r J t~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~z Report No. 11770-TH Thailand Mitigating Pollution and Congestion Impacts in a High-growth Economy Country Economic Report February 14, 1994 Country Operations Division Country Department I East Asia and Pacific Region FOR OFFICIAL USE ONLY MICROGRAPHICS Report No: 11770 TH Type: ECO Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization CURRENCY EOUIVALENTS Currency unit = Baht Averaqe 1993 - US$1.0 Baht 25.320 Baht 1.0 = US$0.0395 Average 1992 - US$1.0 = Baht 25.400 Baht 1.0 US$0.0394 Average 1991 - US$1.0 = Baht 25.517 Baht 1.0 = US$0.0392 GLOSSARY OF ABBREVIATIONS ADB Asian Development Bank ATC Area Traffic Control System BERTS Bangkok Elevated Road and Transport System BMA Bangkok Metropolitan Area BMR Bangkok Metropolitan Region BMTA Bangkok Metropolitan Transit Authority BOD Biological Oxygen Demand ROI Board of Investment BOT Build-Operate-Transfer BTS Bangkok Transit System CHD Coronary Heart Disease CNG Compressed Natural Gas cO Carbon Monoxide COHb Carboxyhemoglobin CTF Central (wastewater) Treatment Facility DEA Department of Energy Affairs DEDP Department of Energy Development and Promotion DIW Department of Industrial Works DMR Department of Mineral Resources DPC Department of Pollution Control DSM Demand-Side Management EAT Expressway Authority of Thailand EGAT Electricity Generating Authority of Thailand EIAs Environmental Impact Assessments EPZs Export Processing Zones GEMS Global Environmental Monitoring System HC Hydro Carbons IEAT Industrial Estate Authority of Thailand IQ Intelligent Quotient IRP Integrated Resource Planning I&M Inspection and Maintenance JICA Japan International Cooperation Agency ktoe kiloton oil equivalent LTD Land Transport Department MEA Metropolitan Electricity Administration mg milligrams MOC Ministry of Commerce FOR OFCML USE ONLY MOI Ministry of Industry MOPH Ministry of Public Health MOSTE Ministry of Science, Technology and Environment MRTA Metropolitan Rapid Transit Authority MRTS Mass Rapid Transit System MTBE Methyl Tertiary-Butyl Ether mtoe million tons of oil equivalent MVA Manufacturing Value Added MWA Metropolitan Waterworks Authority NAAQS National Ambient Air Quality Standards NEB National Environment Board NEPO National Energy Policy Office NEQA National Environmental Quality Act NESDB National Economic and Social Development Board NGOs Non-Governmental Organizations NICs Newly Industrialized Countries N02 Nitrogen Dioxide NSPS New Source Performance Standards OCMRT Office of the Commission for the Management of Road Traffic OECD Organization for Economic Cooperation and Development OEPP Office of Environmental Policy and Planning ONEB Office of the National Environment Board PCB Polychlorinated Biphenyls PEA Provincial Electricity Authority PM1O Particulate Matter smaller than 10 microns PMG Premium Leaded Gasoline PTT Petroleum Authority of Thailand PWD Public Works Department RMG Regular Leaded Gasoline RTG Royal Thai Government S02 Sulfur Dioxide 8PM Suspended Particulate Matter SPURT Seventh Plan Urban Transport SRT State Railways of Thailand TDRI Thailand Development Research Institute TISI Thailand Industrial Standards Institute toe ton oil equivalent ug micrograms ULG Unleaded Gasoline USAID United States Agency for International Development USEPA United States Environmental Protection Agency VKTs Vehicle Kilometers Travelled VOCs Volatile Organic Compounds VSLs Value of a Statistical Life WLDs Work Loss Days WTP Willingness to Pay This document has a restricted distribution and may be used by recipsents only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. lInLCWADI MITIGATSNG POLLUTION AND CONONSTIN IMPACTS IN A NIXG-GROIM CNOW Coutry Economic Renort Table of Contents Paae No. EXECUTIVE . . . . . . . . . . . . . . . . . . . . . . . . i I. BCONOMIC GROWTH AND URBAN ENVIRONMENTL4 . . . . . . . I A. Introduction . . . . . . . . . . . . . . . . . . . . . . . . 1 B. Growth and Environmental Quality . . . . . . . . . . . . . . 1 C. The Primacy of the Bangkok Metropolitan Regicn . . . . . . . 8 D. Institutions for Environmental Management . . . . . . . . . 9 II. URBAN ENVIRONMENTiL QXALITY: THE PRIORITY AND LINKAGES . . . . . 14 A. Introduction . . . . . . . . . . . . . . . . . . . . . . . . 14 B. Criteria for Setting Environmental Priorities . . . . . . . . 15 C. Trends in Urban Environmental Quality . . . . . . . . . . . . 19 D. Estimation of Environmental Impacts and Valuation of Benetits . . . . . . . . . . . . . . . . . . . . . . . . . 38 B. Tentative prioritization of Urban Environmtal Problems . . 48 F. Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 III. POLICIES TO CONTROL EMISSIONS FROM ENERGY PRODUCTION AD USE . . 53 A. introduction . . . . . . . . . . 5 . . . . . . . . . . . . . 53 B. Trends in Energy Supply and Demand . . . . . . . . . . . . . 54 C. Current and Projected Environmental Impacts . . . . . . . . . 60 D. Energy Pricing and Bnvironmental Regulation . . . . . . . . . 67 E. Proposed Reforms . . . . . . . . . . . . . . . . . . . . . . 78 F. Pollution Impacts and Costs . . . . . . . . . . . . . . . . . 87 G. Summary ........................ . 88 IV. ADDIESSING THE ENVIRONMENTAL IMPAS OF ROAD TRANSPOT . . . . . 91 A. Introduction . . . . . . . . . . . . . . . . . . . . . . . . 91 B. Determinants of Transport Emissions and Congestion ... . . 92 C. Environmental Impacts ... . . . . . . . . . . . . . . . . . 98 D. The Effectiveness of Current Policies ... . . . . . . . . 102 E. Proposed Reforms . . . . . . . . . . . . . . . . . . . . . . 113 F. Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 V. CONTROLLING INDUSTRIAL DISCHARGES AND WASTS . . . . . . . . . . 130 A. Introduction . . . . . . . . . . . . . . . . . . . . . . . . 130 B. Trends in Manufacturing Growth . . . . . . . . . . . . . . . 131 pgaae Ng. C. Pollution Trends . . . . . . . . . . . . . . . . . . . . . . 134 D. Effectiveness of the Regulatory System . . . . . . . . . . . 140 B. Proposed Policy and Institutional Reforms . . . . . . . . . . 150 F. Summary ......... . 159 This report was prepared by a team consisting of Sudhir Shetty (task manager), Kariyawasam Wijetilleke (transport), and consultants, Alan Krupnick (environmental priorities and valuation), Raymond Hartman (energy), Philip Sayeg (transport), and Jay Nagendran (industry), with res3arch assistance provided by Rapti Goonesekere and Judy Lu, and secretarial assidtance from Grace Coward and Jane Tameno. Page No. TABLES IN TEXT 1.1 Recent Economic Developments . . . . . . . . . . . . . . . . . . 3 1.2 Export Reliance of Growth . . . . . . . . . . . . . . . . . . . . S 1.3 Relative Importance of Foreign Direct Investment . . . . . . . . 7 1.4 Distribution of Economic Activity and Population in BMA and BEM .8... . . . . . . . . . . . . . . . . . . . . 2.1 National Ambient Air Quality Standards . . . . . . . . . . . . . 22 2.2 S02 Concentration in Ambient Air at Monitoring Stations . . . . . 29 2.3 NO2 Concentration in Ambient Air at Monitoring Stations . . . . . 30 2.4 Ozone Concentration in Ambient Air at Monitoring Stations . . . . 31 2.5 Water Quality Classification Trends on Chao Phraya . . . . . . . 34 2.6 Raw Water Quality - MWA Treatment Plants (1992) . . . . . . . . . 3S 2.7 Finished Water Quality - MWA Treatment Plants (1992) . . . . . . 35 2.8 Groundwater Water Quality Data -- 1989 . . . . . . . . . . . . . 37 2.9a Bangkok - Morbidity Associated with Sulfur Dioxide Estimated Impacts of 20* Reduction in Ambient Concentrations . . . . . . . 40 2.9b Bangkok - Morbidity and Mortality Associated with Particulates Estimated Impacts of 20% Reduction in Ambient Concentrations 40 2.9c Bangkok - Morbidity and Mortality Associated with Lead Estimated Impacts of 20% Reduction in Ambient Concentrations 40 2.9d Bangkok - Morbidity Associated with Ozone Estimated Impacts of 20% Reduction in Ambient Concentrations . . . . . . . 41 2.10 Summary of the Range of Health Benefits of a 10 Percent Improvement in Air Quality in Bangkok . . . . . . . . . . . . . . 41 2.11 Estimated Persons at Risk from Curbside Carbon Monoxide Concentrations . . . . . . . . . . . . . . . . . . ... . . . . 45 2.12 Impacts of Congestion Reduction . . . . . . . . . . . . . . . . 48 3.1 Shares of Primary Energy supply . . . . . . . . . . . . . . . . . 54 3.2 Shares of Final Energy Demand by Economic Sectors . . . . . . . . 55 3.3 Shares of Manufacturing Sector Energy Consumption . . . . . . . . 56 3.4 Electric Power: Capacity, Generation and Consumption Trends . . . 57 3.5 Electric Consumption by Sectors ... . . . . . . . . . . . . . . 58 3.6 Electric Generation by Energy Sources . . . . . . . . . . . . . . 58 3.7 Shares of Sulfur Dioxide Emissions -- Thailand . . . . . . . . . 63 3.8 Shares of Nitrogen oxide Emissions -- Thailand . . . . . . . . . 63 3.9 Share of SPM Emissions in BMR by Sector and Year . . . . . . . . 64 3.10 Share of SO2 Emissions in BMR by Sector and Year . . . . . . . . 65 3.11 Fuel Oil Fund Balance ... . . . . . . . . . . . . . . . . . . . 71 3.12 Fuel Taxes and Emissions Factors by Fuel Type . . . . . . . . . . 72 3.13 Proposed Industrial Air Emission Standards - Selected Pollutants . . . . . . . . . . . . . . . . . . . . . . . . . . 74 4.1 Vehicle Kilometers Travelled by Vehicle Type -- Thailand . . . . 93 4.2 Vehicle Registrations (under Motor Vehicle Act) . . . . . . . . . 94 4.3 Consumption by Types of Petroleum Products . . . . . . . . . . . 96 4.4 Energy Emissions by Sector (BMR) . . . . . . . . . . . . . . . . 99 4.5 Emissions from the Transport Sector (BM) . . . . . . . . . . . . 99 4.6 Lead Content of Gasoline sales in BMR . . . . . . . . . . . . . . 104 Paae N. 4.7 Major Road Projects - BMR . . . . . . . . . . . . . . . . . . . . 113 4.8 Uncontrolled Emissions Comparison - Two Stroke and Four Stroke Motorcycles . . . . . . . . . . . . . . . . . . . 117 5.1 Manufacturing Value added Shares: Selected Subsectors . . . . . . 132 5.2 Shares of Number of Establishments . . . . . . . . . . . . . . . 133 5.3 Estimated Pretreatment BODS Generation: 1991 . . . . . . . . . . 136 5.4 Estimated Hazardous Waste Quantities by Waste Type for 1991 . . . 139 5.5 Rankings of Hazardous Waste Types in Thailand - 1991 . . . . . . 139 5.6 Sectoral Shares -- Foreign Direct Investment and BOI-Promoted Investment . . . . . . . . . . . . . . . . . . . 142 5.7 Industrial Water Effluent Stendards - Selected Indicators . . . . 146 GRAPHS IN TEXT 1.1 Primary Energy Intensity by Economic Sector . . . . . . . . . . . 6 2.1 Damage Function . . . . . . . . . . . . . . . . . . . . . . . . . 17 2.2 Locations of Air Quality Monitoring Stations in BMR . . . . . . . 20 2.3 SPM Concentrations at ONEB's Six Permanent Stations . . . . . . . 23 2.4 Lead Concentrati.n in Ambient Air at Monitoring Stations of DPC ... . . . . . . . . . . . . . . . . . . . . . 25 2.5 Carbon Monoxide Concentration at Permanent Stations of DPC . . 27 2.6 Roadside Noise Levels in Bangkok . . . . . . . . . . . . . . . . 32 3.1 Primary Commercial Energy Demand . . . . . . . . . . . . . . . . 61 3.2 Final Energy Demand in Thailand . . . . . . . . . . . . . . . . . 61 3.3 Total Emission Shares by Sector in 2006 . . . . . . . . . . . . . 66 3.4 Projected Trend in Emissions from Power Generation - BMR Region . . . . . . . . . . . . . . . . . . . . 66 3.5 Projected Trend in Sulfur Dioxide Bmissions from Power Generation - Northern Region . . . . . . . . . . . . . . 67 3.6 Real Prices of Electric Power by Enduse Categories . . . . . . . 69 3.7 Real Prices of Fuel Oil . . . . . . . . . . . . . . . . . . . . . 70 4.1 Vehicle Shares of Fuel Consumption in the BMR, 1991 . . . . . . . 97 4.2 Emissions by Vehicle Category . . . . . . . . . . . . . . . . . . 100 4.3 Transport Emissions in the SMR .... . . . . . . . . . . . . . 101 4.4 Energy Emissions by Sector in BMR, 2001 . . . . . . . . . . . . 10. 1O 4.5 Prices of Petroleum Products in BMR . . . . . . . . . . . . . . . 105 4.6a Leaded Gasoline Price/Tax Series . . . . . . . . . . . . . . . . 106 4.6b Diesel Fuel Price/Tax Series .... . . . . . . . . . . . . . . 107 BOXES 3.1 Evaluating Emissions Control Technologies: Some Pitfalls . . . . 85 4.1 Status of Mass Transit Proposals . . . . . . . . . . . . . . . 112 4.2 Experience with Mass Transit: Implications for Bangkok ... . . 127 TABLES IN ANNEX A2. Mn. 1 2.1 SPM Concentrations at Permanent Monitors 2.2 CO Concentrations at Permanent Monitors ANE II.2 2.3 Classification of Water Quality According to Beneficial Use - Selected Parameters ANNEX II.3 2.4 Baseline Data and Assumed Changes in Pollutant Concentrations 2.5 Health Benefits Literature Used for Dose-Response Functions 2.6 Unit Values for Health Impacts in the U.S. and Bangkok 2.7 Summary of Range of Health Benefits of a 20 Percent Improvement in Air Quality in Bangkok ANNEX II.4 2.8 Relative Contribution of Three Pathways of Exposure to lead in Bangkok 2.9 Economic Value of Lead Exposure Through Air Pollution in Bangkok 2.10 The Economic Value of Morbidity and Mortality Effects of Ambient TSP in Bangkok ANNEX II.5 2.11 Baseline Data for Congestion Reduction Scenarios ANNEX III.1 3.1 Energy Content of Fuels 3.2 Structure of Petroleum Product Retail Prices ANEX IV.3 4.1 Energy Content of Transport Fuels 4.2 Emissions Factors by Fuel Type GRAPHS IN ANNEX ANNEX II.1 2.1 SPM Concentrate 2.2 Lead Concentrate 2.3 CO Concentrate MAP IBRD No. 25462 EZMCUTIVE amAIM A. Xatroducticn 1. Thailand has accumulated a remarkable and enviable record of economic growth since 1986. Real GDP grew at almost 10 percent annually during 1986-90, and even as the economy slowed in 1991-92, growth remained close to 8 percent p.a.. As a result, per capita incomes have now risen to over US$1600, more than twice as high in real terms than in 1980. The improvements in livizs standards that the majority of the Thai people have seen as a result are also evident in a variety of social indicators. Life expectancy has risen by almost 3 years since the early I9IIOs. And the ohare of the poor in the population has fallen to about 22 percent. 2. But, as growth has proceeded at this rapid pace, questions are increasingly being asked about its environmental costs, and whether inclusion of those costs could reduce, and potentially even reverse, the welfare improvements that have resulted from higher incomes. These concerns about the adverse impacts of economic growth in Thailand have emerged about both the extraction and use of natural resources (primarily deforestation) as well as the impacts of pollution and congest'on. This report deals only with the second of these sets of environmental impacts. These effects are receiving greater attention now with the acceleration of growth since 1986. And policy and institutional responses have been implemented or are being proposed. 3. In particular, this report focuses on the three areas in which the environmental impact of growth hao been most obvious--energy production and use, transport, and manufacturing. In each of these sectors, economic growth during the last decade has led to dramatic increases in the scale of production and conrmnption, and the consequent environmental stresses have grown correspond- ingly. 4. The Royal Tbai Government (RTG) has responded to the growing concerns about these environmental impacts with a number of legislative and policy initiatives. The improvement of environmental quality was explicitly listed as one of the objectives of the Seventh National Development Plan (1992-96). This commitment was underlined by the enactment of a comprehensive environmental law, which covered pollution and natural resource conservation, in April 1992. The most significant institutional change that resulted from this legislation is the upgreding of the former Office of the National Environment Board (ONEB) to ministerial status, as part of the Ministry of Science, Technology and znvironment (mosTs). This move, along with the reconstitution of the National Environment Board (NEB) with the Prime Minister as its Chairman and a number of sectoral ministers as members, show the high-level commitment that now exists within Thailand to achieving environmental improvement. s. There are at least three reasons why this is an appropriate time to pose questions about the seriousness of different environmental effects of growth in Thailand, and to evaluate options for mitigating these impacts. First, the unabated pace of transformation that has resulted from the recent economic expansion means that the resulting environmental impacts are likely to be significant and growing. Therefore, the costs to Thai society, in terms of - ii - forgone welfare, will rise if ameliorative policies and programs are not implemented. These welfare costs of doing nothing ara likely to be even greater in Thailand because of a second factor, the concentration of the population and of economic activity in the Bangkok Metropolitan Region (BMR). During the last decade, and despite the RTG's commitment to regional decentralization, the BMR has led the country in population growth, and in the expansion of energy use, road transport and manufacturing. And the third reason for examining the pollution and congestion impacts of growth is that most mitigative actions directed towards these effects have long lead times before they can be effective. So, while prevention of further deterioration is in most cases cheaper than ex- post clean up, strategies for achieving it are not easy to formulate and ifplement without detailed up-front planning. 6. This report contends that the present time, when growth continues to be robust and there is consensus about the thrust of macroeconomic policies, is particularly auspicious for policymakers to deepen their efforts to identify and tackle the most serious urban environmental problems affecting Thailand. B. feneral Findings 7. This report has th- - main findings. First, the recent rapid economic growth has indeed exacerbateed ny environmental problems in Thailand through the expansion that has occurred in energy production and use, road transport, and manufacturing output. Consequently, the levels of many pollutants and of traffic congestion, particularly in the BMR, already impose significant costs through their impacts on health and productivity. In particular, air pollution due to suspended particulate matter and lead, water pollution from organic and toxic wastes, and traffic congestion in the BMR are serious problems. Moreover, as growth continues, these costs will escalate without strong policy and institu- tional actions to ameliorate tLa environmental impacts of growth. But there is cause for optimism in that the recent economic expansion, and the likelihood that it will continue for the rest of the decade, mean that resources are available to make the necessary investments in improving environmental quality. S. The availability of public and private sector resources is important because, the second finding is that in most areas of concern, achieving environmental improvements will not be costless. Because Thailand has followed economic policies that have been relatively efficient (in narrowly economic terms), there are fewer opportunities than in less efficient economies to implement "win-win" policies and investments that can improve environmental quality without slowing economic growth. But where these "win-win" possibilities exist, they should be exploited aggressively because they reduce the need to make trade-offs between growth (conventionally measured) and environmental quality. 9. Finall , the report finds that while it will be necessary for Thai policymakers to assess trade-offs, it should be possible to improve the urban environment without giving up too much econori.c growth. To reduce trade-offs in this manner, it will be necessary that: (i) the policies for environmental management be chosen with regard to their implementation costs; (ii) they be targeted towards the problems of highest priority in terms of the net benefits from their mitigation; and (iii) the institutional framework be capable of - iii - implementing these measures. Because Thailand, unlike industrialized countries, is in the early stages of making environmental improvements, it should be able to do so at relatively low cost provided attention is focused on these issues of problem selection, policy choice and phasing, and Institutional coordination. 10. In formulating and implementing such cost-effective policies and programs for addressing the environmental impacts of rapid growth, Thai policymakers currently face hr,ee main constraints. First, there is a lack of reliable data on many aspects of the environmental problems that have arisen both in terms of the environmental damage that results (the benefits side), and on the costs of reducing environmental impacts. These gaps mainly reflect problems in the availability and reliability of data on ambient environmental quality and on the shares of emissions contributed by different sources. Second, there is a dearth of analyses of cost-effective policies and investments in many areas. Many of the existing studies focus only on the technical aspects or environmental impacts with little attention to the costs of implementing alternative measures. 7inalJX, key environmental tunctions such as policy formulation, monitoring and enforcement are scattered ac-oss many ministries and agencies. This has led Lo problems in coordinating responses across agencies or to duplication of effort in reponding to similar issues. C. Benefits of Environmental ImDrovement 11. Given tbese constraints, the first step in designing cost-effective solutions to Thailand's urban environmental problems is to set priorities among them. Setting priorities is critical for tw reasons. Improving urban environmeutal quality is only one of many policy goals in Thailand, and so it must compete for resourcea with other objectives such as expanding education, managing natural resources, and alleviating poverty. Making environmental improvements will also typically involve trade-offs. Therefore, it must be recognized that because not all environmental problems are equally pressing, actions to improve different aspects of the environment will bring divergent benefits. 12. The main methodology used in this report in setting priorities among environmental problems is the efficiency criterion- -that of maximizing net social benefits. However, this approach is circumscribed to recognize the limited data available on both the costs and benefits of en ironmental improvements. In particular, the priorities derived here are based on the social benefits of mitigating various problems. Based on this initial screening, the costs of controlling the problems whose control would bring the greatest benefits are then estimated for different policy options. Moreover, since the estimates of benefits and control costs are imprecise, no attempt is made to judge the efficient level of control. Rather, the approach taken is to evaluate alternative policy interventions to mitigate these and other environmental impacts in terms of their cost effectiveness by comparing, for instance, the costs per ton of reducing SPH emissions. Obviously, the drawback of this approach is that it provides guidance only as to the least-cost approach of - iv - reducing specific pollutants, not answers as to how much each pollutant should be reducedd' 13. Applying these methods, the report finds that the highest-priority problems are air pollution due to suspended particulate matter (SPM, mnd .specially particles smaller than 10 microns--PM10) and lead; surface water pollution due to microbiological contamination; and traffic congestion in the SMR. Of these problems, mitigation of the two air pollutants and reductions in congestion are examined in detail here because these are linked most closely to the sectors being studied. Microbiological contamination of water is not addressed because it arises primarily from discharges of untreated sewage by households, which would not be exacerbated by economic growth. The analysis in Chapter II indicates that the mid-point estimates of the annual health benefits, from less sickness and lower mortality, of reducing ambient concentrations by 20 percent from current levels in the BMR would be between $400 million and $1.6 billion for SPM and between $300 million and $1.5 billion for lead. The value of the annual time savings from lower congestion associated with a 10 percent rE-duction in peak-hour trips is estimated at about US$400 million annually. 14. The problems of medium priority are discharges into water of organic material (BOD) by manufacturing firms and households, and of toxics. While the evidence on the impacts of these forms of surface water pollution is unclear (and no valuation of benefits is attempted), there is reason to believe that these impacts are growing, and should be controlled especially around the water intakes for the BMR. 15. At present, other urban pollution problems are of lower priority in terms of their health and productivity impacts. This category includes pollutants such as sulfur dioxide (S0), nitrogen dioxide (NO), hydrocarbons (SC), carbon monoxide (CO), air toxics, and solid hazardous wastes. For inotance, the analysis in Chapter II shows that the mid-point estimates of the annual health benefits from 20 percent reductions in current ambient concentra- tions in the BMR are about US$200,000 for S02, and between $9 million and $36 million for ground-level ozone (which is formed by the combination of N02 and RC). As is obvious, these benefits are much lower than those associated with control of SPM and lead or with reducing congestion. 16. However, these judgmento on priorities are based on the seriousness of these problems at present. For some pollutants, such as solid hazardous wastes from manufacturing, and ground-level ozone (from NO2 and RC emissions from transport), it can be anticipated that the resulting health impacts will grow in L This approach, which screens environmental problems in terms of gross benefits and then identifies least-cost interventions, carries the risk of identifying the wrong set of priorities compared to a full-fledged application of the efficiency criterion. Evidence from industrial countries, however, indicates that this risk is small because it is unlikely that environmental problems with small aross benefits would provide large net benefits of mitigation. For instance, as Chapter IV indicates, controlling 8PM and lead provides higher gross and net benefits to society than controlling 802 or 110. v seriousness. Therefore, for many pollutants, it is time to begin plAnning for the implementation of measures to control discharges. This conclusion is strengthened by the experience of industrial countries, which indicates that controlling discharwes of these pollutants involves long lead times and complex institutional arrangements. 17. This prioritization of problems should be viewed as tentative for three additional reasons, all of which should be addressed in future detailed work. First, there are questions as to the quality and reliability of the data on which these judgements rest. The paucity of ambient data is a particular problem for some of the pollutants that are currently viewed as being of lower priority. The need to improve the database in order to refine the priority- setting exercise should be recognized. Seond the appropriateness of extrapolating dose-response relationships from the United States to Bangkok in estimating the health impacts can be questioned. This weakness points to the need to expand efforts to estimating these relationships in the Thai context, particularly through epidemiological studies that examine the linkages between health and pollution (especially of air and water), which are typically site- specific. Finally, the monetary values used in estimating the health benefits associated with the mitigation of various environmental impacts are also subject to uncertainty. Since monetization of impacts is necessary to compare pollutants, efforts to derive estimates better grounded in the economic realities of Thailand and the BEMR would sharpen the setting of future priorities. D. Recommendations for Policy and Institutional Reform 18. The priorities summarized above are useful in deciding which problems should be targeted first. The policy and institutional recommendations in this repor'. are phased so that they aim initially at the impacts whose mitigation at their current levels would bring the largest benefits. As noted earlier, for the sectors dealt with here, these problems are air pollution due to 8PM and lead, and congestion. Steps to control water pollution due to discharges of organic and toxic wastes from industrial sources are of the next-highest priority. 19. Bnerov-Related Emissions. With rapid economic growth has come almost a doubling of energy demand during the past decade. Apart from increased consumption of transport fuels, this expansion has meant the need for more power generation as well as greater use of fuel oil and lignite by manufactur4ng firms. The most serious environmental impact of this increased energy use has been its contribution to air pollution in the BMR and in the Northern Region around EGAT' I generating facilities in Mae Moh. in the BMR, industrial energy use is a major contributor to SPM emissions, and, along with power generation, to S02 emissions. Power generation accounts for about 90 percent of S02 emissions in the Northern Region. Scenarios for emissions growth until 2006 point to the continued dominance of these sources. Nationally, they would account for about 85 percent of 802 emissions. In the BMR, the share of power generation and industry in S02 emissions would rise to about 70 percent, while the contribution of power genaration in the Northern Regien would remain at about 90 percent. 20. Reforms of the courrent policy and institutional framework for controlling energy-related emissions should be directed towards three features - vi - that have reduced its effectiveness and raised its costs. First, by relying primarily on emissions standards for individual sources, the present regulatory system places impossibly large demands on the financial and technical resources of the regulatory agencies. Given their resource constraints, the agencies are unable to conduct sufficiently frequent source monitoring and the system relies heavily on self-regulation by EGAT and other large point sources. Seco, the present system suffers from overlap and redundancy iu responsibilities across agencies. This leads to confusion about regulations and procedures, and leads to duplication of functions. PInall, while energy prices in Thailand are not subsidized in general, the taxation of fuels results in crosa subsidies that favor the use of lignite by subjecting it to a tax rate almost a third that on imported coal, and about a seventh of that on fuel oil. Since lignite use contributes substantially to 802 and SPM emissions. this cross-subsidy conflicts with the regulatory system in reducing emissions. 21. It is recommended that policy reforms be phased so that control measures are aimed initially at emissions of SPM and 503 in the BMR and around Mae Mah. Further, attention should be given to two areas in which potential "win-win" opportunities exist. It is important, first, for regulators to ensure that the supply price for lignite used in EGAT's capacity planning and tariff- setting exercises accurately reflects production costs (including an appropriate depletion premium). Second, and more important, the current emphasis on implementing demand-side management (DSM) initiatives by BGAT should be maintained. Conservative estimates indicate that DSM measures, if successful, can reduce the growth in electricity demand by about 5 percent, and bring environmental benefits by reducing generation needs and avoiding the need for capacity additions. 22. But, given the pace at which electricity demand in Thailand is anticipated to grow over the next five years (about 10 percent annually), these steps will obviously not be sufficient to reverse rising energy-related emissions. It is recommended, therefore, that a combination of fuel taxes and emissions standards be implemented. The fuel taxes should initially be aimed at industrial users of lignite and coal, which are the main contributors to 8PM emissions (and lignite to 802 emissions as wel'). Emissions standards should be established for 8PM and 80a in some locations for EMAT' s power generation facilities, and should remain in place for SPM for industrial sources. The proposed differential fuel taxes should apply to all industrial users. However, it should be supplemented with a system that would provide rebates to sources that continued to use the relatively more-polluting fuels but could demonstrate that their emissions met the stipulated standards through process modifications or the installation of control equipment. The use of fuel taxes would lead to savings in administrative costs by avoiding the need for extensive source monitoring. And the rebate mechanism would allow for the possibility, which the use of fuel taxes alone does not, that it would be cheaper for some users of lignite and coal to continue to use those fuels while meeting emissions targets in other ways. 23. Tranusort Eminsions and Conaestio-. The economic boom has led to dramatic increases in the demand for private and public transport, particularly in the BMR. Between 1982 and 1990, the number of vehicle kilometers travelled - vii - (VXTs) by road rose at more than 10 percent annually. And vehicle registrations in the Bm as well as in the whole Kingdom rose at a similar rate. The result has been a substantial increase in tranaport emissions for a range of pollutants. And despite attempts to expand the road infrastructure, it has been unable to keep pace with the demand and congestion continues to worsen. Among air pollutants in the BMR, transport accounts for the bulk of lead, and more than a fifth of SPM emissions. Mobile sources are also the main contributors to CO, 9W0 and HC emissions. Among transport sources, two-stroke motorcycles, which account for over 90 percent of all motorcycles in the BMR, are the worst offenders for SPM and RC emissions. They co.,tribute about 87 perceot of SPM emissions, a fifth of lead emissions, and almost half the hydrocarbons ewissiona from transport sources in the BMR. Diesel-powered vehicles, mainly trucks'and buses, contribute about a seventh of the transport 8PM emissions. 24. While several interventions are in place to reduce transport emissions and congestion, most have bsee ineffective in the face of the growth in the number of vehicles and 'VKTs. The most effective measures have been the reformulation of fuels to reduce lead in gasoline and sulfur in diesel, which have been initiated by the National Energy Policy Office (NEPO). However, while these steps have controlled the growth in emissions of lead and 803, they obviously do not affect congestion. 25. Reforms of the current policy and institutional framework should proceed in two general directions.. First, there should be an attempt to reduce emissions from vehicles as well as to control congestion. The economic costs of congestion in the BMR are already high, and without action, will continue to rise. Moreover, to the extent that congestion reductions will bring some (although small) emissions benefits, it provides a "win-win* scenario for emissions reductions. The seon feature of the control strategy is that it should be phased. This approach is driven partly by the recognition that not all air pollution problems, even in the BMR, are equally urgent. But more importantly, many actions in areas such as the reduction of congestion and the use of sophisticated emissions controls on vehicles will require more analysis and greater planning before they can he implemented effectively. 26. In the initial phase of the program, which would likely last about five years, the aims should be to reduce emissions of pollutants whose impacts in the BMR are already serious, to prevent the worsening of congestion, and to begin planning and actions that will underpin the next phase of the program. In particular, the programs to phase out lead in gasoline, and reformulate diesel (including reducing sulfur content to 0.25 percent weight) should be completed according to the present schedule. These actions will have significant impacts on ambient levels of lead, 803 and 8PM. The implementation of emissions standards for two-stroke motorcycles, which would ensure that their emissions are reduced (by about 90 percent for 8PM and about 66 percent for RC) to the levels of four-stroke motorcycles, is a priority. During this first phase, the introduction of serious demand management measures will not be feasible politically as well as logistically given the lack of public transportation alternatives that are viewed as acceptable. Rowever, higher taxes on transport fuels should be considered as a way of restraining the growth in the use of private transport modes, and the worsening of congestion. - viii - 27. Prices of transport fuels in Thailand have fallen significantly in recent years in real terms, most sharply for gasoline where they are now about 35 percent lower than in 1984. Moreover, taxes on these fuels are among the lowest among non-oil exporting countries. A variety of other measures to influence choice of transport mode away from private vehicles and to enhance the quantity and quality of road space should also be part of this initial phase so as to prevent congestion from worsening. These steps include the expansion of flexible work hours, extension of bus priority measures, upgrading of bus services including greater autonomy to BMTA, improvements in traffic management including the reduction in intersection cycle times, and strengthening planning processes for distributor roads. 28. In this initial phase, actions should also be initiated to plan for the medium-term program that will be required in order to go beyond the emissions reductions that will flow from the actions noted above. Such planning should be focussed on two areas. First, improved data are required so that more informed decisions can be made about which pollutants should be targeted in the next phase. This implies the need to initiate action in improving the ambient monitoring system, and conducting systematic studies to value the health impacts of pollutants. And second, implementing measures to reduce vehicle congestion in the BMR will require not only analysis of alternative schemes but also improvements in the bus system, and its integration with mass transit schemes that are implemented. Planning is essential in each of these areas if congestion is to be successfully tackled. 29. Industrial wastes. Other than emissions associated with use of lignite and fuel oil, the most serious environmental impacts of manufacturing activity are in terms of organic and toxic discharges into water, and solid hazardous wastes. Untreated domestic sewage is the largest contributor of organic wastes, but the manufacturing sector also accounts for a significant share of discharges. And manufacturing firms are the main sources of toxic water pollutants as well as solid hazardous wastes. Recent growth in the volumes of these wastes reflects both the three-fold increase in the size of Thailand's manufacturing sector in the last decade, and the shift in its structure away from food processing and agro-based industries towards sectors such as garments, electrical and transport machinery, some of which are potentially more pollution intensive. However, while the volume of hazardous waates has likely risen over the past decade, the sectors that are most inttinsive in their generation-- chemicals and basic metals--still account for only a small share of manufacturing value added.Y So, this aspect of structural change in Thai manufacturing means that the problems associated with the generation and disposal of hazardous wastes will remain manageable in the short term allowing policymakers the lead time in which to plan and implement a cost-effective strategy for addressing these issues. ' Thus, the total volume of hazardous wastes generated in the Thai manufacturing sector is still relatively small compared to countries where these pollution intensive subsectors account for a larger share of the manufacturing sector. - ix - 30. The present system for controlling industrial wastes is directed mostly towards discharges of organic matter (BOD). While this emphasis is appropriate given the mix of industrial activity in Thailand, reform of this system should be directed at two features that have reduced its cost effective- ness. First, the system is already overburdened because by relying largely on source-specific standards (as with the control of air emissions), it implies onerous source monitoring requirements that are beyond the staffing and financial capabilities of the DIW. Policy reforms should attempt to reduce the burden of monitoring on regulators, and to streamline this and other regulatory functions. Second, the present regulatory framework does not recognize that control options and costs will vary across industrial subsectors and types of wastes. Reforms should be based on the recognition that because it is difficult for regulators to specify in detail the lowest-cost control options for different enterprises, those decisions should as far as possible be left to the enterprises themselves with the government enforcing the framework for pollution control. 31. Policy reforms are required in controlling organic and chemical discharges into water as well as in the disposal of solid hazardous wastets from manufacturing. For water pollution control, the main recommendation is that the current standards-based system be replaced with a system of presumptive charges. Unlike a system of ideal pollution charges, these charges will be based not on actual waste flows, which are difficult to monitor accurately, but rather on presumed discharges that are calculated ex ante by the regulatory agency based on proxies such as output and minimum treatment levels. Alongside this system would be a rebate scheme that would provide an incentive to firms to minimize their waste streams by providing refunds of a portion of the charge amounts if they can demonstrate higher levels of treatment than the minimum level required. These presumptive charges could be determined either by BOD discharge volumes alone or by a combination of water quality parameters for industries where other pollutants are important. 32. The advantages of this approach, which resembles but is simpler than those in France and Germany, would be twofold. First, it would reduce the burden of monitoring discharges of all sources. While some source monitoring will still be required to verify the discharge information on which refunds are based, the burden of the bulk of monitoring will be shifted on the firms. The second source of savings with this scheme will be in compliance costs to firms. This scheme will confront firms with the choice between not going beyond a minimum treatment level and incurring the charge, and of installing additional treatment facilities and saving a portion of the charge. As a result, additional pollution control will be undertaken in a least-cost manner because only those firms will do so that find it cheaper to treat their wastes than to pay the charge. All others will not undertake additional waste treatment but will be liable for the presumptive charge. 33. In managing hazardous wastes, the first priority should be to establish an appropriate incentive framework to encourage waste-generating firms to separate these wastes, undertake secure storage and disposal, and minimize their generation over time. Despite the existing regulations concerning hazardous waste management in Thailand, such a framework is not currently in place. Unless instituted, it will not be possible to establish and operate x hazardous waste treatment facilities except with large subsidies, as with the existing pilot facility. It is recommended that a performance bond system be implemented to encourage firms to separate and store their wastes safely. Such a system, which resembles the presumptive charge system for water pollutants, would charge firms in the main hazardous waste generating industries according to their estimated waste quantities. This bond amount would be refunded if firms brought their wastes to secure storage facilities; could show the existence of such facilities on-site; or demonstrate that waste treatment or minimization was being undertaken. Along with implementation of this scheme, planning should begin to determine the institutional arrangements for constructing and operating hazardous waste treatment facilities. If the performance bond system is operational, it will likely avoid the need for large subsidies except if these are intended to provide technical extension services to small- and medium-scale firms or assist them in adopting waste-minimization technologies. 34. Institutional Reforms. The overlapping responsibilities that currently exist between various government agencies have impeded the formulation and implementation of cost-effective policies for environmental management. There is, therefore, a need to clarify responsibilities in various areas and improve coordination. Three areas are of particular importance. First, there is currently a duplication of source monitoring ead enforcement activities for discharges of industrial sources into air and water. Further, there is no clear regulatory responsibility for controlling emissions from EGAT's generating facilities. It is recommended for both energy-related emissions and industrial discharges that policy planning and implementation responsibilities be consolidated within a single agency. There are advantages to nesting these functions within DPC, which has been assigned the lead role in policy planning, formulation, and coordination by the revised environmental legislation. Although DIW has the institutional experience in these areas it should be possible to harness its expertise with appropriate transfers of staff and resources between the two agencies. 35. The second area in which action is required is responsibility for asbient monitoring. C"rrently, at least four RTG agencies are involved in monitoring air and water quality, and there are questions as to the comparability of the methods they use and the quality of the data that are generated. In order to use the available staff and financial resources well, some of these monitoring efforts should be combined. Again, DPC should take the lead role within the government in monitoring of ambient air and water quality. While other agencies such as MOPH should continue their monitoring activit_et.~, they should do so as part of an unified effort. 36. Finall , the need for institutional coordination is particularly critical with regard to interventions to reduce vehicle emissions and congestion. Success in both these areas will require well-coordinated efforts on several fronts including fuel reformulation, vehicle emissions controls, inspection and maintenance, demand management, public transport, and the provision of road infrastructure. Coordination is currently lacking, in part, because of the large number of agencies that are involved. An option worth consider:ng is to give one agency the lead responsibility for efforts to reduce congest:on. The agency - xi - recommended here is the Office of the Commission for the Management of Road Traffic (OCMRT), which already is responsible for the coordination of road and mass transit megaprojects in the BMR. E. Pollution and Cost Impacts of Proposed Prooram 37. Most of the actions recommended in this report are targeted towards reducing emissions of the pollutants currently considered to be of high and medium priority. Hence, it is for these pollutants that emissions reduction will be greatest. However, there will be additional benefits to the extent that other pollutants are also reduced. Further, the initiation of actions in other areas such as planning for transport demand management strategies, and the institution- al arrangements for hazardous waste treatment will also bring benefits although these will not actually be realized until the next phase of the program. 38. In the BMR, the estimated annual emissions reductions from the demand side management (DSM) measures recommended for electric power, and the taxes on lignite and coal are about 8,500 tons of SPM and 16,000 tons of SO1 by 1997 -- decreases of about 3 percent for SPM and 8 percent for S02. It is estimated that the tax on lignite use by BGAT will reduce annual emissions (relative to the uncontrolled scenario) in the Northern Region by over 72,000 tons of SPM and about 54,000 tons of 8Si by 1997. These reductions represent decreases of almost 64 percent for SPM and 10 percent for 802 in the Northern Region. 39. The DSM measures would result in net savings of about $57 million annually if the estimated energy savings are realized. The short-run impacts of removing the cross-subsidy to lignite use in the power industry and of complying with emissions standards are estimated at $47-51 million annually. Lignite taxes would raise costs to manufacturing users of lignite by about $11.3 million each year. The short-run cost, therefore, of the measures recommended for control of energy-related emissions (outside transport) is about $60 million annually (about 0.08 percent of GDP), and could be offset by the savings from DSM measures. 40. The fuel reformulation options aimed at reducing lead and SPM, and the conversion of two-stroke motorcycles will have the largest impacts on emissions from transport. As a result of fuel reformulation, annual emissions in the BMR will fall by over 700 tons for lead by 1996, by 5,000 tons for SPM, and by 4,000 tons for 802. These represent reductions of transport emissions by 9s percent for lead, 7 percent for SPM, and 4 percent for 8Sg. Implementing the proposed emissions standards for two-stroke motorcycles (so that their SPM and HC emissions are reduced to levels of four-stroke engines) would decrease SPM emissions in the BMR by about 9,400 tons in the first year (or 12 percent of transport emissions), and by 56,000 tons by the year 2000 (or 39 percent of projected transport emissions). The additional reductions in HC emissions would be about 10,000 tons annually (or 7 percent of current emissions) for the six- year period. The implementation of the automatic traffic control (ATC) system and improved traffic management will reduce congestion and transport emissions somewhat but these impacts are difficult to quantify. 41. The annual costs of reformulating gasoline to eliminate lead are estimated at about $44 million while that for reducing sulfur in diesel (to 0.25 - xii - percent weight) is about $9 million. The cost of converting two-stroke motorcycles would be between $2.8 and $5.6 million each year for the six-year period. Finally, the ATC system will cost about $4 million annually. The aggregate cost of the measures recommended in the initial phase of controlling transport emissions is, thus, of the order of about $60 million annually (about 0.07 percent of GDP). 42. The proposed measures to control industrial pollution would affect mainly wastes discharged into water. The additional waste treatment induced by implementing a system of presumptive charges, even if it is based on BOD alone, would reduce discharges of other water pollutants as well. For the charge level recommended here (about $0.SO/kg or 13 Baht/kg.), it is estimated that untreated SOD discharges would fall by about 135,000 tons per year (or about half of current discharges) if the scheme were implemented in the BMR. The incremental annual cost to industry of achieving this reduction would be about $54 million (about 0.06 percent of GDP). The performance bond scheme recommended for hazardous waste management would not bring any immediate benefits in terms of reduced waste generation. The benefits it would provide are that it would encourage the segregation of wastes and safer storage, and these are difficult to estimate. 43. Finally, while the institutional reforms recommended in the report will involve short-run costs, it is anticipated that there wiil be economies in resource use with consolidation of functions and streamlining of agencies. The one area to which additional resources may have to be allocated is ambient monitoring, particularly of air quality in the BMR. If these increased expenditures are necessary, it is recommended that a portion of the proceeds of the proposed fuel taxes be earmarked for this purpose. P. Conclusions 44. This report's main conclusion is that policies for urban environmental management and pollution control in Thailand offer both challenges and opportunities. The principal challenge is that relatively new problems such as hazardous waste generation are intensifying, as they have in industrial countries, while traditional pollution problems such as contamination of water have not yet been resolved. But this report finds cause for optimism because in each of the major sectors of economic activity considered here, there are substantial opportunities for bringing about environmental improvement at reasonable cost. Unlike many developing countries, Thailand has enjoyed a period of remarkable economic growth, which should enable it to make the investments necessary to improve environmental quality. 45. And because Thailand is still in the early stages of attempting to make environmental improvements, in contrast to industrial countries, it should be possible to reduce the impacts of the main pollutants without incurring high costs. The first phase of the proposed program should be emphasized because it addresses the problems that are most urgent, and is feasible financially and administratively. The priority policy actions identified in this report would cost between 0.2 and 0.3 percent of GDP annually while addressing the problems of greatest immediate concern. But it should be recognized that more ambitious - xiii - actions, which are not recommended for the initial stage, would cost significant- ly more. For instance, it is estimated that treatment of hazardous wastes would cost between $1,200 and $1,700 per ton. Without an effective framework that encourages firms to segregate their wastes, a substantial share of these costs would need to be borne by the government. 46. However, the task of environmental policymaking will not be easy. The environmental agenda in Thailand as elsewhere is crowded with emerging issues as well as unresolved problems. This factor means that successful policymaking depends critically on putting in place systems that will enable the -nalysis necessary for setting priorities. In particular, careful attention will be required to both the benefits and the costs of addressing various problems. Moreover, Thai policymakers must recognize that success in tackling many of the emerging environmental issues due to energy use, transport and manufacturing activities will require detailed planning and institutional coordination. But even here, there is reason to be hopeful. This report has tried to demonstrate that while there is little doubt that many of these emerging issues will worsen without action, their dimensions have not yet assumed crisis proportions. This means that if planning and initial actions begin soon, policymakers have the opportunity to implement cost-effective control strategies. 47. In the recent past, the Royal Thai Government has demonstrated high- level coummitment to environmental protection by improving the legal framework and by earmarking funds for clean-up activities. This report argues that it is now time to translate this commitment into concrete policy actions that begin by addressing the most urgent problems and by establishing the basis for addressing longer-term issues. I. *CMIC GO1RT AID URN= 3IRIUEMAL A. Introduction 1.1 Thailand's record of economic growth since 1986 has been remarkable. Real GDP grew in the second half of the 1980s at an annual rate of about 10 percent, which made even the relatively high growth rate between 1981 and 1986-- 5.6 percent annually--appear slow by comparison. This rapid growth during the 1980s, and the slower but still significant growth during 1991-92 (about 8 percent) have transformed the Thai economy. It is now about two and a half times larger than in 1980, and per capita incomes are almost twice as high. Moreover, manufacturing is now clearly the most dynamic sector of the economy. And the role of manufactured exports and of foreign direct investment inflows has grown significantly. 1.2 As economic growth in Thailand settles to a more sustainable pace, it is an appropriate time to analyze the management of urban environmental problems. This chapter, and those that follow, focus on three areas where the stresses of rapid economic growth are likely to be the greatest--energy production and use, transport, and manufacturing. It is in these areas that economic growth is thought to have the most serious adverse impacts on welfare. The resulting costs, in terms of impacts on human health, productivity and amenity, would be high if no action is taken to put in place policies and programs to mitigate these effects. It is important to document these environmental effects, and to attempt to evaluate which problems are worsening and which ones improving. 1.3 As discussed later in this chapter, these environmental impacts are thought to be magnified in Thailand because they are concentrated in the Bangkok Metropolitan Region (BMR). Despite the RTG's commitment to regional decentralization during the last decade, the predominance of the BMR in Thailand both in terms of population and economic activity has increased. And this has meant that the expansion of energy use, road transport and manufacturing, and the associated environmental stresses have also been greatest in the BMR. 1.4 The final reason that it useful to examine issues of urban environmental management and pollution control in Thailand is that experience in industrial countries shows that these adverse environmental impacts associated with economic expansion can be reduced to manageable levels at relatively modest cost. And the Royal Thai Government (RTG) has recently been increasing its involvement in addressing urban environmental issues. But the implementation of such ameliorative measures usually involves economic costs and long lead times. Therefore, an evaluation of the current approach and analysis of alternative strategies would be useful to Thai policymakers. B. Growth and Environmental Quality 1.5 Few economies have experienced the transformation that Thailand has seen in the past decade. The Thai economy today is considerably larger, more complex and more dependent on manufacturing than it was in 1980. Table 1 provides some indication of these changes in terms of growth rates as well as economic structure. Given the magnitude of these changes, it is not surprising that there is concern as to the associated environmental impacts. However, as e -2- this section argues, the intuitive notion that the adverse environmental impacts of growth are directly proportional to the scale of the economy is likely to be seriously misleading when applied to a dynamic economy like Thailand. The impacts of economic growth on the urban environment even with expanded energy use, transportation and industrial activity depend on several other factors in addition to the scale of economic activity. In particular, the structure of the economy, the efficiency of input use (especially in energy and industry) and the types of production technologies in use all matter in determining the environmental impacts. These factors are discussed in greater detail in the sectoral chapters that follow. In this section, the emphasis will be on analyzing Thailand's case in relation to its overall growth experience. Changes in Structure nd Scale and their Environmental ImRacts 1.6 The most striking change in Thailand's economic structure since 1980 has been the increase in the share of manufacturing, and the even greater decline in the share of agriculture (Table 1.1). In 1981, the agricu.Ltural sector produced almost a quarter of GDP and was larger than manufacturing. By 1992, agriculture accounted for less than 12 percent while the manufacturing sector contributed over 27 percent. Moreover, since the economy itself is almost two and a half times as large as in 1981, the volume of manufacturing output has risen five-fold since 1980. And the environmental impacts of this expansion of manufacturing are even greater because manufacturing activity in Thailand continues to be heavily concentrated in the BMR, which has the highest population density. - 3 - Table 1.s1 Recent Uconomlo Developments (Percentages) 1981-85 1986-90 1991 1992 Real Growth 6DP 5.6 9.9 8.1 7.4 Agriculture 4.9 2.5 4.9 3.9 Industry 5.0 14.0 12.1 9.3 Services 6.3 9.8 6.2 7.0 Economic Structure (% of GDP in current prices) Agriculture 19.0 15.1 12.6 11.9 Industry 32.5 36.9 38.6 38.7 Services 48.5 48.0 48.8 49.4 Exports of goods and 22.8 33.4 35.4 35.7 nonfactor services manufactured exports (real growth) 15.4 28.0 20.1 28.1 Manufactured exports/ Merchandise exports 34.7 53.9 59.3 64.8 Savings and Investment (at current prices) Gross nationUl savings/GDP 19.0 26.1 33.7 33.8 Gross domestic investment/GDP 24.8 30.1 42.0 40.2 Public capital 3.1 2.4 3.0 3.9 expenditures/GDP Private fixed investment, real growth 3.0 21.6 14.0 3.4 Source: Bank of Thailand; World Bank staff estimates. 1.7 Not only has the manufacturing sector in Thailand grown; its structure has also changed since 1980. The most striking changes are that food processing is no longer the largest sector in terms of value added, and the growth that has occurred in the shares of electrical and general machinery. But it also noteworthy from the pollution perspective that the shares of chemicals and basic metals industries is still relatively small. The value added share of chemicals in 1989 was lower not only than in Malaysia, but also lower than in the Philippines. And the share of machinery and transport equipment in Thailand was less than two-thirds that in Malaysia.J 1.8 These high growth rates of the manufacturing and service sectors (especially transportation) have meant that energy use has increased dramatically. Total energy demand in the economy has almost doubled since 1982 (see Chapter III for details). The largest increases have come from transportation and manufacturing. In particular, energy demand in the transport sector almost tripled during 1982-91, so that it now accounts for about 40 percent of the total. There has also been a shift in the sciurces of energy, particularly in manufacturing from traditional renewables (such as fuelwood and bagasse) to modern sources (petroleum products and coal). 1.9 The increase in energy demand within the transportation sector reflects both the growth of motor vehicles and total vehicle kilometers travelled (VKT). This growth has occurred in the entire Kingdom as well as in the BMR (see Chapter IV for details). In particular, during 1982-91, the number e - vehicles rose annually at over 14 percent in the Kingdom, and at almost 10 percent in the BMR. Particularly striking has been the increase in the number of motorcycles, most of which have two-stroke engines. Their numbers increased during this period at annual rates of over 16 percent in the Kingdom and 11 percent in the BMR. Efficiency of Resource Use 1.10 Thailand's remarkable growth performance has been built on both a favorable external environment as well as on prudent domestic policies. A number of external factors in the late-1980s were conducive to rapid growth led by foreign investment. These included the depreciation of the dollar relative to the yen, rising costs in Japan and the newly-industrialized countries (NICs) of Bast Asia, and lower oil prices. But these fortuitous events by themselves would not have resulted in the growth performance that Thailand has registered had they not been accompanied by sound macroeconomic and structural policies. Thailand's macroeconomic management since the early-1980s, when it took a number of stabilization measures, has been exemplary. A combination of tight monetary policies and conservative fiscal management have helped maintain macroeconomic balance. As a result, the fiscal balance swung from a deficit of almost 5 percent of GDP in the early-1980s to a surplus in 1991, and the debt to GDP ratio fell from about 47 percent in 1985 to 38 percent in 1991. 1.11 Growth has also been fostered by the structural measures that were adopted in the 1980s. Competitive exchange rate management was combined with a shift in the incentive system toward aggressive export promotion. These policies were supplemented with gradual (and continuing) reductions in trade restrictions, liberalization of the financial system, reforms in tax policy, and an overall receptivity to foreign investment. The resulting growth in manufactured exports has been spectacular. I World Bank, 1992, World Development Indicators, Table 6, p. 228. - s - 1.12 Thailand's manufacturing sector is now strongly export-oriented. Exports of goods and non-factor services rose from 25 percent of GDP in 1980 to 36 percent in 1992. Manufactured exports have grown even faster with their share in total merchandise exports having risen from 3S percent to 60 percent during this period. Table 1.2 shows the contribution of exports to GDP growth during the last decade and provides a comparison with the previous decade as well as with Malaysia and Korea. It shows that value added in exports accounted for almost a third of total GDP growth in the last five years- -almost three times the share in the early-1970s, and roughly in line with that in Korea. Table 1.28 Bxport Reliance o8 growth (perlod average, pwoerot) 1971-75 1976-80 1981-85 1986-92 GDP growth 5.6 7.9 5.6 9.5 Contribution of export 0.6 1.5 1.0 2.9 value added ' 11 19 18 30 Export reliance ratio b Malavaia GDP growth 7.1 8.5 5.1 7.2 Contribution of export 2.1 3.5 2.4 5.5 value added ' 29 41 48 75 Bxport reliance ratio b Koea GDP growth 8.7 7.5 8.4 9.2 Contribution of export 2.5 2.7 3.0 2.8 value added " 29 36 36 31 Export reliance ratio " a. The domestic value added in the incremental exports as percentage of GDP. b. The ratio of OContribution of export value added growth" and "GDP growth." Source: NESDB, Thailand; Bconomic Report. Ministry of Finance, Malaysia; Economic Statistics Yearbook, 1993, The Bank of Korea; and staff estimates. 1.13 The framework of structural policies in place in Thailand has meant that economic growth, and particularly in Thai manufacturing, since 1980 has been relatively efficient. This path of efficient resource use has likely been an important factor in mitigating the environmental impacts of economic growtL. One indicator of this are the trends in the efficiency of energy use as shown in Figure 1.1. The primary energy intensity of the Thai economy has fallen by about 10 parcent between 1982-91. This implies that energy supplies in 1991 were about 10 percent lower than would have been the case had energy intensity remained constant. This trend of improved energy efficiency is also evident for the industrial, residential and commercial sectors (Figure 1.1). In transport, however, the trend is towards greater energy intensity reflecting the explosive growth in road transport demand, particularly by private vehicles. FIgure 1.1: Prbiy Energy Intensity by Economic Sector _70. 50. 140- 1II Ml 1SI 1 0l 0SI 0l8 -9 1U9 U Sousc KA. ThUmd I -m ei --- iaty-i-Tgi S-!t lll_1992. -e g w u.&c The Role of Foreion Investment 1.14 Apart from its export orientation, Thailand's recent economic growth is also distinguished by the extent to which it has been fuelled by private investment, both domestic and foreign. Table 1.3 provides a regional comparison, and illustrates two points. First, it shows the sharply increased importance of foreign investment in Thailand between the beginning and the end of the last decade. And second, it shows that in the region, only Singapore and Malaysia have done better in terms of attracting foreign investment (as a share of GDP). Thailand's success is particularly striking since it began the 1980w with a much lower share of foreign investment in GDP than either Malaysia or Singapore. Table 1. 3s Relative Importance of Foreign Direct Xnve -.msnt Net Inflow (US$H) Percent of GDP 1980-82 1990-92 1980-82 1990-92 Average Average Average Average Thailand 221.3 2043.1 0.6 2.1 China 386.0 (1982) 4422.0 0.1 1.1 Indonesia 179.3 1449.7 0.2 1.2 Korea -7.7 -281.0 -0.0 -0.1 Malaysia 1198.6 3507.6 4.7 7.1 Philippines 27.3 434.0 0.1 0.9 Singapore 1370.1 3811.3 10.1 9.4 Source: International Financial Statistics, IMF, 1993. 1.15 The increase in foreign investment flows reflects the confluence of the same external and policy factors that encouraged manufactured exports. Initially, external factors such as rising cost pressures in the Asian NICs and the appreciation of the yen during the late-1980s led to relocation of facilities in Thailand. But the increase in foreign investment, which continued into 1990, also reflected investor confidence in Thailand' s sound macroeconomic management, its political stability, and its consistently outward-oriented trade and industrial policies. 1.16 Increases in foreign investment flows into Thailand mirror the growth in overall investment in the economy. The share of gross domestic investment in GDP rose from an average of about 25 percent in the first half of the 1980s to 40 percent in 1992 (Table 1.1). Private fixed investment grew during the second half of the 1980s at an annual rate of over 21 percent in real terms. This spectacular growth in investment in the Thai economy also has implications for the environmental effects of the recent economic growth. An important determinant of industrial pollution is the vintage of the capital equipment used in different sectors. First, newer equipment is likely to be less polluting because it generally generates less waste. And second, new production technologies, most of which have been developed in industrial countries in response to stringent pollution control laws, are more likely to embody waste- minimization techniques. 1.17 Since the high rates of investment in Thai manufacturing since the mid-1980s mean that its capital stock in most subsectors is relatively new, the sector is likely to be less polluting (per unit of output) than manufacturing in countries such as India and the Philippines where many industries are characterized by old and obsolescent capital equipment. This is particularly true for sectors in which foreign investment is more important, such as electrical and transport machinery, where low-polluting technologies are more likely to be available. However, it should be stressed that it cannot be assumed that less-polluting technologies will netessarily be used merely because they are available. C. The Primacy of the Banakok Metronolitan Reaion 1.18 The importance of evaluating the environmental impacts of rapid economic growth in Thailand is sharpened by the concentration of the population and of economic activity in the Bangkok Metropolitan Region (BMR) and within it, in the Bangkok Metropolitan Area (BMA).V As Table 1.4 indicates, the dominance of the BMR has increased even furtk:er in recent years. This factor has sharpened the concern among Thai policymakers about the costs of accelerated growth. Their fear has been that without explicit consideration of environmental impacts, a large part of Thailand's population could potentially face significant adverse health and productivity impacts from industrial, energy and transport-related pollution. An attempt to quantify some of these impacts is made in Chapter II. Table 1.44: Distribution of Economic Activity and Population In 3aa and aWR DMA and Rest of BNR - Samut Prakan (four outer provinces)Y 1981 1989 1981 1989 Population 11.9 12.8b 2.8 3,5b GDP 32.7 35.4 9.6 12.8 Manufacturing Value Added 46.2 43.6 24.9 31.6 a. The provinces of Nakhon Pathom, Nonthaburi, Samut Sakhon and Pathum Thani, which along with BMA and Samut Prakan comprise the BMR. b. 1991 data. Source: Mingsarn (1992); UIIC (1992). 1.19 In 1991, Bangkok's population was about 6.5 million--more than 15 times higher than that of Chiang Mai, the second-largest city. BMR's population in 1991 was over 9.2 million, almost a sixth of Thailand's population. Moreover, during 1981-91, the annual population growth rate within the BMR was about 2.2 percent, compared to an annual national growth rate of about 1.8 percent. Also, there is no evidence of decentralization of population within the BMR. Both the inner ring (BMA and Samut Sakhon) and the four outer provinces saw comparable population growth during the last decade. Y BMR is composed of BMA and the five neighboring provinces. - 9 - 1.20 These concentrations of population within the AMA and BMR obviously imply corresponding agglomerations of energy use, transport demand, and manufacturing activity. And as with the trend towards rising population shares, the share of the BMP in economic activity generally, and manufacturing activity in particular, has also increased. The shares of GDP and manufacturing value added generated within the BMA and BMR in 1981 and 1989 are also shown in Table 1.4. Not only did the BMR account for almost half of Thailand's GDP in 1989, this share rose during the last decade from about 42 percent. These shares increased also for manufacturing value added, where more than three-quarters originated within the BMR in 1989, of which over 10 percent was from Samut Prakan province alone. However, recent data show that some decentralization of manufacturing activity is occurring within the BMR, from the BMA and Samut Prakan to the four outer provinces 1.21 The regional patterns of motor vehicle registration data are less clearcut. In 1992, the BMA accounted for about a quarter of all motor vehicles registered in Thailand. This was lower than its 36 percent share in 1982. However, it represented an increase of almost two and a half-fold during the period. Moreover, BMA's share of passenger cars was almost 73 percent in 1992, having approximately doubled since 1982. 1.22 The use of electric power and petroleum products is also concentrated within the BMR. In 1991, the area within which the Metropolitan Electricity Administration (MMA) distributed electricity accounted for about 45 percent of total consumption.- Similarly, about half of all petroleum products were consumed in 1992 within the BMR (excluding Samut Sakhon) with the share of fuel oil even higher (59 percent). The concentration of road transport and manufacturing demands were obviously the contributing factors. 1.23 These data illustrate that despite the government's objective of decentralizing economic activity within Thailand from the BMR, no such trend is apparent in either energy use or manufacturing activity. The shares of the BMR in GDP and population are actually higher than in 1981. And even where BMR shares have fallen, as with electricity consumption, and vehicle registration, the absolute increases in these mean their potential environmental impacts are more serious now. D. Institutions for Environmental Manacrement 1.24 The preceding sections have indicated the transformation that has occurred during the last decade in ThailandIs economic structure, and in its use of energy and motorized transport. Energy demand has more than doubled; consumption of transport fuels has almost tripled; and manufacturing output has grown about five-fold. These changes have exacerbated many environmental problems associated with transport, energy production and use, and manufacturing. But, as is pointed out in the sectoral chapters that follow, the adverse ' This region includes BMA and the provinces of Samut Prakan and Nonthaburi, and is thus smaller than the entire BMR. - 10 - environmental impacts associated with rapid economic growth can be managed with appropriate policy interventions and institutional responses that need not impose large economic costs if they are well chosen. This section summarizes the current institutional framework in Thailand for urban environmental management and pollution control. 1.25 Thailand has already taken many steps towards addressing the environmental stresses that have been exacerbated by the recent rapid growth. But to ameliorate these environmental problems more effectively at reasonable economic cost, it will be necessary to take actions that cut across many sectors and multiple government agencies. Hence, the lags involved in implementing these actions will be significant and that substantial planning and coordination are required. Moreover, some of the actions that are being considered have the potential to impose significant costs on the Thai economy. Therefore, a mechanism for setting priorities among urban environmental problems is essential. And decisions are necessary about the phasing of policy interventions to address these. The Current Institutional and Policy Framework 1.26 Backqround. The framework for managing the urban environment in Thailand has beer. in place since the early-1970s. At that time, as concerns grew about the adverse effects of industrialization, the Ministry of Industry (MOI) broadened its mandate under the Factory Act (1969) to include industrial pollution control. The emphasis of environmental protection was extended beyond industrial pollution control in 1975 with the enactment of the Improvement and Conservation of National Environmental Quality Act (NEQA). Under this Act, the National Environment Board (NEB) was established as the main policy planning and coordination agency with the Office of the National Environment Board (ONEB) as its secretariat. 1.27 Ambient quality standards as well as guidelines for the use of Environmental Impact Assessments (EIAs) were also established in this Act. ONEB was responsible for coordinating the process of policy planning and formulation with inputs from the National Economic and Social Development Board (NESDB) and the Ministry of Science, Technology and Energy. Implementation of pollution control policies for the industrial sector, including the establishment of emissions standards, monitoring of sources, and enforcement of regulations were the responsibility of the Department of Industrial Works (DIW) in MOI. These activities were conducted under the provisions of the Factory Act. 1.28 Recent Leqislative Changes. Despite a revision of NEQA in 1978, there was a growing perception in the 1980s that its provisions were inadequate to address Thailand's increasingly complex environmental problems. In response, a revised environmental law was enacted in 1992. Under this revised NEQA, the NEB has been upgraded to the ministerial level, and is now chaired by the Prime Minister. The environmental functions previously handled by ONEB have now been delegated to three departments of the Ministry of Science, Technology and Environment (MOSTE), and its Minister is one of two Vice Chairmen of the NEB. The other members of the NEB include the minsters of industry, agriculture, interior, transport and public health. - 11 - 1.29 The revised Act also departs from previous practice in Thailand in three other ways. First, greater authority in environmental protection is delegated to local government officials including provincial governors and mayors. This change is significant in responding to one of the criticisms of the earlier law that too much authority for environmental protection was given to central government agencies such as DIw. Second, the revised law gives non- governmental organizations (NGOs) a greater role in environmental protection by explicitly recognizing the need for greater public participation. This recognition is, in part, a reaction to some of the bitter and well-publictzed conflicts that have occurred recently over the pollution and land-use impacts of new electricity generation facilities. Finally, the role of MOSTE in implementing measures to control pollution from energy, transport and industrial sources is expanded by the revised law. Within this Ministry, the Department of Pollution Control (DPC) is allowed to establish effluent and emissions standards that are more stringent than those of DIW, and can also undertake source monitoring and enforcement actions. Detailed aspects of the institutional framework for pollution control are described below. 1.30 Settina Ambient Standards. The responsibilities for establishing ambient standards for air and water quality, groundwater and noise all lie with the NEB, which in turn acts on the recommendations of DPC. The current ambient standards for air and water (see Chapters II and V for details) were established by ONEB, and are being reviewed by DPC to evaluate whether they should be revised. 1.31 Ambient Monitorinc. The NEQA itself does not specify which agency is responsible for monitoring ambient air and water quality. Apart from some large point sources of emissions (such as EGAT and the petroleum refineries), which carry out ambient monitoring in the vicinity of their facilities, three government agencies undertake ambient air quality monitoring. In the BMR, DPC operates eight permanent monitoring stations, four on-line curbside monitors and twenty two temporary curbside monitors. The Ministry of Public Health (MOPH) has three monitors and the Bangkok Metropolitan Administration also monitors air quality in the BMA. Water quality monitoring is also undertaken in and outside the BMR by DPC and MOPH. In addition, the Metropolitan Waterworks Authority (MWA) also monitors raw water quality on the Chao Phraya around their water intakes for the treatment stations that supply Bangkok's drinking water. 1.32 Environmental Impact Assessments (BIAs). Under the revised law, the Office of Environmental Policy and Planning (OEPP) in MOSTE is provided the authority to review RIAs. These documents of projects of specified types and sizes (see Chapter V for details). Among manufacturing and energy projects, the coverage of this requirement includes those likely to have the most serious land use and pollution impacts. New industrial estates are also subject to EIA requirements. The BIA provision requires that proponents of these projects (including those that receive Board of Investment privileges) submit plans that detail the measures to be implemented to mitigate environmental impacts. The law prescribes the process for review of these documents including their referral to - 12 - a committee of experts. Most significantly, the process is time-bound so that disagreements over environmental impacts, without specific recommendations for changes, are not allowed to delay project implementation. 1.33 Environmental Fund. An important provision of the revised environmental legislation is the establishment of an Environmental Fund with an initial allocation of 5 billion Baht. Most of this funding would come from a tax on petroleum products (see Chapter III for details), but it would also be used to channel donor financing in support of environmental goals. The use of the Fund is determined by the NEB. At present, it is anticipated that most of this money will be used to supplement local government budgets in designated Pollution Control Areas (currently Pattaya, Phuket, Hat Yai and Songkhla) in establishing wastewater treatment plants and solid waste disposal facilities. 1.34 Control of Emissions from Energy Sources. As with the other sectors, a number of government agencies are involved in setting and enforcing regulations with regard to discharges into air and water from power generation and energy use in the industrial sector. DPC can recommend emissions standards with regard to these sources (but has not, although it apparently intends to do so in the future). The cureent emission standards for air pollutants that apply to industrial sources are those prescribed by the Industrial Environment Division in MOI (see Chapter III for details). There are no standards in place for emissions from BGAT's generating facilities. Therefore, EGAT works backwards from the ambient standards in determining whether or not its units are in compliance. The emissions standards that apply to industrial sources are all concentration-based, and for some pollutants differ according to types or sizes of sources. In addition to these source-specific standards, the National Energy Policy Office (NEPO), V"ich is part of the Prime Minister's Office, is also involved in prescribing fuel quality standards for industrial and transport fuels.F 1.35 Control of Transport Emissions and Concestion. An even larger number of agencies is involved in addressing transport-related emissions and congestion. Efforts to reformulate transport fuels aimed at reducing lead, particulates and sulfur dioxide emissions have been led by NEPO working with the Ministry of Commerce. NEPO has also been influential in developing the measures that have just gone into effect requiring catalytic converters on all new passenger cars. The Thailand Industrial standards Institute (TISI) in MOI is involved along with the Land Transport Department (LTD) in the Ministry of Transport establishing emissions standards for all new vehicles, as well as in setting up test facilities. Vehicle inspection facilities are also overseen by the LTD while emissions standards for in-use vehicles are set by DPC. 1.36 Efforts to improve traffic management in the BMR including the use of automatic traffic controls, bus priority lanes and one-way streets, are -' However, although NEPO has been active in initiating analysis of reformulation options, it is the Department of Commercial Registration in the Ministry of Commerce that is statutorily responsible for establishing and enforcing these standards. - 13 - implemented by the Bangkok Metropolitan Authority (SMA) and the Traffic Police. The BMA, the Department of Highways, and the Expressway Authority of Thailand (ETA) are involved in major road construction projects, some of which are being constructed as Build-Operate-Transfer (SOT) schemes. Finally, the Office of the Commission on Management of Road Transport has been established in the Prime Minister's Office to coordinate transport megaprojects and plan demand management measures in the BMR. 1.37 Control of Industrial Discharaes. As with energy sources, DPC has the authority to establish emissions and effluent standards. But in practice, the standards in place for discharges into water and the procedures for hazardous waste management are those prescribed by the ONEB in 1989 with input from DIN. For industrial emissions into air, revised standards were established in 1993 following the revision of the NEQA. (See Chapter V for details). The air and water discharge standards are source-specific, concentration-based, and specify a variety of parameters. These discharge standards are supplemented by detailed regulations regarding the generation and disposal of hazardous wastes. 1.38 The legal authority for regulating emissions from firms located on industrial estates rests with the Industrial Estate Authority of Thailand (I8AT). Within industrial estates equipped with central wastewater treatment plants, IBAT (or the private developers) charge firms for wastewater discharges that are treated in their central facilities. in addition, an ENA is required before construction of an industrial estate. This report is reviewed by OEPP, which is also responsible for overseeing and monitoring the firms on industrial estates after they are operational. - 14 - I . URBaN MVZROITILL QAaLXTY: TME PRZORITZI AMD LINKAGES A. Introduction 2.1 With rapid economic growth, Thailand finds itself searching for ways to address the environmental consequences associated with increases in output, energy use and transportation. Fortunately, rapid growth also makes available the resources needed to implement policy actions and investments for improving urban environmental quality. However, as in otler areas, Thailand must make choices in allocating resources across urban environmental problems. Despite its economic success, Thailand is still a developing country with unmet needs in a variety of areas including education, health and poverty reduction, and the quality of the urban environment is only one of these areas. Moreover, the task of addressing environmental problems has only just begun. Therefore, the number of problems to b3 addressed and the scale of many of these is daunting, both in financial and management terms, if improvements are attempted in all areas at the same time. This chapter evaluates the seriousness of the impacts of various urban environmental problems with a view to assisting policymakers in making these choices. This attempt at setting priorities is based on the philosophy that the process of environmental policymaking is improved if the criteria for choosing which environmental problems to address are made explicitly rather than remaining implicit. 2.2 In setting priorities among environmental issues, this chapter restricts itself to problems that are the concern of this report--impacts related to the generation and use of energy, transport and manufacturing. Hence, no attempt is made to gauge the seriousness of water pollution due to untreated domestic sewage, of indoor air pollution or of occupational hea.th issues. Further, the emphasis is on judging these impacts in the Bangkok Metropolitan Region (BMR) and its vicinity because it is this area with its concentration of urban population, manufacturing activity and energy use that bears the bulk of the environmental impacts associated with rapid growth.Y' 2.3 However, the environmental effects of economic activity are viewed more broadly in another sense. The impacts of externalities such as congestion are included here even beyond their contribution to pollution of environmental media. The rationale that as with pollution they impose costs that are not taken into account by those responsible. For Bangkok, with its overwhelming traffic problems, the key non-pollution exter-nality that has worsened with economic growth is traffic congestion. Moreover, increased congestion has also exacerbated transport-related emissions of air pollutants. ' The main exception to this generalization is the effect of S02 emissions from EGAT's lignite-based generating facilities around Mae Moh in Northern Thailand. - 15 - B. Criteria for settina Environmental Priorities 2.4 Any attempt to establish priorities for environmental improvement must rely on criteria such as the maximization of social benefits or the minimization of costs of attaining certain environmental goals. If such a criterion is to be useful in environmental policy making, it should at a minimum allow the assessment of tradeoffs. The need to assess tradeoffs in the Thai context arises because it is likely that policy makers will need to move beyond twin-win" policy actions and investments (those that provide both economic efficiency and environmental gains) in delinking growth from environmental damage. This means that measures to improve environmental quality will involve costs (in terms of foregone economic growth). Therefore, the most important problems and ameliora- tive actions will need to be identified and given higher priority while other problems are addressed later or with fewer resources. 2.5 Efficiency and cost-effectiveness. The efficiency criterion involves setting priorities by ranking the mitigation in various environmental problems in terms of their net social benefits. To use this criterion requires estimates of the marginal damages (or benefits from control) and the marginal costs (of control) to society of reductions in emissions in the various categories such as urban air pollution and water pollution. The benefits of such reductions can, in theory, be estimated as the value of the impacts avoided by such reductions, which requires assessing the effect of changes in emissions on pollution concentrations, the associated impacts of changing concentrations on outcomes of concern, such as acute health effects, and the value to those affected of avoiding those outcomes. 2.6 Obviously, to apply this methodology to arrive at complete ranking of Thailand's environmental problems would require data of quality and comprehen- siveness that are not available. This means that in many cases, the analysis here will retreat from estimating benefits to considering the population at risk of suffering health impacts at given pollutant concentrations (for instance, estimating those at risk to angina through exposure to carbon monoxide), or, in some cases, considering only emissions. These less demanding calculations, when combined with estimates of costs as in the following chapters, are termed cost- effectiveness criteria. Their use allows comparisons of alternative ways of reducing emissions of pollutants (or their ambient concentrations) in terms of the economic costs involved. However, they do not allow comparisons across different pollutants or media because the costs would be estimated in terms of physical reductions in pollutant emissions. 2.7 Ambient environmental standards. The efficiency criterion is rejected by many analysts, however, because it is perceived as condoning the trade of health benefits or other environmental improvements for money.y An alternative 3' In fact, it does nothing of the sort. The tradeoff is between the beneficial aspects of pollution reduction and the real resources society must give up to obtain these improvements. Money is only a convenient metric for measuring these benefits and costs. - 16 - that is often proposed is to use health-based or environmental-based criteria in the form of ambient concentration standards. This option involves setting maximum ambient limits consistent with avoiding all or serious health or environmental effects. The National Ambient Air Quality Standards (NAAQS) in the U.S. are good examples of such standards, which are set, in theory, to protect health with a margin of safety. These ambient standards are then used in setting priorities for pollution reduction by ranking highest those pollution problem that are most grossly out of compliance with standards. 2.8 This approach has two drawbacks. First, the pollutants that are the grossest violators of the standards may not have the most serious kinds of health effects in terms of mortality and illness. And second, unlike the efficiency and cost-effectiveness criteria, this approach gives no consideration to the costs that society must incur in mitigating pollution problems, which may vary widely across pollutants. 2.9 The use of emissions standards based on technological considerations to set pollution control priorities suffers from these problems as well. AN example is the stipulation of best practicable technology standards for industrial water effluents under the U.S. Clean Water Act, which is used to identify the highest priority areas as those where emissions are most in violation of the standards. An added problem with this approach is that emissions targets, as compared to ambient concentration goals, are even more remote from the ultimate goal of environmental improvements. 2.10 Unlike these two approaches, which recognize, albeit imperfectly, the need for prioritization, the dominant paradigm among environmental policymakers in industrialized and developing countries is to view ambient standards for all pollutants as representing goals that should be met as quickly as possible. Implicit in this approach is the idea that such standards have been initially set to protect health and/or the environment, and that meeting such standards elimi- nates the problem from further consideration. Conversely, it is assumed that the problem does not diminish in importance unless pollution is reduced up to the point at which the standard is met. This issue is of particular relevance to Thailand currently because the process of reviewing, and possibly revising ambient standards is ongoing. 2.11 In technical terms, this view of ambient standards can be depicted by a damage. function (see Figure 2.1) that relates health and environmental damage as to ambient concentrations. Damages are zero at all ambient concentrations up to the standard and rise to some non-zero, and presumably very high level, at concentrations above the standard. The function as described looks like a step with the vertical jump at the standard. This approach has attracted almost every country and it is easy to see the rationale. Such standards represent clear-cut goals and targets for judging how well a country or city is doing with its pollution control problems. Without them, policymakers cannot avoid the messy and ambiguous issue of how much to reduce pollution, with its implicit notion of tradeoffs. - 17 - Figure 2.1: Damage Function Ambient Standard Ambient Concentration of Pollutant 2. 12 The intent of legislation that involves such standards has been to set them at levels that coincide with thresholds in health or other impacts. The U.S. Clean Air Act is explicit on this point, requiring that such standards be set to "protect health with a margin of safety."1 The implicit assumption is that thresholds exist and that the standard should be set somewhere below the vertical portion of the damage function in Figure 2.1 above, to take into account scientific uncertainties about where these thresholds might be. 4. 2.13 The wisdom of designing policies to meet such ambient standards, as opposed to reducing pollution by amounts to maxnmize social benefits, rests on how well the step-function represents reality and, if it is a good representa- tion, whether the step and the standard coincide. On both grounds this practice can be sAriously questioned. First, there is ample evidence of noticeable health effects below the standards for many pollutants, such as particulates and ambient ozone. Regarding cancer risks, lead, and ozone, the notion of a "safe" exposure is clearly being challenged. Exposure to carcinogens is now regarded as carrying some health risk at any concentration ample ecceptable concentra- tion of lead is falling fast. Ozone health effects have now been conclusively - :18 - found in the laboratory at concentrations of 0.08 ppm when subjects are exposed for 6-7 hours.y 2.14 The second problem is that there are also many examples of adjustments to standards in light of new xnowledge, which illustrate the uncertainties that underlie the process of setting ambient standards and the pervasive role played by practical considerations. In the U.S., for instance, standards for air pollution are reviewed every five years. Between reviews, health science continues its progress. As a result, the standard for suspended particulate matter (SPM) in the U.S. was converted to a PM-10 standard and tightened somewhat, the blood lead action level has been continuously tightened by the Center for Disease Control in the U.S., and the ozone standard has been weakened from its original level. Indeed, the process of setting the ozone standard illustrates the extensiveness of the uncertainties that are involved. The first U.S. ozone standard, set at 0.08 ppm. oxidants in 1972, was based on one epidemiological study, since discredited, where ozone effects on health were ostensibly found at 0.15 ppm but where it was determined later that ozone readings were actually 0.25 ppm. Revision of this standard to 0.12 ppm in 1979 was mainly based on a clinical study exposing a handful of people in a laboratory to ozone. Other studies showing effects only at higher levels were ignored and all studies had significant flaws.y 2.15 This discussion shows that while ambient standards may be useful as guideposts for policymakers, they can be misleading when they are viewed as targets or goals around which to design environmental policies. There is little theoretical justification for the existence of thresholds for most, if not all, pollutants. Any reduction in pollution concentrations is likely to have some benefits, irrespective of what ambient concentrations are. Thus, setting standards is a judgment call, informed by science but influenced by practical cons4derations. While comparing ambient pollutant concentrations to these standards may be a useful device for mobilizing actions to reduce pollution, it cannot substitute for careful analysis of tradeoffs, and may divert attention from the need for such analyses. 2f When linear dose-response functions are tested against threshold or other non- linear models for pollutant-health effect linkages, the linear model is generally found to be superior to the other specifications. In other words, the most reasonable shape for health damage functions appears to be that they are linear and have no intercept term. ' See Landy et al, (1990). Practical considerations clearly entered into the assumption of thresholds in the standard setting process. For instance, Senator Muskie, one of the primary architects of the U.S. Clean Air Act, said: "There was no other way [to set the NAAQS than to use a threshold model] .... The statute clearly prohibits the use of economic considerations in the setting of health standards.... We couldn't use a technology handle... .we had to find a threshold. Even with practically minimal emissions there are health effects to someone.... It may be an oversimplification." - 19 - 2.16 Moreover, reducing any pollutant will involve economic costs. The policy objective, from an efficiency perspective, is to balance these costs at the margin with the incremental benefits of reducing ambient concentration of pollutants so as to maximize social benefits. Since such detailed social cost- benefit analyses will in practice be imperfect due to data and methodological gaps, they should be supplemented in the priority-setting exercise w.i.th estimates of physical impacts as well as comparisons of actual pollutant concentrations with various standards. This is the approach followed in this chapter. C. Trends in Urban Environmental Oualitv 2.17 The first step in evaluating the external damages associated with economic activity in the BMN and surrounding areas is to analyze the trends in environmental quality, by pollutant and by environmental medium. For air and water pollution, the monitoring network is also described and evaluated. Where amnbient data do not exist, emissions or other information is substituted to draw inferences about impacts. Despite the previous arguments for skepticism regarding ambient standards, the analysis here is structured around comparisons of ambient conditions with standards because the standard-setting approach remains influential. Air Pollution Trends 2.18 This section assesses the historical trends in ambient air pollution in Bangkok. In the case of lead, additional information on blood lead levels is provided. Ambient air in Bangkok has been monitored continuously since at least 1978, under the WHO's Global Environmental Monitoring System (GEMS) program. The Ministry of Public Health (MOPE) is responsible for administering this program, maintaining the hardware, and analyzing the data. More recently, the ONEB and its successor, the Department of Pollution Control (DPC), in the Ministry of Science, Technology and Environment (MOSTE) has set up its own monitoring activities. Monitorinq Network 2.19 The MOPH and DPC systems run completely separately from one another, following different monitoring protocols and, for some pollutants, using different mo:itoring techniques. Figure 2.2 provides a map locating the DPC monitors within the SMR. The BMA is well covered with monitors, while the five surrounding provinces are not. MOPE and DPC monitors are generally located close to one another. 2.20 DPC operates 8 permanent monitors located throughout the city, and about 50 meters from roads, plus curbside monitors located 3 meters from roads. The permanent monitors measure some or all of the following air pollutants: total suspended particulates (SPM), carbon monoxide (CO), lead (Pb), nitrogen dioxide (NO1), sulfur diox.de (SO2), and ozone. The curbside monitors are particularly important for measuring CO concentrations, which are primarily from gasoline vehicles and tend to disperse very quickly. As they are located below Legend Ambient Air Monitoring Stations 0 1. DPC * ~~~~~2. Chankasenm Teachet's college 43. Ban Somdet Teacher's college 4. Rat Burana Post Office * ~~~~~5. Queen Saowabha Memoreftat Institute 6. The Meteorological Department. Sukhumvit Road 7. The Meteorological Department, Bangna Office S. EGAT Power Plant, Samut Prakan 9. Mineral Delpartment Otlice. Samnut Piakan 20. Samut Prak~an Provincial Office Curbside Monitoring Stations ) 1.Chulalongkorn Unitversity ,i4~~ ..t~ 2. Ministiy of Science. Technvology and tinvironmenr 3. Department of Land Tiansport A ~~~~~~~~~~~~~~~~~~~~4. Odean Circle .T~~~~~~ igure 2.2 Ttelcto of p)orfllanfeflt amibietit airqatymnorgsatosiBngk - 21 - head height, however, they may be picking up more road dust than actually gets entrained in air (thereby overestimating TSP concentrations at head height). The curbside monitors measure only TSP, CO, and Pb. The MOPS monitors follow WHO protocols, locating permanent monitors 10 meters from a road in a residential area, an industrial area, and a commercial area. Daily readings are taken of SPM, Pb, NO2, and 802. 2.21 ReliabilitY of monitoring data. The quality of monitoring data depends partly on the techniques being used and partly on the skill of the technicians. SPM and CO concentrations are easy to measure, while ozone measurement is more difficult. Measuring lead in the air has been a particular problem, in part, because of the complexity and sensitivity of the monitoring equipment. The MOPE stations use cruder methods for measuring NOx and SOx than those used by DPC. Nevertheless, it is possible that the less sophisticated MOPH approach may be providing more reliable data than those of the DPC. The problem is that the more sophisticated and accurate measurement methods used by DPC demand high quality, well trained technicians. But high turnover rates have been a major problem at the DPC. Government salaries are low compared to those in the private sector and new arrivals to the government quickly can be bid away once they obtain some experience. This leads to shortages of staff. While the governmnt is increasing appropriations for additional staff, the low salaries are likely to keep turnover high, assuming the positions can even be filled by quality people. Such personnel problems have contributed, for instance, to the intermittent operation of a set of sophisticated network of five air pollution monitoring stations built with Japanese financing in Samut Prakan. Ambient Standards 2.22 Thailand's ambient air quality standards and measurement methods compared to standards of the U.S. are shown in Table 2.1.1' This table shows that the Thai standards generally are written for the same averaging times as those in the U.S., and are somewhat weaker. Exceptions in averaging times include the lead standard (quarterly for the U.S., 24-hour maximum for Thailand) and NOx (1-hour average for Thailand and annual average for the U.S.). For the latter pollutant, the U.S. has been debating the development of a short-term NOx standard for many years. Note, also, that the U.S. used to have a SPM standard (which would have been tighter than the Thai standard), but has changed this to a PM-10 standard in light of scientific evidence on the role played by finer particles on health. Finally, note that the U.S. has a weaker ozone standard than Thailand.9 1 These standards are reviewed in domtail in Ballofet and Associates (1993). That report also proposes a set of incerim ambient standards. A process for developing longer-term standards specific to Thailand is also proposed, which takes account of many of the considerations discussed above in Section B. Y USEPA is very explicit about the short-term (24-hour, 8-hour, and 1-hour) standards, usually noting that an area exceeding one of these standards for more than a day during the year is in violation of the standards (or, in the case of ozone, for more than 3 days in a 4 year period). Further, ambient air quality - 22 - Table 2.1s National Aiblent Air Quality Standards (Mg/M3) Thailand United States Averaging Averaging Pollutant Time Concentration Time Concentration TSP 24-hour average 0.330 0.260b annual average 0.1008 0.075b PM-10 24-hour aver- 0.150 aged annual aver- 0.050 age CO 1-hour average 50 1-hour maxe 40 8-hour average 20 8-hour max 10 Pb 24-hour average 0.01 quarterly 0.0015 average 8C0 24-hour average 0.30 24-hour aver- 0.365 age annual average 0.10 annual aver- 0.08 age NO2 1-hour average 0.32 annual aver- 0.10 age Ozone 1-hour average 0.20 1-hour avera- 0.235 gee a. GeometrRc mean. b. TSP was the indicator pollutant for the particulate matter until 1987. c. Maximum standards are not to be exceeded more than once per year or, in the case of ozone, more than three times (days) over a four year period. d. Not to be exceeded for more than one day per year. e. Daily maximum. f. TSP measured by gravimetric methods; Co measured by non-dispersive infrared detection; lead measured by wet ashing; 802 measured by pararosaniline; N02 measured by gas phase chemiluminescence; ozone measured by chemilumines- cence. data are generally presented in reports in a form appropriate to the standards. For C0, for example, this means presentation of data on the number of days that the 1-hour maximum or 8-hour maximum standard is exceeded by a given city. The Thai data are not explicit on this point; indeed, as air quality is not presented in terms of number of days that a standard is exceeded at a given monitor or for a given city, it is impossible to obtain a sense of how bad the air is relative to the standard benchmarks. For comparison to EPA standards, we assume that the Thai ambient air quality standards for 24-hour, 8-hour, and 1-hour Uaverages" are daily maximum standards not to be exceeded more than once per year. - 23 - Susnended Particulate Matter (SPM) 2.23 There are many different measurements for particulates, most based on particle size. The SPM measure used by both MOPE and DPC is the most inclusive, covering all particle sizes. Other measures, such as PM-10, cover just the fine particles (10 microns or less in diameter) or even smaller particles that are thought to penetrate more deeply into the lung and therefore be the more injurious to health. Yet, larger particles can be irritating to the eyes and mucous membranes of the nose and throat, still causing discomfort and perhaps other health problems.1' 2.24 National ambient air quality standards for SPM are 0.33 mg/m3 and 0.10 mg/m3 for a 24 hour average and annual average respectively. Figure 2.3 provides data on 24-hour averages for 1983-92, for six DPC permanent stations.1 Table A.2.1 in Annex 11.1 provides more detail on 1991 concentrations for the DPC stations. Figure A.2.1 in the Annex provides curbside readings. Figure 2. 3 Figure 2.3: SPM Concentrations at DPC's Six Permanent Stations 00.22 I0.2- 10.18- 0.16- g0.06 1983198418851988198719B81989199I1901 1992 -in- GI 4-11 hnomm -i- - IW~F= I It should also be noted that the SPM and PM-lO measures make no distinction about the composition of particles. Some particles are carcinogenic; others are acidic or are irritants. V However, these are anual averages of 24-hour average readings, and cannot, therefore, be compared to the 24 hour ambient standard. - 24 - 2.25 The most striking trend in Figure 2.3 is the continuously rising concentrations of particulates at the DPC permanent stations. In addition, Thai annual standards are being violated at every station in every year since 1988. Sven though the highest annual average readings of 0.22 mg/m3 at the ONE0 site were attributable to construction activity, these are shockingly high readings. The situation is even worse on many days. Annex Table A.2.1 shows that the worst days at OBB have concentrations averaging 0.5 mg/m3 and more. 2.26 The curbside monitoring data graphed in the Annex indicates what people walking on the street are exposed to. At 2 monitors, (Mansri Bamrunghuang and Yaowaraj) in 1991, maximum readings of 1.0 mg/m3 (3 times the Thai 24-hour standard) were registered, although as noted above, much of this may be heavier particles representing road dust. Most seriously, min SPM readings at 3 of the 9 curbside monitors exceeded the standards, implying that the Thai standard was violated every day in 1991.2' 2.27 Information on particle sizes is important because the finer particles are thought to penetrate more deeply into the lung. tlnfortunately, neither the DPC nor MOPH stations provide this information. Some recent information is available, however, from other sources. Readings from five monitoring stations in Samut Prakan established with Japanese funding were taken on three separate occasions in 1989. Taking the average share of each size category from each monitor, only 13 percent of the total 8PM concentration is composed of particles exceeding a diameter of 11 microns. This percentage gets no higher than 22.S and no lower than 7.5. The particles of most concern, (i.e., those under 3.3 microns), average 50 percent of the total TSP concentration. Recent data from DPC monitors in the EMR show that particles less than 10 microns in diameter (P110) accounted for about two-thirds of total TSP concentrations.-a In contrast, the rule of thumb in the U.S. is to assume that 40-45 percent of SPM concentrations exceed 10 microns. It is clear that fine particles make up more of the particulate mix in the BMR than in the typical U.S. city. To check whether these proportions are representative of the Bangkok region requires the capability to monitor PM10 concentrations continuously at a few stations. Lead 2.28 The national daily standard is 10 microgram/cml. Thailand doesn't have an annual lead standard, so no comparison of average annual lead levels is meaningful, except to note that, significant reductions in concentrations were observed during 1991 at all DPC permanent monitors (Figure 2.4). Additional, but sparse data are also available from the three MOPE monitors. X Note however that the location of these curbside monitors is not fixed with monitoring carried out for 2 to 4 weeks at a particular location. 1P Siriawasdi (1992). - 25 - Figure 2. 4 Figure 2.4 9 Lead Concentration in Ambient Air at Monitoring Stations of DPC X 0 8 0.7. 0.6- 0.5 ~0.4- 0.3 60.2- 0 E 1983 1984 1985 1986 1987 1988 19B9 1990 1991 L C Z~~~ OM + hw Kn BomOmd4 30ure: DPC -L o--E3-ukwI -mSa,tU 5 -Rabu 2.29 The curbside monitoring data (Annex Figure A.2.2) are more meaningful for comparing to the standard, since they provide ranges for daily averages. Again, concentrations are low at the nine monitors that have continuous data for several years, with minima and maxima around 0.5 and 3 ug/m3, respectively in 1991, and the overall maximum curbside lead level of 4.25 ug/m3 found at Pratoonam Rachaprarop, almost half the Thai standard. There is even better news for lead in 1992. Lead concentrations for the first three months of 1992, which is after the low leaded and unleaded gasoline was introduced were far lower than those of the corresponding months in 1991, before the low lead fuel was introduced.W The benefits to air quality from reducing lead in gasoline were thus, sizable and immediate. 2.30 In spite of this improvement, there is still cause for concern. Despite ambient lead levels never being particularly high in Bangkok, blood lead Wu See, Supat (1992). The MOPE monitoring data for 1992 are too limited to either support or contradict this trend reliably. - 26 - levels of children and adults are among the highest in the world. For instance, while the U.S. Centers for Disease Control has set 10 ug/dl blood and 25 to 40 ug/dl as the action leve's for blood lead in children and adults respectively, the blood lead content of workers in various occupations in Bangkok and the North and Northeast was 31.9 +/- 15.6 ug/dl. Also, the blood lead concentrations of a sample of industrial workers in Bangkok was 22.17 +/- 10.51 ug/dl according to the last comprehensive study in 1979. Lead in the hair of Bangkok residents has been found to be over four times greater than that in rural Thais. Finally, and most disturbingly, a study at the Siriraj Hospital during 1989-90 found that 82 newborn infants had average lead concentrations of approximately 18.5 micro- gram/dl. This study also compared lead levels in children in Bangkok and Ranjanaburi (in the Western region), and found that children of ages 6-13 years in Bangkok had a higher lead level (22.0 +/- 7.5 microgram/dl) than those in Ranjanaburi. 2.31 It is tempting to infer from the high blood lead levels and low ambient air lead levels that emissions into air are not an important pathway for exposure. However, experience elsewhere indicates that such an inference would be mistaken. EPA (1985) found a startlingly close relationship between weekly gasoline sales and blood lead levels in children in the U.S. before unleaded gasoline was introduced. At the same time, U.S. ambient lead levels averaged around 0.5 ug/m3 quarterly average, well under the U.S. standard of 1.5 ug/m3, with no quarter exceeding 1.2 ug/m3. Because quarterly average readings will be far less than daily readings, U.S. ambient lead levels at that time were likely comparable to those currently experienced in Bangkok. In sum, ambient air lead concentrations appear to be a poor proxy for the blood lead levels and the consequent health impacts.' Therefore, it cannot be ruled out that lead emissions into air are a significant source of exposure in Bangkok. Carbon- Monoxide 2.32 Thailand's ambient air quality standards for Co are 20 mg/m3 for an S-hour average, and 50 mg/m3 for a 1-hour average. Trends in CO concentrations in the BMR are shown in Figure 2.5, in terms of the average of daily one-hour mean values for 1983-92, for six DPC permanent stations. Annex Table A.2.2 provides more detail on 1991 concentrations for the stations, and Annex Figure A.2.3 provides average minimum and maximum 1-hour average CO concentra- tions for the curbside monitors. W There are also serious questions as to whether measurements of blood lead levels in Bangkok are accurate. A leading Thai researcher performed a test of laboratory quality in Thailand by sending the same blood lead samples to two laboratories in Thailand and one in the U.S. The results across the laboratories were uncorrelatedi It is believed that the main problem is a lack of quality control for laboratories in Thailand. - 27 - Figure 2. 5 Figure 2.5 Carbon Monoxide Concentration at Permanent Stations of DPC -6 4.5 .4 3.5- 2 2.5 2 '-.1.5 0 - g ~1984 i985 1986 1987 i9898 1989 1990 1991 1992 Sourceg DPC ONE C erkosem -'nsomdej monitoring dafa. - Sanwit -*- Potburoo n9ow 1 2.33 The most striking trend in Figure 2.5 is the recent fall in CO concentrations at all sites. From the detailed data shown in Annex Table A.2.2, however, this decline can be questioned. The detailed monthly 1991 data show that some monitors are sometimes m3pzing data for the high pollution months of November and December.1O' Without more information on missing values for the earlier years, it is risky to draw conclusions. At the same time, note that monitors at Bansomdej and Ratburana have complete data for 1991 and even these show significant declines in CO. Given the significance of vehicles in creating CO and the rise in vehicle ownership and use (see Chapter IV), these results are difficult to explain. Unfortunately, MOPH stations do not monitor CO so these results cannot be corroborated. The curbside monitoring data graphed in Annex Figure A.2.3 generally, but not uniformly, bear out this recent decline, although 1990 showed high concentrations at some stations, while 1991 showed increases at others. 2.34 Referring to the concentrations themselves rather than their trend, the averages are very low, far below even EPA standards. The data on ranges of 1-hour concentrations must be considered too, however, since they indicate Z CO concentrations are expected to be highest in the coolest months of November and December, which they are. - 28 - whether the standards are exceeded on any days. In fact, the standards were not exceeded on any days in 1991 at the permanent stations, although one of the curbside stations registered at least one exceedance compared to both the EPA and Thai standards. In addition, the Annex figure shows more significant exceedances and at more stations in earlier years. Sulfur Dioxide 2.35 Thailand's 802 standards are 0.3 mg/m3 over 24-hours and 0.10 mg/m3 average (geometric mean) over the year. Table 2.2 shows the available data from DPC and MOPH monitoring stations. The DPC monitor at ONEB reveals that monthly 24-hour averages increased strikingly in 1989 over 1908, but that in 1990 and 1991 there was no discernible pattern relative to 1989. The other DPC monitor departs even from this pattern in 1988 to 1989 for the 2 months of data. Annual average readings from the one MOPH station in operation for more than a year show declining concentrations from 1987 to 1990. In any event, referring to the maximum concentrations between 1989 and 1991, they never approach the Thai or U.S. standards. Still, with so few monitors, and given the difficulties of measuring Soi, better monitoring is required before one can rule out concern about this pollutant.-L Iq A similar conclusion also emerges from Monenco AGRA (1993), which examined options for reducing SO2 emissions in Phra Pradaeng in South Bangkok. This study used plume dispersion modelling techniques to predict S02 concentrations based on emissions from the South Bangkok power plant and large industrial point sources, all of which use fuel oil. The predicted maximum hourly and daily average concentrations were found to be significantly higher than the correspond- ing observed maxi concentrations, although the predicted averaae daily and annual concentrations were more in line with the observed averace concentrations. 7he study used the high predicted maxi concentrations to argue for urgent actions to reduce S02 emissions in this area. However, as noted in Section B below, the large divergences between the predicted and observed concentrations argue strongly for improving ambient monitoring networks and data before taking stringent action. - 29 - Table 2.2. 802 Coneentratlon In Abient Air at .anit@rIng Statiorns milligram/cubiamstor (24-hour average) STATION 1987 1988 1989 1990 1991 ONEB 0.015 0.033 0.026 0.034' Ratburana 0.312b 0.0166 0.079d Samrong -- 0.011 Ladprao - - 0.011 - Payathai 0.016 0.013 0.013 0.012 a. Seven-month average for January-July 1991. b. Six-month average for July-December 1988. c. Three-month average: May, November and December 1989. d. Six-month average: Jan-Feb, May-jun, Nov-Dec 1990. * ONES Standard 24-hour average: 0.30 mg/cu.m. Source: DPC and MOPH monitoring data. Nitrocoen Dloxide 2.36 The Thai ambient standard for NO2 is 0.32 mg/m3 daily one-hour maximum. Table 2.3 shows the NO, monitoring data from DPC and MOPE. The DPC data show an increasing trend in N02 concentrations from 1987 to 1989 and the beginning of 1990 and wide month-to-month differences. Maximum levels are still significantly below standards, however. - 30 - Table 2.3s X02 Omcontration in Ambient Air at Monitoring Stations Milligram/cubicmeter (1 hour average) STATIAON 1987 1988 1989 1990 OcEB O.0o11 0.018 0.018 0.0261 Saowabha 0.0260 0.049d Cbankasem 0.034" Samrong - - 0.020 0.0220 Ladprao 0.031 0.034 0.029 0.030 a. Ten-month average, March-Dec. 1987. b. Six-month average, Jan. - June 1990. c. six-month average, July-Dec. 1988. d. Ten-month average, Jan. - May; July - Dec. 1989. e. Right-month average, May-Dec. 1990. * MNM Standard 1-hour average: 0.32 mg/cu.m. Source: DPC and MOPH monitoring data. 2zom 2.37 The Thai ambient standard for ozone is 0.2 mg/m3 daily one-hour maximum. As shown in Table 2.4, ozone concentrations are far below the standards, although the highest concentrations in 1990 were significantly above those in 1989 with the all-time daily maximum being 0.158 mg/m3. The paucity of ozone monitors in the area are a concern. However, a bigger concern is that ozone is being formed downwind of Bangkok and is not being monitored. An on- going study aims to address this concern by setting up a special ozone monitoring station 10 km. downwind from Bangkok. Its initial findings reveal that ozone levels at that location are ino greater than in the city (about 0.05 mg/m3).Ls 1 Dr. Wompong Limpaseni, personal communication. - 31 - Table 2.4: Ozone Concentration in Ambient Air at Monitoring Stations Milligram/cubicm.ter (One Hour Average) 1989 ONEU SAOWABHA 1990 oIE CNAhT.ASE January 0.02 January 0.009 February 0.02 February 0.004 March 0.02 March 0.008 0.012 April 0.02 April 0.024 0.010 May 0.01 May O.00s June 0.01 June 0.017 0.005 July 0.01 0.01 July 0.004 August 0.00 0.01 August 0.003 September 0.01 0.01 September 0.002 October 0.01 0.01 October 0.010 November 0.01 0.01 November 0.010 December 0.01 0.01 December 0.016 ONEB Standard 1-hour Average : 0.20 mg/cu.m Source: DPC monitoring data. AirE Toxics 2.38 Other air pollutants such as benzene, cadmium, and some diesel particulates can also cause health damage. Since no ambient monitoring of these pollutants is done in Bangkok or for that matter in most industrial countries, trends in these cannot be reported. In estimating the health impacts of these pollutants in the next section, it is therefore necessary to estimate emissions and ambient concentrations, as was done in USAID (1990).-W Those estimates indicated that the predicted ambient concentrations of benzene, butadiene, ethylene and formaldehyde were the highest. N See USAID (1990), pp. A-14 to A-18. Emissions of toxic air pollutants were calculated only for mobile sources by combining emissions factors from USEPA with estimates of vehicle kilometers travelled (VKTs) for different types of vehicles. Ambient concentrations were then estimated from these emissions figures using a uniform air dispersion model. - 32 - Noise 2.39 Noise levels between 1985-90 at 6 curbside sites on high traffic roads in Bangkok are shown in Figure 2.6. The 24-hour average readings range from about 78 to about 100 dB(A). These can be compared to EPA's standard for long- term hearing protection of 70 dB(A). Since the measurement of noise levels is on a log scale, the exceedances are significant. However, the figure also shows that average noise levels have not increased over time, and in some locations appear somewhat lower than in 1985-86. Figure 2.6 Roadside Noise Levels In Bangkok 140 lwpt Vl Mrww 199 *s MM *N *s7 a SEM I9 MM I Source: DPC monitoring data. 2.40 But these data, referring only to 24-hour averages, only show a part of the picture. Short-term noise levels are likely to be much higher than these levels. The preponderance of motorcycles in Bangkok traffic is a major cause. it has been estimated, for instance, that a single motorcycle was found to create noise levels of abaut SS dB(A) with variation depending on speed and distance. HeRme, the noise levels at most major traffic intersections with SO to 100 motorcycles would be far higher. - 33 - Water oualitv Trends Surface Water 2.41 Monitoring network. As wich air quality, DPC and MOPH are involled in monitoring the quality of surface water in the BMR. Such monitoring is concentrated along the four major rivers--the Chao Phraya, Tha Chin, Mae Klong, and Bang Pakong. Water quality along the Chao Phraya is monitored by MOPH from its mouth to 340 kilometers upstream at 26 monitoring stations. In addition, OEB operates 17 monitoring stations along the Chao Phraya, 28 along the Tha Chin, 10 on the Mae Klong, and 5 on the Bang Pakong. The most complete data, discussed below, are those for the Chao Phraya. The Metropolitan Waterworks Authority (MWA), which provides water to the BMA, also monitors water quality on the Chao Phraya at its intake (north of Bangkok') as well at its treatment plants. These data are also discussed below. 2.42 The MOPH monitoring stations sample for up to 43 parameters. However, it appears from the monitoring results that only the "most important" parameters are reported. These parameters may include BOD, DO, total and fecal coliform, ammonia, and heavy metals. The frequency and timing (e.g., low flow and seasonality) of sampling is performed in accordance with the procedures prescribed by DPC. 2.43 Ambient standards. Quality standards for surface water have been set for some 26 surface water pollutants, including the conventional physical and biological parameters (e.g., DO, BOD, pH, temperature, total and fecal coliform), organic compounds, heavy metals, radioactive substances, pesticides, and other toxic substances. The standards are based on a beneficial use classification of surface waters into five classes defined by the first set of parameters (Annex 11.2). As shown in that Annex, a river reach does not need to attain the standards of a class all of the time to be categorized in that class. For DO, only 20 percent of the samples collected must meet the prescribed limit, while for BOD and coliform, 80 percent of the samples collected must be at or under the standard for a given class for the reach to be classified in this class. At present, only the four major rivers--those that flow through the BMR--have been classified in this manner. 2.44 Trends. From the MOPH monitoring data, it appears that the quality of the Chao Phraya has been steadily deteriorating over time, according to the five-level classification s-stem. Referring to Table 2.5, in 1988, 9 percent of the stations were rated a five, 43 percent were rated a 4, and 17 percent were rated a 2. In 1992, 43 percent of the stations were rated a 5, 46 percent were rated a 4 and none were rated a 2.-O' Moreover, the 1992 data show that only one station met the designated class for its part of the river. The other areas were i1 The extent of the deterioration may be exaggerated somewhat because data for three stations which were rated a 5 in 1990 were missing in the 1989 report. Therefore, about 19% of the stations in 1989 may have been classified in class S. - 34 - from one to three classes below the designated class, with additional water quality problems in some stations concerning lead, chromium, ammonia nitrogen, and nitrates. In particular, standards for all of the above are exceeded from Bangkok to the mouth of the Chao Phraya, with zinc and ammonia standards exceeded just above Bangkok. In the middle Chao Phraya where Bangkok gets its drinking water, none of these standards are violated. In the upper Chao Phraya, heavy metals and ammonia are again found to exceed their standards in some industrial locations. Table 2.5s Water Quality Classification Trends on Chao Phraya Number of Stations Quality Designated Class Actual Class Class 1992 1989 1990 1991 1992 s 2 5 6 11 4 7 10 6 9 12 3 6 7 4 5 4 2 14 4 9 5 - Total 27 23 24 25 27 Source: MOPH monitoring data. 2.45 These data suggest that non-biological pollution of the Chao Phraya above Bangkok by industry is more a hot spot problem than a generalized one. However, from Bangkok to the mouth of the river, heavy metal and ammonia loads are already high and require better monitoring. Of more immediate importance in gauging the health benefits of improving water quality in the river are: (i) estimates of water quality as it enters and leaves the water treatment plants, which provide 85 percent of Bangkok residents with drinking water; and (ii) estimates of water quality in the Bangkok area of the river, which would affect the 15 percent of residents without tap water and any residents exposed to river water during flooding. 2.46 Data on raw water quality entering and leaving the treatment plants supplying drinking water to Bangkok are provided in Tables 2.6 and 2.7. For intake water, the standards are those associated with class 3 water. For water flowing from the plant, the standards are for drinking water. Considering the raw water quality at the plants in 1992, coliform counts are clearly in excess of standards as expected, and standards for lead are violated at least on one sampling period at one of the two plants. Not all water quality parameters are reported, however. Readings for many heavy metals and other toxic substances such as copper, nickel, cadmium, chromium, and arsenic, are missing. - 35 - Table 2.6s Rat Water Quality - MmA Treatmnt Plants (1992) Bangkhen Samean Parameter Uni t lMax. Min. Max. Kin. Standard (Max.) Color Pt-Co 17.0 6.0 18.0 5.0 pH pH Units 7.81 7.15 8.0 6.6 5.0-8.0 Total Solid mg/i 854 165 258 150 -- Dissolved Oxygen mg/i 6.0 3.8 6.9 4.5 4.0 Free Chlorine mg/i 3.2 0.5 2.8 0.3 2.0 Nitrate mg/l 2.0 0.0 0.5 0.0 5.0 Manganese mg/l 0.9 0.1 0.2 0.01 1.0 Lead mg/l 0.7 0.01 0.03 0.01 0.06 Coliform Colonies/ Bacteria 100 ml. 235,000 13,000 82,000 10,000 20,000 Fecal coliform Colonies/ Bacteria 100 ml. 1,880 600 2,460 220 4,000 Source: Metropolitan Waterworks Authority, Water Quality Control Division. 2.47 Table 2.7 provides data on finished water quality in 1992. As expected, the treatment process drastically reduces or eliminates bacteria (at the cost of a chlorine odor) and has some effect in reducing lead, awmonia, and other substances. Turbidity and pH appear to present some problems, as also might be expected. But health is not at risk if these quality indicators are maintained at the top. Tale 2.7: Flnidhed Iter Owlity - MA Tre.tn Pltans (1992) BSakhen Samson Thonburi Standard (Max.) Paraseter Unit Wax. Nin. ax. Min. Min. Wax. Acceptable Allowable Color Pt-Co 5 0 4 0 4 0 5 15 pR pH Units 7.4 6.9 14.2 8.6 7.7 7.1 6.5-85 .°.2 Total Solid mg/l 270 126 326 124 914 136 500 1500 Free Chlorine ng/l 1.5 0.7 1.5 0.5 1.8 0.8 - Nitrate ns/t 0.5 0.0 0.5 0.01 0.8 0.01 10 10 Wangenese gu/l 0.02 0.0 0.02 0.0 0.06 0.0 0.3 0.5 L*ad au/I 0.02 0.02 0.02 0.0 - - 0.05 0.05 0 Colifors Colonies/ Bacteria 100 mt. 0.0 0.0 0.0 0.0 0.0 0.0 c2.2 '2.2 Fcacl Coliform Colonies/ Bacteria 100 al. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Source: Metropolitan Waterworks Authority, Water Matlity Control Division. - 36 - 2.48 Evaluation of water monitoring. The practice of reporting only the "most important" pollutants is problematic because what is "important" is not defined and apparently varies from year to year and station to station making it difficult to track readings for particular pollutants over time. Further, it is unclear what averaging time is being used for the monitoring data that are reported, i.e., whether these are averages of samples, maximum values, or some other measure. Indeed, about the only comprehensive means of tracking pollutants is to use the "class" designation given to each station area each year. Finally, there is little monitoring of heavy metals downstream from Bangkok. Groundwater 2.49 Groundwater quality data from a sample of wells in 6 provinces surrounding Bangkok was used in USAID (1990) to characterize the quality of Bangkok's groundwater. These data (some of which are reproduced in Table 2.8) were used in estimating health risks to the approximately quarter of Bangkok's population who use groundwater for drinking. This analysis found that for the contaminants that were measured, the levels of all measured contaminants (which however excluded pesticides and other carcinogens) were low enough that the exposure from drinking groundwater was less than the reference doses.W The other problem in Bangkok is land subsidence from excessive withdrawals of groundwater. According to some estimates, land in and around Bangkok has subsided 50-60 centimeters in the last 20 to 25 years, with some areas subsiding at the rate of 14 cm. annually. II' The reference dose for a pollutant assumes the existence of threshold effects. It is defined by the USEPA as the level of exposure (or dose) of a pollutant below which adverse health effects are not likely to be observed. - 37 - Table 2.6s Groundwater Water QualLty Data -- 1989 Parameter Unite Average Quality Thai Groundwater Stadardsb pH pH Units 7.00 7.0-8.5 Color Color Units 15.00 s.0 Copper mg/l 0.00 1.0 Zinc mg/l 0.32 5.0 Lead mg/i 0.02 none Cadmium mg/l 0.00 none Chlorine mg/l 37.00 200.0 Nitrates mg/i 1.30 45.0 a. Average of three wells at sites within 100 kilometers from Bangkok. b. Standards for drinking purposes from ONES (1989). Source: USAID (1990), Table B-8. Solid and hazardous waste aeneration 2.50 Solid wastes, both industrial and residential, are among the fastest growing environmental problems in Thailand. Moreover, the generation of solid wastes rises with increasing affluence.W Improper disposal of solid wastes can result in air pollution, surface and groundwater pollution and pose health risks to scavengers or others who live near dumps. Bangkok's solid household wastes are efficiently collected, with a figure of 85 percent usually cited for residential wastes collected daily. However, this collection rate has recently fallen to 60 percent because the amount of solid wastes being generated has grown rapidly. Much of the remaining wastes are probably dumped illegally. 2.51 Even the solid wastes that are collected are ineffectively handled, being put either in open dumps or composed (10 percent), while open dumping and burning is common in provinces outside Bangkok. Nightsoil is also collected for a fee, with an estimate (USAID, p D-14) that 80 percent of the population disposes Qf it illegally. On the part of industry, the generation and improper disposal of toxic and hazardous wastes are a particular problem. It is estimated that 1,000 industrial plants discharge over 360,000 tons of hazardous wastes yearly in Thailand. In Bangkok, the disposal of heavy metal sludges and solids from smelting activity probably poses the highest risk to public health (USAID, D-S) and represent by far the largest quantities of hazardous wastes (See Chapter V). Nevertheless, risks to groundwater from such dumping may be small because e See World Bank (1992c), Figure 4, p. 11. - 38 - the Bangkok area is predominantly built on clay, which protects the water from contaminant infiltration. 2.52 A related problem is the inadequate attention given to separating infectious hospital wastes from other solid wastes, and treating these separately. A study of 45 hospitals in Bangkok showed that they generate 5 kg of infectious and non-infectious wastes per bed per day and that only 15 percent of these wastes was being incinerated. Concrestion trends 2.53 As is well known, congestion in the BMR, and particularly in the central business district is chronic. Moreover, given the increase in vehicle population over the last decade, congestion has likely worsened. Average rush hour speeds for private cars in the downtown area of Bangkok are now estimated at about 9.5 km/hr for cars and about 11 to 12 km/hr for buses. Moreover, estimates of average traffic speeds at four downtown Bangkok locations showed a significant fall in average speeds for cars between December 1991 and June 1992 from 14 to 9.5 km. /hr. Part of this decrease is attributable to the increase in road construction at some locations. However, the increase in the number of vehicles is clearly a factor. Average speeds fell at all four locations even though construction directly affected only two of them.& Further, congested periods on major roads now last longer and extend over a larger part of the city. D. Estimation of Environmental Impacts and Valuation of Benefits Health imnacts and benefits 2.54 Anvroach. Reductions in ambient concentrations achieved through lower emissions would reduce exposure of the population to pollutants. Reduced exposure will decrease acute and chronic health effects, reduce premature mortality and mean that fewer medical services are needed. Those who benefit from these changes in ambient conditions would be willing to pay for these health improvements and reduced medical outlays. This section presents estimates of the value of these benefits associated with the health improvements due to reduced concentrations of specific criteria air pollutants in Bangkok. 2.55 Two complementary approaches are used here in estimating the health impacts of pollution in the BMA and the two surrounding provinces of Samut Prakan and Nonthaburi. Where well-established relationships are available that link concentrations (or exposures) and health impacts (dose-response or concentration- response functions), these can be combined with the ambient or emissions data summarized in the previous section to derive estimates of mortality and morbidity effects. For Bangkok, this is possible for some criteria air pollutants (SPM, lead, S02 and ozone), for toxic air pollutants, for groundwater contamination with toxics, and for solid hazardous wastes. Where dose-response relationships ' These data were collected by the Office of the Commission for the Management of Road Traffic (OCMRT). The four roads on which traffic speeds were measured are: Vibhavadi, Phetburi, Sukhumvit, and Taksin. - 39 - are not well established, as with water pollution with organic wasteP, and carbon monoxide, the approach adopted is to estimate the population at xisk. 2.56 For pollutants where dose-response functions can be used to estimate health impacts, a health benefits model (calibrated appropriately for Bangkok) is used to compute the economic value of the resulting mortality and morbidity effects. When aggregated, these estimates indicate the benefits of reducing each pollutant. The structure of the health benefits model, the baseline ambient concentrations, and the coefficients of the dose-response and valuation functions are all described in Annex 11.3. The differences in methodology between this exercise and earlier attempts to estimate health benefits for Bangkok are also discussed in that Annex. Estimated benefits of mortality and morbidity reductions 2.57 Selected criteria air pollutants. Health benefits were estimated for four criteria air pollutants--SPM (and its subset P4-10), 602, lead and ozone. These axe the pollutants for which dose-response functions are reasonably well- established in the epidemiological literature for industrial countries. While similar dose-response functions also exist for groundwater contamination and air toxics, no additional data for Bangkok are available beyond those used in USAID (1990). The results of that study are reported in this section but the impacts are not valued. 2.58 USAID (1990) represented an ambitious and comprehensive attempt to rank environmental health risks in Bangkok. However, its aim was to rank environmental problems in terms of the health risks that were posed and not to value the impacts themselves. The findings of that study were used in a later effort to value the health benefits associated with reducing SPM, Co and lead.W Annex 11.4 discusses some of the methodological differences between that approach and the estimation methods used here. Finally, the same health benefits model used here (with some differences noted in the Annex) has also been applied in estimating the benefits from reducing TSP, lead and No, in Jakarta.P 2.59 The health impacts and benefits are estimated for a 20 percent reduction in the ambient concentrations of each of the four pollutants--SPM, S60, lead, and ozone. Applying the methods described in Annex 11.3, Table 2.9 (a) - (d) provides the range and best estimates of the physical impacts associated with this scenario for each of the pollutants. 't See Shin et. al. (1992). W See Ostro (1992). - 40 - Table 2. 9 (a) t BDngkok - Morbidity and Mortality Associated wit.b 3P1 Estizted XIpacts of 20% Reduction La Ambient Concentrations Reduction in number of cases/year Health Xmpacts LOw Mid High Restricted Activity Days (RAD) 3,300,000 5,330,000 8,370,000 Emergency Room Visits (MRM) 3,120 34,600 66,100 Asthma Attacks (AA) 322,000 25,800,000 51,300,000 Chronic Bronchitis in Children (CCB) 863 78,600 156,000 Chronic Cough in Children (CCC) 537 90,700 181,000 Respiratory Hospital Admissions (RHA) 3,450 14,900 26,400 Respiratory Symptom Days (RSD) 159,000,000 200,000,000 251,000,000 Mortality Reductions Schwartz and Dockery (1991a)-SPM 152 405 658 Schwartz and Dockery (1991b)-SPM 459 761 1,060 Table 2.9(b)s Bangkok - Morbidity nnd Mortality Associated with Lead astiated mpacts of 20% Reduction In Ambient Concentrations ReJuctlon in number of cases/yea= Health mpacts Low Kid High Reduction in IQ Points in Children 16,000 26,700 37,400 Hypertension in Adult Males none given 9,500 none given Coronary Heart Disease Event in 10 yrs (CHD) none given 677 none given Mortality Reductions Neonatal Mortality none given 4.27 none given Adult Male Mortality (in 12 years) none given 846 none given Table 2. 9(c): Bangkok - Morbidity Asoaiated with Sulfur Dioxide Zatinated Xmpacts of 20% Reduction in Ambient Concentxation Reduction in number of cases/year Health Impacts Low Mid High Coughing by Children 15,900 152,000 288,000 Chest Discomfort in Adults 6,630 169,000 331,000 - 41 - Table 2.9(d): Bangkok - Morbidity Associated with Ozone Ustimated Impacts of 20% Reduction in Ambient Concentrations Reduction in number of cases/year Health Impacts Low Mid High Minor Respiratory-related Restricted Activity Days (MRRASDS) 32,400 239,000 489,000 Any Symptom-day (ASD) 762,000 1,930,000 3,090,000 Asthma Attacks (AA) 16,200 59,300 101,000 Eye Irritation Days (EI) 1,790,000 2,430,000 3,070,000 Coughing Days (CD) 436,000 1,060,000 1,700,000 Cough Incidents (CI) 5,110,000 8,830,000 13,000,000 Shortness of Breath (SB) 3,390,000 7,600,000 11,800,000 Discomfort in Chest (DC) 3,170,000 6,490,000' 9,940,000 Source: Staff estimates (Annex II.3). 2.60 For each pollutant, the values of these health benefits that accrue from a 20 percent reduction in ambient concentrations are shown in Table A.2.7 in Annex II.3 using the methods outlined there. The mid-points of these health benefits are summarized in Table 2.10. Table 2.10: Summary of the Range of Health Benefits of a 20 Percent Improvement in Air Quality In Bangkok. Health Benefits (1989 S) lTotal Pathway-Impact ($ million) Per Capita (O Particulates- Mortality 138-1,315 18 - 169 Particulates- Morbidity 302-309 39 - 40 Lead-Mortality 291-1,470 37 - 189 Lead-Morbidity 6-8 0.8 - 1 Sulfur Dioxide 0.2 c0.1 Morbidity Ozone-Morbidity 9-36 1 - 5 Total 746-3,138 96 - 402 a. For details of these estimates, see Annex II.3, Table A.2.7. Source: Staff estimates (Annex II.3). - 42 - 2.61 The ranges, even in the midpoints, of these benefit estimates points to the uncertainties inherent in the exercise. Therefore, these estimates should not be taken literally but rather as order-of-magnitude measures of the relative benefits from reducing concentrations of these pollutants. Despite these uncertainties, the striking feature about these estimates is that the highest benefits would arise from reductions in concentrations of SPM and lead. As shown in Annex Table A.II.7, even the low estimates of the benefits of reducing particulates and lead exceed the hiqh estimates of the benefits from reducing ambient S02 or ozone. The disparity in benefits reflects the much higher ambient levels of particulates and lead in the BMR relative to those of SO2 and ozone. Moreover, exposure to these levels of SPM and lead causes deaths which are obviously valued far higher than the illnesses that result from exposure to SO2 and ozone. 2.62 In interpreting these estimates, three features of the data and the estimation techniques are particularly relevant. These aspects point to some of the problems with the ambient data and with transferring the dose-response and valuation functions to Bangkok. First, although the dose-response functions used are recent and employ state-of-the-art statistical and survey techniques, they have been estimated for the U.S..R The most serious problem with applying these to Bangkok is that the epidemiological studies on which they are based are representative of the link between exposures and concentrations in the U.S. These studies link changes in ambient concentrations to health effects with an assumed link between the amount of a pollutant actually breathed by a person during a given period and its ambient concentration. To the extent that people actually breath more polluted air per period (the exposure or dose) in Bangkok, for given ambient concentrations of pollutants, these epidemiological studies would underestimate the relationship between concentration changes and health effects. There is good reason to expect that exposures to pollutants are higher in Bangkok because more people spend more time on the sidewalks and streets than in U.S. cities (particularly Los Angeles, where a number of the epidemiological studies are estimated). Further, more of the population lives in closer proximity to major traffic arteries. Finally, the less use of air conditioning and inferior housing mean that air diffusion from outside to indoors may be greater in Bangkok. 2.63 The problems in extrapolating dose-response functions are exacerbated by two other factors, which imply that the predicted health impacts would be underestimates. Average health status in Bangkok is lower than in the U.S. Less healthy persons are more susceptible to pollution-induced diseases because they are less able to fight them off. Therefore, a dose-response function estimated for Bangkok might be steeper than one estimated for the U.S.. And, there may be fewer attempts made in Bangkok than in the U.S. to avoid pollution, because fa) lower incomes in Bangkok would limit the more costly avoidance options; (b) there ' The only exception is the one that relates lead exposures to premature death from heart attack in adults. This relationship is the most questionable of those used here because it is the oldest. Unfortunately, no more recent study exists that quantifies this impact. Recognizing this uncertainty, Table 2.9 shows the mortality benefits of lead reductions with and without this effect. - 43 - is less education about the effects of air pollution on health; and (c) there are fewer and less publicized public warnings about high pollution episodes. 2.64 The second aspect of these estimates is that they exclude health impacts of air pollution that have been found in laboratory and toxicological research, but have not yet been reproduced in epidemiological studies. Note, for instance, that the effects of S0 on health are relatively small. This is a consequence of the prevailing view in the literature that particulate effects dominate those of SO2 directly on health, whenever the two pollutants are treated together in a statistical analysis. S02 does not appear to have much effect on health on its own, at the concentrations present in ambient air in most countries. The effects of SO2 on health through its transformation to acid aerosols cannot be ruled out, however, because these sulfates are counted as particulates. Thus, some fraction of the benefits from reducing particulates in Bangkok could probably be attributed to reductions in SO2 through associated reductions in sulfates. 2.65 In estimating the health impacts, the estimates here have used average air quality data and thus assumed no concentration thresholds below which pollutants are harmless. Had threshold effects been used, as is implicit when air quality standards are prescribed, benefits would have been lower. For ozone, in particular, if one believes that ozone concentration levels are as low as the limited data show and one believes in threshold effects at the standards, the benefits from further reductions would be close to zero. 2.66 Finally, two issues arise with the data used in deriving these estimates that may overestimate the health effects. One issue concerns the quality of ambient data. The ambient monitors are located primarily in dense downtown areas and therefore may overestimate concentrations (and therefore changes in concentrations) affecting people who live and work in outlying areas. This may be particularly true for SPM and lead, but is less significant for ozone concentrations, which, as secondary pollutants, are less sensitive to the location of emissions. The second data issue is with regard to work loss days (WLDs). Again, these have been derived for U.S. conditions. However, it is generally felt that absentee rates in Bangkok are lower than in the U.S. because of the greater penalties paid by workers for missed work in terms of reduced jib promotion possibilities and fewer days of paid sick leave. It may therefore be the case that the observed effect of pollution on WLDs would be less in Bangkok than in the U.S. Estimated Health Risks 2.67 Carbon Monoxide. CO affects health by combining with hemoglobin in the blood to form carboxyhemoglobin (COHb), which inhibits the ability of the blood to carry oxygen. High levels of COHb cause death through asphyxiation, while low levels can cause angina in persons with chronic cardiovascular disease. In the general public, COHb has been associated with an inability to concentrate and with headaches. Because there are no relationships in the literature relating CO to the probability of health effects, a quantitative analysis such as those appearing above cannot be performed. In its place, we follow USAID (which followed USEPA practice) in estimating the number of people at risk for - 44 - health effects, defining at risk as people in the target population who are exposed to concentrations of CO exceeding the US 8-hour standard of 0.10 mg/m3. This approach is equivalent to assuming that the dose-response function has a step at the U.S. standard, with health effects being zero below it and rising by some unknown amount above it.&V 2.68 The methodological,details of the approach used here, and its relation to the analysis in USAID (1990) are explained in Annex 11.4. The results here are strikingly different from those of USAID because more recent (1991) data are used (Table 2.11). No people are found to be at risk based on average CO readings, in contrast to the USAID finding that 270,000 people are at moderate risk and 1.3 million people at mild risk based on average readings. The same pattern is also found for worsta readings for people with heart disease, although the estimates for 1991 indicate that on the worst days, more of the general population was at mid risk than in 1988A U' Howeyer, this does not imply that the evidence supports such a step-shaped dose-response function regarding CO. The epidemiological evidence on the effects of Co has not been able to go beyond the risk assessments presented here. V Note that of the 6 monitors where 1991 data are not available, but which were in the USAID data set, 4 had average and worst day readings below the U.S. standard, I had the average below and the worst above, and 1 had both the average and the worst day above the U.S. standard. Of the 6 monitors included in both studies, the readings for these in the USAID data set were such that only 3 had both the average and the worst day readings below the standard, 2 had the average below and the worst day above, and 1 had both readings above the standard. Thus, excluding 6 monitors from the analysis should not have changed the comparability of the results, and may even have biased the results here upwards. - 45 - Table 2.11: Hsttasted ersoms at Risk from Curbeide Carbon bonozida Concetreations" (millions) Moderate Risk* Mild Riske Estimate - Povulation Averae Day Worst Day 'veraoa Day Worst Day USAID (1990) 5.724 0.20 0.934 0.50 2.335 (0.27)d (1.30)d (0-68)d (3.25)d Updated Estimate 7.8 0 0.104 0 5.2 Notes: a. Target population is defined to be at risk when ambient &o concentration exceeds 10 mg/m3. b. Estimated risk of angina to persons with heart disease (assumed 2 percent of population). c. Inability to concentrate and headaches for persons in general population. d. Estimates scaled up to population of 7.8 million. Source: USAID (1990); Updated Estimate by World Bank staff from ONEB curbside monitoring data for 1991. 2.69 Air Toxice. Using estimated ambient concentrations from mobile sources, USAID (1990) applied USEPA risk factors to each pollutant in order to predict cancer risks. That analysis found that, at most, between 70 and 80 cases of cancer may result each year from exposure of the population of the BMA to these mobile source emissions. Note however that as with C0, this is the estimate of the population at risk, and not an estimate of the actual number of cases that will result. 2.70 Water Pollution. No quantitative analysis of health effects from exposure to waterborne pollutants and other pathways of exposure has been conducted. This was because lacking dose-response functions and data on exposures to water pollutants, analyses of health impacts were not possible. It should be noted, however, that heavy metals currently are not high in the reaches of the Chao Phraya that provide Bangkok's drinking water and, although SOD and fecal coliform levels are high at the plant intake, the drinking water is generally of acceptable quality for these parameters when it leaves the plant. Thus, for health, the focus shifts to the possibilities of negative pressure in the water delivery system resulting in contamination of the water supply before it reaches the tap and on exposure to the full range of pollutants by the 15 percent of people living in Bangkok who are not provided with tap water and anyone exposed during flooding of the Chao Phraya. 2.71 Given the relatively high quality of drinking water as it leaves the plant, the concern about water quality around BangkokIs drinking water intake at - 46 - the Chao Phraya is also primarily about future conditions. It is feared that the greatest environmental problem for Bangkok is poor water quality creeping up the Chao Phraya toward the drinking water intake at Sam Lae. Given the worsening quality trend, these fears seem well founded, unless it were determined that the water treatment plant were able to remove all problem pollutants at low cost (which is unlikely for heavy metals). 2.72 Risks from groundwater contamination, as estimated in USAID (1990), were found to be exceedingly low, far below reference doses, although cadmium exposure was 7.4 percent of the reference dose. 2.73 Solid and Hazardous Wastes. Communities of people who live near or make a living by scavenging from dump sites are high risk groups, but the population at large probably faces low risks. A study of a community of about a thousand persons who retrieve, recycle, and sell items from dump sites showed that childhood respiratory illness was high (16 percent had an illness at least once or twice a month) as was infection with waterborne diseases, although there was no difference in illness rates between children in these communities and surrounding communities. Lung function for adults was found to be low, but again, with no appreciable difference due to occupation. High particulate levels in the air, as well as hydrocarbon and benzene, and poor quality water (groundwater with relatively high levels of mercury and PCBs) also characterized the area, although bottled water is available and rain water is stored in jars. Cancer risks to this community from benzene and methylene chloride were estimated and excess cancers per year found to be 0.02, based on a population of 6,000, with none of the reference doses exceeded for non-carcinogenic contaminants. Productivitv Imnacts 2.74 Benefits of Reducin@ Congestion. The analysis of the benefits of reducing congestion is similar to those that estimated the health benefits of improving air quality. A detailed transport model of the BMR was used to simulate the effects on congestion of uniform reductions in peak hour vehicle trips.3Z' Benefits were computed for two scenarios--reductions in peak hour trips by 10 percent and 20 percent. Despite the unrealistic but simple assumption of uniform trip reductions, the use of a transport model to estimate the benefits of congestion reductions improves on existing estimates because the resulting time savings are linked directly to trip reductions. An earlier study, for instance, assumed that half the city's cars (435,000) are on the road each day, with an occupancy rate of 2 persons and are stuck in traffic for an extra hour due to congestion. Applying an average hourly income of $1.25, congestion W See USAID (1990). W The model was the SPURT Transport Model developed by PPK Consultants in connection with the. Seventh Plan Urban Transport (SPVRT) project in 1990. For a description of the model see SPURT (1990). - 47 - costs were estimated to be over $1 million per day or $272 million per year, assuming 250 workdays/year.& 2.75 The benefits of reduced congestion are estimated as the value of savings in operating costs (for the eliminated trips) and the value of reductions in travel time for those still traveling.& The data and methods used in estimating these benefits are summarized in Annex 11.5. As some of these assumptions would tend to overstate the benefits while others would understate them, the net effect is unclear. In particular, the assumptions of the transport model such as unchanged distribution between transport modes, and the predeter- mined number and distribution of trips result in a conservative estimate of the benefits of trip reduction. But since the estimated benefits apply only to those still traveling and do not take account of losses in utility in excess of operating cost savings for some of tbose whose trips are eliminated, the benefits are overestimated. 2.76 The baseline data and the results for the 10 and 20 percent trip reduction scenarios are shown in Table 2.12. Total daily operating and time savings are 10.776 million B and 20.317 million Baht, respectively, or about 3.9 billion Baht and 7.4 billion Baht per year respectively, if traffic improvements occur daily. Unscaled (i.e., not multiplied by 8) time savings are about 7.4 minutes per car user for the 10 percent reduction and 13.9 minutes for the 20 percent reduction. Peak speeds rise by 0.9 km./hr and 1.7 km./hr. respectively. gY Shin et.al. (1992). 31' Hence, the benefits of emissions reductions and fuel savings due to reduced congestion are not included in these estimates. - 48 - Table 2.12: Impacts of Congestion Reduction 20t trip re- Category 01t trip reduction duction Change in: pcu-hours 15,700 29,600 person-hours 47,100 88,800 nours/car user 0.1226 0.23125 speed 0.9 kph 1.7 kph pcu-km traveled 0.273 million 0.539 million Peak Hour Benefits' $ 53.9 million $101.6 billion Total Benefits (Peak- Hour *8)8 $ 431 million $812.7 nuillion a. Benefits ignore costs to those who change behavior and any implementation costs. Source: Staff estimates (Annex II.5). E. Tentative Prioritization of Urban Environmental Problems 2.77 This exercise has combined several methods in order to be able to derive priorities for urban environmental management in Thailand. The priorities that emerge from this analysis are tentative for two reasons. First, the limitations of data mean that only the benefits of health improvements could be estimated explicitly and even those only for a few air pollutants. And questions remain about the applicability of the relationships that were used in the analysis. Given the lack of dose-response relationships that apply to Thailand the approach here can be defended because the alternative of making policy without analysis would be worse. And given the urban focus of this effort, the emphasis on health effects seems reasonable. Moreover, the analysis has been supplemented by estimating the benefits to reducing congestion. 2.78 The second reason that these priorities are tentative is that they focus onl" on oross benefits. As discussed earlier, priorities among environmen- tal problems would ideally reflect comparisons of their net impacts on welfare. In order to do this, the analysis of benefits of mitigation here would need to be supplemented with an assessment of the costs of controlling various pollutants and of reducing congestion in different ways. The sectoral chapters that follow focus on this issue. However, it should be noted that the benefit estimates derived here go a long way in setting priorities because it is unlikely that the - 49 - net benefits to society of addressing a particular environmental problem will be large if the gross benefits of doing so are small. Priority Problems 2.79 The analysis here points to the largest benefits flowing to the control of three pollutants- -SPM and lead in air, microbiological contaminants of surface water--and of traffic congestion. Of these hiah-nrioritv problems, the contamination of water by disease-causing organisms is linked mainly to household wastes that are discharged in the form of untreated sewage. With diarrhea cases rising and limited sewage treatment in Bangkok, it is clear that microbiological contamination is a major priority. But it is the two air pollutants that are linked most closely to the sectors being studied in this report. The large benefits from reducing congestion are noteworthy because they are often ignored in the debate over environmental quality, which tends to focus on pollutants alone. 2.80 Of medium nrioritv at present are the problems of SOD discharges, by industrial firms and in domestic sewage, and discharges of water toxics. Given the lack of data concerning the linkages of BOD discharges to productivity losses in terms of falling fish yields in the Gulf of Thailand, for instance, it was difficult to quantify the benefits of control. However, significant and growing violations of ambient water quality standards on the Chao Phraya were noted. There is little systematic evidence of the accumulation of toxics in fish and downstream sediment. But the possibility of contamination of the drinking water source for Bangkok with water-borne toxic substances makes it important to deal with these. 2.81 The remaining environmental problems discussed here are at present of lower griorit . It should be stressed that this judgement is tentative and applies only to the present state of knowledge. It is possible that some of these would be viewed as more serious threats to health or productivity as better data concerning their impacts becomes available or as growth proceeds. With some of these pollutants (toxic and hazardous wastes, for instance), it is almost certain that the quantities generated will continue to grow posing increasing dangers to health. Moreover, the judgement that these are of lower priority today should not preclude the initiation of plans to address them. Most of these pollutants have been difficult and costly to deal with even in industrial countries, and require much more coordination and planning than is currently evident in pollution control efforts in Thailand. The pollutants in this category include SO2, NO2, RC, CO, various air toxics, and solid hazardous wastes. Some of these already pose localized health hazards, as with SO2 emissions in Mae Moh and possibly in Samut Prakan. Areas for Action 2.82 The two areas that should receive immediate attention are the system for ambient monitoring, and research to fill some of the gaps that have limited this and previous exercises in priority setting. - so - 2.83 The ambient monitoring effort already suffers from a lack of resources, particularly for air pollutants. While the number of air quality monitors for some pollutants are adequate, these are spread across a number of different agencies. Moreover, monitors for the other major air pollutants -- SO2, NO2, and ozone -- are sparse, and monitors to measure fine particulates (PMIO) do not exist. The duplication of monitoring efforts across agencies is particularly wasteful in light of the resource constraints that ambient monitoring already faces, and will likely continue to face. Moreover, serious problems arise in interpr?ting the data that are being collected by different agencies because they use varying protocols and methods, and because of concerns about the quality of monitoring equipment. 2.84 It is recommended, therefore, that streamlining of the ambient monitoring system for air pollutants (most of which in the BMR emanate from transport) receive priority.& Technical assistance from the Swedish Govern- ment, which has been requested by the DPC for developing an on-line ambient air quality network, would be an important step in upgrading the system. In addition, serious thought should be given to whether a substantial part of this effort should be privatized, while being overseen and regulated by DPC. This solution may be particularly effective since a major impediment in the recent efforts of DPC and other agencies to improve their monitoring capabilities has been high turnover among trained staff, usually to better-paid jobs in the private sector. 2.85 The second area in which action should be initiated soon to assist in setting priorities is the evaluation of the health benefits from reductions in various pollutants. Two types of studies will be required. The first are epidemiological studies that examine the linkages between health and air and water pollution. Because no suitable studies currently exist, this effort at priority settings (and previous exercises--USAID 1990, for instance), has been based on dose-response relationships from industrial countries that differ greatly from Thailand in exposures, culture and lifestyle, all of which make such extrapolation risky. 2.86 Additional epidemiological studies of great value for priority setting would include the following: (i) a statistical analysis of daily mortality rates in Bangkok as a function of daily concentration of pollutants and other variables. This type of study, conducted primarily in the U.S., has yielded the most convincing evidence to date of a relation- ship between particulates and mortality risks; W This recommendation is strengthened by the findings of Monenco AGRA (1993), which reports large divergences between the concentrations of SO2 predicted from a plume dispersion model and observed concentrations at four monitoring stations. To identify the reasons for these differences will require upgrading of the ambient monitoring system. - 51 - (ii) statistical analyses of the links between daily rates of hospitalization/clinic visits, etc. and the concentration of pollutants; (iii) analysis using a new health status survey just being completed in Thailand, which asks for health status information over a two- week period. Analyses linking pollution during the two-week period surveyed to household responses would yield potentially very useful dose-response functions, as have similar studies in the U.S.; (iv) studies tracking the health effects of any new sewage treatment, drinking water treatment, or other government interventions; and (v) efforts to track lead in newborns should be initiated to estimate the extent to which these levels track reductions in lead emissions. Such an analysis would help resolve the considerable uncertainty that remains about the major exposure routes in Thailand to lead. 2.87 Even if the understanding of the links between aealth and pollution is improved, it will be necessary to improve the basis for monetizing these health impacts. Because pollutants vary in the types of health effects they induce as well as the seriousness of these effects, such monetization is essential if a more comprehensive priority setting exercise is to be possible. Research that attempts to uncover the preferences of the Thai people for avoiding various types of health effects, i.e., their willingness to pay for improved health, would help in this regard. Examples of such studies are: (i) studies of the medical costs and work losses associated with illness types related to pollution; (ii) contingent valuation studies of the acute health effects of air pollution, as has been conducted in the U.S., and (currently) Taiwan, China, and (iii) studies of wage compensation for increased occupational risks (for obtaining estimates of value of statistical life.) F. Summary 2.88 Faced with the iecessity of making choices in resource allocation, Thailand must establish priorities among urban environmental problems. This chapter argues for the use of criteria such as efficiency and cost-effectiveness in setting priorities. Using such criteria, rather than relying solely on ambient environmental standards, recognizes the need for policymakers to compare the benefits of environmental improvements with the costs of achieving these. 2.89 Given the lack of data regarding the benefits and costs of environmen- tal improvement, tht. approach taken here has been to estimate the benefits of mitigating environmental problems where possible and combine these with data on ambient conditions and emissions. Despite the methodological and data limitations, the analysis points to several conclusions that guide the policy discussion in the sectoral chapters that follow. At present, the largest benefits in the BMR would flow from the control of particulates and lead in air, microbiological contaminants of water, and traffic congestion. Of these - 52 - problems, the two air pollutants and congestion are linked most closely to the recent rapid growth of the Thai economy, with microbiological contamination of water arising primarily from untreated domestic sewage. Discharges of BOD and toxic into surface water are also significant problems arising from the expansion of the manufacturing sector. Other urban environmental problems including air pollutants such as S02, NO2 and CO, and hazardous wastes from industry are currently of lower priority. 2.90 However, the judgement regarding priorities should not be viewed as conclusive since they reflect only the available data and methodologies. Further, these findings should not be used to postpone the initiation of plans to develop knowledge about the impacts of these pollutants and of ways to control them cost-effectively. In particular, streamlining the current system of ambient monitoring, especially for air quality, and expanding its coverage for pollutants such as ground-level ozone should receive priority. The current system is constrained by lack of financial and technical resources. Eliminating duplication of monitoring efforts across government agencies would help in using the current resources more effectively. Finally, the priority-setting exercise could be improved if focussed research efforts are launched to improve the understanding of the relationships between various pollutants and health impacts, and the data and methodologies for valuing the benefits of mitigating pollution impacts. - 53 - I1X. POLICXES TO CONTROL EMI88ON8 FROM ENERGY PRODUCTIOh USE A. Intxoduction 3.1 Economic growth during the past decade has stimulated substantial increases in energy demand by all sectors of the Thai economy. These demands have been met by expanding the use of domestic energy sources as well as through increased dependence on imported fuels. Predictably, these increases in energy demand and supply have led to greater environmental stress. In the transport sector, which is addressed in the next chapter, these stresses are associated with the final demand for energy. With electric power, the most significant environmental impacts arise during generation rather than with consumption itself. Since air pollution is the environmental problem of highest priority in urban areas, and has been the most serious side-effect of increased energy use in Thailand, this chapter deals almost exclusively with these impacts. The land- use impacts associated with the expansion of hydroelectric power, in particular, are not addressed here. 3.2 Emissions of air pollutants from power generation and from energy use in manufacturing have three determinants, changes in each of which help explain recent trends in Thailand. The growth in primary energy supply is the first factor. The seeon determinant of energy-related emissions is the structure of primary energy supply. And, emissions per unit of primary energy supply is the final factor that determines the emissions impact of energy use. Higher airborne emissions from the energy sector (even excluding transport) have resulted from each of these three factors. The rapid pace of economic growth in Thailand during the last decade has translated into higher energy demand and supply because of rising incomes ad higher per capita consumption. Especially in the North, the increased demand has been met by expanding the use of relatively more- polluting fuels. And problems in implementing and enforcing pollution control regulations have meant that emissions per unit of energy supply have not fallen significantly, on average. 3.3 The next section summarizes energy demand and supply trends over the last two decades and provides projections until 2006. This is followed in Section C by a discussion of the impacts of energy production and use on air pollution. The focus is on evaluating the extent to which the energy sector (other than transportation) has contributed to the priority air pollution problems identified in Chapter II. The main sources of emissions within the energy sector are identified and the section concludes with projections of emissions of the key pollutants from the energy sector without additional environmental controls. The environmental impacts of energy pricing and regulatory policies are covered in Section D. This is followed in Section E by recommendations for reforms in some areas to address environmental impacts from the energy sector. These reforms cover changes in fuel pricing and taxation policies, and in regulatory mechanisms. The concluding section analyzes the cost implications of the suggested reforms as well as their impacts on emissions. - 54 - B. Trends in Enerav SuonlY and Demand Sutclv of Primary Enerov Resources 3.4 In 1992, total primary energy supply amounted to 52.5 million tons of oil equivalent (mtoe), an annual average increase of almost 10 percent since 1983. Of this total, 60 percent was domestically produced in 1992, substantially higher than in 1983. Table 3.1 summarizes total supplies of all primary energy resources (imports plus domestic production) in Thailand over the last decade. In terms of individual fuels, Thailand is almost self-sufficient in natural gas and coal (lignite) supplies, while being almost entirely dependent upon imports for petroleum products. Table 3.13 Shares of Primary Energy Supply (By Source) (percent) source 1983 1987 1992 Modern Energy 61.7 61.5 69.0 Coal 0.5 0.6 0.6 Lignite 2.4 6.0 8.4 Petroleum 36.4 28.2 29.4 Oil Products 12.5 10.0 14.4 Natural Gas 6.1 13.8 14.3 Electricity 3.8 2.9 1.9 Renewable Energy 38.3 38.5 31.0 Fuel Wood 29.9 32.2 26.3 Paddy Husk 3.3 2.4 1.2 Bagasse 5.1 3.9 3.5 Total Supply (KTOE) 22,686 31,706 52,535 Source: DBA, 1992a. 3.5 Two key trends in primary energy supply over the past decade are evident from Table 3.1 that bear significantly on environmental impacts. First, the importance of renewable energy has fallen sharply both in relative and absolute terms. This shift towards modern energy sources reflects, as in other countries, rising incomes and the growing importance of transportation and industrial demands for energy. Since renewable sources typically produce higher emissions of 8PM (per unit calorific value), this shift has beneficial environmental impacts in this sense although emissions of other pollutants might have increased. However, since much of this shift has occurred outside the BMR, *its impact on ambient air quality in the BMR has been small. - 5s - 3.6 The second trend evident from Table 3.1 is the relative increase in the use of lignite, natural gas and refined petroleum products. Together, these three sources now account for about two-thirds of Thailand's primary energy supply, up from 56 percent a decade ago. As discussed in detail in the next section, the environmental impacts of this shift have been mixed. The increase in lignite use has worsened ambient air quality, both in terms of SPM and SO2, in the BMR as well as in Mae Moh. And the shift towards greater use of petroleum products particularly in transportation has been a major contributor to deteriorating air quality in the BMR. However, the greater reliance on natural gas, which is a cleaner fuel in terms of emissions of all the pollutants currently of concern in Thailand, has tempered the air quality impacts of expanded energy use in the Eastern Seaboard. Energy Demand 3.7 As noted in Chapter 1, Thailand's economy grew at an annual average rate of almost 8 percent during 1983-1992, with growth having been even more rapid since 1987. Rising per capita incomes over this period have meant that energy use per person is almost 50 percent higher now. Consequently, and despite lower energy intensity (see Figure 1.1), final energy demand (by economic sectors, residential and commercial users, and transportation) has more than doubled since 1983 to 35.1 million tons of oil equivalent (Table 3.2). Table 3.2: Shares of Final anergy Demand by Bconomic Sectors (percent) Sector 1983 1987 1992 Agriculture 7.9 6.7 5.4 Mining 0.6 0.2 0.1 Manufacturing 28.7 26.0 29.2 Construction 0.5 0.5 0.6 Res. and Com. 30.3 32.2 28.6 Transportation 32.0 34.4 36.1 Total (KTOv) 15,846 21,560 35,104 Source: DBA, 1992a. Final Enerev Demand 3.8 As with the supply side, the changes in the structure of energy demand during the last decade have affected air quality. Manufacturing and transporta- tion demands for energy have accounted for the bulk of the increase in energy demand since 1983. Manufacturing energy demand has more than doubled, and now accounts for about 30 percent of final energy demand. The increase in transportation demand has been even more dramatic, rising at almost 11 percent - 56 - annually, and now represents over 36 percent of total demand. This increase has come at the expense of demands from the agricultural and mining sectors as well as residential and commercial use, all of which grew in absolute terms but declined in relative terms (Table 3.2). 3.9 Because manufacturing and transportation are major users of energy, the patterns of their energy use are examined more closely. This section looks at the manufacturing sector while transportation demand is analyzed in the next chapter. Energy consumption in manufacturing, by source, shows substantial increases since 1983 in the shares of lignite (almost nine-fold) and natural gas (although this share is still small), and a smaller increase in the share of electricity. The share of petroleum products has remained almost constant (and still the largest among modern energy sources), while that of renewable resources (such as bagasse) has fallen sharply. 3.10 Energy consumption within manufacturing is summarized in Table 3.3. Right sub-sectors account for over 94 percent of manufacturing energy demand with almost two-thirds accounted by the food and beverages, and non-metal industries (which includes ceramics and cement). As the structure of the manufacturing sector has changed over the decade, the share of food processing in energy demand has also fallen, with increases occurring in the shares of the non-metal, chemical and basic metal industries. The key sub-sectors also vary in their energy sources. The major user of lignite is the non-metal industry (mainly cement and ceramics), which also relies significantly on fuel oil. Food processing accounts for most of the use of renewable energy sources. Food, beverages, textiles, and basic metal processors also account for significant use of fuel oil. Not surprisingly, firms in these five sub-sectors account for a majority of the air emissions that arise from industrial fuel use. Table 3.3: Shares of Manufacturing Sector Zn.rgy Consumption (By Sub-Sector) (percent) SWbgroup 1983 1987 1992 Food & Beverage 52.5 47.8 36.9 Textiles 8.5 9.2 9.2 Wood & Furniture 0.7 1.3 1.0 Paper 2.9 3.8 3.5 Chemical 4.8 5.3 9.2 Non-Metal 20.5 22.8 27.1 Basic Metal 2.6 3.6 5.0 Fabricated Metal 1.5 2.0 2.5 Other (Unclassified) 6.0 4.2 5.6 Total (fTlB) 4,547 5,599 10,238 Source: DE&, 1992a. - 57 - Intermediate Enrev Demand 3.11 Electric Power. The electric power industry in Thailand grew substantially over the past decade, as shown in Table 3.4. The capacity owned and operated by the Electricity Generating Authority of Thailand (EGAT) more than doubled during 1983-1992, and generation from this capacity more than tripled to 57,098 Gwh in 1992.11 Captive, or private self-generation capacity, also increased substantially over the decade, and now amounts to about 9 percent of BGAT capacity. Table 3.4 s lectric Powers Capacity, Generation and Consumption Treadf Items 1983 1987 1992 installed Capacity (MW)' 5,032 6,985 11,732 Inotalled Capacity (MM)b 516 816 1,074 Electric Consumption (Gwh)' 16,906 24,894 49,304 Consumption per Capita (kWh/capita)* 342 462 853 a. Excluding private self-generation b. Private self-generation Source: DEA, 1992b. 3.12 The major consumers of electric power are the residential, commercial and industrial sectors. Consumption of electricity by final users rose almost three-fold during 1983-1992 with the fastest growth in commercial and industrial demands (Table 3.5). Per capita consumption more than doubled, and growth in electricity demand far outstripped income growth with an average income elasticity of electricity demand of over 1.9. 1' This power is distributed to final energy users by the Metropolitan Electricity Authority (MEA) and the Provincial Electricity Authority (PEA), both of which are public enterprises. MMA distributes to urban users while PEA serves rural users. - 58 - Table 3.S Blectrlc Consumption by Sectors (00h)" Year Residential Ccomercial Industrial Agriculture Others' Total 1983 4,187.7 4,633.2 8,013.6 41.2 28.0 16,906.3 1987 6,135.5 7,331.2 11,319.4 61.3 46.8 24,894.2 1992 10,258.8 18,049.1 20,406.1 117.6 472.1 49,303.7 a. Excluding private self-generation b. Temporary cuetomers Source: DEA, 1992b. 3.13 The mix of energy sources used by MGAT in generating power has also changed substantially (Table 3.6). Hydro capacity has fallen in relative importance while steam and gas turbine capacity has shown the greatest increase. For captive capacity, steam and diesel continued to dominate.Y In terms of the fossil fuels used to fire EGAT's steam plants and turbines, lignite and natural gas have shown the largest relative increases with lignite use rising almost six- fold and natural gas about three-fold.' Consequently, both natural gas and lignite have now overtaken or equalled fuel oil as energy sources for electricity generation by EGAT. The lignite-fired plants are all in the North. The natural gas facilities are in the Central Region (including the Eastern Seaboard), and the North-East. Table 3.C6: lectric Generation by Energy Sources (Gwh)' Year Hydro Fuel Oil Diesel Oil Lignite Natural Gas Geothexmal Total 1983 3,659.8 7,099.4 124.1 1,804.2 6,169.1 - 18,856.6 1987 4,075.3 2,188.4 66.8 6,698.0 15,623.7 - 28,652.2 1992 4,238.5 14,928.9 171.8 14,815.0 22,943.1 1.1 57,098.4 a. Excluding private self-generation. Source: DEA, 1992b. A' Import of electric power (from Malaysia and Laos) amounted to approximately 4.3 percent of total supply in 1982 and declined to 1.2 percent in 1991. I Electric power generation consumed between 90 and 98 percent of all natural gas supplies over the decade. - 59 - National Enerav Balance 3.14 The discussion above is summarized for 1992 in Thailand's national energy balance (see DEA, 1992a) , which shows all energy supplies and their flows into final and intermediate energy demands. All lignite and natural gas is domestically produced. About 70 percent of lignite (in calorific value) is used in power generation with the remaining used in manufacturing (mostly in cement, ceramics and tobacco industries). After processing, almost all natural gas is used in power generation. Electricity is used mainly in manufacturing and by residential and commercial users. Most crude oil is imported, domestically refined and then consumed by final users, primarily in road transportation and manufacturing. Finally, all hard coal is imported and used in manufacturing. Proiected Demand and Sunnlv Trends 3.15 Substantial increases in energy demand are projected in the future as the Thai economy is expected to continue its impressive growth. With growth projected at 7-8 percent per annum during the Seventh Plan (1992-1996), according to recent estimates by the National Economic and Social Development Board (NESDB), primary commercial energy consumption is expected to grow at 7.7 percent per year. While substantial, this growth is still less than the 14.5 percent annual increases during the Sixth Plan (1987-1991). Projections for primary energy consumption through 2006 are shown in Figure 3.1y. 3.16 The projected trends in consumption through 2006 for all fuels are also shown in Figure 3.1. Natural gas and hydro-electricity are projected to rise at a very modest rate over the forecast period because it is assumed that domestic supplies of these two resources are limited, the latter in part because of concerns about land-use impacts. Substantial domestic natural gas discoveries or imports would, of course, alter these growth projections. Consumption of coal and lignite are projected to increase substantially through 2006, more than six- fold. Most of the increase is projected for EGAT, based upon their most recent capacity expansion plans. The lignite is projected to be used at the Mae Moh generation plant (units #1-13), at Lampang and at Xrabi. EGAT also projects greatly increased use of hard coal. The share of lignite and coal in total primary energy consumption is, therefore, projected to increase from 14 percent in 1992 to 32 percent by 2006. The consumption of petroleum, most of which would be imported, is also projected to more than double. However, due to the overwhelming increase in coal and lignite use, the proportion of petroleum use as a share of total primary energy consumption decreases from 66 percent in 1992 to 56 percent in 2006. 3.17 Given the underlying assumptions, these trends show that Thailand will become increasingly dependent upon lignite, hard coal, and petroleum, all relatively polluting fuels compared to natural gas, which is projected to decline in importance over the period. If accurate, these projections show that energy use, if uncontrolled, will lead to increasingly serious air pollution problems particularly in terms of ambient levels of SPM, SO2, and NO.. These emission implications are developed more fully in the next section. Y These projections for energy demand and supply are drawn from TDRI (1990a). - 60 - 3.18 Projected final energy demands for modern energy resources are shown in Figure 3.2. While petroleum products will continue to be dominant, they will account for a smaller share of total demand in 2006. Electricity will account for the second largest share of final demand (about 21 percent). While some coal and lignite would be consumed by final energy users, the largest increases in their consumption will support intermediate demand (electricity generation). In terms of sectoral demands, transportation will cont.-nue to be important (about half by 2006) while industrial demands will rise to about 30 percent of the total. 3.19 Finally, regional projections indicate that much of the national growth in the consumption of energy resources will continue to be centered in the Bangkok Metropolitan Region (BMR) because economic growth will continue to be fastest in that region. In 1986, the BMR accounted for about 58 percent of industrial energy consumption. By 2006, this share is projected to rise to above 60 percent. Moreover, modern energy sources in the industrial sector within the BMR will almost completely replace renewable sources, implying increased usage of lignite, coal, fuel oil and electricity. C. Current and Proiected Environmental Impacts 3.20 This section documents the extent to which power generation and energy use in the manufacturing, commercial, and residential sectors have contributed to emissions of the air pollutants that are of concern in Thailand. It must be remembered, however, that some of the remedies for air pollution from energy sources may increase problems of water pollution or solid waste disposal. For example, any scrubbing technology for S02 will produce byproducts that must be recycled or dumped into water or landfill. These issues are not addressed here because at present they are of relatively lower priority in Thailand. Emissions that result from energy use in the transport sector are discussed in detail in Chapter IV. st Elm Xr .II H - C~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~C P t _ ::E |l g 2 E 11 ! ! 1 2 | { - - 62 - Curxent Shares of Emissions 3.21 Particulate matter (8PM), sulfur dioxide (So2) and nitrogen oxides (NO,) are the main air pollutants of concern in Thailand at present, which originate from power generation and energy use outside the transport sector. SO2 is of concern for its possible health impacts while both SO2 and NO, are acid rain precursors.1f In estimating the shares of energy sector emissions to total emissions, it is necessary to do so at the national level for pollutants that are acid rain precursors. In addition, for pollutants that originate from the energy sector and have local health impacts such as SPM and SO2, it is also necessary to estimate these emissions shares at the regional level. Detailed emissions inventories are scarce in Thailand even for the BMR. The most complete set, which is used here, was derived in TDRI (1990a,b) at the national and regional levels.9 National trends 3.22 National trends in S02 and NO, emissions during 1979-1988 are shown in Tables 3,7 and 3.8 by subsector. Over this period, power generation was the largest contributor of SO2 while transportation contributed the most to NO, emissions. However, the annual growth of S02 emissions from the electric power sector (2.3 percent) was estimated to be lower than for industrial sources (3.6 percent) and from transportation (12.3 percent). The growth of emissions in the electric power sector reflects the increased use of lignite by EGAT at its Mae Moh facilities. In 1990, electric power plants were estimated to account for 45 percent of 802 emissions in Thailand. Industrial point sources and transporta- tion contributed approximately 26 percent and 23 percent respectively. j' An discussed in TDRI (1990a), Chapters 8 and 9, there is little data concerning the effects of acid rain in Thailand or the extent to which emissions from power generation or manufacturing sources within Thailand contribute to trans-boundary impacts. While these effects are currently not thought to be serious, it is possible that they could be more problematic as fossil fuel use in Thailand and elsewhere in South-East Asia continues to rise. 9 Note that these estimates incorporate many assumptions, and should therefore be viewed as illustrative rather than precise. - 63 - Table 3.7s Shares of Sulfur Dioxide (S0,) mdissions -_- Thailad (by Sector and Year) (percent) 1979 1988 Industry 36.4 28.4 Agriculture 5.7 2.8 Res. & Comm. 2.0 l.3 Transportation 3.0 23.0 Power Generation 52.9 44.5 Source: TDRI, 1990b Table 3*8: Shares of Nitrogen Oxid# smissioD (N0o) -T- hailand (by Sector and Year) (percent) 1979 1988 Industry 13.3 11.1 Agriculture 2.5 1.1 Res. & Comm. 17.5 9.4 Transportation 55.4 66.6 Power Generation 11.3 11.8 Source: TDRI, 1990b Recional Trends 3.23 Over the last 15 years, energy-related emissions have also been concentrated geographically. SPM emissions are significant in the BMR due to the concentration of industrial and commercial activity there. S02 emissions have been concentrated in the Northern Region, where the EGAT plants that use lignite are located, and in Bangkok, where the industrial point sources are located. 3.24 BM. Trends in sectoral shares of SPM between 1979 and 1988 are shown in Table 3.9. These data show that the share of power generation is small, because the BGAT facilities in the BMR (North and South Bangkok power plants) use fuel oil, not lignite. The main contributors to 8PM emissions are the residential and commercial sectors (mainly construction), industry and transportation. An indeterminate (but probably significant) share of the - 64 - industrial emissions is from energy generation, associated with the use of lignite and renewables. Table 3.9: Share of OM Rsissions in BDR (by Sector) (Percent) 1979 1988 Industry 26.4 35.0 Agriculture 0.4 0.1 Res. & Comm. 55.2 41.7 Transportation 15.l 22.3 Power Generation 2.9 1.0 Source: TDRI, 1990b. 3.25 Both industry and power generation have been significant contributors to 802 emissions in the BMR during 1979-1988 (Table 3.10). However, the oontribution of the transport sector has been increasing since 1381 with greater diesel usage.Z' Within industry, most of these emissions come from the use of fuel oil, and are thus energy-related. However, these estimates indicate that the share of power generation has fallen substantially. a In the immediate vicinity of large point sources such as BQAT's power plants in Bangkok, the contribution of vehicle emissions to S02 concentrations is obviously much smaller. See Monenco AGRA (1993) for estimates from Phra Pradaeng in South Bangkok. - e5 - Table 3.10: Share of go, Emissions in MME (by Sector) (percent) 1979 1988 Industry 37.4 42.6 Agriculture 5.7 0.7 Res. & Conm. 2.0 1.9 Transportation 3.0 38.7 Power Generation 52.9 16.0 Source: TDRI, 1990b. 3.26 Northern Recion. The main pollutant of concern in the Northern Region is S02, as typified by the pollution alerts in October/November 1992 in Mae Moh. Emissions estimates for the Region confirm the dominance of power generation sources. Between 1979 and 1988, it was estimated that the share of power genera- tion to S02 emissions had risen from about 53 percent to about 87 percent. This trend corresponds with the increase during the period in EC.AT's lig,uite-based generation capacity in this Region.11 Projected Emissions 3.27 Based on the projections for energy demand and supply summarized in the previous section, and estimates for national and regional economic growth, emissions of SPM, SO2 and NO, were projected in TDRI (1990). Again, it is of interest to examine the base case scenarios (without policy initiatives beyond those already planned) at the national level for S02 and NO,, and for SPM and SO2 in the BMR and the Northern Region where these are of greatest concern currently. 3.28 Projected rnational SO0 and NO, emissions from various sources through 2006 are shown in Figure 3.3. The projected growth in S02 is dramatic, almost tripling during 1991-2006. Power generation continues to be the major factor in this trend. However, recent EGAT capacity expansion plans call for the use of low-sulfur coal (outside the Northern Region after the year 2000). As a result, the relative contribution of industrial point sources to SO2 emissions will increase by 2006. The projected growth of NO, emissions is as dramatic with ' The facilities at Mae Moh currently consist of 11 units with a capacity of 2025 MW. Two additional units of 300 MW each are planned by 1996. All existing facilities are equipped with electrostatic precipitators. The two new units will also include wet scrubbers capable of reducing S82 emissions by 90 percent. A study to determine whether units 10 and 11 should be retrofitted with S02 control technologies is ongoing. - 66 - total emissions also projected to almost triple during 1991-2006. As in the past, the transportation sector is projected to be the major contributor, followed by the power generation and industrial sectors. Figure 3.3 Totd Emission Shares by Sector in 2006 30- 50 20- S02 N02 FM- ry m Trm*u - Power Gedi AgAr PA. & Source: TDRI, 1990b. FPIar 3.4. Projsd 2Mid In Msons - 8M Bto 3.29 . The projections for SPM and SOi emissions from power gen- eration are shown in Figure 3.4. While these estimates suggest that without action, both 8PM and SO2 emis- 4 sions will almost double during 1991- Mm 2006, these increases will come mostly ' "U from increases in the shares of indus- trial sources and transportation. For xxn 8PM emissions, power generation will a continue to be relatively unimportant. 3.30 The increase in the share of the industrial sector to the emissions of both 8PM and S02 occurs because these projections incorporate continuing shifts in industrial fuel demands to lignite and fuel oil. Lignite and hard coal currently account only for small shares of manufacturing sector energy demand in the BMR (about 7 percent in 1988). But as described in the next section, the - 67 - effective cost of these fuels is lower than of other fuels, which unless reversed would encourage further substitution. 3.31 Northern Reciion. Without 3.31 Northern Recti2a. WithoutFigure 3A: Protected Trenid in Sulrur Dioxide additional controls, SO emissions Bm s,lonu tom POR Generaton from power generation in this region -- Nothurn Region will likely increase almost three-fold during 1991-2011 (Figure 3.5). This increase reflects continuing power h / generation by EGAT in the regions n using lignite. Consequently, the X g/ share of power generation in S0 emis- A SD sions in the North remains about con- *l stant through this period. to.o t"i~~~~i Se,iu YDUI tNC. D. Enerav Pricinc and Environmental Reculation 3.32 These emissions projections point to the air quality impacts of continued growth in power generation and energy use if no ameliorative policies are put in place. Broadly, there are thre ways to address rising emissions from the energy sector. Xirst, actions could be taken to reduce the growth in energy demand. But since energy use is tied closely to economic activity, it is unlikely that measures to contain demand through improved energy efficiency will by themselves be sufficient to control energy-related emissions. The second point of intervention is to change the structure of energy supply towards the use of fuels that are less environmentally damaging. This includes measures to mandate the use of reformulated cleaner fuels. Finallv, measures could be implemented that are aimed directly at controlling energy-related emissions by mandating emissions standards, imposing emissions taxes or requiring end-of-pipe control technologies or process modifications. 3.33 The level and structure of energy prices can assist in reducing emissions through the first two impacts- -by reducing total demand and by shifting the structure of energy supply towards cleaner sources. Targeted .nvironmstal policieo work directly by shifting users towards cleaner fuels and indirectly by inducing end-of-pipe controls or process changes that reduce emissions per unit of energy use. They also have beneficial effects on the level and structure of energy demand. This section summarizes these environmental impacts of energy pricing policies as well as of the targeted environmental policies that apply to energy use (outside the transport sector). - 68 - Energy Pricinc 3.34 Electric Power. EGAT generates and transmits all retail and wholesale power sold from the grid in the country. Power is distributed through the Metropolitan Electricity Authority (MEA) in and around Bangkok, and by the Provincial Electricity Authority (PEA) in the rest of the country. While there exists some captive capacity, there is currently no provision for EGAT to "wheel" such independently produced power over the grid. 3.35 In preparing load forecasts, EGAT works with a power policy committee that is composed of representatives from EGAT, MEA, PEA, the National Economic and Social Development Board (NESDB) and the National Energy Policy Office (NEPO). The committee forecasts national and regional electricity demands, based on which least-cost capacity planning is conducted for generation alone.2' The capacity plans are usually 15 years in duration. However, the capacity plans may be revised annually if there are substantial surprises in the forecast or changes in supply options. Following the oil shocks of the 1970s, BGAT's capacity plans have stressed the use of natural gas and lignite. One specific result was the construction of the lignite-fired Mae Moh units, of which the early units did not concern themselves with environmental impacts. 3.36 Revenue requirements are calculated every three years on a cost-plus basis. Average tariffs are designed to cover operating costs plus a targeted rate of return (8 percent) to capital. Average rates are then allowed to increase at an agreed rate of growth for the three-year period. Hence, all costs, whether of fuel or pollution control equipment, are passed through to electricity customers. Recently, an automatic fuel adjustment clause has been implemented to allow for unexpected increases in fuel prices. Peak load adjustments have been introduced into the tariff structures of major customer classes, in an attempt to incorporate some measure of differential marginal Costs. 3.37 Average tariffs over the 1982-1992 period for various types and industrial customers are presented in Figure 3.6, in real terms. The rates differ for urban (MEA area) and rural (PEA area) customers. The rates indicate that, as in most countries, urban customers cross-subsidize rural customers.) Further, average electricity prices have declined, although not reflecting a subsidy, by 25 to 35 percent in real terms over the 1982-1992 decade. This decline, although not reflecting a subsidy, has played an important role in stimulating electricity demand. ' In order to meet the currently projected increases in electricity derived from economic growth, EGAT projects that it must construct roughly 1,222 MW of generating capacity each year for the next ten years. Installed generating capacity is expected to triple over the next fifteen years, from 10,000 MW to 30,000 MW. For details, see EGAT (1992). e See Petroleum Institute of Thailand, 1992. UW The average cost of supplying a rural customer will be higher than that of supplying an urban customer. - 69 - Figure 3.6 fIWur 3.6: Red Pric of Eecfrtc Powr by Endu CWegorie ast sow=M. MU" 1903 Wso IWO 1103 III? 1960 iO 1919 *nf 19 Sm. KA * -.-i -m-s 1"26;91aff ~ ~ -0.TaMOjli ISA Source: DEA, 1992b; staff estimates. 3.38 Petroleum products. All prices of petroleum products in Thailand are reviewed by and subject to the control of REPO. Before May 1991, NEPO was quite active in setting retail fuel prices. Since then, retail prices have been deregulated in phases, and the market is noW totally deregulated with no government intervention in setting retail marketing margins or prices. 3.39 In the natural gas market, the Petroleum Authority of Thailand (PTT) acts as a regulated monopolist and is responsible for all gas products in Thailand. It buys gas at the wellhead (based on long-term contracts), pipes and separates.it, and then distributes it to EGAT and industrial users. PTT is allowed a regulated rate of return on its piping functions; hence, its pipeline and separation rates are cost-based. Any change in fuel and/or pollution abatement costs would therefore be passed through. All PTT tariffs to EGAT are reviewed by NEPO but industrial prices are not. 3.40 Figure 3.7 shows the trend of real prices for fuel oil, which is the main petroleum product used outside transport. As with transport fuels (discussed in the next chapter), fuel oil prices have declined by almost 35 percent in real terms since 1984. These trends, do not reflect subsidies, but rather the fall in the price of imported crude (by about 40 percent in nominal tenms) and of imported petroleum products (by about 26 percent) since 1982. - 70 - Fhure 3.7 red PA= of X( c 0 t9Ui 1915 Igr86 167 19|8M 19i* 9i IStl t91t992 I. Source: DEA, 1991c; staff estimates. 3.41 NEPO overinees several energy funds used in implementing energy and en- vironmental policy. The Fuel Oil Fund originated in 1974 after the first oil crisis, and revenues from it, which are derived from fuel taxes (set by NEPO) on refi4eries, have been used to implement a variety of energy-related policy initiatives. Table 3.11 provides some information on the size of this Fund over the 1989-1992 period. Annex Table A.3.3 shows the build-up of prices for a variety of petroleum products as of end-1992, and indicates the extent to which oil Fund taxes vary across petroleum products. - 71 - Table 3.11: Fuel Oil Fund Balance 2millon Baht) (end-period) 1989 134 1990 -1368 1991 6647 August 1992 7572 Sept. 1992 3520' a. This balance reflects the transfer of 4 million Baht to the Environment Fund during this month. Source: NEPO 3.42 Relative fuel subsidies have changed substantially over the period. In 1987, gasoline, kerosene, high speed and low speed diesel and LPG were all heavily subsidized by the Oil Fund. But since 1991, only LPG has been subsidized. Apart from the subsidy provided through the Oil Fund, differential tax rates on petroleum products also imply cross-subsidies across these. The most important of these that affects emissions from non-transport energy use is the lower tax rate that applies to fuel oil compared to diesel (see Table 3.12 below) A 3.43 Coal and Lignite. Almost 90 percent of domestic lignite reserves are operated by EGAT, as a result of a long-term concession granted by the RTG. NEPO has no oversight authority for this lignite. EGAT applies some transfer price analysis to these lignite supplies.W These transfer prices and an estimated depletion premium are then used as lignite supply costs in EGAT's revenue requirement and rate computations. 3.44 The remaining domestic lignite is owned and traded privately. Mining rights for this lignite have been competitively bid by private developers from the Department of Mineral Resources (DM) and the Department of Energy W The current cross subsidies are shown in Annex Table A.3.3. The Fuel Oil %nd contribution rate is currently 0.1 Baht/liter for all fuels except LPG. Of \4s, 0.03 Baht goes to the Energy Conservation Fund while the remainder (0.07 brat) subsidizes LPG. The LPG subsidy is currently 0.1283 Baht/kg. It is _ cted that the Oil Fund tax will be abolished in the event that the LPG 's4y is removed. Arthur D. Little, 1992. - 72 - Development and Promotion (DEDP). All hard coal is imported at international prices. 3.45 Environmental imDacts of enerov griginc. Reforms of environmental regulation in Thailand, as elsewhere, must ensure first that pricing policies do not provide conflicting signals to energy producers and users in reducing emissions. Since energy is not subsidized in general, the main issues that need to be addressed in the Thai context are the supply prices used by BOAT for lignite (which determines the attractiveness of using lignite in expanding its capacity) and the cross-subsidies to various fuels due to their differential taxation. Although EGAT estimates a premium for lignite, there is reason to believe that this is lower than warranted, particularly after the year 2000 as lignite reserves shrink. To this extent, the use of lignite in its future capacity plans is encouraged with the potential for worsening SPM and 802 emissions around Mae Moh. 3.46 The cross-subsidies that arise from the current structure of fuel taxation are shown in Table 3.12. Adjusted for calorific value, this tax structure favors the use of lignite over hard coal, and both of these relative to fuel oil. Moreover, fuel oil is taxed less than is diesel. These cross subsidies have adverse air quality impacts that need to be taken into account. As the Table also shows, lignite produces more emissions of both 8PM and 8C than hard coal, and both these fuels, in turn, result in more 8PM emissions than fuel oil. And fuel oil use in power generation results in higher 802 emissions than diesel. Moreover, the cross-subsidy to fuel oil is supplemented by the decline in its real prices (Figure 3.7), which has likely stimulated industrial demand and contributed to higher SPM and S02 emissions. Table 3.12: Fuel Taxes and Emission Factors by Fuel Type Tax Emissions (Ton/KTOE) b Fuel (Baht/toe) a sPM sc0 Lignite (Mae Moh) 70.85 252.30 126.20 Lignite (industrial) 48.31 172.04 86.02 Coal (Imported) 190.82 107.05 14.91 Fuel Oil 583.50 4.39 60.60 Diesel 3,457.20 0.56 19.72 a. Tax rates as of end-December 1992 using conversion factors for fuels in Annex 111.1 (Table A.3.1). b. Based on conversion factors from Table A.3.1, and emissions factors per unit of fuel from TDRI, 1990a. Source: EGAT; DEA, 1992a; TDRI, 1990a. - 73 - Environmental Reculation of EnerMv-Related Emissions 3.47 This section discusses the regulatory institutions and procedures that are currently in place to address the air quality impacts of energy sources by the industrial and electric power sectors. The institutions and regulatory framework relevant to the transportation sector are described in the next Chapter. A more complete discussion of environmental legislation and institu- tions is provided in Chapter I (Section D). 3.48 Several agencies have figured prominently in the planning and implementation of policies to control pollution from energy sources. The Ministry of Science, Technology and Environment (MOSTE), and NEPO are the main organizations involved in policy and planning. The Department of Industrial Works (DIW) in the Ministry of Industry (MOI), and the Ministry of Interior are the main implementation agencies. 3.49 Electric Power. In the past, there have been no emission or control technology standards promulgated for EGAT, although DPC now plans to establish such standards. Consequently, EGAT has adopted for itself the air emission standards proposed for industrial point sources by MOI, which are summarized in Table 3.13. It has also attempted to ensure that emissions from its generation facilities do not result in violations of the prescribed ambient air quality standards (Table 2.1). Although, EGAT has not been subject to specific control technology requirements, it has been forced to consider the installation of desulfurization techniques for new as well as existing units as concern has grown over the air pollution problems at Mae Moh. - 74 - Table 3.13: Industrial Air Emission Standards - Selected Pollutants Pollutant Sources Standards Particulates -Boiler & furnace Heavy oil as fuel 300 mg/Nm3 Coal as fuel 400 mg/Nm3 -Steel or aluminium manufacturing 400 mg/Nm' -Other Source 400 mg/Nm3 Lfad any source dust 100 mg/Nm3 (Pb) 30 mg/Nm' Co any source 1,000 mq/Nnm SO2 Sulfuric Acid production 1300 mg/Nm' or 500 ppm -Bangkok and its vicinity 400 ppm -Other area 700 ppm NO. Coal as fuel 940 mg/Nm3 or 500 ppm Other fuels 470 mg/Nm' or 250 ppm Source: Ministry of Industry, Circular No.2, 1993. 3.50 While DPC monitors ambient conditions around EGAT facilities, EGAT itself has the most complete environmental monitoring system and equipment in place. For example, EGAT has 16 monitoring stations at Mae Moh.& Five stations perform continuous real time monitoring of SO2, NO2 and SPM; six conduct integrated monitoring of SO2, NO2 and SPM; and seven stations monitor dust fall and sulfation. If these monitoring stations find emissions that result in ambient air quality standards being violated, the Mae Moh units are required to shed load until the ambient standards are met. 3.51 Given this system of regulation, EGAT uses generation costs alone as the basis for its present least cost planning. Its choices of pollution abatement technologies are made subsecruent to the selection of generation technology. Typically, for any potential pollution problem that is considered serious, EGAT performs an environmental impact assessment (BIA) to judge which abatement technology is required given the choice of generation method and fuels. These EIAs are then reviewed by the Office of Environmental Policy and Planning (OBPP, In MOSTE.1y M Based upon EGAT documentation and discussions with EGAT staff. KBN Engineer- ing and Applied Sciences (1990] confirms these monitoring efforts. W See Annex V.1, Chapter V for details of the ETA requirement as it applies to energy and industrial projects. - ~75 - 3.52 As part of the plan to introduce demand-side management (DSM) in Thailand, EGAT's planning methods are currently being broadened so as to explicitly include environmental costs in choosing generation technologies and fuels. Following the enactment of the Energy Conservation Promotion Act in 1992, EGAT is also examining ways of integrating the consideration of DSM options in its capacity planning exercisea. The energy conservation otatute has formalized the responsibilities of the Department of Energy Development and Promotion (DEDP) as a lead agency in energy conservation, and authorizes it to issue building codes for energy use and appliance efficiency standards. NEPO has been assigned the functions of overseeing energy conservation initiatives including EGAT's DSM program and of monitoring the Energy Conservation Promotion Fund established under the law. Finally, a class of large energy users are identified as "controlled facilities" that are required to hire energy managers, conduct energy studies and develop conservation plans, or face financial penalties. In particular, DEDP is allowed by this law to penalize large energy users for noncompliance with energy efficiency standards by raising electricity prices to them. 3.53 Industrial Point Sources. Industrial air emissions are proposed to be governed by the emission standards enacted in 1993 under the revised NBQA (see Table 3.12). In practice, emissions limits are formalized into the operating license of each industrial point source, which is issued by the Factory Control Division (also in DIW). Operating licenses must be renewed every five years, at which time there is less scrutiny than when these are first issued. Moreover, for new point sources in some heavy industries such as cement, petrochemicals, steel, EIAs are required.1y Ths procedure for evaluating these ElAs is similar to that for power plants (see Akaiex V.1). 3.54 Source monitoring is currently conducted by the Industrial Environment Division of DIN along with officials from the Ministry of the Interior. At present, plant inspections usually take place on an agreed-upon basis; specifically, the DIW negotiates a time oi inspection with each plant. However, the DIW is empowered to conduct unannounced inspections. If DPC officials consider DIW monitoring of emissions to be inadequate, they are empowered under the new environmental legislation to conduct their own source monitoring. DPC' s efforts in this regard have been minimal thus far because of lack of personnel. 3.55 Like EGAT, large point sources of energy-related air emissione such as the refineries have their own monitoring systems in place both for ambient air quality and emissions. For example, both Bsso and Caltex will install such monitoring equipment in their new refineries. And the Bangchak refinery already has considerable monitoring capabilities. 3.56 Petroleum nroducts. While NEPO has historically focused upon energy prices, it has recently been involved in analyzing options for reformulating petroleum products with a view to controlling air pollution. As part of this 1 This focus of BIAs on heavy industry is relatively new and has been necessi- tated by the scarcity of regulatory resources. The type and sizes of heavy industries that currently require RIAs are described in Annex V.1. - 76 - effort, it has commissioned a series of studies to estimate the impacts and costs of alternative fuel specifications including lowering the sulfur content in fuel oil from its current specification (about 3 percent weight, on average) .,' While NEPO has commissioned the analysis of these new fuel specifications, the Ministry of Commerce has the statutory authority for announcing and enforcing the standards. As the next chapter discusses, most of these efforts have focused on transport fuels -- gasoline and diesel. Effectiveness of environmental regulation 3.57 This section evaluates the effectiveness of the current regulatory system in controlling emissions from energy production and use (outside the transport sector). The main finding is that the existing system has been ineffective and costly in controlling emissions from the energy sector. Being modelled on the regulatory framework in most OECD countries, th.ie main reliance is on emissions and technology standards. Since these standards are source- specific, their enforcement has strained the capabilities of regulatory agencies. Consequently, non-compliance with the statutes is common, and even where compliance occurs it reflects mainly self-regulation. Moreover, redundancies and overlaps among the regulations contributes to their ineffectiveness in controlling emissions. Some of these problems reflect the relative novelty of these issues in Thailand as well aa of the legal framework itself. However, this novelty also presents opportunities for change that may not be available in the more-established regulatory systems of industrial countries, which also reflect some of the same flaws. 3.58 The system for controlling environmental impacts from the energy aector consists mainly of policies to address emissions of air pollutants from specific sources, such as power plants and industrial firms. These measures are regulatory in nature prescribing source-specific emissions standards, which for SPM, S0o, and NO2 also vary somewhat according to the source (Table 3.13) .L This regulatory system, which is mainly implemented by DPC and DIW, is supplemented by the fuel reformulation initiatives being proposed by NEPO. These reformulation programs recognize the difficulties of monitoring the actions of individual sources, especially among industrial users of fuel oil and for motor vehicles, and therefore specify minir.um specifications aimed at achieving certain air quality goals. However, the reformulation programs that have actually been implemented to date affect primarily the transport sector. Hence, the main instrument for control of air quality impacts of the non-transport energy sector has been the system of emissions standards. 3.59 The current regulatory framework places large demands on the monitoring skills and financial resources available to the regulatory agencies. SZ See, for instance, AIDAB (1991), Monenco (1992) and Monenco AGRA (1993). W These types of standards, whether they specify emissions limits or control technologies, are termed "command-and-control" policies. See World Bank, 1992, Chapter 3. - 77 - Because it works through regulations on emissions that are source-specific, frequent source monitoring is required to ensure compliance. But because the number of sources is large, monitoring on this scale is not feasible given the available resourceq and the constraints faced by DIW in terms of staff and monitoring equipment. DIW has a staff of only about 120 in its Industrial Environment Division, who are responsible for ensuring compliance with air and water discharges as well as hazardous waste generation. Since industrial air emissions have been less important relative to power generation and transport, DIW has placed greater emphasis on controlling industrial discharges into water (Chapter V). 3.60 In practice, therefore, this system of regulation has translated mainly into self-regulation by the large sources of air pollution in the energy sector--EGAT's power plants. In EGAT's case, such de facto self-regulation is apparent when it is noted that its power generation facilities have been sub,ect neither to the industrial emissions standards developed by DIW nor to technology standards. This is partly why the recent acute pollution incidents at Mae Moh are being dealt with in an ad hoc fashion. In the case of large point sources in the industrial sources, including the petroleur refineries, such self- regulation means that compliance with the required emissions standards is based less on efforts by the regulatory authorities to enforce them than on the pressures from citizens and non-governmental organizations (NGOs) on these enterprises to exhibit good corporate behavior. 3.61 For smaller emissions sources--mainly small and medium-sized manufacturing firms that use lignite or fuel oil--these pressures to self- regulate are less intense. There is little information on the extent to which these firms comPly with the emissions standards. But it is clear that the resources available to DIW to monitor the emissions from most firms are grossly insufficient to enforce compliance. For instance, as Chapter V notes, there are over 15,000 registered manufacturing establishmento in Thailand in the five subsectors- -non-metals, food, beverages, basic metals, and textiles- -that account for the bulk of energy use (except electricity) within manufacturing. More than half of these firms are located in the BMR. 3.62 These enforcement problems are compounded by the overlap and redundancy that exists in environmental responsibilities. For example, the DPC, the DIW and provincial governors can all set emission standards. If the standards differ, adjudication is required but it is unclear who would provide it. Likewise, while the D0W is the agency that is supposed to monitor industrial sources, its enforcement powers were unclear until the recent enactment of the emissions standards (in Table 3.13). Moreover, the DPC can also monitor industrial and energy sources under the revised environmental statute if it believes that the Drw is not doing an adequate job. Two agencies are responsible for PIAs, the DIw and the OEPP. Finally, there is overlap in such initiatives as the fuel reformulation standards, which were promulgated by the Ministry of Commerce, but for which DPC, TISI (and even the Department of Land Transport for transport fuels) claim some regulatory oversight. 3.63 These features of the regulatory system adversely affect its effectiveness and cost of implementation in tw respects. First, the reliance on self-regulation as well as the overlap and redundancy of functions leads to - 78 - confusion as to standards and regulatory requirements. In some cases, as with emissions limits on EGMT's generating facilities where it is not clear which agency is responsible for setting or enforcing these, the task is not performed. 3.64 Second and even more important, these features lead to a misallocation of scarce regulatory resources (e.g. monitoring of ambient conditions at Mae Moh by EGAT, MOPH and DPC). Each agency currently responsible for source and ambient monitoring claims that the resources for monitoring are insufficient in terms of the number of personnel, salaries and monitoring equipment. When each age:icy has insufficient resources, it would be more effective to pool the resources into a single agency and invest it with the specific responsibility, whether the setting of standards, source monitoring or enforcement. E. Prooosed Reforms 3.65 Building on the discussion of the pricing and regulatory systems for energy production and use, this section makes policy and institutional recommendations for addressing energy-related emissions from non-transport sources. Three aspects of these proposals are inportant. First, ameliorative policies should be phased in terms of both the pollutants at which they are targeted as well as the source of emissions. Given the health impacts discussed in the previous chapter, the initial phase of control measures should be aimed at reducing emissions of SPM and of S02 (which although not of particular concern yet for health in its gaseous form, contributes to the formation of PM1O), in the BMR and around Mae Moh. 3.66 Second, environmental control efforts should take account first of potential "win-win" opportunities, where economic efficiency gains (narrowly defined) can be combined with environmental improvement. In the energy sector, their potential application is greatest in Thailand with regard to ensuring the realistic pricing of lignite by EGAT, and dema,.d-side management initiatives for electric power. 3.67 Finallv, the cost of environmental control for energy-related emissions could be reduced if a mix of regulatory (command-and-control) measures and market-based policies (mainly fuel taxes) is implemented. Experience from OECD countries shows that using market-based policies such as taxes can reduce the cost of controlling emissions. However, if these measures are designed so that they target fuql use rather than emissions, they would economize on administrative resources, an especially important consideration for developing countries such as Thailand. iS For example, many monitoring stations no longer provide readings because the equipment has failed and/or because staff are not available to perform the monitoring. - 79 - Potential Win-Win Policies Electric Power Generation 3.68 Ligcnite pricincf. Since use of lignite by EGAT in its facilities at Mae Moh has led to the air quality problems there, the first priority is for NEPO and other regulatory agencies to ensure that an appropriate supply price for lignite is used in EGAT's planning exercises. Unless this price imputed to lignite accurately reflects production costs and a depletion premium, EGAT's access to reserves will mean that it will be treated as essentially a costless resource. EGAT has attempted to estimate a supply price for this lignite (about $13.71/ton), based upon production costs and an estimated depletion premium. The first step towards addressing the environmental impacts of lignite use would be to ensure that this supply price (with periodic adjustments) is reflected in EGAT's capacity planning as well as in electricity tariffs.& 3.69 Demand-side _MAUaiemnt. Recent analysis commissioned by the government, which is currently being reviewed, points to the potential energy savings from demand-side management measures. The five-year DSM plan being envisaged is designed to achieve energy savings of approximately 1,427 Gwh by the end of the fifth year with the resulting capacity savings projected to be of the order of 225 MW.L 3.70 This analysis shows that a number of programs for energy users would be cost effective, exhibiting benefit-cost ratios ranging from 2 to 10. These programs include the use of energy-efficient lighting and appliances for residential and commercial users, improved building designs, and use of more energy-efficient motors and production processes in the industrial sector. EGAT will attempt to reach these goals through a variety of financial incentives for producers of energy-efficient technologies and consumers, which would include ' But, clearly this step is not enough to take account of the environmental impacts. Hence, the need for targeted policies as discussed in the next section. Z' These projections conform with other estimates. For example, the National Energy Administration examined the conservation potential of a variety of DSM options in 1990. It identified about 600 MW of savings at US$ 240/KW, which compared favorably with the generation costs avoided by the conservation (at the time, the avoided costs consisted of investment costs of US$ 1,250/KW in generation and transmission and US$ 5S0/KW in distribution). Another study for EGAT in 1990 indicated that EGAT could reduce its peak demand by 2000 MW by the year 2000. Finally, a third analysis undertaken in 1991 for NEPO estimated Thailand's economically-desirable conservation potential to be 2000-3000 MW over the 1991-2001 period. - eo - educational programs, subsidized energy audits and direct subsidies of a portion of the purchase price of designated energy-efficient equipmentA. 3.71 By reducing the growth in electricity demand, these measures will bring environmental benefits. Emissions into air of pollutants including 8PM and SO will be reduced by lowering generation needs. And the adverse environmental impacts of capacity additions will ne avoided to the extent that peak capacity savings are achieved. However, with the projected growth in energy demand, DSM measures alone will not be enough to reduce pollution. Targeted Environmental Policies 3.72 Targeted policies aimed at controlling emissions of SPM and S% from non-transport energy sources in Thailand must recognize the difficulties of enforcement if these measures attempt to limit emissions directly, as with emissions taxes or standards. Such direct environmental policies would place onerous monitoring responsibilities if they are to be enforced effectively, which would greatly strain capabilities of the Thai regulatory agencies. Even in OECD countries, where environmental regulators are more experienced and better financed, direct policies have worked effectively only in controlling emissions from large point sources such as power generation facilities and large manufacturing firms. In Thailand, however, the regulatory agencies in many instances have less monitoring capabilities than the la-ge emissions sources themselves. 3.73 Apart from energy used in transportation, energy-related emissions of SPM and 80 come from two types of sources in Thailand. On one hand, there are a small number of large point sources--EGAT's generation facilities that use lignite, coal and fuel oil, and large manufacturing firms in subsectors such as cement, basic metals and pulp. But emissions in the BMR also come from small and medium-sized manufacturing firms that rely on lignite, fuel oil and renewable as energy sources. ' The economic benefits of these programs are estimated as the avoided costs of additional generation-transmission-distribution capacity. Their costs are estimated as the sum of administrative costs, financial incentive costs, and customer costs besides financial incentives. The justification for using incentive programs in implementing DSM measures is that many electricity users are inertial and would not undertake any conservation investments in the absence of substantial incentives (see, for instance, Hartman et. al. t1991]). It is important, however, that these DSM incentives be integrated with the program of penalties allowed under the law (in the form of increased electricity rates) for "controlled facilities" that do not comply (see para. 3.52). Finally these incentive programs should be scrutinized carefully in order to assess their n benefits. The reason for this scrutiny is that the benefits of such programs, as experience with DSM programs in the U.S. shows, are freauentlv overstated because either customer behavior changes with the more efficient equipment or many (but not all) customers would undertake conservation investment in the absence of financial incentives, once they are informed about the conservation options. - 81 - 3.74 The strategy for regulating energy-related air emissions should, therefore, take account of the implications of the differences between these two types of sources. In particular, it should be recognized that the enforcement of policies tied to controlling emissions directly (such as emissions standards) is more feasible with large point sources because there are few of these sources and their emissions are easier to monitor. For smaller sources, such as most manufacturing firms, difficulties in monitoring their emissions means that policies which try to control emissions directly will place extremely heavy enforcement responsibilities on regulatory authorities if they are to be effective. Therefore, it would be cheaper from an administrative perspective, and more effective in controlling pollution to operate initially on all sources of emissions except EGAT's generating facilities through measures that work through influencing their use of polluting fuels. This insight is already reflected in Thailand's current attempts to use fuel reformulation in achieving environmental goals. 3.75 But the potential disadvantage of a strategy that consists only of mandating a shift towards the use of cleaner fuels should also be recognized. Requiring all users of lignite or high-sulfur fuel oil to shift to cleaner (and more expensive) fuels provides no incentive for them to install control technologies or make process changes to achieve the same reduction in emissions while continuing to use the dirtier fuel. If the costs to some firms or processes of doing so were lower than of switching to the cleaner fuel, the resulting improvement in air quality would have been more costly than if the abatement decisions had been left to the enterprises themselves. And because technologies and their costs are constantly changing, it is difficult even for relatively sophisticated regulatory agencies (such as those in industrial countries) to estimate ex ante which methods of controlling emissions would be cheapest across widely-different firms and industries. 3.76 Therefore, a two-fold strategy of combining fuel taxes with emissions standards is recommended initially. This approach takes account both of the difficulties of monitoring emissions in attempting to enforce direct policies from numerous sources, and of the potential pitfalls of using fuel-based control policies alone. As DPC gains experience and the financing to improve its source monitoring capabilities, more sophisticated policies that control emissions directly (preferable in the form of emissions charges or tradeable emissions permits) could be introduced for large point sources of emissions such as the petroleum refineries and large firms in cement, metals and other industries. Fuel Taxes 3.77 In accomplishing a shift to clear fuels in power generation and manufacturing, it is recommended that differential taxes on fuels (according to their emissions characteristics) be used rather than regulations that mandate the use of cleaner fuels. The reasons are twofold. First, fuel taxes would result in given air quality improvements at lower cost than would mandatory require- ments. With fuel taxes, decisions about fuel choice would be made by the users who would also be the best informed about the costs of various options. The second reason to prefer fuel taxes is that, unlike regulations on fuel use, they would generate significant discretionary revenues for the RTG (see next section), akin to the Oil Fund revenues in the past from differential taxes on petroleum - 82 - products. Most of those revenues are transferred to the Environmental and the Energy Conservation Funds, and proceeds from the proposed lignite tax could also be contributed to these funds, to be administered by DPC and the DEA for conservation and pollution abatement activities.W 3.78 The phasing of differential taxes on polluting fuels should be guided by the priority accorded to various pollutants. Apart frow transport fuels, which are addressed in the next Chapter, these taxes should initially apply to lignite and coal. If ambient levels of S02 remain of concern in the BMR, similar taxes on fuel oil should be considered. 3.79 Taxes on Lignite and Coal. The high sulfur and ash content of lignite make Its use in power generation a major contributor to S02 and SPM emissions in Mae Moh as well as to SPM emissions in the BMR from its use in manufacturing. Yet, the tax structure currently favors lignite relative to coal by taxing it less (Table 3.12). The first step, therefore should be remove this cross-subsidy for all lignite -- EGAT's consumption as well as that used in manufacturing. If the current tax on imported coal is maintained (at Baht 124.50/ton), this would imply raising the tax from its current level of 21.06 Baht/ton to about 57 Baht/ton for lignite used by EGAT and 83 Baht/ton for industrial lignite. 3.80 However, since emissions from the lignite used both by BGAT and in maniufacturing are more than six times higher for 802 and almost twice as high for SPM than from coal, it will not be sufficient merely to equate lignite and coal taxes. For EGATIs generaticn facilities, whose emissions would be easier for DPC to monitor, it is recommended (as discussed below) that emissions standards be used. But for lignite and coal use in manufacturing, the monitoring problems for DPC and DIW associated witlr the enforcement of emissions standards would be serious because a significant share of energy-related SPM emissions from manufacturing in the BMR come from small and medium-sized firms. 3.81 Therefore, it is recommended that the tax on lignite use in manufac- turing be raised beyond equating it to that on coal. Since ambient levels of SPM are the main concern in the BMR, the differential tax on lignite should reflect the higher uncontrolled SPM emissions from its use. The tax on industrial lignite would be about 60 percent higher by this measure than on coal (about Baht 133/ton). 3.82 This differential tax would !lave two impacts on industrial users of lignite.W First, by raising the price of lignite it would encourage some users W Such earmarking of revenues to achieve environmental goals has much to recommend it since it can help relieve some of the financial constraints that the regulatory agencies currently face. Moreover, it can help reduce the opposition to the tax among those who would be adversely affected by its imposition. i Although lignite and coal use in manufacturing in the BMR is not substantial at present, there is evidence that their use (particularly lignite) is growing. The taxes recommended here would force potential users to take account of their contribution to air pollution in deciding whether to switch to these fuels. - 83 - to shift towards the use of the relatively cleaner fuels such as coal and fuel oil. Second, and more importantly, the weighted price of energy itself would be higher. These price increases, as well as those for goods and services that are energy-intensive, would encourage shifts towards reducing its use and the concomitant pollution. 3.83 Also, since reducing ambient SPM levels in the BMR is of the highest priority, a tax on the use of bh lignite and coal beyond that recommended above should also be considered. SPM emissions even from coal use are over 25 times higher than for fuel oil. Despite this differential in emissions, the current tax rate (per toe) for coal in le8s than a third that for fuel oil (Table 3.12). Therefore, a phased increase in the taxes on both coal and lignite so as to eventually approach that on fuel oil is recommended after the initial adjust- ments.r 3.84 Finally, a tax on fuel oil use is not recommended at presert. The reason for imposing such a tax would be that fuel oil use in power generation and manufacturing contribute to SO2 emissions in the BMR. However, implementing the tax on lignite alone will bring about substantial reductions in SO2 emissicins, jointly with SPM emissions, and theiefore at lower cost. If ambient S02 levels remain of concern despite those reductions, only then should taxes on fuel oil be increased. Emissions Standards 3.85 In this framework, emissions standards that specify limits on discharges of particular air pollutants would serve two functions. For EGAT's generating facilities, these standards would be the main instrument for controlling emissions since the lignite used by EGAT would not be subject to the differential tax proposed above for manufactuiring firms. On the other hand, for manufacturing firms subject to those taxes, the system of emissions standards along with a tax rebate mechanism (described below) would address the difficul- ties that arise in controlling emissions at least cost if the proposed fuel taxes were used alone. 3.86 Power Generation. The electric power sector in Thailand will grow significantly between now and 2006, with EGAT planning to triple its generating capacity over this period. Since it is considerably cheaper to control emissions in new sources compared to retrofitting existing facilities, a clear regulatory framework for pollution control is essential, and will allow EGAT to respond in a least-cost fashion. 3.87 EGAT is already a well-managed enterprise that uses contemporary tools for load forecasting, capacity planning and tariff development, and makes W This recommendation is based on the finding that, at present, reducing ambient S02 levels in the BMR is of less urgency than is controlling SPM emissions. As Table 3.12 shows, while fuel oil produces less SPM emissions than coal, it results in higher BCO emissions. However emissions of both SPM and SO2 are lower for fuel oil than for lignite. - 84 - technology choices based upon least-cost methods. But, partly because EGAT has largely regulated itself the past, mitigation of environmental impacts has been addressed only after the capacity plans have already been drawn up. The establishment of emission standards and differential taxes on polluting fuels will allow EGAT' a capacity planning and technology choice to be based upon social least cost methods (integrated resource planning) that include environmental costs. These emission standards for EGAT facilities should be drawn up by DPC in consultation with NEto and EGAT. Given the current pollution priorities, these standards should apply initially only to SPM (at all locations), and S02 (in Mae Moh). 3.88 Such emission standards are superior to technology-based standards, which for instance might require all EGAT facilities to install flue-gas desulfurizers to contril S02 emissions. Emiasions standards provide greater flexibility to enterprises in choosing abatement technologies to meet the air quality goals, and are therefore more likely to lead it to adopt the least-cost method of control. It is exceedingly difficult even for well-informed regulators to identify the least-cost control technologies as is illustrated by the continuing debate over the ranking of options to address S0 emissions from EGAT's Mae Moh units (see Box 3.1). 3.89 It would be desirable if these emission standards for power plants reflected three considerations. First, the standards for new sources should be stricter than for existing facilities. Such New Source Performance Standards (NSPS) reflect the higher costs of retrofitting existing sources with control equipment. Second, they should apply to the entire generating facility rather than to individual boilers. This feature is not considered in the system of emissions standards currently in place (Table 3.13), although it is apparently being implemented for some large point sources such as the refineries. The "bubble" concept of setting standards to cover the entire facility has been used since the mid-1970s in applying the Clean Air Act to large point sources in the United States. It has the potential to reduce overall control costs by allowing EGAT to choose the least-cost way of complying with emissions standards for the whole generating unit rather than being concerned about compliance for each emissions source in the unit. 3.90 Finally, the standards should be regionally differentiated to reflect differences in population and meteorological coneitions that contribute to the impacts of additional emissions. This would mean, for instance, that emissions standards for both SPM and S02 would be more stringent in the BMR and at Mae Moh than elsewhere, reflecting the already poor ambient air quality at both locations. In fact, setting So2 emissions standards would not be a high priority yet in areas with little energy use or few power generation facilities currently. 3.91 Industrial noint sources. Since the use of lignite and fuel oil in the manufacturing sector is concentrated within a few industries (cement, ceramics, textiles, chemicals, basic metals and paper), large plants within these industries are the most significant sources of air emissions. For manufacturing firms, the regulatory system would consist of the emissions standards for SPM (similar to those already mandated by DIW), supplemented with the differential taxes on lignite and coal recommended earlier. - 85 - Uox 3.1: Evaluatin Emissiaons Control lechnolot _es: Saoe Pitfalls Evaluating alternatve emissions control technologies is coaptex because even when only a single pollutant is concerned, the least-cost choice depends on a variety of considerations. These factors include the degree of control required, site features such as meteorology and topology, type of combustion technology, and whether or not the equfpment is being retrofitted. The complexity of these choices ;s illustrated by the differing conclusions of two recent analyses of S02 control options for EGAT's lignite-fired plants. The ffrst study evaluated alternative flue gas desulfurization techrologies for the Laupang Power Project n Northern Thailand--a 300 kV facility with boilers fired by Mae Moh lignite. Of the three technologies considered in detail, the only one ruled out by this study was desulfurization through dry sorbet inJection (DSI). Although its capital costs are the lowest, the study found its oporating costs to be high, its efficiency in removing sulfur low, and that it produced large amounts of solid wastes. The second analysis, conducted in 1990, examined SO2 control options at EGAT's facilities in Nae Noh. At that time, units 1-9 were already in operation, 10 and 11 were under construction, and 12 and 13 were being planned. None of the units in operation or being built included SO2 control equipment. This study concludes that coal cleaning and DSI shoutd be the preferred technologies for sulfur removal for both retrofitted and new facilities. The same point, about the wide variation in control costs across alternative control technologies, is also illustrated by another recent analysis or S02 and NO2 control options for large industrial point sources in Samut Prakan. It estiusted the costs of controlting emissions from 49 sources associated with five alternative measures, and found that the total costs (across atlL sources) varied by a factor of ten between the least costly and the most costly options. The two most expensive options were the desulfurization of fuel oil and flue gas desulfurization. The differing conclusions reached by the two studies of EGAT's facilities and the large cost differences for industrial sources points to the risks inherent in a regulatory approach that attepts to specify control technologies without regard to the specific pollutant o. the facility under consideration. The level of control costs and the ranking of control options will differ, aong other factors, according to whether a facility is new or being retrofitted; on the size of the facility and the capital vintage; and on whether the emissions of a single pollutant or a number of pollutants are to be reduced. from a regulatory perspective, therefore, it is better to provide a clear set of emission targets (for instance, as recomoended here, by specifying standards and imposing fuel taxes). Given this framework, enterprises (EGAT or industrial sources) could then evaluate alternative options ex ante as part of their overasl planning exercises, and choose the least-cost method of reducing their emissfons. 3.92 The emissions standards would, for instance, specify emissions levels achievable if less-polluting fuels (such as low-sulfur fuel oil) or control technologies were used in those facilities. Further, enterprises could claim a rebate for taxes paid on the lignite and coal they use if they could demonstrate that the emissions standards had been met by process modifications or end-of-pipe controls. These claims would need to be audited and verified by licensed environmental auditing firms before they would be accepted by the regulatory authority. It is likely that it will only be the largest energy-using manufacturing firms, such as the refineries and cement plants, and EGAT that would make use of this facility because it would only be for them that it would actually be cheaper to install pollution control equipment rather than switch to alternative fuels. 3.93 At this stage, it is recommended that emissions strandards and the rebate scheme for industrial sources, most of which are located in the BMR, be implemented only for SPM. However, the three features of these standards suggested with regard to WGA should also apply to these standards. The -ebate mechanism for lignite taxes would likely only be used by the largest sources of - 86 - emissions within manufacturing. It would likely only be for these sources that it would be cheaper to meet emissions standards by altering manufacturing processes, raising stack heights or installing end-of-pipe control equipment than by substituting towards cleaner fuels. For smaller firms, the scale of their lignite or coal use would mean that they are less likely to find such modifica- tions and retrofitting economic compared to substituting towards alternative cleaner fuels due to the taxes. 3.94 The real gains from this system of controlling energy-related emissions are two-fold. First, it would allow the choices about che manner in which emissions reductions are achieved to be made by the enterprises themselves. This means that regulators are not forced to make decisions that require detailed firm-specific information about how and where to achieve emissions reductions (see Box 3.1). As a price-based control mechanism, fuel taxes are better able to achieve emissions control at the lowest cost from a social perspective by ensuring that the least-cost control options are chosen first. 3.95 The second advantage of this system is that it reduces the need for source-specific monitoring substantially. With the current system of emissions standards alone, a high degree of compliance is possible only if sources were monitored closely, which requires considerable staff and technical resources, both in limited supply at present. With the combination of fuel taxes, emissions standards, and a rebate system recommended here, the burden of demonstrating compliance is shifted on the enterprises neither of which is currently available in Thailand. Hence, the scale of monitoring activity required of regulators is reduced sharply. This frees up regulatory resources to be used in other areas of environmental planning and policy making. Institutional Reforms 3.96 Reculatorv resnonsibilities. A major problem with the current regulatory system is the duplication of efforts across agencies, particularly DPC and DIW with regard to the control of energy-related emissions and industrial wastes (addressed in Chapter V). This duplication should be eliminated because it wastes resources, and reduces the effectiveness of the current system by causing -,onfusion among agencies. It is recommended (as with the oversight for industrial wastes in Chapter V) that policy planning and implementation be consolidated in a single agency. Moreover, it appears that there are advantages with nesting all these functions within DPC. While this option runs the risk of losing the institutional experience that already exists within DIW it appears feasible if done gradually, and with transfers of staff and additional resources between DIW and DPC. 3.97 Monitorina. A specific area that will see improvement if such a consolidation of functions is achieved is source monitoring. While a shift to the regulatory system recommended here would reduce the need for source monitoring it would not eliminate it. The regulatory agency must have a mechanism for validating the emissions audits that firms provide in order to claim tax rebates. Part of the increased funding for source monitoring could come from the proceeds of the lignite and coal taxes recommended here. And consolidating regulatory responsibilities will also mean more effective monitoring because there will be less competition among agencies. - 87 - P. Pollution Imoacts a costs 3.98 This section provides estimates of the reductions in emissions and the economic costs of the policy reforms proposed above to address energy-related air pollution. These estimates are not intended to be precise but rather are "ballpark" figures of the first-round impacts. As with the estimates provided in the next two chapters for controlling emissions from transport and industry, they are intended to illustrate that the costs of addressing the pollution problems of highest priority would not be prohibitive if cost-effective measures are chosen. Pollution ImDacts 3.99 Ligite Pricin_q. Of the win-win measures, the impacts of improving the transfer pricing of lignite alone will have some benefits, but these are difficult to quantify. The indications are that EGAT's planning exercise' does undervalue lignite but only by a small amount. If the computed supply price is being used in the planning exercise, the add'tion of a small (at present) depletion premium will not have a large impact on B6AT's planning decisions except towards the middle of the next decade as lignite reserves are depleted. 3.100 DSM. The 4 . cts of implementing DSM measures will, on the other hand, be significant. It is estimated that these measures would, if effective, mean that over a five-year period, the need for capacity additions of 238 MW could be avoided as would the generation of about 1400 Gwh of electricity annually.-M Assuming that the fuel saved due to this reduction in electricity demand is fuel oil (the marginal fuel), annual use of fuel oil (mainly in the BMR) for power generation would fall by about 129 million liters by 1997. The emissions reductions that would result annually from 1997 (relative to uncontrolled levels) in the BMR are approximately 540 tons of SPM and 7,400 tons of S02. These emissions reductions represent decreases (relative to uncon- trolled projected total emissions) of about 4 percent for SOk and only a small fraction for SPM. 3.101 Emissi:ns Standards and Taxes. The precise emissions impacts of raising the lignite tax are also difficult to estimate for its use in both power generation and in manufacturing. Since it is difficult to retrofit the existing lignite-fired power capacity, the impact on emissions of removing the current cross-subsidy to lignite will arise from the changes it will induce in EGAT's future capacity planning. It is assumed that BGAT's planned lignite-based facilities already under construction (Mae Mob units 12 and 13) are commissioned. But in response to emissions standards, other such facilities planned to be commissioned in 1996-97 (two 150 MW plants at Mae Rhan) are assumed to be fitted with low-sulfur control or combustion technologies and precipitators or to switch to hard coal. Under theae assumptions, annual emissions of SPM and SO2 would fall in 1997 by 72,000 tons and 54,000 tons in the Northern Region. These W For details see World Bank (1993), Table 3, p. 38. W See Annex 111.1 for details of this and other estimates. - 88 - represent reductions of 64 percent for SPM and about 10 percent for S02 relative to uncontrolled levels. 3.102 Within manufacturing, the differential lignite tax proposed -orre- sponds to an increase of about 20 percent in lignite prices. Assuming a short- run price elasticity of -0.5 for lignite and full conversion to coal, about 10 percent of current lignite demand will shift to coal. Based on this conservative estimate, the emissions impact of this shift would be a decrease of about 8,000 tons of 8PM and 8,700 tons of S02 in the EMR. These reducF.ions represent decreases (relative to total 1988 emissions in the BMR) of about 2 percent for 8PM and about 4 percent for 8SO. 3.103 Finally, the short-run emissions impact of raising taxes on lignite and coal (beyond the initial tax increase on lignite) would be small because coal use even in manufacturing is quite limited. But in the medium-term, the potential impact of this tax would be significant since it would indace substitution to cleaner fuels and the adoption of energy-saving measures. 3.104 Cost impacts. These cost estimates are only first-round effects. The net economic costs of more realistic pricing of lignite used by MGAT, and of the implementation of DSM programs are negative to the extent that these would provide gains in economic efficiency. While this would be small for lignite pricing, the grins from implementation of DSM would be considerable. It is estimated that the average cost of the DSM program is about 1.7c./kwh. compared to EGATIs current generation cost of 5.7c./kwh. This translates into a net economic gain from the DSM program of about $57 million annually after 1997. 3.105 All the other targeted policies will increase costs in power generation as well as in manufacturing. The added annual burden of the lignite tax in the short-run on manufacturing (mostly cement production) will be about $11.3 million nationwide. The impact of removing the cross-subsidy to lignite on the power sector is about $17 million annually given current lignite use. Additional short-run effects on electricity generation will be to raise costs by about $10 to $14 million annually after 1997 due to the use of desulfurizers at EGAT's new lignite-based capacity, and about $30 mi±lion annually even if all new capacity requires precipitators to reduce SPM emissions. Wor EGAT's new capacity that is lignite-based, generation costs will thus rise by about 0.6 to 0.7c./kwh. 3.106 It should be emphasized, however, that these costs do not represent the net economic costs of these policies. They represent the short-run transfers from fuel users to the government. In the medium- and long-run, these measures will induce substitution either away from energy towards material, capital or labor, or among energy sources away from these fuels as well as energy conservation among end-users. Consequently, the economic costs of these measures will be lower than these first-round impacts depending on the speed of the adjustment. G. Sumar 3.107 Over the past decade, emissions of air pollutants such as SPM and S02 from energy production and nse in Thailand have risen sharply reflecting the pace of economic growth. Primary energy supply to satisfy higher demand has almost - 89 - doubled since 1982. The pollution impacts of this growth have been magnified in some areas by the shift in the structure of energy supply towards relatively dirty fuels such as lignite both in electric power generation and within manufacturing. In part, this shift reflects the structure of cross-subsidies that arise from energy taxation, which favors the use of lignite over fuel oil. Efforts to control energy-related emissions from the power sector and manufactur- ing, implemented through ambient standards and source-specific emissions limits have not been effective in reversing the adverse air quality impacts of these factors. 3.108 Projections for ecciomic growth and energy use point to a continued rise in energy-related emissions, without additional policy action, both nationally for pollutants stich as SO2 and NOh, and in the BMR and the Northern Region for SPM and 402. Energy demand is anticipated to grow at over 7 percent annually. And in meeting this expanded demand, the share of lignite and coal is expected to rise from about 10 percent to about a third by 2006. Given these projections, policy action must be aimed at forcing producers and users to take account of the adverse pollution impacts of energy production and use. 3.109 Since the use of electricity and other energy inputs in Thailand is not subsidized in general, the scope for "win-win" policies, which would provide environmental improvements and economic benefits is limited. However, the efforts currently being made in promoting demand-side management (DSM) for electric power by EGAT are promising in this respect. By reducing the growth in electricity demand and the need for peak capacity additions, these initiatives would contribute to environmental goals while providing economic efficiency gains. 3.110 However, DSM efforts will not be enough because they will only slow the pace of energy demand. It is rec-mmended that additional targeted policies be instituted to control energy-related emissions. The starting point should be to remove the cross-subsidy from differential taxes, which currently favors lignite use in power generation and in manufacturing. However, lignite use results in greater emissions of 8PM and S02 relative to coal and fuel oil. This difference in emissions should be reflected in a higher tax rate, relative to other fuels, on its use by manufacturing firms. Such a differential fuel tax, which should also be considered for coal use in manufacturing, is preferable to the current approach of specifying source-specific emissions standards because its administrative ease make it easier to enforce for the manufacturing sector, which is characterized by a large number of emissions sources. The disadvantage of such fuel taxes -- that they may discourage cost-effective installation of emissions control equipment or process changes -- should be addressed by implementing a rebate scheme for large and medium-sized manufacturing firms. 3.111 For EGAT's power generation facilities, it is recommended that beyond the removal of the cross-subsidy that favors lignite use the primary emphasis be placed on defining and implementing emissions standards. Specifically, measures that specify control technologies should not be implemented. It is recommended that these emissions standards be stricter for new sources compared to existing facilities; cover the entire facility rather than individual sources; and be regionally differentiated. At present, amissions standards for the power sector should apply to 8PM at all locations, and to S02 in the Northern Region. - 90 - 3.112 The cost of these policy proposals, even in the short-run when the scope for adjustments is limited, are modest. Moreover, since these policies would combine fuel taxes with emissions standards, they should be administrative- ly less onerous than the current approach of relying solely on emissions standards. And using this approach rather than specifying emissions control 'echnologies promises savings in pollution control costs. Finally, the recommended strategy would be cost-effective because it focuses on SPM and S02 (mainly in the Northern Region), which are the air pollutants due to non- transport energy use that are currently of highest priority. - 91 - IV. ADDRNS8BNG TRE INVIRONUMNTAL IMPACTS OF ROAD TRANSPORT A. Introduction 4.1 As documented in Chapter I, the last decade has seen unprecedented growth in incomes in Thailand and particularly in the Bangkok Metropolitan Region (EMR). This rise in income levels has had a particularly dramatic impact on the demand for private and public transportation. And as these demands have been met, traffic congestion and transport-related air pollution have grown and continue to worsen. The scale of the problems now seems formidable. The behavior of millions contributes to these problems, and a myriad of government agencies is involved in attempting to implement strategies to mitigate them. Consequently, many analysts now feel that only draconian solutions will be effective. 4.2 The main externalities that arise from the transport sector are air pollution and congestion. Obviously the latter can be traced entirely to transport. The contribution of transport to air pollution, however, varies by pollutant. For some air pollutants whose impacts are of concern (Chapter II), such as lead, transport sector emissions are the predominant source. For other pollutants such as SPM and S%, the share of the transport sector is smaller although there is still considerable uncertainty about these estimates. However, for most of the air pollutants that are already of environmental significance or whose impacts are likely to be of concern in the coming years, the transport sector is a significant source of emissions particularly in the BMR. This conclusion along with the already high economic costs associated with congestion imply that strategies to control externalities that arise from road transport are of particular significance in the BMR. 4.3 Emissions from the transport sector are determined by three factors, each of which can be altered through policy intervention. The first determinant is the aggregate demand for transport services, and its growth over time. The distribution of this demand (in vehicle kilometers travelled--VKT--for instance) over alternative modes is the second aspect. The final factor is the emissions per VET for different modes, which has several determinants. In Thailand, the increase in emissions over the last decade reflects the changes in each of these three factors. Total trunsport demand has risen with GDP and with the structural changes in the economy. The distribution of this higher demand in the BMR across transport modes has also changed over the past decade, with private vehicles such as cars and motorcycles having shown larger increases in VKTs than buses. And finally, emissions per VKT have fallen, on average, with the introduction of cleaner fuels and newer vehicles but they have likely risen with worsened congestion. 4.4 The congestion impacts of transport depend on the supply and demand for road space. The demand for road space is determined by the first two factors discussed above--total transport demand and its distribution across modes. Obviously, the key supply determinant it.; the area devoted to roads. But supply also depends on the effectiveness of traffic management and on road quality. All - 92 - three of these areas have been problematic in Bangkok, and increased congestion has been the result in recent years. 4.5 The chapter begins by describing trends in the various determinants of transport-related pollution and congestion during the recent years of rapid economic growth. In particular, trends in transportation demand and the distribution of transport modes in the BMR, and their implication8 for consumption of different fuels in the transport sector are described in Section B, as are projected trends in these. As the main determinants of congestion, the system of traffic management, and road provision and quality are analyzed. Section C then evaluat3s the environmental impacts of these trends in transport demand and fuel consumption. The shares of the transport sector to the key air pollutants in the EMR, as well as the shares of different vehicles are noted. Estimates of future emissions shares of transport sources are also provided. Trends in congestion are noted as well as the impact of congestion on transport emissions. Section D describes trends in transport fuel prices over the last decade and evaluates the current system for controlling emissions from transport sources. Based on this evaluation, recommendations for addressing traffic congestion and emissions are made, and estimates of their impacts and costs presented, in Sections B and F of the chapter. B. Determinants of Transoort Emissions and Congestion TransIDort Demand 4.6 Stimulated by economic expansion and population growth, demand for road transport has increased dramatically in Thailand over the past decade. In 1988, over 93 percent of all passenger traffic and almost 84 percent of freight traffic were carried by road. The absolute increase that has occurred in road transport is evident from the rise during 1982-1990 in VKTs, which more than doubled in Thailand (Table 4.1), and in vehicle registrations during 1982-1992 in the BMR and the entire Kingdom (Table 4.2). - 93 - Table 4.1: Vehicle RlloMeters Ttavelled By Vehiele Type--Thiland (million km) 1982 1990 Average Annual t Growth Rate cars & Taxis 4,325 15,438 17.24 Light Buses 2,906 3,749 3.24 Heavy Buses 1,687 2,682 5.97 Utility Vehicles 9,607 23,900 12.07 Total 20,505 45,769 10.56 Source: Department of Land Transport, 1991. 4.7 Changes have also occurred in the composition of VKTs with the growth in VKT8 being most rapid for cars, taxis and utility vehicles. Although similar data are not available for the BMR, it would be expected that these trends would be mirrored there. Although these data do not include VRTs for motorcycles, they point to spectacular growth in their registrations between 1982 and 1990 especially within the BMR. This increase is likely matched by a corresponding rise in motorcycle VITs9.y M Note however that there is considerable uncertainty about the precise number of vehicles actually operated within the BSR. The vehicle registration figures can be misleading because many vehicles are opera. sd in the provinces but registered in the SMR. This bias is thought to be grec test for motorcycles. It was corrected in the SPURT study by using driving license statistics and these adjusted figures are also presented in Table 4.2. - 94 - Table 4.2: Vehicle Registrations (under Motor Vehicle Act) (thousands) SPURT Estimates 1982 1992 1989 Vehicle Type Greater BNR Totala BNR Totala BMA Bangkok' Autos 269 370 650 891 494 562 Microbuses 107 131 338 506 Utility Vehicles 85 350 217 1,120 Motorcycles 339 1,417 1,006 6,308 375 461 Others' 50 so 53 233 a. Thailand. b. Greater Bangkok includes the Bangkok Metropolitan Area (BMA), and the provinces of Nonthaburi, Samut Prakan and Pathum Thani. c. Includes motortricycles, taxis, cars for hire, tractors, farm vehicles and trailers. Source: Transport Statistics, Department of Land Transport, 1993; SPURT, Draft Final Report, Working Paper No. 15, October 1990. 4.8 Per capita vehicle ownership in the BMR of approximately 210 vehicles per thousand residents (based on registration statistics) is low compared to that in industrialized countries--about 505 vehicles per thousand residents.y The low vehicle ownership rate is primarily because average household incomes even in the BMR are still far below the threshold for car ownership. This also explains why 46 percent of all vehicles (based on registrations) in the BMR are motorcycles, which is a far higher share than in industrialized countries. However, with economic growth anticipated to continue, it has been projected that the number of cars in Greater Bangkok will increase from 562,000 in 1989 to over 2 million in 2006. These estimates predict that the phase of most rapid growth in the number of private cars has only just begun, and that by 2006 the number of cars and pick-ups in Bangkok will probably more than triple.F 4.9 Buses are currently estimated to carry about half of all passenger trips in the BMR. Urban bus services are managed by the Bangkok Metropolitan Transit Authority (BMTA). BMTA operates about 4,800 buses and controls the operation of about 6,000 privately-owned buses, which includes 2,000 mini-buses. I In the BMA (as opposed to the BMR), according to the Department of Land Transport, the ownership rate in 1988 was higher--323/1,000. ' SPURT, Working Paper No. 15 (Draft Final Report), October 1990, p.4-6. Although JlCA (1990) estimates only a doubling of private vehicle ownership during this time, that estimate was considered conservative by SPURT and Thai policymakers. - 95 - Until two years ago, the bus fleet consisted mainly of old vehicles, many of which had been in operation for over 20 years. However, substantial acquisition of new vehicles has taken place under the bus leasing program and 1000 new airconditioned and regular buses are now in operation. BMTA also recently awarded a concession to Bangkok Motor Company for 400 new air-conditioned mini- buses to provide high quality service at premium fares within the central area and between tourist sites. 4.10 Although many new buses have been introduced, the average age of BMTA's fleet is still about 10 years. The 2000 mini-buses are, on average, more than 10 years old and most have truck chassis with bus bodies. They operate with the permission of SMTA, in return for a fee, but are inadequately supervised. Partly because of capacity problems with the bus system, taxis and tuk-tuks and similar para-transit vehicles including motorcycles have flourished. In 1989, it was estimated that there were 13,500 taxis, 15,300 small vehicles (three-wheelers or tuk-tuks and four-wheelers or silors) and 17,000 soi motorcycles in operation.y ConsumDtion of Transport Puels 4.11 The impacts on emissions of various pollutants of growing transport demand and the changes in vehicle mix are evident from the growth in consumption of transport fuels in Thailand as well as in the EMR. Table 4.3 shows that fuel consumption rose at an annual average rate of over 10 percent during 1982-1992 for the entire Kingdom and 10.5 percent in the BMR since 1986. The increases in diesel and LPG consumption overall, and of diesel and gasoline in the BMR have been particularly striking. N JICA (1990). - 96 - Table 4.3: Consumption by Type of Petroleum products (million litres) Ave. Annual percent Thailand BAER Growth Rate Petroleum Products 1982 1992 1986 1992 Thailand BiER Regular Gasoline 1,322.8 2,116.3 384.7 614.5 4.8 8.1 Premium Gasoline 692.3 1,709.2 605.6 911.8 9.5 7.1 Unleaded Gasoline - 515.0 - 409.9 - - Total Gasoline 2,015.1 4,340.5 990.3 1,936.2 8.0 Il.L Diesel 3,931.0 10,375.3 1,975.3 3,608.6 10.2 10.6 LPG 600.8 2,097.4 692.2 1,099.0 13.3 8.0 TOTAL 6,546.9 16,813.2 3,657.8 6,643.8 9.9 10.5 Source: DEA 1992c. 4.12 Figure 4.1 illustrates the shares of various transport fuels consumed by different types of vehicles in the BMR. Almost all the diesel is used by buses, trucks and pick-ups, all of which have shown sharp increases in registrations. It is also worth noting that motorcycles now account for almost 60 percent of the regular gasoline consumed in the BMR. Traffic and Road Infrastructure 4.13 The resulting impacts of this increased transport demand on congestion depend on traffic management and the provision and quality of road infrastructure. The importance of these factors in Bangkok can be seen by noting that the vehicle ownership trends by themselves do not explain why congestion in the BMR is so severe. Per capita ownership rates are still relatively low, and a large proportion of vehicles is motorcycles, which by taking up far less space should aggravate congestion less than passenger cars or pickups. Congestion in Bangkok is worse because of the low amount of land area devoted to roads, the paucity of medium-sized distributor roads, and problems with traffic management. 4.14 Road Networks. There are 980 km of major roads and 2800 km of sois in the BMR. However, the road availability as a share of total area in the 8MR is only about 11 percent, which is low by international standards.y In addition, there is no clearly defined road hierarchy, distributor roads are lacking, and the connectivity of the existing smaller roads is poor. The radial roads are well developed and include the First Stage Expressway. But of the ' See JICA (1990). By contrast, in cities in industrialized countries 20 to 25 percent of their area is occupied by roads. - 97 - circumferential roads, only the Middle Ring Road is almost complete. In inner Bangkok, the road network is characterized by the presence of very wide roads and the small local lanes (or sois) that connect to them. Because of the absence of distributor roads, both the main roads and some sois must carry local and long- distance traffic. Figure 4.1: Vehicle Shares of Fuel Consumption BMR 1991 Regular Gasoline Premium Gasoline 3_ 1.2% - E alSE | ~~~~~~3.4%, . == _ O~~~~~~~~~~.4 1EC mmDp,dt" Iue 1 Maur Diesel LPG 3 ~~~~~~~~16M.6.B 2.3i 6.0%. 3 ^ t 8~~~~ ~~~~~~~.1 s Source: IEC (1992). 4.15 The lack of road space also aggravates congestion because develpmuent in the BMR (and particularly in the BMA) tends to be concentrated along the road networks. Although development is spread over a large (and growing) geographic area, it has largely proceeded without any formal planning control, and away from the main roads large tracts of land lie vacant. Further, the lack of connecting - 98 - roads increases driving distances. The SPURT project estimated that because of these gaps in some areas of the BMR, 30 percent more vehicle-kilometers resulted. 4.16 Traffic Control. Almost all major intersections in Bangkok are signalized. Of these approximately 200 signalized intersections, most are manually controlled by the Police who tend to operate very long cycle times (up to 10 minutes), greatly increasing delays as a result. Normal practice in other countries is to try to keep cycle times to two minutes or less. C. Environmental ImDacts 4.17 The major environmental impacts of the transport sector in the BMR take the forms of air pollution and congestion. As discussed in Chapter II, the air pollutants that already impose significant economic costs are SPM and lead. Other air pollutants that the sector contributes, including CO, RC, NO2, SO2, and air toxics are emerging problems particularly as the number of vehicles continues to grow. Congestion already imposes high costs, and will also become worse as vehicle ownership rises. Vehicle Emissions 4.18 Status. Emissions from vehicles account for a significant share of the total emissions of all air pollutants in the BMR. As Table 4.4 shows, all the ambient lead in air originates from the transport sector, as well as about a fifth of the SPM.-' Estimates of emissions shares are not available for CO and RC, but data from other cities indicate that transport sources account for almost all CO and a substantial share of NC. V These estimates are from TDRI (1990b), and are the same as those shown in Chapter III. As indicated there, these estimates, although imprecise, are the best available ones. The share of transport in lead emissions should be viewed with particular caution since the contribution of industrial facilities, particularly lead and zinc smelters, has not been estimated for Bangkok. - 99 - Table 4.4: nezrgy bulsions by Sector, (MRM) (tons/year) Total Share by Sector (tP Emissions 1988 Industxy Transport Power Bnisslons SC2 203,634 42.6 38.7 16.0 NO 217,S22 9.4 76.0 5.0 SPN 255,265 35.9 22.3 1.0 Lead 519 - 100 - a. The remaining emissions come from the sectors not mentioned in this table: agriculture, residential and commercial. Source: TDRI, 1990b; staff estimates. 4.19 Trends in transport sector emissions of the major air pollutants in the BMR during 1979-1991 are shown in Table 4.5. Emissions of all pollutants from vehicles have almost doubled during this period. The estimation methods used for computing transport emissions, and the need for caution in interpreting them are explained in Annex 4.3. Table 4.s5: kuisuon from the Transport Sector (MR) (Thousand Tons/Year) Ave. Annual t Growth Rate 1986 1991 (1986-91) SPM 42.51 76.15 12.4 NC0 121.97 218.20 12.3 s82 58.77 103.82 12.1 CO 595.67 1,065.79 12.3 RC 83.85 149.94 12.3 Lead 0.396 0.618 9.3 Sources: TDRI, 1990b; staff estimates. 4.20 Finally, Figure 4.2 shows the contributions of different vehicle types in 1991 to emissions of the major air pollutants in the BMR. Motorcycles are - 100 - significant contributors to emissions of all pollutants except 8S0, but are particularly important with regard to SPM and lead, the two pollutants that are currently of greatest concern. Diesel-powered trucks contribute to both 8PM and S02. Cars, being mainly gasoline-powered, account for the bulk of lead emissions, as well as CO and HC emissions. F%M 4.2 Emuisms by Vehie Catey 120- 100- 80- 140- 1 t 20 w,w,w, NOX HC CO SPM Pb S02 _ G Diesd Trucks I LPG Vehtdus X Mlotorcycs| Source: Walsh (1990). 4.21 ProjectigM. The same methodologies used in estimating current emissicns from transport and its distribution across vehicle types have been used to predict emissions trends in the BMR until the year 2001. The trends for various pollutants are shown in Figure 4.3 and the transport sector's share of total emissions in the BMR is shown in Figure 4.4. These projections are contingent on no additional policy action. The share of transport emissions increases significantly for both SPM and N02. - 101 - Figure 4.3 Transport Emissions in the BMR 2.5- 0.5= 1991 1996 20056 Yer Source: iDPI (1990a) and SPM -- Z -- S02oz shaff O O*$ IU- Co -'4co NC - Le I Figure 4.4 Energy Emissions by Sector in BMR, 2001 100- 80o 70- 50- .60 501 1| 40- f 20- 10 | 0- S02 N02 SPM so1 wc TOr_________ 1990 4mikKkal MTransort Potw - 102 - Congestion 4.22 With economic growth and expanded development, traffic congestion in the BMR is increasing. Congestion is now widespread and speeds are low (averaging 10 km/hr or less) over a wide area. In many parts of Bangkok, congestion exists for most of the day. And because of the sparseness of the suburban road network, congestion in suburban areas rivals that in the inner ring of the city. While it is difficult for average speeds to fall muceh below 10 km per hour, the spread of congestion greatly increases journey times. The burden of congestion is mainly felt by bus travellers who have fewe- travel alternatives than car users. A further characteristic of congestion is that it increases the variability of travel times. 4.23 Traffic congestion is also associated with increased emissions particularly for HC, even if the number of vehicle trips remains the same. This increase is due both to longer trip times (for the same distance) and the higher emissions associated with the need for more frequent stopping and acceleration. In Bangkok, the latter is likely quite significant particularly fo-: motorcycles. In the next section, a rough estimate of these emissions benefits are derived for Bangkok but it is noted that these are small in comparison to the gains that would accrue from lower congestion itself. 4.24 Projections. Future congestion trends can be inferred from the projected growth in vehicle trips in the BMR. The available estimates vary widely, but are indicative of the extent to which congestion could worsen. For a study region that covered about three-quarters of the BMR, JICA (1990) es :imated that with the doubling of the vehicle population by 2006, total vehicle trips would rise by 68 percent. The SPURT study in 1991 estimated that trips would increase by 52 percent by 2006 but their estimate of the number of trips in 1989 was about two-thirds higher than the JICA estimate. Hence, even with substantial investments and upgrading of road infrastructure, congestion in the EMR will likely worsen. D. The Effectiveness of Current Policies 4.25 Given the seriousness of the pollution and congestion impacts of vehicle use in the BMR, a variety of policy interventions is already in place. However, one of the difficulties in dealing with the environmental impacts of the transport sector is that it is possible to intervene at multiple points. These interventions can be designed to influence one or more of the determinants of transport demand, of modal choice or emissions intensity, or the availability of road space and the efficiency of its use. However, it is important to recognize that these alternative interventions vary widely in their effectiveness and economic costs. This makes it necessary to evaluate options carefully before choosing which ones to implement. Reformulation of Transnort Fuels 4.26 The reformulation of transport fuels in order to reduce emissions of key pollutants has been an area in which there has been considerable action since 1990. The analytical lead in this area has been taken by the National Energy Policy Office (NEPO) with the standards being announced and enforced by the - 103 - Ministry of Commerce. Reformulation thus far has focussed mainly on measures to reduce lead in gasoline and sulfur in diesel. 4.27 Gasoline Reformulation. These measures have aimed thus far primarily at reducing lead emissions. In 1990, the maximum lead content in gasoline was set at 0.4 grams per liter. In May 1991, unleaded gasoline (lead content 0.013 grams/liter) was introduced in the BMR. And in September 1992, the maximum lead content in all gasoline was lowered to 0.15 grams/liter. Despite the opposition of some refiners, it is intended that all gasoline in Thailand will be unleaded by January 1996. 4.28 Two other steps are being taken to reformulate gasoline (see Annex IV.1 for details) in order to reduce emissions of SC and Co. Changes have been made in the distillation range. And although refiners are not yet required to add MTBB (Methyl tertiary-butyl ethyl), it is mandatory that gasoline contain no less than 1 percent oxygen. 4.29 Diesel Reformulation. The reformulation of diesel by reducing its sulfur content has been aimed at reducing the emissions of SO2 and of sulfates that contribute to SPM concentrations. Low-sulfur diesel (0.5 percent weight) was introduced into the BMR in 1991 by pooling imported low-sulfur diesel with local production (which contains about 1 percent weight sulfur). Use of such low-sulfur diesel is now mandatory and its distillation point has also been reduced. NEPO intends to lower the sulfur content further, to 0.25 percent weight and 0.05 percent weight, in 1995 and 2000 respectively, but the timing of this program has not been finalized. 4.30 Smokeless Oil for Motorcycles. Since motorcycles account for a significant share of the emissions of all pollutants, especially particulates, (Figure 4.2), the lubricating oil combined with gasoline in two-stroke engines has been reformulated to reduce emissions of SPM anœ RC. 4.31 Alternative Fuels for Buses. Currently, all buses have diesel engines. BMEA has introduced an experimental program of 82 new buses designed to operate on Compressed Natural Gas (CNG). The program will be evaluated to monitor the performance of these CNG-powered buses, and if it proves successful their use will be increased. 4.32 Undoubtedly, the fuel reformulation programs have been the most effective of the current measures in reducing emissions. Because fuel standards do not require changes in behavior of individual drivers and apply to all vehicliss, they are relatively easy to implement. It is notable that just over a year after its introduction, unleaded gasoline already had a market share of about lit percent in the BMR (Table 4.6). Combined with the reduction in the lead content if regular gaooline, it is estimated that lead emissions are already about 18 psercent lower in the BMR compared to their levels if unleaded gasoline had not been available. Although the use of low-sulfur diesel is not yet mandatory, it is estimated that by pooling domestically produced diesel with imported low-sulfur diesel, the sulfur content of diesel used in transport has fallen in half. As a result it has likely already led to reduced emissions of s5 and lower ambient levels of PM10, which result from the formation of sulfates. - 104 - Table 4.6s Lead Content of asolin Sales in MM 1991 (April-December) 1992 (January-August) Market Share of ULG (%) 18.3 18.2 Total Gasoline Sales 1256.5 million litres 1433 million litres (ULG + PMG + RMG) Total Lead Content 413.4 tons 472.1 tons (14.2 *)' Total Lead Content in 502.6 tons 573.2 tons (14.0 %) the Absence of ULOb a. Percentage increase in total lead content between 1991 and 1992. b. Based on the assumption that regular leaded gasoline (RMG) and premium leaded gasoline (PMG) were used equally instead of actual unleaded gasoline (ULO) use. Sources: DEA 1991c; NEPO. 4.33 The costs of implementing these fuel standards have been relatively low. Detailed estimates are provided in Annex IV.3 and are discussed further in the next section. These strategies for reducing lead, SPM and SCO are cost effective also because there are no alternative ways of controlling these emissions other than by reducing VKTs, which is likely to be very costly as Bangkok continues to grow. Moreover, to the extent ambient 80O levels are of concern in some parts of the BMR, this approach of reducing transport emissions is cheaper than doing so by mandating lower sulfur content in fuel oil or requiring desulfurizers on fossil-fuel fired power plants (Chapter XCU). 4.34 But despite the emissions reductions from these fuel reformulation measures, many other features of the current policy and regulatory framework tend either to offset these benefits or achieve emissions reductions at high costs. Among the former, the most significant is the fall in real prices of transport fuels over the last decade (see below). Combined with the unpriced use of roads (as in most other countries), the fall in gasoline and diesel prices has contributed to the increase in VKTs. Another significant factor has been the fall in vehicle prices following the relaxation of import restrictions. While the reductions in tariffs and quantitative restraints on imports are desirable from the perspective of economic efficiency (narrowly defined), its impacts on vehicle ownership and usage illustrate its potentially negative effects on emissions in a context in which the externalities from vehicle use are unpriced. And the few demand management measures in place have had a small impact but need to be broadened and better coordinated if they are to be more effective. Fuel and Road Pricina 4.35 Pricina and Taxation of Transvort Fuels. The system for setting prices of petroleum products, including transport fuels, has been summarized in - 105 - Chapter III. Figure 4.5 illustrates the price trends in real terms of gasoline, diesel and LPG since 1984. The decline in crude oil pric?- over this period has meant decreases in the real prices of all these fuels. The fall has been particularly sharp for premium and regular gasoline. And although the demand elasticities are probably small in the short-run, these price decreases have undoubtedly stimulated gasoline and diesel consumption, contributing to lead and SPM emissions. Figure 4.5 Prikes of Petoleum Products in MM 100- Io- 856 £C80- 0 75- ~70- & 65- 60 1984 1985 1986 1987 1988 1989 1990 1991 1992 --1 bprek O 0 H__ oLvOSA Dll s to .~~ 0 BLSb Ma -_-LP Source: DBA (1992C). 4.36 Not only have gasoline prices fallen in real terms; taxes on gasoline in Thailand are also lower than in all its neighbors (except Indonesia, a major oil producer), (Figures 4.6 a and b) and in four OBCD countries. A similar pattern is observed for diesel taxes, except that Malaysia has a lower tax rate. 4.37 There is also a small cross-subsidy to diesel because it is taxed at a lower rate than gasoline: an average of 3 Baht/liter compared to 3.35 Baht/ liter for leaded gasoline. Utnleaded gasoline is taxed at about 22 percent less than regular gasoline, but the pump prices of the two differ by 0.1 Baht/liter or less because of differential production costs. A subsidy to LPG use has been in place since 1987, and has encouraged the conversion of tuk-tuks and silors from gasoline. - 106 - Figure 4.6a Premium Leaded Gasoline Price/Tax Series 5.0 4.5 4.0 3.0 2.0 f.0- 0.0 Fuel Price MFuel Tax Premqium Leaded Gasoline Price/Tax Series 7.0 6.0 *3.0- 2.0- 1.0- 0.0 Ful Prilee Fud Tax Note: Data of South Korea are as of 06/93. Source: "Energy Detente", December, 1993. - 107 - Figure 4.6b Diesl Fud Price/Tax Sorts 1.4 1.5 1.2. | 1ud PlhX Fad Tax Disel Fuel Prce/Tax Serie uGO - Tud PRice Fid Tax Note: Data of Thailand is as of 07/93; and data of the United States is as of 01/94. Source: "Energy Detente", December 1993. 4.38 Road Pricinq and Restrictions. Tolls for use of roads in the BMR are currently charged only on expressways (at present only the First Stage - 108 - Expressway). Even on this road, tolls were increased recently by 50 percent after 10 years, thus lagging significantly behind the rate of inflation. Further, these charges do not differ according to peak and off-peak periods. 4.39 Private road transport is also restricted on many central Bangkok streets by one-way roads and bus lanes. In 1985, the Police introduced a major one-way circulation system in the central area uLilizing Sukhumvit and Phetchaburi roads. However despite the one-way flow, traffic volumes along these streets are very high and congestion remains significant during peak hours. 4.40 Since 1975, 80 km of bus lanes have been implemented along central area streets in Bangkok. These have greatly benefitted the 50 percent or so of urban commuters who rely on buses. Where the bus lanes are enforced, they have succeeded in providing shorter travel times to passengers. However, in the late 1980s many bus lanes were not enforced pioperly, with cars illegally using them or parking in them. This inadequate enforcement eroded many of the earlier benefits. In response, many central area streets have now been made one-way but the bus routes have been left unchanged so that bus travel occurs in the opposite direction to general traffic flow. These "contra-flow" bus lanes have been very successful because they require less enforcement. The traffic police are also attempting to increase enforcement of the "with-flow" bus lanes. 4.41 There is almost no control of off-street parking in Bangkok. New buildings and sites are free to provide as much parking as they wish. The parking supply is large and readily available in many areas. On-street parking restrictions have been successful and are enforced on most of the major roads. Finally, since the early 1970s, all truck traffic has been banned in the central area during peak morning and evening hours on weekdays. Heavy trucks are allowed only during weeknights and weekends. Vehicle Pricinar and Taxes 4.42 During the 19808, import tariffs and domestic content regulations were used to promote the domestic manufacture and assembly of motor vehicles. Until 1990, tariffs on imports of built-up cars and vehicle parts were as high as 300 percent, and the import of small cars (less than 2300 cc. engine capacity) was banned. The import protection provided by these tariffs was supplemented by requirements that half the content of domestically-assembled cars be locally produced. 4.43 These policies were drastically reformed in 1991. The ban on imports of small cars was eliminated, and tariffs on imports of all cars and vehicle parts reduced to 20 to 60 percere. These reforms were intended to expose the relatively inefficient domestic motor vehicle industry to greater international competition. one result has been a fall in domestic prices, particularly for care.7' And this has led to a sharp increase in sales of new vehicles, particularly imports, in 1992. Between 1986 and 1990, new vehicle sales rose from about 80,000 to over 300,000, an average annual increase of almost 40 21 IIEC (1990) estimated, for instance, that the prices of three popular automobile models fell about 15 percent in 1991. - 109 - percent. After falling in 1991 because consumers postponed purchases to await the impacts of low tariffs, sales again rose by 30 percent annually in 1992-93 to over 450,000 vehicles in 1993. 4.44 Vehicle registration (first-time) charges and annual license fees in Thailand have also been low--another feature that has underpinned the growth in vehicle ownership. Taxes vary by vehicle type, engine capacity, and weight, and are about 1000-2000 Baht for passenger cars and about 2500 Baht for heavy trucks. Other Demand Manaaement Measures 4.45 The most significant measure that has been implemented in this regard is the staggering of work hours by the government. Since May 1991, government employees can choose between three sets of work hours. Some private employers also offer this choice. Based on a study by the Office of the Commission for the Management of Road Traffic (OCMRT), a scheme to provide financing for purchase of school buses has been implemented recently with a revolving fund established to provide low-interest loans. Vehicle Emissions Controls 4.46 in reducing emissions per vehicle kilometer, fuel reformulation is only one option. Two other options are end-of-tailoile controls such as catalytic converters that reduce exhaust emissions, and vehicle emissions srndards (including the use of catalytic converters). 4.47 Catalytic Converters. There are two types of catalytic converters commonly in use: oxidation or two-way catalysts, which reduce CO and SC emissions, and oxidation/reduction three-way catalysts that control NO, emissions as well. Catalytic converters have been mandated for all new cars (domestic and imported) in Thailand beginning during 1993.F 4.48 EmssionsL Standards. Experience in OECD countries has shown that emissions standards can, if enforced adequately, result in significant impacts on all pollutants including 8PM. However, to enforce compliance, not only must meaningful standards be established for new and in-use vehicles. Effective inspection and maintenance (I&M) procedures must also be established and implemented. RTG agencies, including the Thai Industrial Standards Institute (TISI) and DPC, have recently established emissions standards for new gasoline- powered cars, light-duty and heavy-duty diesel vehicles, and motorcycles (see Annex IV.2 for these standards). It is anticipated that the standards for diesel vehicles and motorcycles (two-and four-stroke) will be revised soon. F For new cars larger than 1600 cc., these are required in imports registered after January 1, 1993, and domestic models registered after March. All new cars with engine capacities less than 1600 cc. need catalytic converters after September. The law does not specify whether these should be two-way or three-way converters. - 110 - 4.49 Insnection and Maintenance. The Land Transport Department (LTD) in the Ministry of Transport and Communications and the Traffic Police are the agencies responsible for checking the compliance of in-use vehicles with emissions standards. The revised NEQA also gives DPC the authority to perform inspections of in-use vehicles. The only testing required currently is for noise, and emissions of black smoke and CO. Noise and emissions testing are conducted currently as part of LTDIs general vehicle inspection program. All new vehicles are subject to such inspection under the regulation of TISI. But among in-use vehicles, only those registered under the Land Transport Act (buses and heavy-duty trucks) and commercial vehicles registered under the Motor Vehicles Act (taxis, tuk-tuks and rental vehicles) are subject to inspections during annual registration renewals.F These inspections are carried out mainly at LTDIs facilities, of which there are four in the BMA and four in the other provinces of the BMR. Private inspection stations are also franchised by LTD, and there are four in the BMR. The standard of inspection facilities and staff capabilities varies widely. The best-equipped facility--at LTD's headquarters in Bangkok--has a daily capacity of only about 400 vehicles. 4.50 However, detailed procedures for emissions testing, are not yet in place, and current inspection results must be viewed with skepticism. Test data from LTD during 1984-1988 show that, of all vehicles inspected, over 98 percent passed. And even of those that failed, fewer than a seventh failed the emissions or noise tests.2 4.51 With regard to buses and trucks, the BMTA has contracted Isuzu, Benz, Mitsubishi and Volvo to inspect for black smoke. For the maintenance of heavy duty vehicles, the BMTA has depots in each of its 10 zones in the BMR. Private bus operators are responsible for their own maintenance but lacking their own facilities depend OL poorly-equipped private repair shops. 4.52 Since catalytic converters will be mandatory only from the current model year, their impact on emissions from the entire vehicle fleet is currently minimal. Further, the emissions reductions that they can achieve will continue to be small until a substantial share of the fleet has been replaced, which could take the better part of the decade even with continued economic growth. And judging from the experience in the OECD, there is reason to believe that the extra costs involved in equipping new cars with catalytic converters will reduce the turnover rate. The impacts of emissions standards and the vehicle inspection system on emissions from in-use vehicles have been minimal. Emissions testing is conducted regularly only for trucks and buses and even for these vehicles, the efficacy of test procedures is doubtful. V Inspection regulations are currently being revised so that all in-use vehicles will be required to undergo regular emissions testing. JP Land Transport Department Sector Paper, March 1990. - 111 - Public Transnort Policies 4.53 The BMTA has severe operating problems due to congestion, shortages of drivers and, until recently, the Government's restrictive policy on fares which did not allow it to cover costs. Bus fares, in particular, have been a political issue for over 20 years. Flat fares of 2.5 and 3.5 Baht are applicable to the blue and red buses run by BNTA and the buses and mini-buses of BMTAls subcontractors. These provide a basic service which is similar in standard despite the different fares. Air-conditioned buses use a six-zone fare system with the fare for first zone being 6 Baht and for each subsequent zone, 2 Baht. 4.54 Traffic congestion greatly contributes to the problems faced by the BMTA. Congestion reduces the speed and therefore the productivity of buses and so a larger fleet and crew are needed to perform the same task than with less congestiLn. The buses are severely overcrowded because of the effect of traffic congestion on the operation of the buses and a shortage of drivers. Although the level of fares was increased by about 20 percent in mid-1992, and the BMTA currently covers its operating costs, unless fares are maintained in real levels the issue of cost recovery will recur.W 4.55 Since the bus system is already estimated to carry about half of all passenger trips in the BMR, it has been effective in reducing emissions by curtailing demand for private transport in this regard. However, the system is already overcrowded, and suffers from the perception of poor service. Therefore, without improvements in bus operations, it is unlikely that it would be possible to shift commuters from private vehicles to buses. Further, buses themselves are a significant contributor to emissions, particularly of black smoke. Mass Transit 4.56 Three mass transit system proposals are currently being considered. The proposed design of these projects and their current status are described in Box 4.1. Each of these projects is being sponsored or undertaken by a different government agency, although two schemes -- the Bangkok Elevated Road and Transport System (BERTS) and the Bangkok Transit System (BTS) are to be funded privately. The Metropolitan Rapid Transit System (MRTS), which replaced the previous Skytrain project, is to be financed by the Government, although the extent of public-sector financing is yet to be determined. SuDplv-side Measures 4.57 Since the only effective component of the current strategy for dealing with the environmental impacts of transport has been the fuel reformulation program, the growth in VKTs has not been reduced. Moreover, the decreases in real fuel prices and vehicle prices have stimulated the demand for private road transport. Finally, congestion and emissions have worsened also because the W In 1991, the Government wrote off BMTAs accumulated losses (about $S500 million). Moreover, subsidized fuel supplies from PTT and low interest loans were arranged. - 112 - interventions on the supply side have been ineffective in keeping up with higher demand for road space. 4.58 Road Infrastructure. The major problem (as identified in the SPURT report, for instance) has been the lack of attention paid to distributor roads and missing link roads. Recent policy and institutional changes including completion of the Bangkok City Plan, the assignment of responsibility to the Public Works Department (PWD) for planning and construction of distributor roads, and the requirement that market prices be paid as compensation for land acquisition will all help in filling this gap. Box 4.1: Statua ef Mass Transit Provosals The agencies involved with the three mass transit systems under consideration, and the status of these projects is summarized below: * Hopewell Elevated Rail System (60 km) and Elevated Expressway (57 km) for State Railways of Thailand (SRT): The contract has been signed, but all finance not yet arranged. Detailed engineering designs have been prepared, and discussions are continuing between SRT and Hopewell over what constitute design and approval procedures. * Metropolitan Rapid Transit System (20 km) for the new Rapid Transit Authority: The tender documents have been issued and proposals are being evaluated. MRTS replaces the previous Skytrain project, which was canceled in June 1992. * Bangkok Transit System (14.5 km) - contract signed by the BM4A with Bangkok Transit System Corporation. Finance not yet arranged but preliminary design and tender documents have been issued. Proposals for turnkey construction have been received, and financing options are being considered. 4.59 The SPURT study recommended an investment program for missing link roads and distributor roads in developed and developing areas with the funding intended to come from the Central Government. In order to overcome the problem of insufficient institutional capacity, SPURT recommended also that the Public Works Department under the Ministry of Interior and possibly the Department of Highways, under the auspices of the Ministry of Transport and Communications, take on responsibility for distributor road investment in the Lat Phrao area, and the rapidly growing northern suburbs in Nonthaburi province and the western part of Bangkok. Based on these recommendaticns, the new ADB Urban Transport Project is funding a detailed study of the needed western distributor roads as well as investment in major roads in the Bangkok area. This project will also provide - 113 - significant resources to OCMRT for the planning of urban transport and traffic management. 4.60 Large investments are occurring in road projects in the BMR with the Second Stage Expressway (32 km), the Don Muang Tollway (16 km) (airport to central Bangkok) and the last phase of 15 overpass projects all currently under construction. Table 4.7 provides a description and status of these and other significant but smaller projects. Tabb 4.7: Maor Road Project - RMR Cost Length Expected (Baht Project Status (km.) Compleion bilion) Agency 9 constucted; I under constuction; Overpasses S in design stage; mid-1995 2.3 BMA Under construction; Ratchadapisek will complete Middle nterhge Ring Road; end-1995 1.0 BMA Don Muang DOH Tollway Under constuction; 16 end-1995 10.0 concession Second Stage First phase operational; ETA Expressway 32 end-1998 33.0 concession Tbird Stage Concession arrange- ETA Expressway ments being negotiated; 30 1998-2000 45.0 concession Ram Inthra Expressway Constucon imnent I8 end-1996 26.0 ETA 4.61 Traffic Manacement. Congestion has increased also because some aspects of traffic management have been neglected. For instance, although almost all intersections are now signalized, they are manually operated and tend to have long cycle times which adds to traffic delays. The BMA is about to let a contract for the first stage of a computer-controlled Area Traffic Control System (ATC), which would provide the opportunity to implement appropriate traffic control strategies that would reduce vehicular delays and emissions. But agreements between the Traffic Police and the BMA on the division of responsibilities have yet to be reached. Finally, the introduction of one-way roads by itself has been unable to improve traffic flow or reduce delays because traffic volumes remain high. E. EPronosed Reforms 4.62 The Government recognizes the seriousness of the environmental impacts of road transport in the BMR. Many steps have been taken in recent years, and particularly since the recent revision of the environmental law, there has been movement in a number of areas. However, the preceding analysis of the effectiveness of the current policy and institutional framework in addressing air - 114 - pollution and congestion points to the need for reform. In particular, attention must be paid to the costs and benefits from various interventions so that substantial improvements can be achieved without throttlinq economic growth in the BMR. 4.63 The recommended strategy would build on several existing elements of the government's program while placing greater emphasis on other aspects that have been relatively neglected until now. It has two main thrusts. First, it is aimed at reducing emissions from vehicles, and second at mitigating congestion in the BMR. 4.64 There are strong reasons for combining measures to reduce congestion with those that control vehicle emissions. As Chapter II has documented, the economic costs of congestion in the BMR are already substantial, and comparable to the health costs imposed by the major air pollutants. As incomes rise, these costs (in terms of losses of productivity and leisure) will increase further. Moreovex, other economic costs of congestion will grow as investors decide to locate in other countries in response to the perceived disadvantages. 4.65 The second reason for emphasizing measures that reduce congestion is that these will also offer some emissions reductions. The benefits of reducing congestion, estimated in Chapter II, did not include these benefits of lower emissions. Policies that reduce traffic congestion will cut emissions because of the elimination of vehicle trips, reductions in stop-go traffic, and increases in average speeds. Estimates of these emissions reductions are not available for Bangkok but U.S. estimates indicate that the greatest reduction in HC emissions would arise from the elimination of vehicle trips rather than the other factors. Moreover, the value of the associated emissions reductions is small compared to the value of time losses due to congestion.2 Nevertheless congestion reduction offers a "win-win" scenario, where economic benefits (narrowly defined) and environmental gains can be obtained simultaneously. For a developing country like Thailand that has to be concerned with the cost of reducing pollution, it is important that such options receive serious attention from policymakers. 4.66 The proposed program is also phased with some actions that are considered urgent and/or low cost implemented early while others, which require more analysis and planning or are aimed at problems that are currently less serious, would be initiated later. Such a phased approach is recommended because some measures are relatively low-cost and easily implementable. These interventions target pollutants that are already priorities from a health perspective; have already been analyzed for their effectiveness; and do not require substantial coordination in their implementation. Some of the fuel reformulation efforts already underway are examples. But other intervention;, particularly those targeted towards achieving congestion reductions, will require more analysis and planning before they can be implemented successfully. The same W For details, see Krupnick (1992). It is unclear whether this conclusion would extend to Bangkok. The value of time as well as of the health benefits would be lower in Bangkok than in the U.S.. However, the emissions reductions are likely to be higher in Bangkok because the baseline congestion is worse. - 115 - is also true of policies designed to encourage the use of sophisticated emissions control technologies or of alternative fuels, which aim at reductions in emissions of pollutants that are not yet of priority concern. Initial Phase 4.67 The first phase of the program should try to: (i) reduce emissions of pollutants whose impacts are already serious; (ii) prevent the worsening of congestion; and (iii) initiate actions and planning for the next phase of the program. In particular, it is recommended that some of the fuel reformulation initiatives already underway be completed on schedule; the implementation of emissions standards for motorcycles should be accelerated; taxes on transport fuels should be raised; some demand management measures should be expanded; bus services should be improved; investments in distributor roads should be made; and some aspects of traffic management should receive more attention. Fuel Reformulation 4.68 Since lead and 8PM are the two highest-priority pollutants, and the transport --sector, contributes substantially to each, the current fuel reformulation efforts in each of these areas should be continued. The lead content in all grades of gasoline has already been lowered to 0.15 and unleaded gasoline introduced, both at relatively low economic cost per ton of lead emissions reduced. According to the schedule for phasing out lead, all grades of gasoline will be unleaded by January 1996. The costs of achieving these reductions are moderate, and the present timetable should be maintained. The shift among consumers to unleaded gasoline could also be accelerated by widening the price differential between leaded and unleaded grades. Currently, the differential tax treatment results at best in only a small price advantage to unleaded gasoline. If this could be increased, not only would the market share of unleaded gasoline rise. It would also discourage drivers of post-1993 cars equipped with catalytic converters from using leaded gasoline, and poisoning the oonverters. Such a differential tax is discussed below. 4.69 Reformulating diesel by reducing its sulfur content (to 0.25 percent weight) and its viscosity is also highly cost effective given the contribution of sulfur to the smaller constituents of SPM. As is done currently, low-sulfur diesel should be provided (through imports, for instance) and sold at a lower price upto the time at which its use is made mandatory. Since the precise contribution of sulfur to SPM (in the form of sulfates) is not yet clear, and ambient levels of 80 are not yet a serious problem in most of the BMR, it is recommended that the proposal to require all diesel to have sulfur content no higher than 0.05 percent by weight not be implemented without further analysis. Requiring the reduction of sulfur to this level would be much more costly than mandating the 0.25 level (see below), and while there may be benefits from doing so, these need to be confirmed. - 116 - 4.70 While the present interest in CNG buses is justified, their use may be limited by the cost of high-speed refuelling compressors.2 LPG refuelling is lower cost and may be a Atter alternative. Rigorous observance of safe installation, maintenanc- and refuelling procedures is essential for using either of these fuels. Since the present level of maintenance of buses is not adequate for the safe operation of alternative fuels, a complete program of training and inspection will be required before these are introduced into the fleet. 4.71 Emissions ImDacts and Costs.*u The largest impacts on transport emissions in the first phase of the program will come from the proposed fuel reformulation measures. Of these, the impact on lead emissions is the easiest to estimate. Since the program envisages the eventual replacement of all leaded gasoline by the beginning of 1996, the decrease in annual lead emissions from gasoline use is estimated for that year. In the BMR, lead emissions will fall from their current level of about 750 tons annually to approximately 38 tons by 1996, a fall of about 95 percent in transport-related emissions. 4.72 The impacts of the diesel reformulation program on SPM and SO2 emissions are more difficult to estimate because of greater uncertainty about the emissions factors applicable to various specifications of diesel. It is further complicated for SPM emissions because, as noted in Chapter II, the SPM-sulfur link is uncertain even in industrial countries and highly site specific. Keeping in mind these caveats, it is assumed that the proposed changes in the distillation range of diesel will reduce SPM emissions from diesel use from about 6.3 qms./liter to 4.8 gms./liter. At current consumption levels, this translates into a fall in SPM emissions of about 5000 tons annually in the BMR or about 7 percent of current transport emissions in- the BMR. 1.73 For S02 emissions from diesel use, it is assumed that reducing sulfur content to 0.25 percent weight from its current level (a little over 0.5 percent weight) will lower emissions from 3.8 gms./liter to 2.6 gms./liter. At current consumption levels, this means that total S80 emissions will fall by about 4000 tons annually in the BMR or about 4 percent of current transport sector S02 emissions. 4.74 The details of the investments required for these fuel reformulation programs, both for lead in gasoline and sulfur in diesel, are contained in Annex IV.3. The costs of removing lead are shown there in two stages, for reducing it to 0.15 gm./liter, and then for reformulation to unleaded (0.013 gm./liter). The additional investment and operating costs associated with achieving these reductions are larger for the initial reduction, and translate to about $1.52/bbl. or 1.2c./liter. The incremental costs of reformulating further to unleaded are about $0.44/bbl. or 0.028 c./liter. These unit costs translate into W A detailed study of the costs and impacts of CNG-fuelled buses is being conducted under the Action Plan financed by the Bank's Fourth Highway Sector Loan. V Details of these estimates are provided in Annex IV.3. These figures are "ballpark" estimates of the first-round impacts, are not intended to be precise. - 117 - a total additional cost (in 1992 $) of about $44 million annually by 1996 when all gasoline will be unleaded. Hence, the cost/ton in 1996 of lead emissions reduced would be about $66,200. 4.75 For reformulation of diesel to reduce sulfur to 0.25 percent weight and reduce viscosity, the incremental cost is estimated to be about $4.21/bbl. or 2.65c./liter, if the starting point is 1.0 percent weight (as with most of the locally-refined diesel). This incremental cost translates into a total ,cost of about $9 million annually, given the current consumption of diesel in the BMR. Given the estimated reductions in emissions that would result, the cost- effectiveness of reducing these pollutants in this manner is about $ 1800/ton of 8PM and $2250/ton of 80. Emissions Standards 4.76 Motorcycles are a major contributor to both the priority air pollutants in the BMR (Figure 4.2). The share of motorcycles in the vehicle population is already high, and their numbers have increased at a rapid pace with continued growth anticipated. Motorcycles account for about 46 percent of the vehicles registered in the BMR and 70 percent of all vehicles registered in Thailand. Emissions from motorcycles depend also on their engine types. It is estimated that about 92 percent in the BER (and 83 percent in the Kingdom) are equipped with the simpler two-stroke engines, most of which are assembled domestically.A There are significant differences in emissions of various pollutants between motorcycles with two-stroke and four-stroke engines (Table 4.8). These figures show that the choice between two-stroke and four-stroke engines involves tradeoffs regarding the relative importance of SPM and HC emissions on the one hand and that of NO2 emissions on the other hand. Table 4.8: Uncontrolled Emissions Comparison - Two Stroke and Four Stroke Motorcycles - mu8sions (Grams/, km.)d motorcycles SPK CO Mc NO3 2-Stroke Engines 0.21 17.00 9.9 0.075 4-Stroke Engines 0.029 20.00 2.39 0.150 Source: Faiz et al. 1990. 4.77 Given the air pollution problems in the BMR, the higher emissions of SPM with two-stroke motorcycles are clearly of greater concern than the NO2 reductions it achieves. Moreover, this problem cannot be addressed by fuel teformulation. It is estimated the use of smokeless lubricating oil for two troke motorcycles (although now mandatory), has little effect either on SPM or > emissions. Moreover, no other fuel reformulation option is feasible to reduce = WURT (1991), Working Paper No. 16, p. A22. - 118 - these emissions. For this reason, it is recommended that measures be implemented to force the replacement of the current two-stroke motorcycles either with four- stroke motorcycles or with advanced two-stroke engines that incorporate timed fuel injection and crankcase lubrication. It is estimated that these steps would result in reductions per kilometer in HC emissions of about 66 to 75 percent and in SPM emissions of almost 90 percent (Table 4.8). Obviously, the undesirable consequence of this measure would be a doubling of NO2 emissions. But given the urgency of reducing SPM emissions and because two-stroke motorcycles account for almost 87 percent of these emissions from transport, this increase is considered tolerable in the I-iitial phase. 4.78 In achieving this replacement of uncontrolled two-stroke motorcycles, it is recommended that two steps be taken. First, the current emissions standards should be revised immediately so that they apply to all new motorcycles (two-and four-stroke). The revised standards would specify levels of SPM and HC emissions that could only be met with modified two-stroke engines (as noted above) or with four-stroke engines. Suitable penalties should be instituted and imposed on manufacturers and importers who do not meet these standards after a suitable phase-in period. An undesirable side-effect of these emissions standards would be that the cost increases associated with implementing them would be partly reflected in higher motorcycle prices. This may slow the replacement of existing motorcycles. To offset this effect, a second measure is recommended. The annual license fee on all in-use uncontrolled two-stroke motorcycles should.ibe increased so that it is higher than for four-stroke or modified two-stroke motorcycdles. This would make it less attractive financially to postpone replacing existing two-stroke motorcycles with more expensive models that meet the tighter emissions standards. 4.79 To reduce diesel particulate emissions, setting emission standards for new buses is a high priority, which would complement the reformulation of diesel fuel to reduce sulfur. In-use emissions standards can be enforced only with improved and more stringent inspection procedures for buses--BMTA and private. If BMAT is given more freedom to set fares it will be easier for it to meet emission standards for its buses. It should also be ensured that buses are subject to a tight program of maintenance, and training for mechanics and drivers. 4.80 Emissions and Cost _Im_acts. The emissions impact of the recommendations on two-stroke motorcycles would depend on the rate at which these are replaced with improved two-stroke or four-stroke motorcycles. Assuming an economic life of six years, and that all replacements are the newer lower- emission models, the estimated reduction in emassions of SPM in the BMR at the end of the first year would be about 9,400 tons (about 12 percent of transport emissions). At the end of the six-year period, the annual emissions reduction would be about 56,000 tons or about 39 percent of projected transport emissions. In addition, RC emissions would fall by about 1O,0oo tons annually over this six- year period, a decrease of about 7 percent of current transport emissions. 4.81 The estimated cost of replacing current two-stroke motorcycles with cleaner alternatives is between $30 and $60/vehicle. Assuming that a sixth of the existing fleet is replaced each year, the additional cost is between $2.8 and $5.6 million annually over the six-year period over which the entire fleet is - 119 - replaced with cleaner engines. For the estimated emissions reductions in the first year of this program, its cost effectiveness would be between $300 and $600/ton of SPM, and about the same per ton of RC reduced. Note that the cost per ton of SPM reduced in this manner is less than that for the emissions reductions achieved with the proposed reformulation of diesel. But because of uncertainty about emissions inventories, and the relative ease with which fuel reformulation can be achieved, it is recommended that both actions be taken. Demand ManacTement 4.82 In this initial phase, it should be recognized that demand management efforts will be constrained both by logistical and political factors. Logistically, the most important constraint is the current state of public transport in the BMR, including the central area. Buses are already overcrowded and the service quality perceived to be poor. Mass transit programs are still a long way from coming to fruition. Hence, there are few alternatives to private transport modes. This lack of alternatives also makes it politically almost impossible at present to restrict the use of private transport in any meaningful way. For these reasons, it is premature to recommend consideration of an area licensing scheme (as in Singapore) or other quantitative restraints on usage of private cars. However, even within these constraints, a range of options can be implemented to reduce the growth in usage of private transport modes. 4.83 Fuel Taxes. Considerable potential exists for using fuel taxes to manage transport demand. At present, fuel taxes in Thailand are among the lowest in the world (Figure 4.6). Moreover, there has been a secular decline in real prices of transport fuels. These trends offer an opportunity to raise taxes, which would help slow the increase in VKTs by private cars and motorcycles. Raising the tax differential between cleaner fuels and unreformulated fuels even further would also help accelerate the adoption of unleaded gasoline or low- sulfur diesel during the period leading up to their mandated use. However, this differential should be widened by raising the tax on the non-reformulated fuel, not by reducing further the tax on unleaded gasoline and low-sulfur diesel.-@ 4.84 Fuel taxes by themselves are unlikely to reverse the growth in the use of private transport modes. Estimates of gasoline demand elasticities in Thailand range from -0.1 to -0.4. However, even with these low elasticities, higher taxes will reduce fuel use and thereby contribute to lower emissions. Part of this reduction in fuel use will come about because the costs of driving larger cars will increase with higher taxes, inducing some substitution towards more fuel-efficient cars and motorcycles. This impact will also supplement the strategy of shifting motorcycle demand towards modified two-stroke or four-stroke engines, which are estimated to be about 25 percent more fuel efficient than existing two-stroke motorcycles. Fuel taxes are thus an efficient way of inducing the use of fuel-efficient vehicles, and would make the imposition of mandatory fuel efficiency standards on vehicles redundant. Raising fuel taxes N These tax differentials per liter are currently about 0.77 Baht for gasoline and 1.11 Baht for diesel. - 120 - will also lead to the elimination of some vehicle trips, thus moderating congestion impacts. 4.85 Other Measures. Other demand reduction measures initiated recently should be deepened. While all government agencies and some private employers have adopted a flexible system of working hours, two factors have limited its effectiveness in reducing congestion. First, many persons are constrained by their need to transport their children to school, in part because of the lack of a safe and efficient school bus system. Therefore, it is necessary to consider expanding the use of school buses even if necessary by using a system of cost- sharing between parents and the government (as with the school-bus financing program). The second reason for the limited impact of flexible work hours thus far is that the private sector, by and large, has continued to operate with fixed work hours. The inflexibility of banking hours is cited as an important contributing factor. The introduction of flexible banking hours, by government mandate if necessary, should be considered to encourage the use of staggered working hours in the private sector as well. 4.86 It is strongly recommended that regulations to restrict the usage of private vehicles in Central Bangkok on one or two days a week, for instance, according to license plates, n be implemented. Not only is such stringent demand management premature, it is also inefficient compared to pricing measures. Moreover, experience from Mexico City suggests that these schemes are easily abused. Households respond by purchasing second vehicles, which are typically older and more polluting. As a result, congestion is not reduced while emissions may actually rise. And its potential ineffectiveness will make it more difficult to implement better demand management measures in the future."' Public Transnort 4.87 If any progress is to be made in beginning the process of shifting travel demand from private vehicles towards public transport, the bus system needs to be significantly upgraded. The key to doing so would be to give BNTA greater autonomy in managing bus services, particularly regarding the setting of fares. In return for this autonomy, BMTA's performance should be subject to periodic review using an agreed set of performance indicators. 4.88 Encouraging a shift to buses will also require implementing a system of improved bus priority measures. While the OCMRT and the traffic police are increasing enforcement of the existing bus lanes, which are adjacent to the curb, it is expected that the level of enforcement needed to even marginally improve bus travel times by these with-flow bus lanes cannot be sustained because it would cause even greater congestion for private vehicles, whose drivers are politically influential. Despite this constraint, there appears to be scope for adoption of some bus priority measures. These schemes should be considered and implemented on a network basis along with the bus route structure so as to expand the use of contra-flow lanes, exempted turns, and short exclusive bus-only road segments. IF For details of the Mexico City experience, see World Bank (1992a), Ch.V. - 121 - 4.89 Major road projects currently being implemented also provide opportunities for integrating the use of private vehicles and bus services. For instance, the completion soon of the first phase of the Second Stage Expressway, the Don Muang Tollway, and the Skamai Ram Inthra Atnarong Expressway offers opportunities for reducing congestion if a new system of express bus services can be introduced along these. Priority measures of buses to access and egress these expressways will need to be planned. New air conditioned and regrlar buses, whose acquisition is already planned, can form the basis of a high quality commuter bus service. To take advantage of these opportunities, preparation needs to commence, including the identification of needed improvements in bus terminal facilities. Traffic Manaaement 4.90 There is still significant scope for improved traffic management. The introduction of traffic management measures to reduce delays and give priority to buses and other high occupancy vehicles will bring immediate improvement. Measures that are required include additional enforcement, and reducing the length of intersection cycle times (to 2-3 minute maximums in accordance with international standards rather than 5-10 minutes as commonly practiced). systematic traffic strategy and control could be implemented in association with an appropriate area traffic control system (ATC), which has the potential to reduce vehicular stops and delays by about 20 percent.W Thus ATC which is relatively inexpensive compared to the major infrastructure projects (see Table 4.6) appears to be a cost-effective investment. Road Infrastructure 4.91 It is important that the initial steps that have been taken with regard to the planning of distributor roads be expanded. The PMD is presently preparing a master plan for the development of distributor roads for the Greater Bangkok Region, and this study, with the forthcoming ADS Western Distributor Roads Study, will identify the scale of investment and funding mechanisms needed to cater for the large task ahead. To make further progress will require strengthening the systems of planning: for land-use, infrastructure site approval. 4.92 Fmissions and Cost Imoacts. The impacts of the other elements of the initial phase of the program--improved traffic management, demand management measures, the construction of distributor roads, and improvements in the bus system--are difficult to quantify. It has been estimated that these measures would collectively result in a savings in fuel consumption of about 5 percent. Hence, emissions, particularly of CO and RC would fall in the BMR by about the same proportion. However, these impacts would quickly be overtaken by the effects of rising fuel use in a year or two. These interventions will also reduce congestion somewhat, but their precise impacts are difficult to estimate. 4.93 The additional cost of implementing the area traffic control system recommended in the initial phase of the program has been estimated at about 500 IN See JICA (1990). - 122 - million Baht (or about $19 million). The SPURT study also estimated the additional investment required to undertake a program to provide missing link roads as well as expanding the provision of distributor roads. The provision of link roads requires investments of about 7 billion Baht (or $270 million) while the distributor roads are estimated to require investments of half that amount (3.5 billion Baht or $135 million). Plannina for the Medium-Term Procram 4.94 The measures recommended for implementation in the first phase will reduce vehicular emissions, particularly of the two air pollutants of greatest concern--lead and SPM. There will be some beneficial impacts on congestion. However, the reduction in congestion will not be dramatic. The government's more ambitious medium-term program should, therefore, be geared towards achieving two objectives. First, more information and analysis are required in order to identify pollutants, beyond lead and SPM, whose control is of high priority in the BMR. Specifically, this will require improrements in air quality monitoring, more systematic studies of health impacts, and the development of more detailed emissions inventories that are specific to conditions in the BMR. The second goal of the medium-term program should be to reduce vehicle congestion in the BMR. As discussed below, achieving this will require serious efforts to restrain the use of private transport in the central areas of Bangkok. Implementing those measures in turn presupposes the provision of improved public transport and mass transit options. In both areas, planning must begin soon if implementation is to be timely and successful. Identifying Pollutants to be Tarcieted 4.95 The priority-setting exercise in Chapter II was incomplete in several respects because of gaps in existing data and analysis. For air pollutants, this was true particularly for NO2 and RC (individually as well as for their contributions to the formation of ground-level ozone), CO and air toxics. While these air pollutants were judged as not being of high priority yet from the perspective of their health impacts, this conclusion was tentative because of uncertainty on several counts. The incompleteness (or even the lack) of ambient data, and questions about the quality of the existing measurements were a significant constraint. In addition, the valuation of the health benefits that would accrue from the control of some air pollutants was based on dose-response functions derived from the U.S.. Differences in exposure patterns and susceptibilities to disease between the populations in the U.S. and the BMR were, thus, not taken into account and could alter some of the results. And, finally a series of assumptions were made regarding the monetary value to be placed cn morbidity and mortality impacts of various pollutants, and these could be questioned as well. 4.96 In our view, it would be unwise for the Thai regulatory authorities to design a cost-effective medium-term plan for dealing with emissions from the transport sector that addresses pollutants beyond those targeted in the initial phase without first attempting to fill these gaps. It is primarily because of these problems with the availability of data and analysis that there is lack of - 123 - consensus among analysts, even across government agencies, as to the seriousness of alternative problems and the strategies for addressing them. 4.97 Filling these gaps in a timely fashion so that a medium-term strategy can be fashioned will require actions in three main areas, the deta4ls of the first two of which have already been spelt out in Chapter II. First, the overlaps that currently exist in collection and analysis of ambient data by various government agencies (which is also noted in Chapter III) should be eliminated. And, second, studies should be initiated soon to evaluate the health benefits of reducing ambient concentration of various pollutants. 4.98 The third area in which action should be initiated so as to improve the information base for further policy action is the estimation of emissions inventories for the major air pollutants in the BMR as well as in other rapidly- growing areas such as the Eastern Seaboard. Such inventories are critical inputs to designing a cost-effective pollution control strategy. They should cover all major sources of emissions--transport and non-transport. Within the transport sector, the shares of different types of vehicles should be determined. Most of the emissions inventories used in this report were estimated in connection with the study conducted by TDRI (1990a). While those estimates represented a commendable effort to improve the database concerning the sources of emissions, they suffer from gaps and flaws similar to those noted before with regard to the dose-response functions that were used in Chapter II. In particular, the inventories for transport sources are all calibrated on the basis of U.S. vehicle fleets of the 19708 and assume U.S. driving conditions. These assumptions may lead to misleading conclusions regarding emissions shares when applied to Bangkok. Some efforts to improve the data regarding emissions from energy use by manufacturing firms in the BMR are already underway (see Chapter III). Initiating similar efforts in the transport sector is a priority. 4.99 The findings of these analyses with regard to the key pollutants and the main sources of emissions in the transport sector should be used to guide the design of policies and institutional arrangements in the medium-term program. It is not recommended that any of the measures already being implemented (fuel reformulation/emissions standards/catalytic converters) should be reversed. However, it is recommended strongly that more stringent emissions standards, control technologies or fuel standards not be implemented without the additional Analysis proposed here and in Chapter II. In particular, this recommendation applies to the proposals (discussed below) that Taiwanese standards be adopted for motorcycles (which would likely force the use of catalytic converters) and that the maximum sulfur content in diesel be lowered to 0.05 percent (by weight) by the year 2000.f' 4.100 The rationale for this recommendation of caution in mandating stringent new controls on vehicle emissions is twofold. First, implementing these proposals (or further fuel reformulation) would be very costly. The IN Some of the analysis proposed here has been initiated since this report was drafted, primarily under the Action Plan supported in part by the Bank's Fourth Highway Sector Loan. For instance, see Weaver and Chan (1993) for a detailed analysis of emissions control technologies and standards for motorcycles. - 124 - magnitude of these costs can be seen by assessing the incremental cost impacts and the effectiveness of three additional actions that have been proposed in Thailand. 4.101 Further Reductions in Sulfur Content of Diesel. It has been proposed that sulfur content in diesel be mandated at 0.01 percent weight by the year 2000. The incremental cost of achieving these reductions. (beyond the 0.25 level that would be in effect from 1996) is about 2.5c./liter--more than 25 percent higher than the cost of reducing sulfur content from 1.0 to 0.25 percent weight. Assuming that this step would reduce S02 emissions to about 3.0 gms/liter and 1 gm./liter respectively, annual emissions in the BMR (at current diesel consumption levels) would fall by an additional 5400 tons of S02. The cost effectiveness of these emissions reductions would, therefore, be about $15,625/ton of S0. 4.102 Installina Catalytic Converters on Motorcycles. This proposal would achieve additional reductions in HC compared to the modification or replacement of two-stroke motorcycles discussed earlier. Moreover, it would also reduce Co emissions by about 50 percent while not increasing N02 emissions. However, no additional SPM reductions would be achieved. The incremental cost of this option over that already discussed is about $40 per vehicle. If HC emissions are reduced from 2.4 to 0.3g/km. with catalytic converters, and if the same replacement profile over six years is assumed, this would mean (for the current number of motorcycles) additional reductions in HC emissions of about 3,000 tons annually in the BMR. The cost effectiveness of these reductions annually would be about $1,200/ton of HC. This figure is more than twice the cost/ton for the less ambitious measure included in the initial phase, and illustrates again the snarply rising costs of achieving air quality improvements. 4.103 Installina Three-Way Catalytic Converters in Passenqer Cars. As with the motorcycle option above, this measure would achieve additional control of both HC and CO (compared to the oxidation catalysts that are already required in new cars), and in addition (unlike oxidation catalysts) would reduce emissions of N02. Analyses of the cost effectiveness of three-way catalysts in industrial countries are based on additional costs of about $200-$250 per vehicle (compared to oxidation catalysts). Estimates are that emissions reductions for HC are achieved at about $370/ton, and for N02 at over $4,000/ton. In contrast, the cost-effectiveness of RC reductions for oxidation catalysts is about $265/ton. 4.104 While it may be appropriate to incur these costs in protecting human health, it should first be established that these measures would indeed reduce pollutants that have serious adverse health impacts at existing and predicted ambient levels in the BMR, and that they would control emissions of these pollutants in the least costly manner. The current knowledge base is too weak to make a compelling case for action on either of these grounds. 4.105 The second reason for delaying immediate action is that imposing more stringent emission standards or control technologies would likely be ineffective given the deep-seated weaknesses that currently exist in the institutions and procedures for enforcing them. Examples are the problems that already exist with the inspection system for in-use vehicles, the delays in setting up an emissions - 125 - testing facility, and the lack of facilities to test whether new vehicles meet current emissions standards. These gaps point toward the need for coordinated action in enforcing existing standards better before going forward with tightening them on the books. Strengthening the existing system will require that decisions be made regarding the type of inspection facilities to be used, the location and operation of emissions testing laboratories, and procedures for enforcing compliance with new-vehicle standards. These decisions are now being made by the Thai authorities with the work being undertaken under the Action Plan supported in part by the Bank's Fourth Highway Sector Loan. Reducina Vehicle Conqestion in the BM 4.106 Significant reductions in vehicle congestion in the BMR would be feasible over the medium term. With the costs that congestion already imposes and their probable increase as incomes rise, measures that reduce congestion will bring substantial welfare improvements. However, in order for the potential for congestion reduction initiatives to be effective and affordable, it is essential that the political commitment to this goal be made early, and that it be combined with complementary actions regarding public transport policies. 4.107 The analysis here reaches the same conclusion as did earlier studies (such as the SPURT report) about options for congestion reduction in the BMR. If congestion is thought to be a serious environmental problem (and this report argues that it is among the most significanrit), some form of restricted use of private vehicles in the BMR will be essential. The choices that are required concern the form that these demand restr' tions should take. This conclusion about the need for serious demand restric .on in the medium term emerges from two aspects of congestion in the BMR. There is considerable suppressed demand for road space in the SMR. Estimates in 1985 were that suppressed demand was already of the order of about 20 percent P Given the increase in the number of vehicles and the lagging expansion of roadspace, this number would be much higher today. Such high levels of suppressed demand mean that even if better public transport and mass transit schemes accommodate about 20 percent of the current vehicle trips (which is very optimistic), there would be no net impact on congestion. The outlook without demand management is even more grim because of the second factor- -the relatively low per-capita ownership of private cars in the BMR (para. 4.8). As incomes rise, this number will rise sharply, especially as motorcycle owners move up to automobiles. And the result will be gridlock if per capita automobile ownership levels even approach those in Malaysia or Singapore, where these are six times higher than in Thailand. 4.108 Institutional Coordination. Hence, to reduce congestion will require coordinated efforts in the areas of demand management, public transport and the provision of road infrastructure (including traffic management). Such coordination is lacking at present in large part because of the number of agencies involved. For instance, OCMRT is the lead agency in planning demand management strategies and in coordinating megaprojects, but it depends on BMA and the Police for implementation of these. BMA, PWD and the Department of Highways are all involved in road infrastructure with the BMA, the Police and OCMRT See EDB Bangkok Metropolitan Regional Development Proposals (1987). - 126 - involved in traffic management. Three government agencies--EMA, MRTA and SRT-- are associated with different mass transit schemes. The implementation of a suitable institutional mechanism for achieving coordination among these agencies is essential if progress is to be made. 4.109 Since there are so many agencies involved in these areas, a promising option that should be considered is to give one agency such as OCMRT the lead responsibility in coordinating efforts in all areas concerning congestion reduction. This would require supplementing its resources and clarifying its role to other agencies and departments. 4.110 Demand Manaaement. Alternative means of restricting demand, which would be implemented in conjunction with planned additions and improvement of public transport and road infrastructure, will need to be evaluated. The scheme recommended in the SPURT Report has considerable merit. That recommendation consisted of introducing an area-wide traffic restraint scheme within the Middle Ring Road which encompasses the main Bangkok business centers. This scheme is comprehensive and would include extensive introduction of new bus lanes and the enforcement of existing ones as well as supporting measures such as the Area Traffic Control (ATC) system. While this system could be implemented in a variety of ways, SPURT considered the use of a Daily License to be both simple and practical. Under the scheme a Daily License would have to be purchased in advance and displayed prominently on the windscreen of the vehicle. 4.111 The aim of such a restraint scheme is to discourage trips that have a low value and so reduce overall traffic congestion. Reductions in traffic volume of between 10 and 15 percent seem possible depending on the charge adopted and associated method of indexation. Increases in average vehicles speed through reduced idling at intersections, of the order of 20-SO percent are likely. It is important that public transport improvements are implemented to provide a travel alternative and that a circumferential route (the Middle Ring Road) provide the opportunity to bypass the restraint area. It also appears that road- based bus lanes are a desirable supporting measure to make use of the less congested road space afforded by the restraint scheme. An additional benefit of the restraint scheme is that it will raise significant revenues which can be used to implement other traffic and transport improvements. 4.112 Public Transport Imnrovements. Such a demand restraint scheme will not be possible unless the public transport system is improved significantly so as to provide reasonable modal alternatives to private vehicles. This will require decisions both with regard to the proposed mass transit schemes as well as the bus system. While there are still unanswered questions as to the cost- effectiveness of the three mass transit schemes presently under consideration, the delay in addressing these issues and in implementing one or more of these schemes if justified reflects a failure of planning. Unless this problem is addressed, it is possible that even mass transit projects will not be screened adequately, and even if implemented will not be well integrated with each other or with the bus system. Hence, there is a risk that substantial public expenditures will be made in one or more of these projects without corresponding benefits in the form of reduced congestion or improved air quality. - 127 - 4.113 Two problems stand out with the planning of the mass transit schemes. First, many physical conflicts between the projects remain unresolved. The Government recently commissioned a consultant to investigate these conflicts, and the report succeeded in convincing government officials of the severity of the problems. But little action has been taken. Moreover, contracts for the projects were signed despite these problems. While it appears that the worst of the conflicts will be removed (because it is in the interest of the proponents to do so), the risk remains that the planned systems do not form the ideal network. Box 4.2: Exnerience with Mass Transit: Imnlications for Bancrkok The work of Professor Tony Ridley' s team (Ridley, 1992) showed that the planned MRTS (and other mass-transit systems in the developing world) have the following characteristics: * Overall socially beneficial with substantial savings in vehicle operating costs and travel time benefits to commuters; o users largely drawn from existing public transport modes; o Net revenues, that is revenues minus operating costs, from operations are unlikely to fund more than 25 percent of system capital costs; and 4 Profits from land development would be unlikely to be able to fund more than an additional 10 percent of total costs. This report also concluded that the MRTS system, which has similar characteristics to the other systems proposed in Bangkok, would require a significant subsidy, although the BERTS, which has significant tracts of land available for development, may perform better than the above analysis indicates. However, Ridley's conclusion appears robust since Allport et al. (1990) found that not one of about 20 MRT systems implemented in recent years in the developing world was found to be profitable. 4.114 Another significant problem is yet to be resolved. Even if the three transit systems are completed they may all fail because there is a fundamental lack of understanding of the nature of a transit system--that there is insufficient net revenue to finance a system to operate on commercial lines even with reasonable amounts of property development. Although the proposed BERTS has large amounts of land to be developed as part of the concession, even these may not be sufficient for it to break even. The project is also experiencing delays because of its inadequate preparation. The BTS is well advanced in the planning - 128 - stage and would complement the other systems but as a purely private venture with no land available for development (unlike BBRTS), its viability is not assured. The Government needs to resolve to fund the M4RTS and recognize that a subsidy will be needed - it should not be persuaded that the other systems are assured. Failure to do this is likely to prolong the period of indec'sion and lead to a situation where in two or more years nothing has progressed or worse still, that cheap, inferior designs are half built and close off optimal alignments and systems. 4.115 SPURT found that even when the three mass-transit systems are developed they would be unlikely to carry more than 10 percent of all trips. And because of the severe level of trip suppression which prevails at present, a mass transit system is not expected to reduce average travel speeds. Also, land use intensification will occur along the mass transit alignment because of increased accessibility. However, the person-trip capacity of the corridors in which mass transit is planned to be implemented will greatly increase and the worst incidents of traffic congestion would be reduced. But, even after mass transit systems are constructed buses will continue to carry over 40 percent of all trips. Hence, significant improvements to the bus system will be needed even if the mass transit schemes are implemented. In particular, studies would be needed of the potential role for busways and bus lanes as feeders to mass transit terminals. F. ummar 4.116 With rapidly rising incomes, the demand for private and public road transport has increased dramatically in the last decade in the Kingdom and particularly in the BMR. Vehicle registrations have almost tripled in the BMR, with especially dramatic increases in the numbers of motorcycles and cars. This growth, and the corresponding rise in vehicle kilometers travelled (VMTU), have been associated with rising emissions of a variety of air pollutants including lead, SPM, HC, and Co. Further, the pace at which transport demand has grown, the shift towards private modes such as cars and motorcycles, and the relatively small share of road space have worsened congestion in the BMR despite increased road investment and traffic management measures. Both transport emissions and congestion have been worsened by the decline since 1982 in real prices of transport fuels as a result of falling world oil prices. 4.117 Without policy action, the ambient levels of most air pollutants emitted by vehicles as well as the extent of congestion in the BMR will increase sharply in the next decade. Continued economic growth will mean that transport demand will continue to rise rapidly, and rising incomes will mean that modal shifts towards private vehicles will persist. Consequently, the costs of pollution and congestion in the BMR will escalate unless ameliorative policies are instituted. 4.118 The strategy proposed here for mitigating the environmental impacts of road transport has two main features. First, it is aimed at reducing vehicle emissions in conjunction with measures to reduce traffic congestion in the BMR. In part, this is because although the costs of congestion are often ignored, they are already serious in the BHR and will continue to rise without corrective actions. More;over, reducing congestion will also reduce vehicle emissions by - 129 - eliminating vehicle trips, increasing average speeds, and improving traffic flow. In this sense, measures that reduce congestion provide a "win-win" scenario for reducing emissions. 4.119 The second feature of the proposed strategy is that the actions are phased. In the initial phase, attention should be focussed on SPM and lead, which are the pollutants that are already of high priority; on preventing the worsening of congestion; and on initiating plans to implement measures that would be included in the next phase. In particular, the measures recommended for the initial phase include: completion of the ongoing reformulation programs to raduce lead in gasoline and sulfur in diesel; implementation of emissions standards for motorcycles; increases in taxes on gasoline and diesel; expansion of some demand management measures; improvements in bus services; investments in distributor roads; and implementation of the ATC system for traffic management. 4.120 These measures will reduce vehicular emissions of the key pollutants, lead and SPM, with some reductions also in HC. While providing these benefits, these actions involve relatively modest costs. The next phase of actions to control emissions and congestion will likely involve higher costs. Therefore, it is essential that more information be collected and analysis conducted regarding the pollutants and emissions sources that are to be targeted. In particular, improvements in ambient monitoring are required, studies to evaluate impacts of various pollutants are needed, and more reliable emissions inventories should be assembled. Implementing a medium-term plan successfully would also require strengthening the system for vehicle inspections and emissions testing. Finally, an integral part of planning for the medium-term would be a commitment to serious demand management efforts in the BMR (involving restrictions on the use of private vehicles) in the SBR, and its integration with an expansion of public transport including proposed mass transit schemes. - 130 - V. COMTROLLZWG ZNWUSTRXAL D19CRARGB8 ARD WATSTS A. Introduction S.1 As was discussed in Chapter I, one of the most striking aspects of Thailand's development during the past decade has been the expansion of the manufacturing sector. Moreover, the structure of the manufacturing sector is very different today compared to the early-1980s. As this growth has occurred, concerns about the pollution impacts of manufacturing activity have intensified. This chapter aims to delineate these impacts with a view to identifying the priority mitigative measures for government action. 5.2 The major environmental impacts of the manufacturing sector are associated with emissions into air, discharges of organic and toxic wastes into water, and generation of solid hazardous wastes. Of these, emissions into air from manufacturing firms come about primarily from use of coal, fuel oil and renewable to produce energy. These impacts, and ways of mitigating them, have already been dealt with in Chapter III. Hence, the main issues discussed in this Chapter are those associated with water pollution and hazardous wastes. The impacts of each of these pollutants are of growing concern particularly in the BMR. And manufacturing firms are major contributors to each of them so that solutions will need to be targeted towards them. 5.3 The nature and severity of the impacts of pollution from the manufacturing sector, and the changes in these effects over time are determined by five factors--the scale of manufacturing activity; the structure of the manufacturing sector; the location of firms, and particularly their geographical concentration; the production technologies and processes used in different industries and, in particular, their implications for efficiency of resource use; and finally, the pollution abatement technologies used in various subsectors. changes in each of these factors in Thailand over the past decade, have influenced the growth in pollution from manufacturing. The scale of manufactur- ing activity has risen dramatically over this time. Manufacturing structure has changed from being primarily agro-based to one that combines agro-processing with the production of intermediate and capital goods. The location of manufacturing firms continues to be concentrated in the Bangkok Metropolitan Region (BMR) although within it there are signs of decentralization from the BMA. With large foreign investment flows in recent years, there has been significant upgrading of industrial processes and equipment with corresponding increases in sectoral efficiency. But despite the elaborate regulatory framework in place to address industrial pollution, there is little evidence that investments in abatement equipment has been significant. 5.4 The next section evaluates the changes in the manufacturing sector that have occurred during the past decade, which have relevance to pollution impacts. In particular, the changes in output and value-added shares of different subsectors are documented as well as the trends in industrial location. Projections of growth rates of various sectors are also presented. Section C examines the environmental impacts of this pattern of industrial growth. The - 131 ^ focus is on evaluating the extent to which manufacturing firms contribute to the key pollutants identified in Chapter II, and on identifying key subsectors towards which mitigation strategies should be targeted. Scenarios are also presented regarding future trends in these emissions. The impacts of sectoral policies and of the regulatory system on choices of production technologies and abatement methods, and thereby on emissions from manufacturing are analyzed in Section D. Recommendations for reform are presented in Section E, which is followed by an analysis of the impacts and cost implications of these policy and institutional recommendations. B. Trends in Manufacturing Growth 5.5 Sectoral Share. Since 1981, the manufacturing sector in Thailand has grown at an annual average rate of over 10 percent (in real terms), while average GDP growth over this period has been about 8 percent. And during 1986-1992, manufacturing growth averaged over 15 percent annually, almost one and a half times faster than GDP growth. Consequer,tly, the share of manufacturing in GDP (at current prices) has risen from about 23 percent in 1981 to about 27 percent in 1992. In absolute terms, the growth has obviously been even more dramatic. Thailand's manufacturing sector today is almost three times as large as in 1981. T'his growth has been accompanied by a significant increase in the number of manufacturing firms during the last decade. It is estimated that between 1979 and 1990, the number of factories in Thailand rose more than two-fold to over 52,000 establishments. S.6 Structure. Along with this spectacular growth, the structure of manufacturing has changed substantially (Table 5.1). Food processing is no longer the largest sector in terms of value added, having been overtaken during in 1990 by textiles. And its share of value added has slipped continuously since 1981. Meanwhile the shares of subsectors such as garments, transport equipment, electrical machinery, general machinery, and leather products and footwear has grown. The structural trends are also mirrored in the growth of manufacturing establishments within subsectors (Table 5.2). The number of firms has grown rapidly in industries such as fabricated metal products, machinery, and transport equipment, which are considered to be highly polluting especially in terms of hazardous and toxic waste generation. 5.7 Two other trends are noteworthy in terms of their implications for industrial pollution impacts. First, despite the structural shifts noted above, the pace of manufacturing growth has been so rapid that many subsectors that have shrunk in relative size, such as food processing, beverages, and paper and paper products, have grown in absolute terms. This growth means that the process of structural change in Thailand has not moved far enough yet that traditional pollutants (usually measured by BOD) from these sources are diminishing. And second, while some industries such as chemicals and basic metals, which are considered highly polluting, have grown in absolute terms, they account for a smaller share of value added, and still remain small. For instance, the shares in manufacturing value added (MVA) in 1992 of chemicals and chemical products was - 132 - Table 5.1: Manufacturing Value Added Shares: Selected Subsectors (At constant 1986 prices) 1981 1986 1992' Food 12.3 13.5 9.0 Beverages 8.4 7.1 6.3 Textile 10.8 11.3 11.0 Wearing Apparel Except Footwear 9.2 10.1 9.9 Leather, Leather Products and Footwear 2.1 2.5 3.5 Paper and Paper Products 1.7 1.5 1.3 Printing, Publishing and Allied Industries 1.6 1.6 1.1 Chemicals and Chemical Products 3.0 3.2 2.5 Petroleum Refineries and Petroleum Products 9.2 8.7 6.1 Rubber and Plastic Products 2.1 2.5 2.7 Non-Metallic Mineral Products 4.8 5.2 5.7 Basic Metal Industries 2.4 2.0 1.5 Fabricated Metal Products 2.3 2.7 2.8 Machinery 2.9 2.7 5.9 Electric Machinery and Supplies 3.0 4.2 8.0 Transport Equipment 8.9 5.6 9.3 Total Value Added (million Baht) 224,294 294,521 671,339 a. Preliminary Source: N1SDB. only about 2.5 percent, while that of basic metals was about 1.5 percent.y Hence, while the hazardous wastes from these industries are certainly of concern, and will likely increase at a more rapid rate in the future, their magnitude has not yet reached catastrophic proportions. 5.8 Location. As discussed in Chapter I, economic activity in Thailand, including manufacturing, continues to be concentrated in the BMR (which includes ' For data from the U.S. manufacturing sector regarding pollution intensities, which illustrate their variations across subsector, see Lucas, Wheeler and Nettige (1992). - 133 - Table 5.2: Shares of Number of Zatablishments Selected Subsectors 1979 1989 Food 21.3 19.6 Textile 3.9 3.5 Wearing Apparel 1.1 3.9 Leather Products and Footwear 0.5 1.5 Paper and Paper Products 0.8 1.0 Non-metallic Mineral 3.2 5.4 Basic Metal Industries 1.8 1.0 Fabricated Products 14.5 11.9 Machinery 12.3 11.9 Electrical Machinery 2.1 2.2 Transport Equipment 5.2 12.7 Total Number of Establishments 19,691 51,500 Source: TDRI (1990b). the BMA and the five surrounding provinces). In 1981, it was estimated that about 71 percent of manufacturing value added originated in the BMR. By 1989, this share had increased to over 75 percent.Z Similarly, over half of all manufacturing firms were located in the BMR. Detailed industrial location data indicate, however, that there is a growing trend towards decentralization of industry within the BNR from the BMA and Samut Prakan to the three outer provinces (Nonthaburi, Nakhon Pathom, and Samut Sakhon). For instance, BMA's share of manufacturing value added fell from about 42 to 39 percent during 1981- 89. And the share of newly-registered factories located in Bangkok and Samut Prakan fell from about 55 percent of the total in 1986 to about 49 percent in 1991, while the share of the three outer BMR provinces rose from 10.2 to 10.7 percent during this period.1 5.9 Over the last decade, the importance of industrial estates (some of which are export-processing zones) has also been growing in Thailand. There are now 20 industrial estates operated by the publicly-owned Industrial Estate Authority of Thailand (IHAT), and almost the same number that have been privately-developed under the guidelines established by IBAT. Most of the operational estates were established since 1987, and it is anticipated that a number of new estates will be set up in the near future. Almost all the v See, Mingsarn Santikarn-Kaosa-ard, uManufacturing Growth: A Blessing for All?", paper presented at TDRI 1992 Year-End Conference, Table 8, pp.22-23. I See op.cit., Table 9, p. 24. - 134 - industrial estates that are already operating are located in the BMR and along the Eastern Seaboard. 5.10 Sectoral Projections. The Seventh Plan expects growth in manufactur- ing value added over the period 1992-1996 to average 9.5 percent annually. Since expected GDP growth during the Plan period is 8.2 percent, the share of manufacturing in GDP will continue to rise. Similarly, the Thailand Development Research Institute (TDRI) projections for the manufacturing sector (in its high- growth scenario) are for annual growth of about 11 percent during 1992-2000. Within this scenario, especially high growth is projected for canned food, textiles, chemicals, machinery and transport equipment. Consequently, the trends towards rising sectoral shares of intermediate and capital-goods industries can be expected to continue. C. Pollution Trends 5.11 Apart from energy use in the industrial sector (which has already been addressed in Chapter III), emissions of air pollutants from the manufacturing sectc.. have localized impacts and are concentrated in a few subsectors. The main pollutants emitted are SPM and some air toxics (such as zinc and cadmium). As noted in Chapter II, SPM levels, rather than air toxics, are of immediate concern in Thailand.4 Within manufacturing, SPM emissions (apart from energy use) arise mainly in cement, paper and pulp, and chemicals. These subsectors account for about 6 percent of industrial value added. They are also dominated by large firms. For instance, there are only three major cement manufacturers, seven paper and pulp manufacturers account for almost three-quarters of installed capacity, and seven firms are involved in the manufacture of chemical ingredients for pharmaceutical. 5.12 The primary pollutants of importance that arise from manufacturing activities are organic and chemical wastes discharged into surface water and hazardous wastes disposed on land. For both types of wastes, discharges from the manufacturing sector are significant both in absolute quantities as well as in terms of their shares relative to other sectors of the economy. 5.13 Water Pollution. The main concern is with the contamination of surface water, not groundwater. The pollutants of concern are organic wastes, heavy metals, and oil and grease. The main issue with regard to organic wastes is its impact on downstream productivity of fisheries, for instance, and not its health impacts. For heavy metals discharges into water, health impacts are an important concern particularly if the contamination occurs around drinking water sources. As Chapter II noted, there is no evidence that the effects on drinking water in Thailand have yet become serious. 5.14 In addressing the issue of industrial discharges of organic wastes, it is important to note that the contribution of discharges of untreated domestic waste water and sewage into surface waters is a far more important source of Y Moreover, apart from the contribution of smelters to lead emissions, road transport is likely to account for the bumlk of emissions of most air toxics. - 135 - contamination, in the BMR and elsewhere. It is reported that up to 75 percent of the BOD load into the lower reaches of the Chao Phraya river (located in the BMR) and 93 percent of the BOD load into the Mae Klong river (also the segment in the BMR) originates from domestic sewageY However, when chemical water pollutants such as heavy metals, oil and grease, phenolics and organic solvents are considered, the industrial contribution to rivers becomes more significant. And even with organic wastes, the recent expansion of the manufacturing sector means that the volume of industrial discharges has likely grown, and with further expansion anticipated its share will increase even further. Since about three- quarters of manufacturing activity is in the BMR, the greatest impacts of these pollutants are on the four rivers that flow through the BMR- -the Chao Phraya, the Tha Chin, the Mae Klong and the Bang Pakong. 5.15 The data on industrial waste water discharges in Thailand, and even in the BMR, are poor. An estimate by DIW in 1986 of national pre-treatment SOD loads by subsector is shown in Table 5.3.9 It is reported that 70 percent of the firms practice effluent treatment. In addition, if it is assumed that the average treatment efficiency is comparable to that in neighboring countries-- about 50 percent--untreated BOD discharges from manufacturing in 1986 were estimated to be about 340,000 tons/year. Assuming unchanged discharge intensities and treatment efficiencies across sectors, this implies that pretreatment SOD loads in 1991 were about 832,000 tons and untreated discharges about 540,000 tons. (Table 5.3). 5.16 The subsectors within manufacturing that contributed the largest shares of these BOD discharges in 1986 and 1991 were food processing (within which the sugar industry would account for a major share), and beverages. In 1991, the shares of textiles and pulp and paper rose sharply reflecting the faster growth of these sectors (Table 5.3). In 1991, these four subsectors collectively accounted for about 28 percent of manufacturing value added. 5.17 An important difference between water pollution and energy-related discharges of air pollutants (outside transport) should be noted because of its implications for corrective policies. Whereas energy-related emissions into air tend to be concentrated among a few large sources, a greater number of manufacturing sources contribute to water pollution. While discharges are still concentrated among the biggest manufacturing firms, a larger number must still be targeted than with energy-related emissions in order to achieve a given reduction in discharges. Precise estimates of the distribution of BOD loadings across manufacturing firms of different sizes are not available for Thailand. However, it can be inferred from several indicators. First, the number of manufacturing establishments is large (Table 5.2). While about two-thirds of these firms are small, with less than 10 employees, there are still almost 4,000 that employ more than 100 employees. Second, the need to target multiple sources of industrial pollution is confirmed by a recent study of industrial pollution E See, Thailand UNCED Report (1992). These estimates may be slight overesti- mates because they exclude the contributions of unregistered small-scale manufacturing units. ' TDRI (1990b) p.29. - 136 - Table 5.3* 3 stimted Pretreanknt BOD5 Generations Mbsufacturzag Subsector Shares (1991) DISCQARGE SHARE OF BDS GENERATED (t) INDUSTRY 1986 1991 Food 55.0 50.6 Beverage 39.0 42.5 Pulp and Paper 2.2 2.5 Textile 1.6 2.4 Chemical 0.4 0.4 Total Manufacturing (tons/year) 523,200 831,600 Source: Department of Industrial Works, and staff estimates. in the Philippines. It found that like most pollutants, SOD loadings were concentrated among the largest firms. But to account for 60 percent of the total industrial BOD loadings in the Manila Metropolitan Area, it was still necessary to target the 100 largest firms.Z' 5.18 Hazardous Wastes. The principal difference between hazardous wastes and other solid and liquid wastes is that they cannot be neutralized effectively with conventional methods of wastewater treatment. Some of these wastes are discharged in water but they consist mostly of solids and sludges disposed on land. As Chapter IT noted, their health impacts are far more serious than with other solid wastes. The evidence in Thailand indicates that at present such wastes have localized health impacts affecting mostly populations that live and work around waste dumps. However, extrapolating from the experience of OECD countries, the problem can be expected to get worse as basic and chemical industries grow in prominence in Thailand. 5.19 About eighty percent of all hazardous waste in Thailand is estimated to be produced by the manufacturing sector. In 1991, this quantity was estimated to be about a million tons.V It should be noted, however, that these and other P' For recent data on the size distribution of firms in Thai manufacturing, see Mingsarn, op. cit., Table 10. For BOD loadings data in Metro Manila, see World Bank, Industrial Efficiency and Pollution control (IEPC) Study, 1992. V Most of this information, and Tables 5.4 and 5.5, are derived from a study conducted in 1989 by Engineering Science Inc. for the Office of the National Environment Board. As explained in Table 5.4, those data have been adjusted to correct some inconsistencies. - 137 - estimates of quantities of hazardous waste generation by manufacturing firms are fraught with uncertainty because in Thailand, as elsewhere in the developing world, detailed industrial surveys and audits of waste generation have not been conducted. Therefore, these estimates are based on the application of waste generation rates per employee (from OECD countries) to the Thai manufacturing sector.y The lack of precision in these estimates should be remembered in judging policy options to address the problem of hazardous wastes. These best estimates of the current hazardous waste quantities in Thailand is summarized in Table 5.4. 2' Broadly, there are three methodologies for estimating hazardous waste quantities. First, firm-specific data could be collected by conducting audits or extensive surveys for the major industrial sectors. Though such information will be accurate, it is very difficult to undertake such detailed studies. The second method applies unit generation rates by subsector estimated in other, typically industrial, countries. Then by estimating the number of tons of each product or raw material used, these unit generation rates can be applied to calculate the hazardous waste generated. The third method, and the easiest, is to establish unit generation rates based on the number of employees at similar industrial facilities in other countries. Then by knowing the number of employees in each of the industrial sectors, the hazardous waste generated can be calculated. This method is obviously the least accurate, because the number of employees varies significantly from country to country based on labor and capital costs, capital vintages, and environmental legislation. - 138 - Table 5.4: Estimated Hazardous Waste Quantities by Waste Type for 1991 Waste Type 1991 Estimate (Tons) Oils 219,467 Liquid org. Residue 311 Org. Sludges & Solids 6,674 Inorg. Sludges & Solids 19,254 Heavy Metal Sludges & Solids 450,000** Solvents 36,163 Acid Wastes 125,428 Alkaline Wastes 34,235 Off Spec. Products 25 Aqueous Or-.anic Residues 242 Photo Waste 16,348 Municipal Waste 11,787 Infectious Waste 76,078 PCB * TOTAL 996,012 * Assumes that no PCB was imported to Thailand since 1975. ** This estimate adjusts that in the ESI study based on discussions with DIW staff. The original estimate likely overestimated this quantity by a factor of three. Source: Engineering Science Incorporated (1989), and staff estimates. 5.20 These estimates of hazardous wastes are juxtaposed with assessments of their relative risks and treatment costs (which was done in the ESI study) in Table s.5. This leads to the conclusion that the most cost-effective reductions in risk would be achieved by targeting heavy metal sludges and solids, photo wastes, acid and alkaline wastes, infectious wastes, halogenated solvents, and organic solids and sludges. Infectious wastes come almost entirely from hospitals and are not further considered here. The other wastes, particularly heavy metal sludges and solids, which are of greatest concern, come mainly from four subsectors--basic metals, fabricated metal products, chemicals, and electrical machinery. Photo wastes originate mainly from printing and publishing. Collectively, the four key sectors accounted for about 12.5 percent of manufacturing value added in 1991 (13.5 percent including printing and publishing). This is not a substantial share of MVA, and is less than the share of the main subsectors that account for the bulk of BOD discharges (Table 5.3). - 139 - However, it is worth noting that all these sectors grew in absolute (constant value added) terms during 1981-1991, and electrical machinery and fabricated metals increased their share of MVA as well (Table 5.1). Table 5.5: Ranking of Hazardous Waste Types in Thailand - 1991 Rankincs Waste Type Environmental Riskl Risk Reduction/ml2lion Bahte Heavy metal sludges and solids 1 1 Photo Wastes 5 2 Alkaline wastes 4 3 Acid wastes 3 4 Infectious wastes 2 5 Halogenated solvents 7 6 organic sludges and solids - halogenated 6 7 a. These rankings, where 1 represents the highest risk (or greatest risk reduction per Baht), are based on estimates of environmental risk factors for Thailand. For each waste type, the environmental risk factor is the product of total quantity generated, relative risk, and exposed population. The risk reduction per million Baht is derived by combining the environmen- tal risk factor with estimates of treatment costs for each waste type. See ESI (1989) for details. Source: ESI (1989); and Table 5.4. 5.21 Projections. Both organic as well as hazardous wastes can be expected to grow significantly in the coming decade without additional control. However, their growth will occur for different reasons and hazardous wastes can be expected to grow more rapidly. The main impetus for the increase in BOD loadings will be the growth in the size of the manufacturing sector. Thailand will not yet be at a per capita income level at which the size of the manufacturing sector starts to decline.L2' So, although the relative importance of the main BOD- LI See Lucas, Wheeler and Hettige (1992). - 140 - generating industries--food processing and beverages--will continue to decline, the growth in their absolute size, and increases in the absolute and relative importance of other subsectors that also generate organic wastes--chemicals and paper and pulp, for instance--will lead to continued increases. 5.22 For hazardous wastes, the increase will come from growth both in the size of the manufacturing sector and in the relative importance of the subsectors such as basic metals, chemicals and machinery that are more intensive in generating such wastes. Estimates for projected quantities of hazardous wastes show that in the uncontrolled scenario, the quantities generated will rise about three-fold during 1991-2001 with particularly large increases for heavy metal, organic, and inorganic sludges and solids, all of which are of particular concern in terms of health impacts."' D. Effectiveness of the Requlatorv System 5.23 As with the environmental impacts of energy production and use (Chapter III), both sectoral policies and environmental policies have impacts on industrial wastes. This section evaluates these effects during the recent period of rapid manufacturing-led growth in Thailand. Important sectoral policies include investment incentives, export promotion, and import protection. These policies can have significant impacts on pollution through their influences on manufacturing scale, location, industrial structure, production technologies. The conclusion of this section, however, is that the key sectoral policies in Thailand have likely been broadly neutral in their environmental effects. Their current stance, which is oriented towards achieving economic efficiency goals rather than environmental objectives is appropriate. Further, this section concludes that although a comprehensive set of policies is currently in place, these have been overwhelmed by the pace of industrial growth that Thailand has experienced. Their lack of focus and reliance on complex regulatory procedures has meant that they have been largely ineffective in mitigating the pollution impacts of industrial growth. Environmental ImDacts of Sectoral Policies. 5.24 Thailand's industrial and trade policies, especially since 1986, have been oriented predominantly towards enhancing export competitiveness in manufactured products. Given this objective, the policy framework has been aimed mainly at attracting foreign direct investment, especially from Japan, into industries where cheap labor gives Thailand a comparative advantage. As Thailand's record of successful export-led growth shows, this policy framework has been enormously successful. The contribution of manufactured exports to economic growth during the past decade has been reviewed in Chapter I. Between 1980 and 1991, manufactured exports rose as a share of merchandise exports from 32 percent to about 60 percent. The annual growth of manufactured exports in real terms between 1985 and 1991 has been over 25 percent. 5.25 Investment Promotion. The Board of Investment (BOI) is the main agency responsible for formulating and implementing investment incentives for Uy Engineering Sciences Inc. (1989). - 141 - foreign and domestic investors. These incentives are provided to BOX-promoted projects, and consist mainly of exemptions/reductions from corporate income taxes and import duties on machinery and raw materials. The criteria for providing these incentives explicitly excludes certain subsectors (including many food processing activities). Provision of incentives is also linked explicitly to the location of projects. Incentives vary across three investment promotion areas: the BMR, 10 surrounding provinces (which includes the Eastern Seaboard), and the remaining 57 provinces. The key privileges--income tax and import duty exemptions/reductions--are available within the BMR only to export-oriented projects or those located in industrial estates. In the intermediate area of ten provinces, the incentives are about the half the levels available to projects in the outlying provinces, where they are also not linked to export orientation and may be supplemented with additional privileges such as subsidized infrastructure provision. 5.26 There has been speculation that these investment promotion policies have encouraged foreign investment in pollution-intensive industries in Thailand. The evidence cited most often in support of this contention is the sectoral mix of BOI-promoted investment. * By noting that much of the promoted investment has been in comparatively polluting industries (especially in terms of hazardous wastes such as the subsectors in Table 5.6), these analyses argue for a change in B0XIs investment promotion criteria to take explicit account of environmental goals. 5.27 This conclusion is questionable for two sets of reasons. First, the analysis of the environmental impacts of BOX promotion policies is flawed. Inferring these impacts from the sectoral makeup of BOI-promoted investment confuses the effects of the normal process of structural change with those that are due to B01 incentives. Even without BO promotion, it probable that foreign investment would have flowed into the same manufacturing sectors as without it. The rationale for the particular sectoral mix of foreign investment that has flowed into Thailand is to be found in relative wage levels and the process of structural change that is occurring in the Thai economy rather than in its laxity of environmental regulation. A partial confirmation of this intuition is provided by comparing the sectoral mix of foreign investment in manufacturing with that of BOI-promoted investment in manufacturing (Table 5.6). It shows that the aggregate shares of BOI-promoted investment in four pollution-i.itensive subsectors was roughly the same as that for all foreign investment. W An example is TDRI, (1990b), p. 94 and Appendix 5.3. - 142 - Table 5.6: 8ectoral Shares -- Foreign Direct Investment and BO0-Promoted Xnveatment (percent) Foreign Dlrect Investment BOI-promoted Investment Subsector 1986-89 1987-90 1986-89 Electrical machinery 37.7 36.6 24.4 Transport equipment and Machinery 4.2 5.9 11.1 Metals and non-metallic products 11.6 11.0 16.1 Chemicals 10.6 11.6 18.0 Total 64.1 65.1 69.6 5.28 The second reason to be cautious about this policy implication is that it ignores the likelihood that most BOI-promoted enterprises have production processes that result in less pollution per unit of output, because they use new capital equipment that embodies waste-minimization techniques. For this reason, the sectoral mix alone provides very little information as to the environmental impacts of BOI-promoted investment. And because process technologies are so important in determining the actual level of waste discharges from a manufactur- ing facility, policymakers should be cautious in trying to screen investments for their pollution impacts according to which industries they occur in. In almost every manufacturing subsector, a variety of pollution control options are available, making it very difficult if not impossible for regulatory agencies to screen investments successfully in an effort to "pick green winners". It is far more effective, and less costly, to establish and implement an environmental regulatory framework that does not attempt to discriminate between different manufacturing investments by evaluating their pollution impacts ex ante but rather subjects firms to an effective system of ex post regulation. 5.29 There is another respect in which the recent changes in BOI promotion policy may be helping to reduce the pollution impacts of manufacturing investment. Since 1989, BOI promotional benefits have not been available to firms in the BMR (except exporz-orier.ted projects or those located on industrial estates). and have been reduced for those in neighboring provinces (including the Eastern Seaboard). Since this locationz.l aspect of BOI incentive policy is the most overt manifestation of the governmen.Is decentralization policies, it could help in decentralizing industry from BMR, and thereby reduce their pollution impacts. 5.30 Trade Policy. Apart from BOX investment incentives, which have favored export-oriented projects within the BMR, the broader export promotion - 143 - policies have included import duty exemption and drawback schemes, export processing zone facilities, export financing. As with investment incentives, these measures have affected structure, location and production technology. The nt pollution impacts of the structural changes brought about by successful export promotion are difficult to identify precisely. However, it is worth noting that unlike many middle-income countries in Eastern Europe and Latin America, which followed inward-looking import-substitution policies, Thailand has a relatively small capital industry segment, which is typically pollution intensive. For instance, the share of manufacturing value added accounted for by capital goods industries in Thailand in 1991 was about 23 percent, compared to 35 to 40 percent in countries like Turkey and Poland. Moreover, export promotion has meant the rapid growth of relatively clean subsectors such as garments (which now accounts for 11 percent of manufacturing value added compared to about 9 percent in 1981). 5.31 Most of Thailand's export promotion policies have applied economy- wide, and to this extent had few locational impacts that affect pollution. The only locational aspect of these measures has been the additional benefits available to firms located in export processing zones (EPZs). Although firms are concentrated within EPZs, the net environmental impacts of these zones has likely been positive. As with the industrial estates (para. 5.44 below), the zones provide wastewater treatment facilities, and tend to consist mainly of new facilities with access to modern technologies, and of firms in clean subsectors such as garments. 5.32 Finally, the impacts on pollution through the effects of export promotion on productive efficiency have likely been positive. The competitive- ness of Thai manufacturing products in export markets, and their explosive growth in recent years (averaging almost 25 percent in real terms since 1986) point to the efficiency of export-oriented manufacturing. Higher efficiency translates into less waste, and by itself means that the pollution intensity (pollution per unit of output) of Thai manufacturing would be reduced. Despite this, it could still be the case that the use of relatively polluting or "dirty" technologies in manufacturing has helped make Thai products more competitive. No evidence from Thailand itself is available on this point. However, data on pollution control costs from industrial countries indicates that even in pollution- intensive subsectors such as chemicals and basic metals, these costs are only a small share of total costs.2 Therefore, it is unlikely that Thailand's success in manufacturing exports has been based to a substantial extent on its lack of effectiveness in enforcing pollution control regulations. 5.33 Imoort Policies. Considerable tariff reform has occurred in recent years. The implications of this liberalization for industrial pollution are unclear in general. The most significant of these recent changes has been the B See Low (1992) for estimates of these cost shares for U.S. manufacturing. The highest share of pollution abatement costs (as a share of output) was just over 3 percent (for cement), and in only 18 (of 123 subsectors) did this share exceed 1 percent. - 144 - reduction in tariffs, elimination of quantitative import restrictions, and relaxation of domestic content regulations on transport equipment (Chapter rV). The effects of those reforms for transport sector emissions have probably been negative to the extent that they have increased vehicle imports and sales. But, the effects of these measures on waste discharges from the domestic transport industry itself will likely be positive, and illustrate how trade liberalization could help in reducing pollution. An important rationale for these import liberalization measures is to promote efficiency within the domestic assembly and manufacturing sectors, which had grown behind high import barriers. Evidence from other countries in the region such as the Philippines indicates that domestic content regulations and high import tariffs have resulted in efficiency losses of almost $900 per vehicle produced domestically.-I4 With greater efficiency will come less waste and faster adoption of newer production technologies, most of which will also be less polluting. 5.34 Summary of Environmental Impacts. Therefore, there is little evidence to support arguments that Thailand's strategy of relying on foreign investment to support export-led growth in manufacturing has had the systematic effect of increasing pollution from the manufacturing. In some respects, export and investment promotion policies and import liberalization measures actually work towards reducing pollution Per unit of manufacturinct outout. However, the massive expansion of Thailand's manufacturing sector in the last decade has meant that the scale effects on pollution have likely predominated. So, despite the fall in pollution intensity (per unit output), the scale of pollution from manufacturing activity has increased, and will continue to rise without ameliorative policies (as indicated in the previous section). 5.35 However, this conclusion should not be interpreted as justifying the modification of sectoral policies in order to control industrial pollution. To try to do so, for instance by establishing a mechanism within BOI for screening foreign investment would be costly (in terms of forgone economic growth) and probably ineffective in addressing pollution. The main reasons have already been noted before. Since pollution in almost every subsector within manufacturing can be controlled (at a cost), it is difficult for regulators to choose between subsectors on environmental grounds. In the process of structural change, different subsectors expand at various times. To tinker with this process on environmental grounds by modifying industrial and trade policies that should be oriented towards economic efficiency (narrowly defined) is fraught with risk because it sacrifices efficiency and is usually ineffective in attaining environmental goals. But the second argument against using these measures is that pursuing economic efficiency often also has environr..ental benefits. Where cleaner production technologies are also lower cost (so-called pollution- preventing technologies), sectoral policies oriented towards economic efficiency encourage firms to adopt these even if pollution control policies are not in t4 See, Box 10.3, p.272, in World Bank, (1993a). - 145 - place.& This conclusion leads, therefore, to the need to institute targeted measures for reducing pollution. Effectiveness of Pollution Control Policies 5.36 This section discusses the current regulatory system for industrial wastes. The discussion includes an evaluation of the goals of the system, an assessment of the effectiveness of the policies and programs currently used by the regulatory authorities in controlling industrial wastes and estimates of the costs of achieving environmental improvements. 5.37 Lecrislative Framework. As with energy and transport-related pollution, the National Environmental Quality Act (NEQA) is the main legislation in place to address industrial emissions. For industrial pollution, as noted in Chapter III, it is supplemented by the Factory Act, which was also revamped in 1992. These laws are operationalized in regulations that specify standards and procedures for controlling discharges into air, water, and the disposal of solid wastes, hazardous w:astes and toxic substances. For water and hazardous wastes, those regulations were issued by ONEB, and are currently being reviewed to judge whether and how they should be revised.W The main institutional implication of the use of these two statutes in controlling industrial emissions is that both the Department of Pollution Control (DPC) in the Ministry of Science, Technology and Environment (MOSTE) and the Department of Industrial Works (DIW) in the Ministry of Industry (MOI) are involved in policy formulation and implementation. 5.38 Emissions Standards. The standards for air and water discharges from industrial sources are comprehensive, uniform across types of sources, and cover all aspects of pollution. Since the permits issued to industries do not specify specific monitoring or reporting requirements, the implication is that all industries must follow these comprehensive standards. For example, for point source industrial air emissions there are 14 possible parameters (see Chapter 1II, Table 3.13) and similarly for wastewater discharges there are 26 possible parameters. & For an example in the paper and pulp industry where cross-country adoption was influenced significantly by openness in trade policies, see Wheeler and Martin (1992). JV For emissions into air, revised regulations were issued in August 1993 under the Factory Act. - 146 - Table 5.7: Industrial Water Uffluent Standards - Selected Indicators Quality Indicator Units Standards Remarks BOD (5 days, at 20L) mg/l 20-60 Fishery canning Max 100 Starch industry Centrifugal Max 60 Sedimentation Max 100 Noodle industry Max 100 Tanning industry Max 100 Pulp industry Max 100 Frozen food industry Max 100 Suspended solids (SS) mg/l Depend on dilution Ratio ratios or wastewater 1/8 to 1/150 Max 30 and receiving water 1/151 to 1/300 Max 60 1/301 to 1/500 Max 150 Dissolved solids (DS) mg/l Max 2,000 or under If salinity of receiving water office's consider- is higher than 2,000 mg/l, DS ation but not more in the effluent should not be than 5,000 higher than 5,000 mg/l of the DS in the receiving water pH -_ 5-9 Cyanide as HCN mg/l Max 0.2 Oil & Grease mg/l Max 5.0 Refinery & Lubricant oil indus- try Max 15.0 Free Chlorine mg/l Max 1.0 Heavy Metals Zinc (Zn) mg/l Max 5.0 Zinc industry Max 3.0 Mercury (Hg) mg/l Max 0.005 Zinc industry Max 0.002 Lead (Pb) mg/l Max 0.2 Manganese (Mn) mg/l Max 5.0 Source: ONEB (1989), pp. 27-28. 5.39 Source Monitorina. All industrial facilities are required under the provisions of NEQA to maintain records of their discharges and submit monthly reports to DIW. In practice, however, DIW expects firms to submit reports quarterly. While not all firms comply even with this quarterly reporting requirement, almost all the reports submitted show full compliance. Therefore, - 147 - the veracity of the source monitoring data available to DIW must be viewed with skepticism. 5.40 Environmental ImDact Assessment (EIA) Procedures, Under the provisions of the NEQA, investment projects above a specified size in certain subsectors are required to secure approval of EIAs from the Office of Environmen- tal Policy and Planning (OEPP) in MOSTE. Within manufacturing, all petroleum refineries, natural gas facilities, cement factories, chemical plants (including fertilizers), and industrial estates as well as large iron and steel plants, smelters, pulp factories and petrochemical facilities are subject to EIA requirements see Annex V.1 for details. A noteworthy, and admirable, feature of this procedure in Thailand is that, unlike many countries (such as the Philippines), the approval procedure is time-bound. OEPP has 15 days to ask the proponent about deficiencies or gaps, and a further 30 days to review and comment on the ZIA submission, which may include referring it to a committee of experts chosen by OEPP. This committee has another 45 days to make its decision and recommendations. Failure to meet this deadline means autcmatic approval of the RIA. 5.41 The advantage of these procedures is that it prevents large industrial projects from being held hostage by bureaucratic procedures or the injection of non-environmental concerns into the ZIA process. Lack of a similar process in the Philippines has resulted in lengthy and costly delays in implementation of large power projects, for instance. Moreover, these procedures mean that the EIA process in Thailand is be4ng used appropriately as a planning tool that can assist investors in mitigating environmental impacts rather than as a means of regulating pollution fron facilities once they are established. 5.42 Enforcement. The Industrial Environment Division of DIW is responsi- ble for enforcement of the discharge standards specified by the statutes. Within this division, the River and Coastal Conservation Branch conducts all of the industrial monitoring and assists in the enforcement action. This Branch has 46 inspectors and aims at visiting approximately 3000 firms annually. Since many firms will call for return visits for verification and follow up, they aim at approximately 9000 visits per year. The visits can vary from visual walk-through inspections to ones where grab wastewater samples are taken for analyses. If problems are identified, verbal and where necessary, written recommendations are made. Follow up inspections are undertaken to verify compliance. The Branch's estimate is that 15 percent of the industries are out of compliance and in 1991 less than 10 cases were taken to court. It should be noted that the monitoring Branch does not conduct any air monitoring and most industrial sectors also do not worry about air monitoring, thereby negating the actual effects of the comprehensiveness of existing standards. 5.43 However, any formal enforcement action has to be initiated by the police (Ministry of Interior). Fines are small and the closure of facilities in response to non-compliance is viewed as a drastic measure, which is consequently undertaken rarely. While the revised NEQA allows for higher fines, its - 148 - implementation remains in doubt because even the lcwer fines were usually not levied.-LI' 5.44 Industrial Estates. This aspect of Thailand's industrial policy has been growing in importance in recent years. Industrial estates, including EPZs, are operated either by IEAT or in accordance with its regulations. On IEAT estates and a number of private estates, common wastewater treatment facilities exist, and the firms are charged for their use of these. The discharges of firms on industrial estateL are regulated directly by the IEAT or the private operator with no regulatory oversight beyond an EIA required of the estate before it is established. Cost-Effectiveness of Pollution Control Policies 5.45 It is not practical for most manufacturing firms, even the large ones, to undertake the extent of monitoring of their discharges--into air, water and on land--that would be required if they were to attempt to comply with the number of emission and discharge standards that exist on the books. In practice, therefore, industrial air emissions from most firms are ignored by industry as well as by the regulators.W And industrial wastewater discharges are regulated mainly only through the measurement of SOD and a few other parameters even in the largest and most modern facilities. 5.46 Air Emissions. Apart from industrial emissions of SPM and possibly S02 into air (most of which would be associated with energy use), it could be argued that this situation of benign neglect is justified. Since the resources available for pollution control are limited, air emissions from most industries (the main exceptions other than heavy users of lignite and fuel oil are cement, ceramics, and basic metals) should rightly be considered a low priority at this time. In this sense, the detailed and comprehensive emissions standards that are currently in place for all air pollution sources are not targeted at the most urgent problems. Ensuring compliance with them would be very expensive for firms to achieve, would provide questionable benefits, and would require the commitment of considerably more resources by the regulatory agencies. 5.47 Industrial Wastewater. Since most industrial wastewater treatment systems are biological, the predominant focus on enforcing pollution control regulations by measuring BOD in water effluent is a reasonable adaptation to the costs of source monitoring. However, the regulatory task is complicated by the fact that the range of water pollutants of concern from different industries is quite wide, which may make it necessary to control additional pollutants for specific industries. For instance, discharges of chlorinated organics for kraft W According to DIW officials, enforcement efforts have recently been strengthened with greater use of industrial zoning and relocation of polluting firms, increased penalties for non-compliance, and the possibility of legal action by parties damaged by pollution. However, it is too early to judge the efficacy of these steps. W Of course, there are exceptions, as with the petroleum refineries, which evidently undertake extensive stack and ambient air monitoring. - 149 - pulp mills, phenolics, oil and grease and sulfides from refineries, and ammonia- nitrogen and phosphorous from fertilizer plants are all of concern. But the current regulations specify multiple pollutants for all sources irrespective of whether their discharges are of concern for particular subsectors or plant sizes. These features make the regulations unfocused and difficult to enforce. 5.48 Since BOD is a reasonable indicator of water quality for most industries in Thailand, the issues that arise in judging the cost-effectiveness of current regulations concern the nature and stringency of the BOD standards specified. The regulations specify effluent standards for all pollutants in terms of concentrations (mg./L.) rather than as limits on total loadings (kg./day, for instance). The disadvantage of using concentration-based targets is that, even if enforced strictly, these encourage dilution of wastes in order to meet standards. In this sense, not only is water conservation discouraged but effluent standards become irrelevant when water is underpriced as is the case in Bangkok for groundwater. The reason that concentration-based standards are preferred is that they are easier to enforce because they do not require data on effluent flow rates. However, this advantage is almost irrelevant in most developing countries, including Thailand, where little enforcement is based on actual measurement of discharges anyway. S.49 The effluent standards also require most. firms to treat their wastewater to a uniform standard of 20 mg/L.B While this target is sensible for municipal sewage where untreated BOD concentrations vary between 100 and 300 M=/L depending on water use, it is an extremely stringent requirement for many industrial sectors where the raw BOD concentrations vary between 1000 and 5000 mg/L. For most industrial firms to attain the prescribed standards would require treatment efficiencies over 95 percent and even exceeding 99 percent. The costs of meeting these standards are likely to be extremely high while their benefits are relatively small. Typically, the costs (per ton of BOD) of going from 80 to 90 percent treatment for industrial sources to tertiary treatment (above 95 percent) rise about three- to five-fold. Such an onerous standard also encourages firms to falsify monitoring data in order to demonstrate their co-mpliance. 5.50 Solid Hazardous Wastes. Since source monitoring of industrial wastes by DIW concentrates mainly on wastewater discharges, hazardous waste generation receives little attent:on despite the detailed regulatory framework that exists. The main action that has been taken in addressing hazardous waste generation was the establishment in 1991 of a small treatment facility by the government in Bang Rhuntien, a western suburb of Bangkok. Its daily treatment capacity is 200 cubic meters of electroplating waste, 800 cubic meters of textile factory waste, and 100 tons of hazardous sludges and solids. The facility was built by the DIW, and its operation has been sub-contracted to a private firm. The contractor is responsible for all waste collection, treatment and disposal activities, but its operations (including service fees and treatment specifications) are regulated by the DIW. About 400 firms currently use this treatment plant at heavily- M The exceptions to this are for fish canning, starch, noodle, tanning, pulp and frozen food industry, where concentrations up to 100 mg/L are allowed. - 150 - subsidized rates. A hazardous waste landfill is also being constructed by DIW in Rachaburi province, about 100 km from Bangkok. 5.51 Enforcement. The existing system for enforcing pollution control laws is weak because it involves multiple agencies--the DIW, DPC and the Ministry of Interior--and because of reluctance to take punitive action against non-compliant firms. Further, the scale of monitoring that would be required to enforce these regulations is beyond the capacity of the agencies given their existing staff and resources. Since even the BMR has over 25,000 registered firms, inspecting 3000 (as the DIW claims to be able to do) accounts for about 12 percent of the total. It is unlikely that the inspectors are able to select the most polluting industries on a consistent basis. Also, those industries that are reasonably sure that they will not be inspected have little incentive to spend money on environmental cleanup. Hence, given the lack of available resources, self- monitoring of discharges by firms is by itself unlikely to be an effective strategy with which to ensure compliance in Thailand. 5.52 Industrial Estates. The most effective aspect of the industrial water pollution control program is on the industrial estates managed by IEAT. In controlling pollution, the estates have the advantage that a large number of relatively modern and homogenous firms are clustered together. These firms are subject to charges for wastewater, which is then treated in a central wastewater treatment facility. The revenues from the fees are used to cover the operating costs of the treatment facility. A system has been developed that charges firms on the basis of the volumes and BOD concentrations of their waste flows. Where measurements of effluent flows are not available, 80 percent of the metered raw water intake is considered to be the effluent flow volume. Based on a maximum influent BOD and Total Suspended Solids concentration of 300 and 200 mg/L respectively, effluent is charged at the rate of 7 Baht/cu.m. of wastewater, or about 23 Baht/kg. of BOD. The IRAT is responsible for regulating the industries within the zone and for collecting appropriate charges. Private industrial parks and zones are subject to inspection and enforcement by DIW and DPC, and some of them also operate wastewater treatment facilities, for which the rates charged are similar to those on IEAT estates. E. Pronosed Policy and Institutional Reforms 5.53 Given these concerns about the cost-effectiveness of the current regulatory system for controlling industrial discharges, radical reforms are worth considering if they would be more effective or less costly in achieving their goals. In particular, reforms of existing policies and institutions must recognize three key aspects of industrial pollution control. First, there is a substantial and growing gap between the goals of the regulatory framework in place to address industrial emissions and those actually achieved through its implementation. The lack of prioritization both among pollutants and between sources of pollution, and the explosive growth in the size and breadth of manufacturing activity over the last decade have contributed to this gap between their objectives and the reality of their implementation. Because the regulations require source-specific monitoring in order to be effective, the growth in the manufacturing sector has meant that the regulatory system has been unable to keep up with the enforcement demands that are placed on it. - 151 - 5.54 The second issue that must be addressed by reform is that there is no single least-cost option for dealing with industrial wastes. Treatment costs will vary according to the degree of clean-up that is specified, across industrial sub-sectors, by the age of the capital equipment being used, and depending on whether treatment is source-specific or at central facilities. Detailed abatement cost data by manufacturing subsector are not available for Thailand. But it is likely that the variation in treatment costs for BOD would be similar to those found in a recent study of the 100 largest industrial sources of water pollution in the Manila Metropolitan Area in the Philippines. The incremental costs/kg. of BOD (corresponding to 95 percent treatment efficiency for BOD) varied by a factor of four on average across manufacturing subsectors. Even more striking, the range of unit costs across firms was almost nine-fold within the chemicals and textiles subsectors, and almost sixty-fold in the food- processing industry. Moreover, while regulators can make guesses about the differences in treatment costs, it ia unlikely that they would have the necessary information to be able to make precise assessments as to how these costs vary because of the range of pollutants and industrial processes that are involved. 5.55 And finally, it should be recognized that there presently is an unnecessary and costly duplication of efforts (also noted in Chapter III) between regulatory agencies including DPC and DIN with regard to policy formulation and source monitoring, and among these agencies and the Ministry of Interior for enforcement. In part, this duplication of responsibilities reflects the growing gap between the statutes and their implementation, especially following the recent revision of the NEQA. Instances where two or more agencies are involved in conducting the same tasks should be eliminated where possible since it wastes staff and technical resources in a situation where these are already scarce. Moreover, this duplication has meant that the implementation of pollution control policies suffers because of lack of coordination between the various regulatory agencies. Policy Recommendations 5.56 These issues that arise with regard to the cost-effectiveness of the current regulatory system have two implications for policy reform. First, the design of abatement policies should be such that they do not require substantial source monitoring by DIW and/or DPC to be effectively enforced. Constraints with regard to staff and budgets limit the amount of source monitoring that can be carried out. For this reason, therefore emphasis should be on designing and using pollution control (so-called indirect policies), which are based not on discharges themselves, but on proxies for emissions such as output.0 5.57 The se implication is that abatement policies should as far as possible leave the choices regarding control technologies and degree of abatement to the firms themselves rather than being specified in minute detail by DIW or DPC. Because the least-cost control option depends so much on the specific pollutant and subsector being controlled, mandated choices either of technology ' For a discussion of the distinction between direct and indirect pollution control policies, and the relative advantages and drawbacks of each types, see World Dank (1992), Chapter 3. - 152 - or of degree of control would very likely lead to unnecessarily high control costs. This risk is even greater in Thailand compared to an industrial country because the manufdcturing sector is still changing very rapidly in terms of its sectoral composition as well as in the vintage and type of capital equipment being used in different industries. Industrial Wastewater 5.58 Presum=tive Pollution Charaes. The most significant change that is recommended in the policies for controlling industrial wastewater is the adoption of a presumptive charge system in place of the current standards-based approach. This system would involve requiring manufacturing firms to pay charges for discharging industrial wastewater. However, the charges would be computed not on the basis of actual discharges but rather would be based on information regarding firms, output and treatment levels. Such information concerning proxies for wastewater discharges should be available quite easily to DrW and DPC. These presumptive charges would be assessed on all registered manufacturing firms above a cut-off size, and would vary across subsectors in a predetermined manner according to their pollution intensities. The charge levels would be determined either by SOD discharge volumes alone or, for industries where other pollutants are important, a combination of water quality parameters. Further, the charges would be assessed on presm discharges beyond a specified minimum treatment level that would be required of all firms. For BOD discharges, this minimum treatment level could, for instance, be primary treatment. Finally, a key feature of the charge system would be a rebate system (similar to that recommended for fuels in Chapter III), which would refund a portion of their charge payments to firms that could demonstrate higher levels of cleanup of their waste streams beyond the minimum level. Makinq this rebate available is critical since it would provide incentives for polluting firms to go beyond the minimum specified treatment by adopting waste minimization technologies or recycling wastes. In this sense, therefore, it would encourage industry to invest in pollution prevention efforts without the need for costly (and usually ineffec- tive) subsidies for this purpose. 5.59 Implementing such a charge system will require upfront effort and analysis. Some of the design issues that will need to be addressed are noted in Annex V.2. However, it would be worth investing this effort because the system promises gains both by reducing the economic costs to industries of complying with pollution control requirements as well as by enhancing the effectiveness of pollution control efforts. This approach will provide savings in controlling pollution because it will leave the choice of control technologies and abatement levels to the enterprises themselves. Therefore, firms that face low incremental costs of control will be encouraged to reduce their discharges by a larger amount than those who face high costs. These low abatement cost firms, by cutting back on pollution more, will be able to save more because they would then claim larger refunds of their presumptive pollution charges. The high-cost firms, on the other hand, would reduce their pollution less but would be unable to claim any refunds. Therefore, this system would be capable of achieving a given reduction in discharges (across all firms) at a lower total cost than with a system that required all firms to cut back their discharges by the same amount (or percentage), as with the current regulatory system. - 153 - 5.60 The proposed presumptive charge system is also preferable because it recognizes the monitoring and administrative difficulties inherent in source- specific regulation as with the present system. By substituting more easily available information than discharges, such an approach recognizes that given existing resources and administrative capabilities, an indirect and more easily administered system is required if control efforts are to be effective. Basing charges on information such as output, which could be gathered during the industrial registration and renewal process by DIW, will be more effective in controlling the emissions of the thousands of firms that DIW is presently unable to inspect. Occasional spot checks will still be necessary to verify that the minimum treatment facilities are operational, and the accuracy of the audited reports of discharges that firms would provide to claim refunds. However, the monitoring requirements of this system would be far less than are currently required since an audit procedure similar to that for income taxes could be established. 5.61 Charging firms for industrial wastewater discharge is not alien to Thailand. The design of the presumptive charges recommended here resembles those already in place in industrial estates where the charge amount for firms whose actual wastewater flows are not available is based on a proxy indicator--their water consumption (para. 5.52). In setting up a presumptive charge system for all industries, it is worth considering whether water consumption should be the proxy variable that should be used or whether the use of output levels is better. Implementing this charge system would also help level the playing field between firms located on industrial estates and those located elsewhere. It should be ensured, in particular, that the charges apply especially to new firms. Given the projected growth rate of Thai manufacturing, most industrial sources of wastewater over the next twenty years will be new rather than those already operating. 5.62 Other Reforms. Along with implementing a system of presumptive charges, two other structural changes in the regulatory system should be implemented. First, the beneficial use classification that is in place for the four major river basins (Annex 11.2) should be linked to the regulatory system. Without such a link, beneficial use classification cannot be used as a planning tool. If linked to control policies, the levels of presumptive charges can be raised or restrictions on new activity can be imposed when the river quality falls below its specified beneficial use. 5.63 Second, the charge system outlined before should be based on presumptive loadings (e.g., tons of BOD/day) rather than on concentrations (such as mg/l). The current emissions standards are all based on pollutant concentra- tions (Table 5.7). Such concentration standards do not encourage water conservation practices, because firms can meet concentration standards by - 154 - diluting wastes with fresh water. Calibrating control policies according to loadings is more effective in terms of measuring actual inputs to the rivers.L" 5.64 Central Treatment Facilities. Implementing a presumptive charge system would also allow firms themselves to make the decision about whether to tie into a central wastewater treatment facility (CTF) where it exists. Firms discharging their wastewater into a CTF would be required to undertake pretreatment to a prescribed degree, and pay a charge for their use of the CTF for further treatment. It is recommended that this charge amount be set at a level that allows recovery of the operating and capital costs of the treatment facility, as is currently the case on industrial estates. Fir.ns that choose to use a CTF should be exempted from payment of the presumptive charge. 5.65 There are several considerations that will determine whether or not it is cost effective to construct a central treatment facility (CTF) for industrial wastewater (alone or combined with domestic wastewater). These considerations include the proximity of the treatment facility to the generators; the types of firms that would tie into the system; the industrial wastewater characteristics; and what level of pretreatment is required prior to tie in. It is obvious that areas where industry is highly scattered will not be suitable due to the high cost of building extensive underground mains that will be required. Therefore, CTFs would be cost effective only if they serve a highly clustered group of industries, as in industrial estates or industrial areas. 5.66 Even here, it will be cheaper to plan the facility at the outset, rather than construct one in an already developed industrial area. Retrofitting a central treatment facility in a well-developed industrial area is extremely cumbersome and disruptive because the infrastructure necessary will require that existing roads and other developed areas will have to be dug up to install collection and trunk mains to convey the wastewater to the treatment facility. Another complication in building a CTF at an existing location is that the larger firms will probably have their own treatment facility and therefore will be reluctant to incur any additional expenditure to tie into the CTF. Since the CTF has to rely on funding the operation with a system of charges, it may be hard pressed to recover costs by servicing small and medium facilities alone. Moreover, building lengthy industrial sewers and mains will raise construction costs (and thus the costs to users) but will also have system losses that may contaminate the groundwater. But where these conditions are met, a CTF will have cost advantages particularly for small- and medium-sized firms for whom it may be prohibitively expensive to construct and operate individual facilities. The ILI However, the use of loadings to establish discharge standards requires greater effort on the parts of regulatory agencies. To ensure compliance with loading standards, production and effluent flow rate figures have to be monitored regularly. It is harder for regulators to monitor compliance merely by analyzing grab samples. However, these monitoring difficulties do not affect the regulator when a presumptive charge system is in place because the burden of proving that refunds should be made is placed on the firm itself, which is in the best position to undertake this monitoring activity. - 155 - problems of monitoring discharges and enforcing compliance are also simplified for the regulatory authorities as a result. 5.67 It is important that these considerations be taken into account in the planning of the two CTFs being considered by DIW in the Suksawat and Rangsit areas of the BMR. These treatment plants will serve domestic and industrial users, and the capital costs are estimated at about $22 million each.W However, the costs of other components, particularly the sewer main and trunks, depend critically on the location of the CTFs. It is especially important that these CTFs charge full cost for their treatment services. Therefore, their economic evaluations should be based on realistic assessments of tie-ins, especially by existing large industrial sources in these areas, and of the construction costs for sewer lines. 5.68 Pollution and Cost Impacts. The implementation of the presumptive charge system would reduce organic and chemical wastes discharged into water. It is anticipated that these charges would be conditioned on BOD loadings alone for most industries but would include other parameters that are of particular concern for selected industries. In estimating the reduction in untreated loadings of BOD from manufacturing that would result, it is assumed that a presumptive charge of about 13,000 Baht/ton of BOD (or $500/ton) is applied. From studies elsewhere in the region, it is estimated that this charge level would lead to a 50 percent reduction in total loadings form the manufacturing sector.2 If, as recommended here, the presumptive charge scheme is introduced only in the BMR, total BOD loadings in the BMR would fall by about 135,000 tons annually.W 5.69 The reduction in the discharges of pollutants other than SOD due to the imposition of a presumptive charge scheme is difficult to estimate because there are no baseline data concerning current discharges. However, USEPA data show the efficacy of BOD treatment methods in reducing other pollutants.& For instance, installation of an aerated lagoon system capable of reducing BOD concentrations on average by about 70 percent would also reduce COD concentra- tions by 50 percent, suspended solids by about 33 percent, and oil and grease by W At the Rangsit site, it is anticipated that there will be 26 industrial and 109 domestic tie-ins with 16,297 and 8,181 m3/d of wastewater respectively. At the Suksawat site, it is anticipated that there will be 110 industrial and 405 domestic tie-ins with 15,972 and 8,329 m3/d of wastewater respectively. ' See, World Bank (1993b), for an analysis of the impacts of a similar scheme in the Metro Manila Area of the Philippines. I& Since data about BOD loadings for BMR are not available, this estimate assumes that about half the untreated BOD loadings for Thailand (shown in Table 5.3) are discharged by firms located in the BMR. This estimate is lower than the share of manufacturing value added that originates in the BMR (about 75 percent) because the proportion of food processing and beverage firms located in the BMR is considerably lower. W See USEPA, 1980, Vol. 3. - 156 - 98 percent. Similarly, an activated sludge system, while reducing BOD concentrations by 86 percent would reduce COD by two-thirds, suspended solids by a third, and oil and grease by about three-quarters. These data show that the reductions in water-borne discharges from manufacturing would extend beyond the control of BOD. 5.70 Lacking detailed estimates of control costs for Thai manufacturing, the impacts computed here are based on estimates for the industrial sector in the Philippines. A recent World Bank study found that the average incremental cost of controlling BOD discharges from the 100 most-polluting firms in eight subsectors in the Metro Manila Area was about $300/ton.& It is assumed conservatively that these costs are about a third higher in Thai manufacturing. This implies that the reductions in the BMR of SOD (and other pollutants) noted above would impose costs of approximately $54 million annually. Hazardous Wastes 5.71 There are two main issues that need to be addressed with regard to policies for the management of solid hazardous wastes in Thailand. First, a framework of incentives needs to be instituted that will encourage waste generating firms to separate their wastes from other solid wastes, store and dispose of these safely and over time minimize waste generation. In practice, this framework does not currently exist in Thailand despite the regulations that are on the books. The second issue concerns the framework within which central treatment facilities for hazardous wastes are established and operated. At present, the Bang Khuntien treatment facility is based on the notion that hazardous waste treatment requires government involvement in the establishment of treatment plants, and large subsidies to waste-generating firms in order to encourage them to use the facility. These assumptions need to be reexamined. 5.72 The recommendation here is that the establishment of a suitable incentive framework for firms that generate hazardous wastes receive attention first. Without such a framework, it will be impossible to set up treatment facilities except by subsidizing their establishment and operation, and that is likely to be expensive while giving the wrong signals in the long run. In terms of policies to induce firms not to dispose of their hazardous wastes illegally, it is recommended that a performance bond scheme be introduced. This scheme, which is similar to the presumptive charge system, would charge firms in the major hazardous waste producing industries--chemicals, fabricated metals, electrical machinery, and transport equipment--according to estimates of their waste generation. This bond amount would then be refunded if these wastes were being treated on site or brought to the central waste storage site. If on-site treatment or waste minimization was being practiced, allowance would be made for this by refunding a larger portion of the bond amount than if the wastes were merely brought for storage.21 V See World Bank (1993b). L' This scheme is similar to that proposed in TDRI (1990b). However, the presumption there was that a central treatment facility would be constructed at the outset and firms would be charged for using this facility. - 157 - 5.73 As far as treatment is considered, there is little question that central waste treatment facilities are the most cost-effective option for firma of the scale and sophistication that currently operate in Thailand. This is due to the fact that no one industry produces enough hazardous waste to justify a separate facility and the treatment and disposal requirements are varied and relatively expensive i In addition, unlike wastewater which is generated in high volumes of liquids, hazardous waste is low in volume and is transportable by truck to a central facility, eliminating the need for expensive trunk lines. Also, few if any plants will have the sophistication required to handle and treat hazardous waste in a safe manner. 5.74 Recognizing these advantages of central treatment for hazardous waste, RTG is planning two additional central hazardous waste treatment facilities in the 9MR, to be located tentatively at Chonburi and Rayong. But given that treatment of hazardous wastes is expensive (see next Section), the priority at this stage should be on thinking through the institutional arrangements for constructing and operating these facilities. If they are operated on the lines of the sang Rhuntien plant, their operation will require large budgetary outlays to support significant subsidies to waste-generating firms. These subsidies send the wrong signals in terms of waste minimization and storage, and it is recommended that their provision be reconsidered. In particular, instituting an appropriate incentive framework that includes the performance bond system will make these subsidies unnecessary except possibly as part of an overall program to assist small-scale waste generating firms (such as galvanizing and smelting facilities) in adopting safe storage and separation of wastes. 5.75 The implementation of the incentive framework for hazardous waste management would not lead to short-run reductions in the quantities of wastes generated. However, by requiring waste generators to take actions (and incur costs) to segregate and store their wastes, it would provide incentives over the longer term for waste reduction. By encouraging improvements in waste storage, these measures would also reduce the likelihood of accidental contamination by hazardous substances. However, the extent of these benefits is difficult to quantify. 5.76 The costs of implementing the proposed incentive framework for managing hazardous wastes are difficult to estimate, but would likely be small, in relation both to the costs of controlling SOD and of a comprehensive program for treating hazardous wastes. These costs would be borne principally by the waste-generating firms and would be incurred in improving their facilities for storing hazardous wastes. S.77 Although there is obviously considerable uncertainty in estimating the costs associated with a full-fledged hazardous waste treatment facility, a rough estimate can be derived as a contrast with the costs of treating BOD. Based on costs of similar facilities in industrial countries, it is estimated that an integrated waste treatment facility with an incineration capacity of 40, 000 tons V Among the few firms that operate their own treatment facilities in North Amrica are Dow Chemicals and Dupont, two of the largest chemical manufacturers in the world. - 158 - and physical/chemical treatment capacity of 5,000 tons annually would involve capital costs of about $65 million. Assuming operating costs of between $1000 and $1500/ton (which includes the costs of transporting and storing the wastes), this implies an annual cost of about $1200-$1700/ton. These estimates indicate, therefore, that the cost of treating hazardous wastes would be between three and five times higher per ton than for conventional organic wastes. While it might be worthwhile to incur these higher costs given the health risks that hazardous wastes pose, the recommendation here is that the first step, which is easier and less costly to implement, and would enable a more successful waste treatment program, is to improve the incentive framework that applies to waste-generating firms. Air Emissions 5.78 Apart from emissions associated with the use of fuels (which have been dealt with in Chapter III), it is recommended that the control effort for air emissions from the manufacturing sector be focussed on SPM. The first step should be to identify large point sources of these emissions by subsector. It is likely that potential SPM emissions will be concentrated in a few industries. For these, a system of presumptive charges and refunds should be instituted on lines similar to that proposed above for wastewater discharges. Such a system would have the same advantages as with wastewater, although the magnitude of the economic efficiency and administrative gains would be less for air emissions control because the number and diversity of firms is smaller than with wastewater discharges. Institutional Reforms 5.79 Eliminatina Dunlication. Due to the recent reorganization of pollution control efforts and particularly the additional authority given to the DPC, conflicts between agencies and overlaps in their responsibility have become serious issues. Since the tasks of monitoring industrial discharges and enforcing pollution control regulations are already beyond the current staffing, financial and technical resources of the key regulatory agencies, duplication of efforts can be ill afforded between agencies. The highest priority should, therefore, be given to resolving this duplication and the conflicts that arise. As with regulating emissions from energy use, one possibility that should be considered seriously is whether to consolidate pollution control functions in a single agency. This could be achieved by transferring staff between DPC and DIW so as to use the experience and skills that already exist. 5.80 Relvina on Communities and NGos. Even with this streamlining of responsibilities and the policy changes recommended, there are inadequate resources to inspect and enforce more than 50,000 firms. Assistance should therefore be extended to organize NGOs as provided for in the revised NEQA. The NGOs can act on behalf of the government by identifying persistent violators. As this role becomes established, their mere presence will act as a sort of indirect enforcement tool. NGOs should be provided access to data on industrial discharges on a reasonable basis. For example, they should be allowed to collect effluent samples and have access to the pollution control records being maintained by firms. - 159 - 5.81 Enforcement. The current policy is to involve the police (from the Interior Ministry) in all enforcement actions. However, these personnel have no training in environmental issues and therefore are not the appropriate enforcement agency. Special investigators should be trained and dedicated within the regulatory agency to take appropriate enforcement action. Further, since the effectiveness of the presumptive charge system depends heavily on industry to self-monitor and report, the government must rely heavily on the accuracy of these reports. Therefore, the highest level of penalty should apply to the false reporting of monitoring data. F. Summa 5.82 Apart from energy-related emu.ssions (covered in Chapter III), the manufacturing sector in Thailand accounts for a significant share of organic wastes discharged into water, and is the main source of chemical discharges into water and of solid hazardous wastes. The increased generation of these wastes reflects the almost three-fold growth in the size of the manufacturing sector since 1982 as well as the structural shifts that have occurred towards subsectors such as machinery and transport equipment that are relatively more polluting. These factors have more than offset the reduction in pollution from the use of cleaner production technologies and efficiency gains in the Thai manufacturing sector. 5.83 Manufacturing growth over the coming decade is expected to continue at over 10 percent annually, and intermediate and capital goods industries are expected to grow most rapidly. Without policy action, therefore, discharges of organic wastes as well as the generation of hazardous wastes from manufacturing firms are expected to rise substantially. The increase in organic effluents will reflect mostly the overall increase in manufacturing activity since the subsectors that generate the bulk of these wastes--food and beverages will continue to shrink in relative terms. However, the growth in hazardous waste quantities will arise from both the absolute and relative expansion of industries such as machinery, chemicals and basic metals. 5.84 These trends in industrial waste generation and the inadequacy of the current regulatory system point to the need for reforms in addressing both organic discharges and hazardous wastes. These changes should aim at rectifying two problems. First, they should attempt to reduce the monitoring burden that regulators currently face due to the current reliance on source-specific standards for a variety of pollutants and the large number of manufacturing firms whose discharges must be controlled. These monitoring needs have stretched beyond the capabilities of the regulatory agencies and contributed to the lack of effectiveness of the regulatory system. The second aspect of reform would recognize that the technical options and costs of pollution control vary substantially across firms and subsectors. Consequently, it would be cheaper to use a regilatory framework that leaves decisions regarding pollution control to the ente:prises themselves rather than having these specified by regulators. 5.85 Based on these goals, the main recommendation for controlling dischargs, of organics and chemicals into water is to shift to a system of presumptive charges. To reduce the monitoring burden, these charges would not be based on actual discharges, as with an ideal charge system, but instead on - 160 - presumed discharges estimated by the regulatory agency. To encourage firms to reduce their discharges, rebates of a portion of these charges would be provided if it were shown that actual discharges were lower than those presumed. The levels of these charges would be based on SOD alone or a combination of parameters where other pollutants are to be targeted. 5.86 For hazardous waste management, the current priority is to provide an incentive framework that would encourage firms to separate the wastes they generate, store these safely, and undertake measures to dispose them or reduce their generation. Such a framework, which currently does not exist in Thailand, would allow tne eventual establishment of central treatment and disposal facilities without the need for large subsidies. It is recommended that a key feature of such a framework be the establishment of a performance bond scheme, which would impose a bond on firms in the main hazardous waste generating industries. A portion of this bond amount would be refunded to firms that delivered their wastes for treatment or storage or could demonstrate on-site treatment or waste minimization. Establishment of further central waste treatment facilities should await the implementation of such an incentive framework if large budgetary outlays are to be avoided. S.87 In implementing industrial pollution control policies, it is also recommended that the present institutional arrangements be streamlined. As with controlling emissions from energy production and use, the possibility of consolidating pollution control functions in a single agency should be considered so as to eliminate duplication and conserve staff and financial resources. Enforcement of the legal framework requires special attention. Efforts should be made to use NGOs more in identifying and prosecuting violators, and penalties for non-compliance should be severe and consistently applied. 5.88 These reforms in policies for industrial pollution control would lead to reductions in discharges of organic and chemical wastes as well as encourage steps to reduce the generation of hazardous wastes. By using charges rather than discharge standards, the system for controlling organic wastes would reduce discharges at lower total costs although some enterprises would face higher costs than at present. The framework for managing hazardous wastes would allow for the eventual provision of storag3 and treatment facilities on a sustainable basis in terms of the need for budgetary outlays. Finally, these reforms in pollution control policy would allow pollution reductions at lower cost than the use of broader sectoral policies such as investment promotion and tariff exemptions in achieving environmental goals. T.M. A.2.1t N Cs.obem ig.s S PIemmeeb Ussitore On IIt 111Cb0tor 1902 24 boors ve_rag,-dtlly sealne, STATION LaXA MIN MA A" X I A" I MINAOW I MAIN A MAX AVG M|N MAI IX IAVG MI MAX AG L MAX AVI I MXN r AV M"N MAX AVG MIN Jammer .43 .81 .10 .48 .24 .10 .a n .19 .22 20 .19 .28 .20 .17 .2n .10 .10 .25 .19 .1S F_barc .48 .27 .14 .U8 .24 .16 . .22 .18 .32 .21 .14 .32 .20 .12 .80 .19 .00 .82 .28 .10 Mafrh .S0 .19 .06 .88 .10 .11 .20 .14 .05 .19 .14 .04 .19 .15 .12 .26 .10 .0 .17 .12 .09 April .0 .15 .10 .15 .12 .0? .10 .14 .08 .17 .18 .07 .21 .14 .07 .19 .10 .05 .22 .11 .00 Vey .41 .20 .18 .16 .14 .12 .15 .12 .09 .15 .1J .10 .16 .14 .11 .12 .09 .07 _.. .81 .22 .18 .10 .15 .11 .16 .12 .07 .15 .12 .09 .16 .1a .09 .12 .10 .08 Jly .28 .1 .09 .19 .14 .07 .18 .11 .06 .14 .12 .0o .19 .1J .00 .1E .10 .04 Auot .26 .24 .22 .19 .15 .10 .17 .14 .11 .15 .12 .10 .1a .1P .10 .12 .09 .00 SeptOmbr .n .2a .14 .22 .18 .O? .2n .14 .09 .21 .14 .10 .26 .14 .10 .10 .12 .05 Octb"er .48 .24 .14 .20 .18 .06 .24 .14 .0 .21 .12 .09 .22 .18 .08 .24 .12 .00 N_mber .57 .24 .00 .29 .20 .05 .27 .20 .14 .26 .21 .14 O _ember .82 .25 .19 .44 .28 .12 .20 .16 .09 .81 .20 .10 -~ ~ ~ ~ ~~.. GM a 24 -r aW a O." 0/08 $"Mt OPC _lXtoris do. IF H . Table A.2.2s Co Cmematralems at Pmmma Emiteim (Mt IS IpiC.btllo ) 1 1 bmw evora.-&tly raedIss umm. STATION SIB I ~~OAJIASEM I SAsommE I suiumWiT I RAThURANA I ANWI !MA AVG U M A I MAX AVG I M Amm MX I AVG !MN M Jamasip .42 .18 .11 0.19 .10 .10 2.44 ".90 .0o 8.48 .79 .10 4.67 .70 .11 6.1? .91 .06 february 14.90 1.48 .11 5.81 . .01 10.0 .02 .11 7.12 .06 .11 9.04 .98 .11 7.03 1.03 .11 S Mb ao20.00 .78 .06 4.81 .68 .11 18.4 .02 .11 4.51 .56 .11 1.90 .82 .11 2.7N .45 .11 7 Apr11 11.50 .38 .11 12.50 1.05 .21 8.77 .68 .11 n8.70 .02 .04 2.88 .56 .11 8."6 .84 .11 mayp 8.4 .66 .11 8.04 .68 .11 2.47 .57 .11 7.59 .76 .11 2.03 .86 .11 _ig 8.00 .58 .07 0.06 1.70 .11 2." .78 .11 4.75 1.01 .07 2.os .60 .11 July 14.60 .48 .11 29.86 1.18 .11 8.68 .70 .11 12.40 .9? .11 8.06 .60 .11 Aumb 11.20 .10 .11 2.25 .76 .11 0.62 .0? .11 6.64 .90 .11 1.80 .21 .11 septlw .41 .18 .11 4.52 .00 .11 8.58 .42 .11 28.50 1.4S .02 23.75 .60 .11 Oabobe 1.25 .21 .11 2.94 .35 .11 5.48 .05 .11 18.80 2.68 .11 10.52 1.80 .11 N1 _abw 11.4 2." .11 9.70 1.24 .11 7 .eeuobw 6.98 2.65 .11 27.1 8.70 .11 0.20 1.68 .1l OM eiadrd 1 bor averag a r0 ll/al $"I UPC 010el0lsg date. '. Figure A.2.1 SPIA Conceitrate SMP Concentrate SPEAJy PAHQWM1I4 S LMD I IiI g ~~~~~~~~~~~~~~~~~S Ik * IoS A a~~~~~ iw Js A 71:68 USm lotSS ma xs n s SPI Concentrate 01%~~~~~~~~~~~~J1 *au a~~~~~~~~~~~~*w 0_ Or s ma ,n i' . X 11 I U 1 1t lll Figure A.2.1 cont'd SPl Concentrate SP Cocentrate X3MSHl ' 'L'G C S ' ' . A '6'~~~~~~~~~~~~~~~~~~~~I OnPM, Conctetnixe T W A- 8~~~~~~ .1 1< - *~~~~~ . , lw to XM o s Ia U .3M Figure A.2.1 .cont'd SPM Concentrate SPM Concentrate PRO1W IM?H&P TSOVAR.J , , ,- , l , e -, , , ~~~~~Al - Sip79 Coslcaatrait a. M i M t .~~~~~~~~~~~~~~S *~ r a Figure A.2.2 Lead Concentrate Lead Concentate o Vf WwM d to U6 az tsX sa UT li, U A o 1i . ¢ * o at~~ -~ ~~~~~~~~? I Lead Concentrate 54- eE~ ~~~I Figure A.2.2 cont'd Lead Concentrate Lead ConcOntrate coi: ff 1 AuA MA I 'at 544, ,54 , *z a YFR lead Concentrate ~~~- .21 -Wc - ~ ~ , - I .1 S E3U Figure A.2.2 cont'd Lead Contrate. Lead Conceitrate i . . .. 0 ~~*o :n '4. .10 ~ ~ ~ 0 1. w .1*~~~~t 04.~ ~ ~ ~ 4a 6~ ~ ~ ~ ~ ~~~Y Figure A.2.3 CO Coacentrate CO Concentrate SAPHW PARCINT. InTrnU 50. 41a 14~~~~~~~~~~~~~~~~'O CO0 Concentrate -jo ta M D I~~~~ V ~ ~ ~ .E -~~~~~~~~~~~~~~~.L1 o~~~~~~~~~~~0 oA U~~~OCocDrt :- <~~wIT 40 7 MAXt X ft Figure A.2.3 cont'd CO Coccentrate CO Coucentrate . 49 as~~~~~~~~~~x .,. I L ; * RU ' ' Yu~~~~~~ * CO Coneentate 30 .~~~~~~~~1 . E . W JiM im zoUV Moo I= . £o. YDR~~~~YN AM= uLaL Page I of 3 Nater oualitvStandards for, Surfac Mate lother thakn sea vater 1. Conventional physical and biological parameters are used to define five water quality classeo according to beneficial use. The allowable uses in each class are: Class 1: River reach L in natural state, without waste water of any kind. All uses are permitted. Class 2: River water can be used for (i) drinking if 'normal disinfection* and 'general water treatment' takes place (primary treatment), (ii) fishing, (1ii) use by animals, (iv) swlmming and water sports, (v) agricultural wlthdrawals, (vi) industrial use, (vii) transportation; Class 3: (i), (v), (vi) and (vii) above only; Class 4: (i) only with secondary water treatment, (vi) and (vii) only; Class 5: (vii) only. 2. The basis on which each class of water quallty is define is shown below in Table A.2.3. ANLNX 11.2 Page 2 of 3 TAB A.2.3 Classification of Water QualLty According to 3enefLcial Use -- Selected Parameters Classification of Vatet Quality I.coording to the Use of vater Resourcea its tiatlo -- Parameter Value Unit Class Class Class Class Cl ______ 1 2 3 4 5 A. Physical a Biologieal: 1.Temperature C N N N N 2. pa - N 5-9 5-9 5-9 3. DO 20 * mg/l N <6 <4 <2 4. SWD 80 % g/i N >l.5 >2.0 >4.0 le 5. ColLfanu s0 n/i N Bacteria L1e Omi -Total > -0 Coliform 5000 20000 -Fecal > - _ Coliform 1000 4000 _~~~~~~ - -.. mR ... ._ MM Luum Paige 3 of 3 Praitor Unit value0 S. Organic Compoundst 6. Nitrate in the 5.0 form of Nitrogen mg/litre 7. Anmonia in the 0.5 form of Nitrogen mg/litre C. Toxic Substancess 8. Phenols 0.005 mg/litre 9. Arsenic 0.01 mg/litre 10. Cyanide 0.005 mg/litre D. Heavy metals 11. Manganese 1.0 I4/litre 12. ZLc_ 1.0 mg/litre 13. Morcury 0.002 mg/litre 14. Lead 0S05 mg/litre B. PestLcides: 15. DDM 1.0 _______ _______ __ _ - microg/litre _ _ -_ ._ - _- Sources NotifLcation of the Ministry of Science, Technology and Znergy (3.B. 2528 (1985)), published ln the Royal Government gazette, Vol. 103, part 60, dated Aprll 15, B.3. 2529 (1986). V Maximum concentration allowed for water resources uader categories 2,3, and 4. Annex 1 a3 Page 1 of 13 Health Benefits Model Methodoloov 1. Since most of the elements of this model have been described elsewhere (ostro, 1992; Krupaick et al, 1992), this section will present only a brief summary of the model and end by contrasting it with that in Ostro (1992), which has been applied in similar work in Jakarta. 2. This model is based on the damage function approach to estimating benefits. Beginning with baseline and assumed changes in the concentrations of specific pollutants (see Table A.2.4), dose-response functiLns from the ep4demiological and clinical literature and population data are used in calculating changes in a variety of health endpoints, as listed in Table A.2.5. The economic value of these changes are then estimated, based on the health benefits literature (summarized in Table A.2.6). The detailed results are shown in Table A.2.7. The model proceeds to aggregate these benefits over each pollutant and over the various endpoints to arrive at an estimate of the health benefits associated with the assumed changes in concentrations of the pollutants. Each of these calculations is performed using statistical and judgmental confidence intervals on the coefficients of the dose-response and valuation functions. The resulting ranges of impacts and benefits are propagated using the crude, but common approach of multiplying "low" health impect estimates by "low" values, "high" impacts by "high" values, and "expected" impacts by "expected" or "best" values. Scenarios 3. The main scenario in this model was a 20 percent reduction in air pollution concentrations in Bangkok. In order to calculate this percentage from the air quality data presented above, estimated baseline air pollution concentrations for Bangkok were obtained. It was assumed that average monitored concentrations from the stations in Bangkok were representative of exposures to the Bangkok population, which is assumed to be 7.8 million people (SPURT, 1991) located in the Bangkok Metropolitan Area plus the provinces of Samut Prakan and Nonthaburi. The 20 percent reduction in concentrations was assumed to be experienced by the entire population. input data 4. Data are provided in Table A.2.4. With regard to air pollutants, the following data were used: (i) SM: The average 24-hour SPM concentration was estimated to be 166 ug/m3 for the DPC monitors and 148.3 ug/m3 for the MOB monitors. Taking a straight average, the model assumed daily average 8PM concentrations in Bangkok to be 157.1 ug/m3. Thus, a 20 percent reduction in 8PM equals a reduction of 31.4 ug/m3. Based on information gathered from the Department of Pollution Annex II.3 Page 2 of 13 Control (DPC), 8PM concentrations were transformed into PMi0 concentrations for use with certain dose-response functions assuming a ratio of PM10 to SPM of 0.6. (ii) p22: Monitoring data for this pollutant are scarce, with only two downtown monitors (one each from DPC and MOH) having reasonably complete and reliable reporting. The model averaged the 24-hour average readings from the DPC and MOH monitors to obtain baseline concentrations of 0.016 ug/m3, with a change of 0.0032 ug/M3. (iii) Lead: Data for 1990 are available from both DPC and MOR stations; however, data for 1991 are available from only the DPC stations. Since the use of low lead and unleaded gasoline was introduced in May L991, this later year is more representative of current conditions. Thus the model uses the daily average of 0.32 ug/m3 from the DPC monitors in 1991 as the baseline, with 0.064 ug/m3 representing the assumed change in concentrations. (iv) Ozon: Ozone conctntrations appear to be low in the area, even downwind of the central area. The daily peak of 0.0255 ppm in the DPC monitoring data is below what in the U.S. would be considered background. Nevertheless, in estimates of health benefits on air pollution control in the U.S., reductions in ozone appear to be the most significant. Therefore, this model performs two sets of computations- one including ozone effects and benefits, and another with these impacts and benefits omitted. The model contains no dose-response functions for CO and N02, the former because no such functions exist, and the latter because, in our judgment no significant associations between NO2 and health have as yet been found. 5. With regard to other input data, it needs to be noted that information for Bangkok was used preferentially, with Thailand data substituted where necessary. Where no data were available for Thailand, U.S. data were either adjusted or used unchanged as a proxy. 6. Demographic data of age distribution, mortality rates, life expectancy, and birth rates were obtained for BMA/Bangkok. Initial blood lead levels for Bangkok were obtained from several papers, as noted above. The ratio of air lead to blood lead, which is assumed to be 2 and 8 for U.S. children and adults, respectively, was changed to 4 and 10, respectively, to reflect the greater amount of time and proximity of the Bangkok population to mobile and point sources of lead. Mean blood pressure and the standard deviation of blood pressure in the population of Bangkok were assumed to be the same as in the U.S. All other 4-put parameters were asoumed to be the same as in the U.S. Flgure A.2.3 cont'd CO Concentrate CO Concentrate PR&tAI aPRAP Ysa0T is.~ ~ ~ ~ ~ ~ ~~~~~~~~~~a . ~ ~~~~~~~~~~~~~~~ ........ T-r 'f if ' 9 S9 O X 2- S 0 LWA a 4 ~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 1 I1 IS~~~~~~~~~~~I to~~~~~~~~~~~~~~~ ASU - - oimtin W Annex 11.3 Page 3 of 13 I. Dose-response functions in the model were not modified to take into account any special conditions in Bangkok, relative to those in the U.S.1' The greater proximity of the Bangkok population to both point and mobile sources, the greater degree of diffusion of outdoor air indoors, and, perhaps, the greater time spent outside by the Bangkok population relative to the U.S., point to a notion that at a given concentration exposures would be larger in Bangkok. However, it does not necessarily indicate that the response to a given reduction in concentrations would be larger in Bangkok. In fact, with linear dose-response functions, which most of the functions are or approximate, baseline pollution levels are irrelevant to the estimation o.; health impacts (except that a higher baseline concentration, multiplied by a given percentage reduction, leads to a larger absolute reduction in concentrations). S. According to experts in Thailand, there is reason to believe that a study of the relationship of air pollution to work loss days, and the use of medical services in Bangkok would show fewer WLDs and doctor visits than at comparable pollution levels in the U.S. (i.e., flatter dose-response functions).3 However, this should be viewed as a behavioral result not one based on physiology. Taking off days from work is thought to be discouraged more in Bangkok than the U.8., with absentee rates of individual workers publicized within companies. Anecdotal evidence suggests that workers take very few sick days, although we were unable to obtain data to examine this view. Furthermore, doctor visits are likely to be low in response to illness as people generally self-medicate, and only see a doctor if the results are not satisfactory. While people in the U.S. behave similarly, Bangkok residents have access to drugs like antibiotics which would be available only through a doctorIs prescription in the U.S. At the same time, Bangkok residents may be less tolerant of some environmental insults than people in the U.S. Immigrants to Bangkok from the northeastern areas of Thailand have been found to be anemic and therefore at particular risk from lead exposure. Anproaches to Estimatina VSLs 9. The approaches to valuing impacts were modified in this model, however, to reflect differences in wage rates and medical costs between the U.S. 1' We were unsuccessful in finding any epidemiological studies of use in quantitatively linking air pollution to health in the Bangkok area. We did find a study summary, Project on Study and Obeervation of Health Impact from Environmental Pollution in Lampaeng Province, which estimated logistic regressions explaining respiratory illness rates and lung function in teenagers living in Mae Moh and Jae Hom Districts. The former is an area influenced primarily by emissions from electricity generating stations. The latter is a control area. It appears that no relationship was estimated between air pollutants and health, however. 1 Dr. Debhanom, personal communication. annex IX. 3 Page 4 of 13 and Thailand/Bangkok (Table A.2.6). The value of a statistical life in the U.S. (which is calculated as the WTP for a given reduction in risk divided by the risk reduction) is estimated to range from $1.6 to $8.5 million, with a midpo~it of $3. 5 million, based primarily on U.S. data and resulting estimates of wage premia earned by workers in riskier jobs. The direct transfer of such values to other countries is controversial as is the deflation of values to reflect wage differences between the U.S. and other countries. If the U.S. VSLs are deflated by the ratio of average wage rates in Bangkok to the U.S. (0.13), the range and midpoint estimates of VSLs in Bangkok would be $208,000, $455,000, and $1.1 million. 10. An alternative approach would be to use results from U.S. studies showing that the WTP for mortality risk reductions, althouLgh sensitive to income, is not proportional to income. Indeed, a person with an income half that of another person has been found to be willing to pay only 17.S percent less than the higher income person for the same amount of risk reduction. In other words, the income elasticity of the WTP for mortality risk reductions is about 0.35. However, applying this elasticity to Bangkok is questionable because it presumes that the lowest wage U. S. workers have identical preferences about mortality risks to the average wage workers in Bangkok. Nevertheless, using this elasticity and assuming the daily wage in Bangkok is $12 and that in the U.S. is $90.27 (U.S. Statistical Abstract, 1991), the Bangkok estinates of a VSL range from $790,000 to $4.2 million, with a best estimate cf $1.7 million. 11. A final approach to estimating a VSL, and the preferred approach in our view, is to base the estimate on a study of wage rate differentials in the country (or city) in question. While such a study does not exist for Bangkok, there is enough information available to make a set of crude estimates. The VSL is estimated as the wage premia associated with a death risk divided by the death risk. The authors were informed that construction workers in Bangkok are paid 15 to 20 percent above comparable workers in less risky industries, and that approximately 200 of these construction workert die per year on the job. In addition, death benefits are supposed to be $400. Finally, the number of workers in construction in Bangkok is about 149,000. Thus, death risks are 13.4 per 10,000.21 Assuming that average wages are $3000 per year, construction workers would earn $450-600 premia.V Therefore, the VSL could vary from $336,000 per year to $448,000 per year, depending on the size of the wage premia. As the premia also covers workplace injuries, the authors choose the lower of the two estimates. Y For comparison, mortality risks for construction workers in the U.S. averages 32/100,000 (U.S. Statistical Abstract, 1990). Y The $400 death benefit translates into $1 in expected value, so that it can be ignored. Annex 11.3 Page S of 13 Other adtustments 12. This model uses a different approach to adjust otlxer types if values. For restricted activity days, such as a work loss day, values for the U.S. are based on wage rates. This is thought to be a reasonable proxy of the value placed by society on this day, assuming markets are competitive,F although it ignores "pain and suffering. " The work-related effects of a loss in IQ from lead exposure are also based on wage rates. Thus, for Bangkok, the values for the U.S. are adjusted simply by using the ratio of wages in Bangkok and the U.S. (about 0.13). All other values except those based on medical costs are adjusted by the wage ratio. 13. Values based on medical costs are adjusted in several different ways. Possible approaches include adjusting U.S. medical costs for the cost differential of medical services and adjusting these costs by the ratio of spending on medical services in the two countries (the Shin et al approach). The latter approach is problematic because it incorporates both price differentials and differences in the use of medical services. If Bangkok residents make less use of medical services than U.S. residents, use of this measure will underestimate the cost of medical services to residents of Bangkok when they are used. Taking the cost of a doctor's visit in Bangkok as $8 (Dr. Debhanom) and the like cost in a U.S. city ($50), the ratio of doctor visit costs in the two countries is 0.16. If medical expenditures were used, the ratio would be 0.08.o E In this case, one would assume that the worker is paid the value of his or her marginal product. V Medical costs of 2.8 percent of total Bangkok household expenditures *$3,760 expenditures per Bangkok household in 1988 divided by 5 percent of household expenditures in the U.S. for medical care * $2s,892 expenditures per household in the U.S. (U.S. StiioalAbact, 1990). Annan4L. Page 6 of 13 Table A.2.4t Baseline Data and Assued Changes in Pollutaut Concentrations t'opuiuio. 7.800.000 penmu ________________7__0 POW oa f m Ol dma 17 6.41 rlad male frames onopopwmdtkm 49.8% O Age pop Agep25.34 Age 35-44 Age 45-54 AgB 5544 Pmonaef teaposiatioswp id pep 223% 13.S 7.7% 4Ai Mos:mly 0we047 dealo I lsyr Bhute 0.0214 bittspe yr Womwe e tmiy 66.1 ye mabwweold i 3.5 p. Baoiza 10PLtIO wi 10m 94.26 _/mpataamI3 Bal&o PFb 0.mi2es 0.2 I A m3 BDaadoUly 4lrmafcr03 Q02S5 npo h1ue dair.- 14oulfor3 4001 ppm Air Qulity hme in plMO *1.815.Ok _1*m imlm3 in'iTsP -3.14E+01 _ /g m J3 nSem802 -3.20E+00 nampumag A3 kimmm~einN0x m anae - I iA3 lummin &Pb -(40SE.0 _ Xm I W3 lIaleodd uab Wood Pb hvel 12 adopuraIdl Pb blood to slope for sdes 4 (uwupAn idl) I(rmmpems I mh3 bblood towiapeoaddm 10 (miaoupwu I dl) I (ndcmgmasIoA3) Y,wot amuywo in valnmaaeo 1989 nynums(phnid) U.S Doillu Ftcmargnwtd US. d-tolherforywizon tabove I AvSg dly w12.00 Avh,agdotorcom, 0 lasicity of WI? mad mioom 0.35 A*WyWrmiMtfMwl I Aft=aY WMP edjniMn f 2 0.1S Annex 1.3 Page 7 of 13 Table A.2.5s E.uth 3S!ltt Literature Vaed for Doe-Ieaponae luctios. h. _Pfun __ _ PM1O Oz02e 80 NOx Pb Premature Schwaz and Neonatal: CDC Mortalty Dockely (1991); Rae et (1991a) at (1991) Adult: Shureff (1974) Respiratory Plagia_nnks Hospital andParker Admsson (1988 Emergency Samet et al Sunyr et al room visit (1981) (1991); Samet et al (1981) _ _ __ Restricted Ostro (1987) day __ Minorrmsoicted Portey and acivity day Mlay (1989) Asdma Atack Ostro et al Wh _tmor Day (1991) and Kom (1955) (1980>; ChildBonchits Dockey et al _ _ _ _ _ _ _ _ _ _ _ _ (1989) _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Coronay Heart Piride et al , . . . _ _ ~~~~~~~~~~~~~~~~~(1985) Hypertension Schwartz et a! cas (1985) Chronic Dwkeryetal cough_8 (1989) 0~~~~~~ OS i _ _ I 16i _ X _ SI An=ex ILI* Page 9 of 13 Table A2.6: UOit Values for Healtih Impacts in the U.S. and Bangkok Measme Low Mfid High Units Approach Value of a $1.6 $3.5 $8.5 $millionl Heduaic wage moes and death Co Vauation(CVM) 0.8 1.7 4.2 income elascity adjustmen | (e = 0.35) 0.208 0.455 1.1 . wageB/wage,. (1989) 0.336 Bngk wag premia/mortality risk in constuction H o s p i t a l 6,306 $/eve Medical Costs 838 DV (Bangkok)/DV U.s.a [5S04] d[Medica CostsImedical Emergency 178 $/event Medical Costs Room Visit 24 DV (Bangkok)/DV U.S. (141 [Medical Costs/medical wostsm Conaly Haut 28,334 $/event Medical Costs Disease _ ___ 3,766 DV (Bangkok)/DV U.S. [2,6 [Med Cos/medica Hostas ts Hypeotesion 442 S/case Medical Costs ADa3&IL. Page 10 of 13 59 DV (Bangkok)/DV U.S. [.. [Medical Cost%,/medical costst C h r o n i c 132 $/case Medical Coss Brondiitis 18 DV (Bangkok)ADV U.S. [ll} [Medical Costs/medical Restricted 51.38 $/dy Wag Actiyity Day (RAD) 683 Ratio of Bmkok/U.S. Daily Respiratory 59.58 $/day Adjusted Dally Wage RAD OtRAD) _ 7.92 Ratio of Bangkok/U.S. Daily wage Minor RRAD 13.13 21.48 36.40 $/day Adjused daily wage 1.75 2.86 4.84 Ratio of BakoWU.S. Daily wage IQ poi 1,147 $poi Increased incoms 152 Ratio of Bangkok/U.S. Daily wage Asma Attack 10.74 29.84 48.93 $/attack CVM ,. ., , ... . . . ~ ~ ~~day, 1.43 3.97 6.50 Ratio of Bangkok/U.S. Daily wage Any Symptom- 2.98 5.97 11.93 $Jday CVM day , Page 11 of 13 0.40 0.79 1.59 Raioof BagwkoU.S. Daly wage Adult Chest 2.98 5.97 21.48 $/day CVM 0.39 0.79 2.79 Ratio of Bakok/U.S. Daily wae Cough 1.66 4.77 13.13 S/day CVM 0.22 0.63 1.25 Rato of Bangkok/U.S. Daiy Shortness of 0.72 9.55 21.48 $/day CVM breath 0.10 1 27 2.86 Rado of BagkU.S. Daily wage Chest tghtness 2.98 5.97 12.95 $/day CVM 0.40 0.79 1.72 Ratio of BagkowkU.S. Daily Throa itation 2.90 3.58 10.31 $/day CVM 0.39 0.48 1.37 Ratio of Bangkok/U.S. Daily wage Eye Iritation 2.98 5.97 12.95 $/day CVM 0.40 0.79 1.72 Ratioof Bagok/U.S. Daily wage U p p e r 5.04 5.37 8.74 S/day CVM respiratory symptoms__ 0.67 0.71 1.16 Ratioof BangkWU.S. Daily wage Page 12 of 13 L o v e r 2.07 5.32 14.81 $Iday CVM respiratory .ympom _ _ _ 026 0.71 1.97 Ratio of Bangkok/U.S. Daily wage a. A typical charge for a doctor visit In Bangkok in 200 3, or $8. in am urban U.S. city, the charge would by $50, for a raio of 0.16. b. Mme average wae in Bangkok is about 300B per day, or $12. In the U.S. it is about $90. The ratio is 0.13. AXMS II, 3 Page 13 of 13 Table A.2.7: Sumry of the Rae of ealth Benefits of i 20 Parcent apio nt In Air quality In s,ngkoek. (S millions. 1989) Per Capita Pathway Low Mid High Rangoh Particulates- 120 7C0 2,760 4 - 570 Mortality, 362 1,315 4,446 31.2 187.3 72.9 tV8.4 Particulates- 88.3 309 802 11 - 103 Morbidity' 86.9 302 789.3 Lead- 672 1,470 3.570 22 - 458 Nortality' 174.7 382.2 928.2 290.6 Lead- 6.2 7.8 9.4 <1 - 1.2 NorbidityV 6.3 Sulfur Dioxide Cl 0.2 1.5 '1 Norbidity Ozone- 1.8 9.4 35 0.23 - 30 Morbfdit9 2.6 35.9 232 Totalt 300.8 - 1,131 746.9 - 3,138.9 2,486.3-9,060.9 37 - 1,162 a. Ranges represent 95 percent confidence intervals on concentration-response functions multiplied by either 95 percent statistical or judgmental confidence intervals on unit values. Thus, LOU benefit estimate represents the LOW impact estimate multiplieo by the LOW unit value; the MID benefit estimate represents NID*MID and the HIGH benefit estimate represents HIGH*HIGH. The figures on the first line in ea._h cell are estimated using unit values in bold in table 2-25. Use of alternative values or concentration- response functions is detailed in the text and footnotes to this table. b. The estimates within each of the LOW, MID, and HIGH cells represents the range of unit values estimated according to four methods, each corresponding tc . line of the table: (i) the income elasticity adjusted U.S. value (see text) using the Schwartz et al, 1991a ioncentration-response function, i) the income elasticity adjusted U.S. value (see Annex 2.3) using the Schwartz et al, 1991b concentration-response function, (iii) the Schwartz et al 1991a function with values adJusted by the ratio of Bangkok/U.S. wage rates, (tv) the Schwartz et al, 1991a function with values adjusted by using a Bangkok-based estimate of the VSL based on wage premia in the Bangkok construction industry (see text). See table 2-25 for values. C. First line uses wage ratios to make some adjustments in U.S. values and doctor visit cost ratio to make others. Secend line uses the ratio of household medical expenditures in the two countries instead of the doctor visit cost ratio. d. The lines within the cells represent the range of unit values estimated according to three methods: (i) the income elasticity adj'sted U.S. value (see text) using Shurtleff, 1974 concentration-response function, (ii) values adjusted by the ratio of Bangkok/U.S. wage rates, (ifi) values adjusted by using a Bangkok-based estimate of the VSL based on wage premia in the Bangkok construction industry (see text). The Shurtleff function, being the oldest used, is the most suspect of all. Using no thresholds is also controversial and would tend to overestimate benefits. e. Second line represents use of ratio of medical expenditures in Bangkok versus U.S., replacing an estimate of the ratio of doctor visit costs in Bangkok and the U.S. used in the first line. f. First line represents estimates using epidemiological studies. Second line represents estimates using clinical studies. g. Ranges for total LOW represents the sum of the lowest and the sum of the highest benefit estimates in each cell in the LOW column respectively. Correspondingly for MID and HIGH. h. Per capita benefits estimated using 7.8 million people. Source: Staff estimates (Annex 11.3). Annex II. 4 Page 1 of 6 Previous Health Imoact and Benefit Studies of Relevance to this Renort (1) U8AID (1990): Methodolocv: 1. The study used environmental and population data from Bangkok (population of BMA was assumed as 5.5 million) along with dose-response functions taken primarily from the U.S. The health risks associated with air and water pollutants, groundwater contamination, food contamination and solid and hazardous waste disposal were estimated. 2. The study mixed the following scenarios for pollution control: (i) for TSP and CO the scenarios were reducing current concentrations to the U.S. standards; and (ii) for lead, the study estimated benefits from reducing blood lead levels from their current amount to that of adults and children in the U S. To compare different types of health effects, the study used a "severity index" adapted from Thailand's NEB. 3. In order to predict exposures, the following assumptions were made: (a) for CO and TSP that: (i} the population was distributed uniformly around each of the stations monitoring a particular pollutant, whether those stations were curbside (for CO) or permanent (for TSP); and (ii) the mean concentration for a year was typical of each day; and (b) for lead, the percentage share of lead exposure from lead emissions in each media were estimated by assigning shares to air, water, and food as shown in Table A.2.8 reproduced from that beport. 4. Assegsment of Health Risks and Innut Data. The following assumptions were made: (i) Risks from emissions of toxic air pollutants from mobile sources: Input data included (a) USBPA potency factors; (b) a set of emissions coefficients (grams per km) from the U.S., generally for pre-catalytic converter (e.g., 1974) vehicles; (c) Bangkok VKT estimates; and (d) a very simple air dispersion model assuming mobile emissions were evenly distributed in the area. (ii) (ii) Surface water pollution risks: Input data included estimates of levels of toxics and metals in tap water (which were all below standards) and concentrations of pesticides and other substances found in raw water at the drinking water intake point for water received by 75 percent of the Bangkok population. These data were used with potency factors to estimate cancer risks, and "reference doses" to estimate the number of people exposed to concentrations that could lead to adverse but non-carcinogenic health effects. Risks from exposure to microbiological contaminants could not be estimated. However, the authors of the study reported estimates of total incidence and actual in-patient Annex XI.4 Page 2 of 6 plus out-patient incidence of environmentally-related microbiological diseases; furthermore, they speculated on the degree to which these diseases had environmental causes. 5. The risk analysis for groundwater proceeded identically to the risk analysis for surface water. Groundwater quality data were obtained for several deep water wells around Bangkok; these data were assumed to represent the quality of drinking water withdrawn. It was assumed that twenty-five percent of the population obtained water from groundwater supplies. (i) Health risks arising from ingestion of food contaminated by pesticides, toxic pollutants, and bacteria: Dietary information and analyses of the contaminants in food and other information were combined to estimate cancer cases, the relationship of exposure to various non-carcinogens, and the "reference dose." (ii) Health risks from disposal of solid and hazardous wastes: assessments were made on the basis of very limited data on concentrations of pollutants measured at dumpsites and in leachate, as well as some rough calculations. (2) Shin et al (1992): 6. Using the health impacts estimated in UISAID (1990), this study estimated the economic benefits from pollution reductions in Bangkok by assigning various monetary values to the estimated risks found for TSP, CO, and lead. Msethodoloy ri) Suspended Particulate Matter (SPM): Work Loss Days (WLDs) were valued at the wage ($1.25/hour for an 8 hour day), while Restricted Activity Days (RADs) not resulting in work loss were valued arbitrarily at 50 percent of the wage and applied to the entire population. The value of a statistical life (VSL) was estimated using the traditional, but outmoded, human capital approach, which asserts that a person's value to society is the discounted value of his/her earnings. In applying this approach, an annual income of $2500, a life expectancy of 6s years, an average age of 26 with 39 years as the remaining time in the labor force, and a 5 percent discount rate were assumed. Based on these assumptions, the value of a statistical life is $44,682. The ri,sults are shown in table A.2.10, with total benefits from TSP reductions of $451.2 million in 1989 applied to a population of 5.86 million. 7. Carbon Monoxide (CO): The USAID study only estimated the number of people at moderate and low risk. However, Shin et al (1992) arbitrarily assigned seven WLDs per year to the moderate risk group and one WLD to the low risk group, for a benefit of $10.7 million annually. Annex II,4 Page 3 of 6 S. JLad: Hypertension cases were valued as the sum of medical costs and work loss days ($276 in the U.S.), and adapted to Bangkok by deflating this sum by the ratio of Thailand to U.S. medical costs (the adjustment factor is 0.096) for $26 per case. The same adjustment factor was used to arrive at cost per CID/case and stroke/case based on medical costs and lost earnings in Bangkok ($7,659 and $5,533, respectively). The cost of chelation therapy for children with very high blood lead levels is estimated to be $336/case in Bangkok and IQ loss is valued at $50 per Doint based on future lost earnings. Table A.2.9 shows the benefits, which vary from $39.5 million to $99.4 million, depending on baseline blood lead levels assumed and assuming that airborne lead is responsible for 40 percent of blood lead in adults and 70 percent of blood lead in children. Differences in Methodoloov between this Study and Previous Studies 9. The methods used in estimating health impacts and benefits used in this chapter are, in several important respects, different from those used in USAID (1990) and Shin (1992). There are three refinements. First, it poses more consistent control scenarios by assuming all pollutant concentrations are reduced by 20 percent. The previous studies mixed pollution control scenarios by estimating for some pollutants for reducing concentrations to zero, and for other pollutants by reducing concentrations to Thai ambient standards. Second, the model used here is based on more up-to-date dose-response studies, and the ambient data for Bangkok are obviously more recent. Finally, the analysis of the health impacts for CO goes further than that in USAID (1990). The estimates here apply to the BMR population of 7.8 million people (rather than the BiA), and are more conservative because it assumes that the entire population is exposed to mild health effects, not only those without heart disease as in USAID. 10. However, the estimates here are more narrow than those in USAID (1990) in one important respect. The analysis in this chapter deals quantitatively only with the health-air pollution link. The USAID study, on the other hand, estimated links between health and contamination of surface water, groundwater, soils and food contamination. Another difference in the methods used here and those in USAID (1990) is that we have used average pollution concentrations from monitoring stations in calculating baseline concentrations rather than preserving the variability of mean values over the monitoring stations. The USAID approach would be superior to the extent that dose-response functions were more non- linear. However, as argued in the text, these functions are close to being linear and thus, the two approaches are mathematically nearly equivalent. Annex II. 4 Page 4 of 6 Tabb A.2.8: Readve Conuibtion of Three Pathways of Exposure To Lead in Bangkok Adults Chbdren Percn from Aikb 8%-40% 10%-70% percent from Wate 10%-40% S%-30% Percen frm Fod 40%S80% 20%-80% a. Bid on esmaued icme to blood lead lels caused by exposure through each medium, as reported in Table P.1, USAID, 1990. Percenae rerse ididu medium as fracton of toa icrement i blood lead accounted for by these die. medi of exposure. Ranges peseat uncetanty caused by aermative assumptons for all tree exposure pathways. For each combinaton of s , todas for thd three media sum to 100%, by defiition. Potential contrbutions ftom othr was are not consiered i3 tdese esdmates, but are ncbded in de resuls presented in Table P.2, USAID, 1990. So3ae: USAJD (1990) Page 5 of 6 Table A.2.9s Economic Value of t"Rxposue Through air Pollutoe ia Bangkok Beafkgound Level 16ug/dl PhD 23ug/d1 PhD 45ug/dl Phi (1) Hypertension cases/year 210,000 320,000 530,000 EconoMic valueb 6.2 9.4 15.5 (2) Heart Attack Cases/Year 210 320 430 Economlc value' 1.6 2.5 3.3 (3) Stroke Cases/Year 110 210 430 Economic value' 0.6 1.2 2.4 (4) Death cases/year 210 210 430 Uconomic value 9.4 9.4 19.2 Children (5) CDC group IV Cases/year 530 7,500 64,000 Economic Value' 0.2 2.5 21.5 (6) Lost 1g Points/year 430,000 530,000 750.000 Economic value' 21.5 26.5 37.5 Total economic valueb 39.5 51.5 99.4 a. Air pollution is assumed to be responsible for 40 percent of blood lead level for adults and 70 percent for children. b. Millions of U.S. dollars. Sources Shin et. al. (1992). Page 6 of 6 Table A.2.10: The BEonomic Value of Morbidity and Kortality Effects of Ambient TSP in Bangkok Morbi-dity 1983 1984 1985 1986 1989 WLDr 5.81 7.39 4.77 9.86 26.46 Economic valueb 58.1 73.9 47.7 98.6 264.6 RAD-WUD& 5.44 6.91 4.46 9.24 24.78 Economic value6 . 27.2 34.6 22.3 46.2 123.9 Total value 85.3 108.5 70.0 144.8 388.5 Mortality Population' 5.02 5.17 5.36 5.47 5.86 Mortality 308 392 253 523 1404 Economic value6 13.8 17.5 11.3 23.4 62.7 TOTAL (morbidity 99.1 126.0 81.3 168.2 451.2 + mortality)b a. Million days per year. b. Million US dollars (1989 price). c. Million persons. Note: 1989 data was from a different source than 1983-86, so the data are not strictly comparable (also, note the three-year gap). Source: Shin et. al. (1992). Methodolo2a for Natimatina Benefits of Conuestion Reductions The baseline data used in estimating congestion benefits are hown below in Table A.2.10. The costs and value of time savings are Qxpressed in terms of passenger car units (pcus), which are used to convert all types of vehicles into equivalent units in terms of the space they take up on the roadway. The conversion factors to pcus are taken from SPURT (1991), Table 8.8. The value of time, aggregated across all vehicle types and trip types, is assumed to be 85.8 Baht/hour per pcu (at 1989 prices). This estimate is developed from the assumption that the value of time for workers in their hourly wage rate (assumed to be 30 Baht for those using motorcycles and buses and 150 Baht for those using cars), with non-work trips valued at 40 percent of the wage, following British conventions. Benefits to the peak hour are multiplied by 8 to estimate the daily benefit. Table A.2 .1:s Basell Data for Congestion Reduction Scenarios category Peak hour person-hours 384,000 Pcu-hours 128,000 Person-trips 780,000 Pcu-trips 260,000 Peak hour speed 24.1 kcph Peak hour pcu-km 3.082 million travelled Value of travel time 85.6 B/pcu-hour (1989 B) a. Benefits ignore costs to those who change behavior and any implementation costs. Source: SPURT (1989). AM, III. I Page I of 5 utlRatlom of Impacts and Costs of Alternatil Measures Table &.3 . 1Xs lw Content of fuels Fuel Ton Oil Equivalent (toe)/'OO Tos of Fuel Lignite (Mae Moh) 297.24 Lignite (Industrial) 435.94 Coal (Imtported) 653.92 Fuel Oil 941.24 Diesel 861.98 Source: D3A, Thailand Energy Situation, 1992, and BAT (foi. lignite and coal) ANNEX 111.1 Page 2 vi S I. Emission Imnacts: (i) Demand-side Manaaement Assumptions: (a) Estimated annual savings in power generation (after five years) - 1427 Gwh; (b) Fuel oil is the fuel saved due to DSM; (c) For fuel oil, 11.04 kwh are produced per liter; InDacts: Annual savings of 129.3 million liters of fuel oil, all in the BMR. Applying the emissions and conversion factors in Tables 3.12 and A.3.1 imply reductions in SPM emissions of about 543 tons, and in S02 emissions of about 7,370 tons annually. (ii) Lianite Tax and Omissions Standards: AssumDtioM: (a) Current price of lignite to manufacturing firms is 550 Baht/ton (including the tax of 21.06 Baht/ton); (b) Tax rate on manufacturing lignite use increased to 133 Baht/ton, which is 60 percent higher (per toe) than the tax rate on coal; (c) Elasticity of manufacturing sector demand for lignite is -0.5, and all fuel switching is to coal; (d) EGAT's lignite-based facilities to be commissioned in 1996-97 switch to coal or use desulfurization technologies and precipitators; Annual generation at these two facilities = 2000 Gwh; Impacrts: (a) In the manufacturing sector, applying emissions factors in Table 3.12 implies reductions in the BMR of SPM emissions by 7,982 tons/year and of S02 emissions by 8,733 tons/year. (b) In the power sector, annual emission of SPM and SOk would fall by 72,000 tons and 54,000 tons respec- tively, applying the emissions factors in Tables 3.12 and A.3.1, and assuming (conservatively) that the facilities switch fuels. Page 3 of 5 II. Cggt lmvags: Lignite Tax and Smisgions Standards: Assumotion: (a) Cost per kwh of installing desulfurizers and precipitators is between 0.5 0 and 0.7 O.Y This figure is assumed to be the upper bound on unit costs. (b) Based on conversion factors in Table A.3.1, 1245 kwh are produced per ton of Mae Moh lignite and 1800 kwh per ton of industrial lignite. Umpactat (a) Since 11.724 million tons of lignite are used annually by BGAT, costs would rise by about $17 million due to the removal of the cross-subsidy on lignite. In addition, costs would rise between $10 million and $14 million in complying with emissions standards. (b) Given 1991 consumption of 2.817 million tons of lignite in manufacturing, total costs would rise by about $11.3 million assuming the demand elasticity in (iic) above. 1 See Ruitenbeek, 1991 and World Bank, 1992C. Tabl. A.8.2: Do_mble StXAur. of Petroleu Prdtcw ReoWil Priem Whole- OIl Con. slo Eb4.ftn. Tax s Fud Fwmd Prieo Mi mg Subid RultI (Avg.) 9/Litre 3/Litre B/Litr. Avg.) VAT WVAT mern for LPG VAT Price P-GAS 0.L) 4.2119 C.8S0 0.03 M00 ?.GM8 0.5387 8.200 1.1748 - 0.0822 9.400 E- ) 5.8524 2.5650 o.o030 0.0700 6.0o74 0.5626 6.o000 0.6257 - 0.0438 9.2700 Ro-A S ) 8.4 8.8W0 0.0800 0.0700C 7.0984 0.4965 7.689 1.0286 - 0.0720 6.6900 REG-US RaN)- 8.8550 0.08o0 0.0700 7.8106 0.5110 7.6220 0.77 - 0.0641 S.AM00 t_OE 4.2617 8.8000 0.08o0 0.0700 7."17 0.56 .1960 0.7566 - 0.05$1 9.0100 H4IESEL (1S ) 4.2608 8.8100 0.0o00 0.0700 $.07M3 O.46 7.1872 0.6071 - 0.06s 6.0000 H-OIESEL (0.5 8) 4.3152 2.2000 0.0840 0.0700 0.05 0.4057 7.1168 0.6248 - 0.057 6.0000 L-OIESEL 4.0G7 2.8100 0.0800 0.0700 0.5067 -0.4566 0.922 0.9814 - 0.0"62 7.9600 FUEL 600(1) 2.5682 0.5965 0.080 0.0700 8.2866 0.2801 8.5109 0.5448 - 0.0861 4.1000 RIEL 150 2.4427 0.5420 0.0300 0.0700 2.9647 0.2039 8.1986 056 0.0877 8.7700 FUEL 200) 2 28 0 0.175 0.0800 0.0700 2.6584 0.1997 8.061 0.6 - 0.0448 8.7800 FUEL 2004 2.2219 0.5148 0.0800 0.0700 2.8861 0.1086 8.084 0.60M - 0.0422 8.800 FUEL (M 2.4891 0.57n1 0.080 0.0700 8.1402 0.2198 8.8600 0.296 - 0.0209 8.8600 UOE LARS(I/KG) 7.6062 2.8870 -2.8051 0.0000 7.6901 0.58 6.2284 2.86 0.0000 0.1 10.750 UPG-8MALL 7.62 2.S670 -2.85 0.0000 7.6901L 0.56 8.2284 2.866 0.0000 0.0 10.750 -CANS ) 7.002 .7 -2.3051 0.0000 7.6.01 0.588 0.2284 1.42" - 0.096 9.7600 SthIm/I 8.4105 0.0000 0.0000 0.0000 .4108 0.2887 3.6490 0.706- 0.049 4.4050 , MAL Table A.S.2 (wAtd.) D*ort Structure of Potrol.. Product Rote)l Price Eqd-Oeceb 1962 "*lo- Sub- Oil co".. eat eldy PWT Tax Foud Fun Prle. Mktto for Ret I PRItCE /Litre /LItre M/itre fAt.) VAT WSVAT mre LP VAT Prece PRE-S 0.1 4.2104 *.4200 0.0 0.'0oo 7.7304 0.6411 8.2716 1.1111 - 0.0798 0.4800 PR-4AS UL) 4.65 2.000 0.0800 0.0700 7.7066 0.6116 7.?160 1.8564 - 0.0949 9.2700 REI4tAS ( RO 8.140 8.4WO 0.0800 0.0700 7.1840 0.4004 7.684 0.0072 - 0.0091 6.0900 REI-4AS (7M).1 8.420 0.0800 0.o7o. 7.828 0.5188 7.0461 0.758 - 0.0626 0.8600 KEROS_ 4.180? 8.8500 0.0800 0.0700 7.5057 0.5817 0.1274 0.0246 - 0.0677 0.0100 "am IESEL (25 8) 4.0528 2.8750 0.0800 0.0700 6.5278 0.4560 6.9842 0.9496 - 0.06S6 8.0000 "VA&EEL (O.55 5) 4.1070 2.2650 0.0800 0.0700 6.4720 0.4580 6.9250 1.0062 - 0.0704 8.0000 L-ODESEL 4.0187 2.8750 0.080 O.00 6.47 0.4542 6.9420 0.0607 - 0.0806 7.0600 RUEL 000(1) 2.2008 0.6066 0.0800 O.O7O 8.00o 0.2105 8.2178 0.824 - 0.0677 4.1000 FUEL. 1500(2) 2.0869 0.5520 0.0800 0.0 2.6900 0.1084 2.0700 0.9819 - 0.0682 8.7700 FUEL 2000(8) 1.9140 O.2M 0.0800 0.0700 2.6015 0.1321 2.7886 0.089 - 0.0819 8.7800 FUEL 2500(4 1.0008 0.5248 0.0800 0.0700 2.6811 0.1772 2.7038 0.900 - 0.0685 8.0 fUEL(S) - 0.511 0.0800 0.070 2.5811 0.1772 2.06 0.9010 - 0.068 8.:0 LP@-LAIE BKG W 5.4304 2.30M80 -0.1208 0.0000 7.6Q01 0.5888 0.2284 2.86 0.0000 0.6 10.750 LPV-SMAM5 t.4804 2.8000 -0.1208 0.0000 7.601 0.568 0.22 2.856 0.0000 0.01" 10.75M u-CARS / .4004 2.8800 -0.120 0.0000 7.0801 0.680 8.2a4 1.4221 - 0.096 0.70 8>iu ) 8.4108 10.0000 0.0000 0.0000 8.4208 0.2894 8.6507 0.705 - 0.0400 4.4050 SUSAL TMTAL U | Atmx ZV. I Chanmes ProDosed or Im0lem,ented in Transnort Fuel Specificatioso Specification Before Reform. Chanued or To Be Rxnagtgd Benefits Changed Gasoline Lead (grams/liter) 0.45 0.15 (8/91)-Leaded reduces lead in the ambient air 0.013 (1/96)- facilitates use of Unleaded catalytic converters Oxygen Cont. (Vol.*) None 2.0 Reduce CO and RC emissions particularly from automobiles without catalytic converters Diesel oil Sulphur (Wt.*) 1.0 0.50 Sep. 1991 reduce diesel 0.25 Jan. 1995 particulates and 0.05 Jan. 2000 urban S02 emissions Distillation, deg.C None 210 reduce smoke and 20% polyaromatic NC emissions 90% 357 288 95% None 330 viscosity, centi-stokes '40 deg.C 1.8-4.1 1.8-2.S - do - Annex rv.2 Vehicle Emission Standards-Actual and Proposed Actual Gasoline: SCE R 83 Approval B CO: 30.0 (with catalytic (gm/test) RC & NOx: 8.0 converter) Particulate: - Diesel (Light ECE R 83 Approval C RC & NOx: 6.5-8.0 Duty): (gm/test) CO: 25-30 Particulate: 1.1 Diesel (Heavy ECE R 49-01 (gm/km) CO: 11.2 Duty): RC: 2.4 NOx: 14.4 Motorcycle-2- ECE R 40-01 (gm/km) CO: 12.8-32.0 Stroke: HC: 8-12 -4-Stroke ECH R 40-01 (gm/km) CO: 17.5-35.0 RC: 4.2-6.0 ProDosed Gasoline: 91/441/EEC (gm/km) C0: 2.72 NC & Nox: 0.97 Particulate: 0.14 Diesel: 91/441/EEC (gm/km) CO & NOx: 0.97 EC: 2.72 Particulate: 0.14 ECH 91/542(A)/EEC 00: 4.5 (gm/km) NOx: 8.0 RC: 1.1. Particulate: 0.36* * multiplied by 1.7 for engine capacity < 85 Kw. Notorcycles. Taiwan CO: 4.5 NC & NOx: 3.0 BMTA Buses: ECE 91/542(B)/BEC CO: 4.5 (gm/km) RC: 1.1 NOx: 8.0 Source: TISI; Paiz et. al. (1992) Annex IV.3 Page 1 of 5 Eati3mtion of Ympacts and Costs of Transport Sector Poliiees Table A.4.1: Energy Content of Transport Fuels Fuel Ton Oil Equivalent (toe)/'000 Tons of Fuel Gasoline 745.07 Diesel 861.98 Source: DEA, Energy Situation in Thailand, 1991. Table A.4.2: 8missions Factors by Fuel Type (gma./liter) Fuel Lead SPM S02 N02 HC Co Uhleaded Gasoline 0.013 18 1.95 14.1 72.5 565 Leaded Gasoline 0.15 18 1.95 14.1 72.5 565 Diesel (O.5 weight) -- 6.3 3.8 28.2 6.1 18.3 Diesel (0.25% weight) -- 4.8 2.6 28.2 6.1 18.3 Diesel (0.01W weight) -- 3.0 1.0 28.2 6.1 18.3 Source: TDRI (1990 b) Appendix D-20; staff estimates. Annex IV.3 Page 2 of 5 I. Emissions ImDacts: (i) Fuel reformulation: AssumDtions: (a) Annual growth in gasoline consumption in the BMR of 10 percent, which implies consumption of 2958 million liters in 1996; (b) All gasoline used in the BMR in 1996 and beyond is unleaded (0.015 gms./liter of lead); (c) All high-speed diesel used in BMR is consumed by road transport (3390 million liters in 1991). Imoacts: Applying the emissions factors in A.4.2 implies that in the EMR lead emissions each year fall to 38.5 tons. Also, from use of reformulation diesel, SPM emissions fall by 5085 tons and S02 emissions fall by 4068 tons per year in the BMR. (ii) Modifications of two-stroke motorcycles: Assum=tions: (a) Emissions factors in Table 4.8 for two-stroke and four-stroke engines; (b) Using SPURT figures, number of motorcycles in BMR in 1991 was 560,000 of which 92* are equipped with two-stroke engines; (c) Number of kilometers driven, on average, is the same for each two and four-stroke motorcycle; (d) Replacement of one-sixth of current two-stroke motorcycles fleet each year after introduction of emissions standards. Impacts: In 1991, two-stroke motorcycles accounted for 65,450 tons of SPM. At the end of the six-year period when all two-stroke motorcycles are replaced, the net reduction in SPM (relative to 1991 levels) will be 56,420 tons. This translates into annual incremental reductions over this six-year period of 9,400 tons of SPM. Similarly, the annual reduction in HIC emissions would be 10,040 tons. (iii) Further measures: (a) Reducina sulfur content in diesel to 0.01 percent weight: Assuming incremental cost of 2.5 c/liter for going from 0.25 percent weight to 0.01 percent weight Annex IV.3 Page 3 of 5 and applying the emissions factors in Table A.4.2 implies (at current diesel consumption levels) annual reductions in SPM and SO0 emissions of 6102 tons and 5424 tons respectively. (b) Installinq catalytic converters on motorcycles: Assumntions: (a) Reduction in HC emissions from 2.4 to 0.3 g./km. and in Co emissions from 17 to 9 g./km; (b) No additional reductions in SPM emissions. Impacts: In 1991, RC emissions from motorcycles were 80,970 tons and CO emissions were 243,000 tons. If all motorcycles had been equipped with four-stroke engines, HC emissions would have been 20,730 tons in 1991 with CO emissions roughly the same. Adding catalytic converters to four-stroke motorcycles would reduce HC emissions by 18,139 tons from these levels when all motorcycles are equipped or 3,023 tons annually assuming replacement over six years. The reduction in CO emissions at the end of this six-year period would be 114,350 tons or 19,059 tons annually. II. Cost Imoacts: (i) Fuel reformulation: (a) Reduction of lead in aasoline with addition of MTBE: Estimated investment US$70 million Cost of Lead Reduction, with investment amortized over 12 years, discounted at 12 percent per annum: Capital cost US$1.52 per barrel Operating Cost 0.40 MTBE ( 11 vol.*) 0.50 Total US$2.42 per barrel (b) Diesel reformulation. The cost of the diesel oil reformulation program is separated into two investment components: improving volatility and viscosity by changing the distillation profile, and reduction of the sulfur content, first from 1 percent to 0.25 wt. percent weight Annex IV.3 Page 4 of 5 and subsequently to 0.05 wt. percent. The costs for the different components are given below: (i) Imrovincr volatility and viscosity Approximate cost of all associated operations is estimated as: 12,000 bpd mild-hydrocracker complex $90 million Amortizing investment over 12 years and discounting at 12 percent capital cost per barrel $3.90 operating Cost $3.67 Total incremental cost per barrel $7.57 Blend with 92 percent of diesel incremental cost per barrel reduces to $0.61 Tn addition to limit 20 percent volume distilled temperature to 210 deg. C about 40,000 barrels of Kerosene would have to be down graded. The price differential between Kerosene and diesel oil is about $1.50 per barrel. Spread over the total diesel oil requirements in the BMR the incremental cost will amount to about $0.50 per barrel. (ii) Reduction of sulfur (i) To 0.25 Wt. Percent Per 100,000 bpsd Hydro-desulfurization 110,000 bpsd Estimated Investment $300 million Amortizing Investment $1.30 per barrel Operating Cost $1.80 per barrel Total Cost $3.10 per barrel (ii) To 0.05 Wt. Percent Per 100,000 barrels Hydrocracking Capacity 104,000 bpsd Estimated Investment $650 million Amortization of Investment $3.52 per barrel Annex IV.3 Page 5 of 5 Operating Cost(over desulf.) $0.04 per barrel Total Incremental Cost Over 0.25 wt. % $3.92 per barrel Summary of Diesel Reformulation Costs ($ per barrel) Improving Viscosity and Volatility 0.61 Front End Distillation 0.50 Sulfur - 0.25 wt % 3.10 Sub-total 4.21 Incremental Cost of Sulphur Reduction To 0.05 wt.% Over 0.25 wt % 3.92 Total 8.13 (ii) Two-stroke motorcycle engine modifications:1 (a) Cost per motorcycle of modifying two-stroke engine or switching to four-stroke engine so as to meet proposed emissions standards: $30-$60. (b) Cost per motorcycle of installing catalytic converter on four-stroke models: $70-$100. (iii) Oxidation and three-way catalysts on automobiles:2 (a) Cost per vehicle for oxidation catalyst: $380 - $630. (b) Cost per vehicle for three-way catalyst: $630 - $800 These cost estimates are drawn from Faiz et.al., 1992, Table 6.3. 2 These cost estimates are drawn from Ruitenbeck (1990), pp. 10-11. Annex V.1 Page 1 of 4 PROCLAMATION FOR TYPES AND SIZES OF PROJECTS REQUIRED ENVIRONMENTAL IMPACT ASSESSMENT (EIA) No. 2. Table I Notification of types and sizes of projects or activities requiring EIA reports and measures for the prevention of and remedy for the adverse effects on the environmental quality. ITEMS TYPE OF PROJECT OR ACTIVITY SIZE 1 Dam or Reservoir, storage volume of 100 million cubic meters (MCM) or more or storage surface area of 15 square kilometers or more 2 Irrigation irrigated area of 80,000 rais (12,800 hecteres) or more 3 Commercial Airport all sizes 4 Hotel or Resort Facilities 80 rooms or more environmentally sensitive areas such as areas adjacent to rivers, coastal areas, lakes or beaches or in the vicinity of national parks or historical parks 5 Mass Transit System and all sizes Expressway as defined by the Mass Transit System and Expressway Act or projects similar to expressway or rail type mass transit system 6 Mining as defined by the all sizes Mineral Act 7 Industrial Estate as defined all sizes by the Industrial Estate Authority of Thailand Act, or project similar to Industrial Estate 8 Commercial Port and Harbour with capacity for vessels of 500 ton-gross or more 9 Thermal Power Plant capacity of 10 MW or more _, t ANNEX V.1 Page 2 of 4 ITEMS TYPE OF PROJECT OR ACTIVITY SIZE 10 Industries 1. Petrochemical Industry using raw materials which are produced from oil refinery and/or natural gas separation with production capacity of 100 tons/day or more 2. Oil Refinery all sizes 3. Natural Gas Separation all sizes of Processing 4. Chlor-Alkaline Industry production capacity of each requiring NaCl as raw or combined products of 100 material for production tons/day or more Na2CO3, NaOH, HCl, C12 NAOC1 and Bleaching Powder 5. Irons and/or Steel production capacity of 100 Industri tons/day or more (production capacity calculated by using production capacity of furnace in ton/hour multiply by 24 hours) 6. Cement Industry all sizes 7. Smelting Industry other production capacity of 50 than Iron and Steel tons/day or more 8. Pulp Industry production capacity of 50 tons/day or more 11 All projects in watershed all sizes area classified as 1 B by the Cabinet Resolution Annex V.1 Page 3 of 4 PROCLAMATION FOR TYPES AND SIZES OF PROJECTS REQUIRED ENVIRONMENTAL IMPACT ASSESSMENT (EIA) No. 2 ITEMS TYPE OF PROJECT OR ACTIVITY SIZE 1 Coastal Reclamation all sizes 2 Building in areas adjacent building to rivers, coastal areas, lak 38 or beaches or in the 1. 23.00 meter height or vicinity of national parks more or historical parks 2. total area of all floors or area of any floor in the same building is 10,000 square meters or more 3 Residential Condominium as 80 units or more defined by Condominium Act 4 Land Appropriate (or housing Number of land plot is 500 development) plots or more or total land area is more than 100 rais (16 hectare) 5 Hospital which located 1. in area adjacent to 30 beds or more rivers, coastal areas, lakes, beaches 2. in area other than #1 60 beds or more 6 Pesticide Industry or all sizes Industry Producing Active Ingredient by Chemical Process 7 Chemical Fertilizer Industry all sizes Using Chemical Process in Production 8 Highway or Road as defined all projects which by Highway Act passing equivalent to or above the through following area minimum standards or rural highway including roadbed expansion Annex V.1 Page 4 of 4 ITEMS TYPE OF PROJECT OR ACTIVITY SIZE 1. wildlife sanctuaries and wildlife non-hunting areas as defined by Wildlife Conservation and Protection 2. National Parks as defined by National Park Act 3. watershed class 2 as approved by the Cabinet 4. manegrove forests designated as the National Forest Reserves 5. coastal area within 50 meters from the maximum sea level Annex V.2 Page 1 of 2 Outline of presumptive charge System for water pollution It is recommended that for all industrial sources of wastewater the current regulatory system, which is based on source-specific standards eventually be replaced with a combination of presumptive pollution charges. Initially, these presumptive charges should be applied to the largest induetrial sources of wastewater in the BMR because as argued in the text, this i a where the cost savings will likely be the largest. In its structure, this &Cneme is similar to those in place in France and Germany to address water pollution.' The pollution charges payable by firms covered under the system would be based on their presumed discharges into the environment, not their actual discharges. These presumed discharge levels would be computed from information about anticipated production and plant capacity, and waste treatment or control facilities. Such information would be required by the DIW of all new firms in and from all existing facilities above a certain size. This feature of the presumptive charge system implies that regulators need information regarding only production levels and treatment facilities rather than actual measurements of discharges, which would be required with a system of pollution standards or pollution charges. (i) Enforcement requirements: Initial compliance with this system would be enforced through the information available to DIW on anticipated production as well as evidence provided by the firm concerning the existence of treatment facilities and/or process changes that reduce discharges. Obviously, it is not sufficient only to ensure initial compliance since it is likely that many firms will fail to operate their treatment or control facilities while paying presumptive charges that correspond to the discharge level with controls. It is necessary, therefore, to ensure continuing compliance with the regulatory system. This would be the main role for the environmental regulatory agency (either DIW or DPC), which would monitor the operation of treatment or control facilities with a program of periodic announced visits to firms. Violators would be subject to severe penalties including fines and possible closure of facilities. In addition, permits to operate industrial facilities would be renewable at regular intervals (depending on their size and pollution loadings) and these renewals would be conditioned on satisfactorily operating treatment facilities. Finally, firms would be responsible for monitoring their discharges periodically and reporting these to the regulatory agency. Such self-monitoring data would also be used as a cross-check by government inspectors in judging compliance during their plant visits. (ii) Coveraae: The system should be instituted initially for all new sources above a certain size in the main polluting subsectors--for instance, all firms in subsectors such as food processing, beverage production, pulp and paper, textiles, and chemicals. The enforcement effort initially should be on the largest new sources. For existing sources, a grace period should be announced during which they can install the baseline treatment/control facilities, after which the same fee structure would apply to them, again initially above a certain minimum scale. Once again, firms would bear the burden of proof to demonstration the installation of control facilities as well as any process changes or controls I For destriptions of these systems, see Bower et.al. (1981) for France and Germany, and Brown and Johnson (1984) for Germany. The Netherlands (see Bressers, 1983 for a description) also has in place a successful system of effluent charges for water pollution. However, that system is more sophisticated than that being proposed here because it relied more on the monitoring of actual discharges than either the French or German systems. Annex V.2 Page 2 of 2 that result in improvements beyond this level. Enforcement actions would again begin with the largest existing sources in each region. (iii) Fee structures: For discharges into water, the basis for the fee in moet industriee would be BOD loadings. Not only is this the pollutant of greatest concern in most cases but it is also highly correlated with other pollutants. For some eectors euch as pulp, it may be necessary to supplement BOD with other pollutants, and base the presumptive tax on a composite pollution index. The level of the charge should be such that it induces some firms to install treatment/control facilities beyond those viewed as the baseline technology. Estimates indicate that for BOD a level of 13 Baht/kg. (or $500/ton) would achieve a significant degree of cleanup. Finally, it would be desirable to allow the fee to be varied across regions in order to reflect the differential costs of pollution. However, these variations should be approved at the cuntral level rather than at the regional level in order to avoid competition among jurisdictions by reducing the levels of their pollution charges. (iv) Exoort processing zones and industrial estates: For firms locating in industrial estates and EPZs, the pollution charges should be levied on the operators of the estates/zones (or IEAT). 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Thailand: Country Economic Memorandum: Buildina on the Recent Success - A Policy Framework. Report No. 7445-TH, 1989. --------. Mexico: Transport Air Quality Manaaement in the Mexico City Metropolitan Area. Report No. 10045-ME, 1992a. -----------. The Philinpines: An oneninca for Sustained Growth. Report No. 11061-PH, 1992b. ----- .------ World Develonment Report 1992: Develonment and the Environment, 1992c. World Bank. Philinvines: Environmental Sector Study - Towards Im=roved Manacrement of Environmental Imnacts, Report No. 11852-PH, 1993. World Bank/UNDP. Industrial Eff icier v and Pollution Control (IEPC) Study- -Metro Manila Area. 1992. -'I 88c'o ~~~~~~~~~~~~MYfMAft Ti ~ LAO PEOPLE'S DEMA REPUBLIC / j i e-W , ;- viix {i'\rt.;:t- ; $ ~~S T E R %\O I IZ '~~4 ) e SA ~; ; ,f ,,n ofo/lo n/an n o n > HAYI LAANMD VIET NAM rcr S aYJ u EW .......... - ~~~~~~~~~~~NATIO 140fWAYS '° I'. ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~A ,12 ' j = ~~~~~~~~~MWAY2 v \ / OkYO*O sT 1 i0ffAfA KjARMAjS .' j fM' S. 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