due to the air quality concerns of large cities. In buses, a clear trend towards urban transport electrification can be observed. Initially, hybrid and plug- in hybrid buses dominated, but battery and electric bus technology has evolved so quickly that most operators now switch directly from fossil-fuel to fully electrified buses. To identify the optimal e-bus type, the ecosystem within which e-buses move must be assessed. This requires optimization of e-bus technology jointly with charging infrastructure, plus the required grid and potentially bus-depot upgrades. The e-bus ecosystem is influenced by a range of factors such as operating conditions, climatic conditions, routes, policies, business models and finance structures (see Figure 14). Basic e-bus technology types are (i) overnight/slow or depot-charged buses; (ii) fast-charging buses; (iii) ultra-fast charging buses; (iv) trolleybuses, including hybrid trolleybuses and (v) battery swap buses. 46 Figure 14: E-Bus Ecosystem and Influencing Factors Source: Grutter Consulting Impact To calculate the potential impact of low-carbon vehicles, the MOT target of 4,850 electric buses and 148,000 electric cars was taken as a base. Ethiopia’s carbon grid factor is 0.36 kgCO2/kWh based on IEA data for 2018 (including total electricity production minus transmission and distribution losses). The table below shows the potential impact of vehicle electrification. Table 17: Environmental Benefits of Electrification Impact per annum (in tons) buses cars total PM2.5 reduction 72 274 347 NOx reduction 1,729 1,231 2,960 GHG reduction (CO2e) 259,778 395,712 655,489 Source: Authors; based on 4,850 buses and 148,000 cars The impact of using hybrid vehicles is on average a 20% reduction in combustion emissions. For EVs, the reduction of local pollutants is 100% and 70-75% in GHG emissions. Economic Cost-Benefit Implementing the MOT targets would derive around US$ 28 million worth of economic benefits from reduced emissions. EVs have the disadvantage of up to three times higher capital expenditure but have lower operational expenditures. Whether vehicles have lower or higher total ownership costs depends on local factors and cannot be assessed in the framework of this study. Complexity and Risk The measure is relatively easy and straightforward to implement. An initial subsidy incentive is required for EV uptake. In terms of grid and electricity availability, total electricity demand from EVs is rather limited. For the number of EVs targeted, the annual electricity demand would be around 670 GWh, or 5% of 2018 Ethiopian electricity production. The impacts on the grid are more localized in nature, e.g.: for buses at charging sites, where substations might need to be upgraded. 47 Conclusions Low-carbon vehicle promotion greatly reduces local and global emissions and is not dependent on other measures. Once vehicles are introduced, its impact is immediate. However, the measure requires financial and economic policies to promote EVs as well as upgrading the city’s power infrastructure to support charging infrastructure. How beneficial this is from an economic viewpoint cannot be currently assessed. It is recommended to start with a multisector e-mobility strategy involving the energy sector and feasibility design for pilot deployments in the short term and prioritize electrification with urban commercial vehicles (vehicles used for passenger or freight transport), especially buses, due to technology maturity, financial benefits, their high mileage and emissions, limited grid impact, and simple, investor-friendly business models. 48 13. Public Transport, Non-Motorized Transport, and Transit Demand Management Measures Public transit and walking are the dominant travel choices in AA, with 31% and 54% mode share, respectively. Addis Ababa has an established tradition of bus public transport services. The standard bus services are provided by Anbessa and Sheger bus companies, as well as public service buses that transport government employees. Anbessa, originally established in 1945, has a long presence bin AA’s urban transport sector. Altogether, the standard buses carry 571,000 passenger trips daily. However, the conventional bus service is unable to meet the growing demand today. The lack of quality fleet, low frequency and poor service quality drive the rising middle class to SOVs.39 The mini- and midi-bus sector, while providing point to point connections and reportedly carrying more than 1,500,000 passenger trips daily,40 operate on older and polluting fleets with diesel propulsion, under-tuned engines, and frequent acceleration and deceleration in traffic. The two LRT lines have been in operations since 2015 and are carrying a daily ridership of 120,000. However, shortage of railcars, among other infrastructure and accessibility constraints, has impacted service quality and ridership potentials. The mild climate in Addis Ababa is conducive to walking and cycling, green modes of transport. However, sidewalks in AA are often narrow, uneven, or obstructed by vendors and car parking – if they exist at all. This is not just inconvenient, it’s dangerous and discourages users from walking. There has been a lack of dedicated bike lanes. In March 2020, the city built a new bus lane during the beginning of the COVID-19 Pandemic which gained popularity. As the city grows, how to meet the population’s growing mobility and accessibility needs, retain them on NMT and public transport, and delay or reduce the shift toward car purchase would require the city’s proactive interventions in infrastructure, policies, and implementation strategies in a cohesive manner. Further delay to actions will push the rising middle class toward car ownership, a trend that would be difficult to reverse, if not impossible. Near-term investments come to fruition; however, needs are much larger. In the next 2-3 years, through these interventions and policies (Chapter 1 and 2), AA will be running a new BRT Line, a modernized public bus company with passenger friendly ITS system, a new urban corridor that serves as a template for a multimodal road development, and a technology-based traffic management system. Nonetheless, these are only the beginning of a much larger-scale package of physical and policy interventions toward shifting to a green, clean and sustainable urban transport. It is imperative for AA to formulate and implement a set of cohesive sector policies toward improving public transport and NMT, shifting user behaviors from driving, and avoiding further degradation of air quality from the transport sector. Policy Measures Based on the review of AA government’s studies in motorization management and global urban transport experience that demonstrates air quality benefits, the following the measures are identified: • Improved bus operational efficiency through route restructuring and cleaner fleet. • Increasing the attractiveness of public transport and its mode share in relation to a BAU scenario. • Increasing the attractiveness of NMT, e.g., through sidewalks and cycling lanes, and thereby the mode share of NMT. 39 AA Bus Optimization Study, 2020 40 AA Bus Optimization Study, 2020 49 • Promoting transport demand management (TDM) policies, such as parking policies, low emission zones, road pricing, as well as transit-oriented development (TOD). These measures have in common that they do not require new vehicles and can be realized in the absence of cleaner fuels. Impact Improved bus operational efficiency. Bus efficiency improvements result in emission reductions due to a reduced number of buses transporting a comparable number of passengers (higher load factor). This improvement can come from avoiding competition on routes of various bus operators, all of which operate at a low occupation rate. Large buses can also reduce total emissions. Emission improvements can be reduced or offset if measures result in reduced attractiveness for customers (e.g., due to reduced bus frequencies, stops at fewer sites, or less competition leading to higher prices) thereby resulting in a negative mode shift. The magnitude of emission reductions depends on the efficiency or inefficiency of the current system and how much improvement is feasible. The bus route restructuring has been studied by the city government as part of the AA Bus Optimization Study (Chapter 2). An immediate step is for AA to formulate a phased implementation strategy for bus restructuring for optimal operations efficiency supported by the fleet expansion. A key missing piece, as noted in the WRI study, is the city’s strategy and approach toward the deployment of a low-carbon, cleaner bus fleet (i.e., hybrid buses, electric buses). Chapter 12 discusses the impact and benefits of low-carbon buses. Figure 15: Overlapping Routes among Anbessa, Sheger and Mini/Midi Buses Source: AA Bus Optimization Study. Increasing the attractiveness of public transport. Today, Addis Ababa has a high public transport mode share. However, if public transport is not an attractive option, increases in income will result in a mode shift toward private means of transportation. This shift is already happening. 50 Increasing the attractiveness of public transport results in a mode shift (relative to the BAU scenario) towards public transport. Public transport in general has significantly lower emission factors per passenger-kilometer than private means of transport, including taxis and shared taxis. However, the magnitude of difference depends on factors such as fuel consumption per unit of distance per vehicle mode and, more importantly, the average occupation rate per mode. The magnitude of the mode shift depends on how much the appeal of public transport increases relative to other modes of travel. Convenience, connectivity, ease of travel, cost and accessibility are all important factors. Mass Transit (LRT and BRT). Monitoring of CDM projects in public transport shows that more mode shift occurs with rail-based transport systems than with bus-based systems, including BRTs. The higher speed and convenience of rail-based systems seem to win over users more than bus systems. AA needs to improve the LRT service quality by reinvesting in fleet and infrastructure and operationalize the first BRT line financed by AFD with a well-thought-out operations plan that involves informal paratransit sector. Meanwhile as the AA is anticipating launching a BRT network operations study, the transformation of mini and midi-buses should clearly be part of this important mass transit plan. Figure 16: Public Transport and NMT in AA Source: Authors, Addis Ababa City Administration, and World Bank Addis Ababa Sidewalk Study. Increasing the attractiveness of NMT. NMT has no direct emissions. This includes cycling, walking and (electric) micro-mobility such as scooters, which are often more convenient, especially for the vulnerable population including women. Safe and sufficiently wide walkways and segregated bike lanes are core to fostering NMT. NMT is also essential for last-mile connectivity with public transport. Good public transport systems and good NMT and micro-mobility systems complement each other. Emission reductions from NMT are based on the amount of people, the average trip distance and the mode used in absence of NMT. The mode share per km and not per trip is therefore important, as the average distance of NMT trips is far shorter than that of motorized ones. Promoting TDM and TOD. Among the TDM strategies, this study identifies selected measures that effectively contribute to congestion and air quality management in global experience. • Congestion pricing, often done in the forms of road pricing and cordon pricing, is a surcharge added to travel during peak periods or in highly congested corridors and areas, typically in the central business districts (CBD). It is a method that reduces traffic, enhances public transportation and improves air quality since there are fewer vehicles on the road. Both Singapore and London have applied congestion pricing into CBD and the Washington DC region in the US has dynamic corridor pricing for peak-direction travels into the region’s center, 51 all of which generated substantiable revenue to reinvest in transport. While this measure has been effective in congestion management of the developed economy, it relies on the application of intelligent transport systems including dynamic pricing, which is not feasible in AA as yet considering the transport development stage and sector capacity. • Parking management and pay for parking moderate drivers’ behaviors leading to less driving and fewer pollutants. AA has designed an area-based on-street parking management pilot program including parking pricing, which will be implemented in a short timeframe. Its deployment and scale-up would be helpful in discouraging driving and generating revenues for transport. TOD will potentially result in trip avoidance, shorter trips and a mode shift towards public transport. Shorter trips can also be made more easily with NMT. As AA already has a LRT system and is embarking on a TOD study. Economic Cost-Benefit In general, all these measures have a positive economic cost-benefit. However, the benefits are basically privatized (time savings, reduced health costs) whilst the costs are born by the government. The effectiveness of each measure varies and cannot be generalized. Complexity Efficiency improvements in theory are straightforward and simple. In practice, however, they can have a negative social impact (loss of jobs) and it can be very difficult to reach agreement between operators on how to reduce frequencies and how to share profits. Improving public transport operation efficiency is far simpler if a transit authority decides on how routes shall be managed. Public transport improvements in general require significant investments and thus involve considerable complexity for financial structuring and for funding. They might also require permanent subsidies to be sustainable. TOD and TDM measures are in general very complex to implement, apart from some relatively simple parking measures. The resistance of private car owners to restrictions on car usage tends to be large. Realizing TOD measures in built-up areas is also a challenge. Large-scale implementation of TDM and TOD measures is thus very rare. Conclusions The measures to improve public transport and NMT and to manage private vehicle demand are all considered positive and impactful. Policies and investments on public transport, NMT and TDM should be considered short-term interventions, and their impact will likely occur in and sustain through the medium term due to technical complexity, capacity development, and the finance required. These policies and investment will have a lasting sustainable impact on curbing the negative externalities of motorization, do not require costly control measures, and will put AA on a path to green development. Based on the review of AA’s ongoing interventions and urban transport studies, this study highlights the following priority actions for the near term. • NMT: continue to build quality and safe sidewalks and bike lanes. • Public transport: complete and operationalize transport projects financed by the World Bank and French Development Agency; optimize network and improve bus and LRT service quality to shift users from driving; develop BRT network strategies; and formulate actions for paratransit sector growth and reform including fleet upgrading. • TDM: implement parking management pilot project and scale up across the city, including paid on-street parking. 52 • TOD: complete the LRT TOD study and urban design for four LRT stations and implement the integrated land use and transport infrastructure development in station areas. 53 14. Summary and Conclusions Table 19 summarizes the results of the assessment of potential mitigation measures discussed in previous chapters. Table 20 further prioritizes the different mitigation options based on the criteria of environmental impact, economic impact, and implementation complexity. The recommended priorities from this study are then screened by their magnitude and rapidity of impacts and categorized into short-term, medium-term and long-term measures. Sometimes, high priority does not necessarily translate into quick implementation. Short-term refers to implementation with impact within 1-2 years, medium-term for impact within 3-5 years, and long-term beyond 5 years. Proposed short- and mid-term measures are: Short-term measures include the following: (i) Introducing 50 ppm diesel fuel, combined with Euro 4/IV vehicle emission standards or equivalent, which is a high priority for the government. (ii) Fostering public transport and NMT measures, if possible, combined with transport demand measures and transit-oriented development. This is also consistent with government priorities, as AA city administration recently announced an initiative to add 3,000 buses. Public transport, at today’s 31% mode share, carries high passenger volume and results in significantly lower GHG emissions per passenger-kilometer than private means of transport. However, due to usage of diesel buses public transport is also a major source of local pollutants. Moreover, without increasing the efficiency of public transport, fostering of public transport alone will not result in air quality improvements. Measures such as operational improvements and restructuring to allow for replacement of minibuses with larger units on heavy demand routes are the most relevant in terms of air quality improvement. (iii) Establishing maximum in-use vehicle emission levels and measurement procedures and strengthening the integration of emission testing in road-worthiness tests with quality control and enforcement measures, which are being developed by the Federal Transport Authority. (iv) Introducing a ban on importing all diesel vehicles with less than 3.5t gross vehicle weight, including both new and second-hand vehicles. At present, 36% of registered vehicles in Ethiopia are diesel vehicles. Even with the best available diesel technologies, the real-world performance of diesel engines results in high PM and NO2 emissions. Among these measures, (i), (ii) and (iii) are identified as high priority by the government. Medium–term measures: (i) Promote hybrids and EVs with fiscally neutral instruments and other policies (short term can start with developing multi-sector e-mobility strategy and understanding power infrastructure investment to support e-mobility). (ii) Integrate emission inspection including data access and sharing for vehicle roadworthiness test centers. (iii) Limit the age of in-use fossil buses for urban public transport to speed up public transport renovations and incentivize switching to electric units. 54 Table 18: Assessment of Mitigation Measures Implementation Overall assessment and Category Option Groups Air pollution impact GHG impact Cost-Benefit complexity recommendation • Current level: 500ppm • A pre-condition for most other measures • Direct: strong SO2 • Stand-alone: • Technically simple as 1. Low-sulfur fuels: • Euro 4 fuel (50ppm) reduction; small PM2.5 significantly higher fuels are imported Introduction of 50ppm recommended; Euro 5 fuel reduction; no NOx costs than benefits • Fuel sur-cost is 1-2 sulfur (stage 1) and (10ppm) not recommended impact No impact • Combined with US$ cents per liter 10ppm sulfur (stage 2) yet due to costs • Indirect combined with vehicle emission which is not diesel. • Low-sulfur fuels without vehicle emission regulations: see considered a huge subsequent issuance of regulations: see below below barrier tighter vehicle emission standards will only have a limited impact • Current level: none but primarily Euro 2 vehicles • Euro 4 emission standard for Fuel and new or used vehicles is vehicle recommended once 50ppm emission sulfur fuel is available standards • Technically simple as • Euro 6 level not • Euro 4 together with vehicles are imported recommended yet due to 2. Emission standards for 50ppm sulfur fuels and certificates of higher costs than benefits • Direct: large reduction newly registered vehicles cost-neutral conformity can be • Euro 3/5 standards not of all pollutants (used or new units): Euro • Euro 6 together with used recommended due to • Measure requires low- No impact 4 (stage 1) and Euro 6 10ppm sulfur fuels • No investment in marginal benefits compared sulfur fuels as pre- (stage 2) has significantly national vehicle to Euro 2/4 condition higher costs than testing center is • This measure can only be benefits required implemented together with low-sulfur fuels • Vehicle emission standards cannot be replaced with in- use vehicle emission controls as the latter are only to identify faulty vehicles with excessive emissions 55 • Support the government in the establishment of maximum levels for in-use vehicle emission controls including measurement procedures and equipment 3. Maximum emission standards levels for in-use vehicles Low impact due to • Strengthen the process of (I/M); emissions testing limited vehicle In theory more benefits integration of emission is already performed degradation in emission than costs but in testing in road-worthiness together with the (i.e., increasing practice many systems Highly complex to tests with appropriate roadworthiness test and emissions over time due No impact only incur costs due to enforce and control quality control and the government is in the to aging of vehicles) and lack of adequate enforcement measures process of determining complexity of effective implementation and maximum pass levels for implementation & enforcement • In-use vehicle inspection in-use vehicle emission enforcement cannot be used to determine controls the vehicle emission standard or the compliance of a vehicle with a given vehicle emission standard, but only to identify gross polluters significantly in excess of prescribed limits. • Small impact if no fuel • Fuel efficiency labels switch are complex to design • Highly negative if this Fiscal measures to promote • Implementation is 4. Fuel efficiency or CO2 results in dieselization Moderate No general statement low-emission vehicles should complex for second- emission standards • Positive impact if impact possible hand vehicles be designed to be fiscally switch towards electric neutral. • Simple if focused on vehicles (EVs) hybrids and EVs Small increase in fuel • Requires Euro 4 fuels Not recommended due to 5. Vehicle retrofits with consumption but Vehicle Significant reduction of Significantly higher • Technically complex highly negative cost-benefit emission control reduction of measures equipment PM2.5 Black Carbon: costs than benefits • On-road enforcement relation and high and controls required implementation complexity total small reduction 56 Vehicle age is not an • GHG adequate proxy for • Pure age limitations emissions of • Age is not an adequate proxy vehicle emissions and as are simple to regulate HDVs are not and is not correlated well a stand-alone measure but for in-use vehicles related to age with emissions 6. Maximum vehicle age could increase seldomly enforced • Small age Vehicle scrapping • Emission standards are the for imports and in-use emissions, as vehicle (e.g., multiple deterioration programs have appropriate parameter to limit vehicles eventually deterioration rates are countries have combined with scrapping lower than changes in • Car GHG significantly higher maximum ages for vehicle emissions programs emission standards (a emissions costs than benefits buses which are never • Scrapping programs are not 10- or even 20-year-old more related to enforced) recommended due to very CO2 standards high costs with limited Euro 4 vehicle has lower • Scrapping programs emissions than a brand- than to vehicle benefits are complex to design new Euro 2 unit) age Neutral for country but • Highly recommended due to 7. Ban on import and slightly higher cost for simplicity and immediate Marginal new registration of diesel High reduction of PM2.5 private diesel car users impact increase to Simple measure passenger cars and light and NOx due to diesel being • Petrol cars are a cost- neutral commercial vehicles subsidized and petrol effective alternative to diesel not units • Recommended for urban buses but requires more in- depth evaluation first High reduction per High impact due Higher upfront costs Simple measure but • Develop an e-mobility 8. Promote low-carbon vehicle but low impact to low carbon and in general still requires new business strategy across multiple vehicles (hybrids and due to low levels of grid factor of higher total lifetime models to be sectors, which could include EVs) vehicle renovation and Ethiopia financial costs commercially viable designing and/or low vehicle numbers implementing a demonstration project Dependent on concrete • Often requires high • Recommended measures to measure but in general All measures initial investment ensure a sustainable low- highly positive in All measures result in potentially result • TOD and TDM emission transportation Public 9. Improve public economic terms due to mode shift and have a in high GHG measures are highly system transport transport, NMT and congestion reduction, high potential for emission complex to design and • Priority on implementing measures TDM time savings, reduced reducing local pollutants reductions due implement ongoing interventions and vehicle operating costs to modal shift and reduced health • Benefits often only key policy recommendations: accrue in the long- (i) Sidewalks and bike lanes, costs 57 term due to requiring (ii) Anbessa and BRT behavioral change projects under DP financing, (iii) Public transport network optimization including paratransit minibus reform, (iv) Parking management pilot project, and (v) Completing BRT and TOD studies. 58 Table 19: Prioritized Mitigation Measures Priority Measure Rationale Low-sulfur diesel (50ppm; at a This measure is a pre-condition for many other later stage 10ppm) (option no. 1) measures including stricter vehicle emission standards or import of low-emission vehicles. This measure should be linked with vehicle emission standards as otherwise its impact will be limited. Vehicle emission standards: once This measure directly results in lower emissions 50ppm sulfur fuels are available and is also a good criterion for selecting which introduce Euro 4/IV; long-term vehicles to import. This measure is dependent on Euro 6/VI (option no. 2) low-sulfur fuels. Improve public transport and This is important for achieving sustainable low- NMT, if possible combined with emission transportation systems and the economic High-priority TDM measures (option no. 9) benefits in general outweigh the costs by far. measures Establish maximum levels for in- Maximum in-use vehicle emission levels are under use vehicle emissions, development by Addis Ababa; adequate measurement procedures, measurement procedures, standards and a high- equipment standards, and quality supervision and enforcement system strengthen its integration into the including on-road spot checks can reduce the roadworthiness test (part of potential to circumvent the system. option no. 3) Ban on import and new The measure has a significant impact on reducing registration of diesel passenger pollutants with a positive cost-benefit ratio and is cars, and light commercial very simple to implement vehicles less than 3.5t (option no. 7) Foster electric and hybrid In the long-run carbon neutrality in transportation vehicles (option no. 8) will only be achieved with EVs. The measures could start with electric buses and then be expanded to other commercial vehicles used in urban settings Age limitation for in-use urban This option allows for periodic renovation of the fossil public transport buses (part bus fleet and thereby also improves the Medium- of option no. 6) attractiveness of public transport and gives an priority incentive to usage of electric units. However, the measures cost-benefit of the measure is negative and it will only have significant positive impact if the vehicles meet higher emission standards This measure will depend on the establishment of Integrate emission testing minimum emission standards, and effectiveness including data access and sharing and soundness of emission inspections. in roadworthiness test control Introducing this measure face weak capacity, high centers (part of option no. 3) complexity, and lower cost-benefit. Fuel efficiency standards (option High complexity with a low impact for Ethiopia no. 4) plus the potential to result in a further dieselization with resultant worsening of air quality Vehicle scrapping programs (part High cost, negative cost-benefit, high complexity Low priority, of option no. 6) and limited impact not Vehicle retrofit programs with High technical complexity and highly negative recommended diesel particle filters (option no. cost-benefit 5) Age limitations for import of new This is not an adequate proxy for vehicle or in-use vehicles (part of option performance no. 6) This report acknowledges limitations in our analysis. Lack of data, a common challenge in many developing countries including Ethiopia, has limited the depth of quantitative analysis. As this study was entirely conducted during the COVID-19 pandemic, the inability to conduct field trips and in- person discussions with stakeholders has also constrained in-depth assessment of the local situation. Therefore, the study faces some limitations and more quantitative analyses should be done to advance the transport air pollution control agenda in AA and in Ethiopia. The results of cost-benefit assessments presented in the report intend to give an indication or first approximation. It would be premature, for instance, to derive an abatement cost curve from them to guide the implementation of mitigation measures in detail. Specific measures, such as electric vehicle promotion, would require a much more in-depth assessment and feasibility study to assess their financial and technical viability for AA. This report focuses on the assessment and applicability of mitigation options, not on implementation strategies. The development of implementation strategies would require a follow-up effort in collaboration with the government on the political and institutional fronts. 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