Ancillary benefits are positive externalities which arise as a secondary consequence of a primary policy goal, such as reductions in urban air pollution (ancillary benefit) consequent to reductions of fossil fuels use (primary policy goal). They are also referred to as secondary benefits and as co-benefits.
Ancillary benefits of climate mitigation policies
The discussion of ancillary benefits has become important in relation to the development of climate change policy. Reducing carbon dioxide (CO2) emissions from, for example, the transport sector would also produce a reduction of other air pollutants, such as nitrogen oxides and particulates, which are emitted together with CO2 as a byproduct of fuel combustion. These secondary reductions would result in a diminution of urban air pollution, thus generating health improvements to the local communities. These health benefits, additional and secondary to the primary policy goal of CO2 abatement, are the ancillary benefits.
The largest share of the ancillary benefits of CO2 abatement is related to public health improvements: reduced mortality (in terms of avoided premature deaths) and morbidity (for example reductions in the number of cases of chronic respiratory diseases like asthma and bronchitis). However there are also significant benefits which relate to ecosystems, such as a reduction of the deposition of acids and particulates on water and land. In addition, reducing air pollution as an ancillary benefit would slow the degradation of historical buildings, improve visibility, and save on government expenditures required to meet established air pollution targets.
Monetary estimation of ancillary benefits
Ancillary benefits may be estimated in monetary terms – monetized - in order to inform decision-making, for example through a cost-benefit analysis of a given policy, whose ultimate costs will then be estimated by assessing the direct policy costs minus the ancillary benefits.
However, there are many uncertainties inherent in the methodologies used to monetize ancillary benefits, as with all benefit and cost estimation methods. One method is to use indirect valuation techniques based on “stated preferences” (instead of on preferences revealed through a market transaction) of willingness to pay (or willingness to accept compensation).
Though estimates vary considerably in the literature, it is clear that ancillary benefits have the potential to offset a significant part of climate policies mitigation costs.
Space and time dimension
A very important feature of ancillary benefits is the spatial and temporal dimension within which they occur. The specific climate benefits from reducing CO2 emissions are very difficult to estimate and accrue in the long-term to the global community without a direct beneficial feedback to the abating country. Costs born by one country may be enjoyed by another. And costs born today, may have benefits that will materialize perhaps decades into the future, and be enjoyed the most by future communities. Ancillary benefits on the other hand tend to accrue within the same time horizon as the mitigation costs, and tend to occupy the same spatial dimension as the abatement effort (although there are cases of inter-regional diffusion and distribution).
- EEA, 2006, Air quality and ancillary benefits of climate change policies, Technical report N. 4/2006, Copenhagen: European Environmental Agency, June 2006
- IPCC, 2001, Third Assessment Report Working Group III “Mitigation”, Cambridge: Intergovernmental Panel on Climate Change, Cambridge University Press, 2001
- OECD, 2000, Workshop on Assessing the Ancillary Benefits and Costs of Greenhouse Gas Mitigation Strategies, Washington DC: Organization for Economic Cooperation and Development, 27-29 March 2000