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Technical Assistance for Better Air Quality by Transposing the Large Combustion Plant Directive, Contract no. TR2010/0327.04-01 –Regulatory Impact Assessment Report (Final) – Public version This Project is co-financed by the European Union and the Republic of Turkey

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Service Contract Number: TR2010/0327.04-01

Technical Assistance for Better Air Quality by Transposing the Large

Combustion Plant Directive

Regulatory Impact Assessment Report (Final)

- Public version - Turkey (December 2015)


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Document Lead Sheet

Client Project No: TR2010/0327.04-01

FW Project No: 1-BH-0511A

Document No: BH0511A-00-13F

Technical Assistance for Better Air Quality by Transposing the Large Combustion Plant Directive

REGULATORY IMPACT ASSESSMENT REPORT

ISSUE DATE ORIG

APPROVED

FW / PM

APPROVED

CLIENT

DISTRIBUTION DESCRIPTION

A 31/12/2015 PS PS/JM CFCU,

MoEU, PSC

Draft for Client Comments

B 25/04/2016 PS PS/JM CFCU,

MoEU, PSC

Final draft version following comments

C 11/07/2016 PS PS/JM UF MoEU Final version


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Project Title: Contract Identification Number:

Technical Assistance for Better Air Quality by Transposing the Large Combustion Plant Directive

EuropeAid/132843/D/SER/TR

Service Contract Number: Contract Value:

TR2010/0327.04-01 € 998,033.00 Date of Project Commencement: Date of Project Completion:

22 July 2014 24 months Contracting Authority: Contact Person:

Central Finance & Contract Unit (CFCU) Eskişehir Yolu 4. Km 2. Cd. (Halkbank Kampüsü) No: 63 C-Blok 06520 Söğütözü-Ankara/TURKEY

Ms. Emine Döğer, PAO-CFCU Director [email protected]

Coordinating Body, Key Beneficiary: Contact Person:

Ministry of Environment and Urbanization Mustafa Kemal Mahallesi, Eskişehir Devlet Yolu (Dunlupinar Bulvari) 9. Km. No:278 Çankaya, Ankara +90 312 5863056 (T) +90 312 4740335 (F)

Ms Betül Aydın [email protected]

Consultant: Contact Person:

Consortium AMEC Foster Wheeler, Lead Partner Via Caboto 15 Corsico - Milan Italy - 20094 +39 02 44862175 (T) +39 02 44863112 (F) Project Management Ltd Killakee House, Belgard Square Dublin 24, Ireland +353 1 4040700 (T) +353 1 4599785 (F)

Mr Paolo Sammartino, Project Manager [email protected] Mr Jim McNelis, Project Director [email protected]

Project Office Address: Team Leader:

Ӧveçler Mahallesi 1314 Caddesi No: 18/6 Çankaya/ Ankara Turkey

Mr Rob Bakx +90 312 4961601 (T) +90 312 4961605 (F) [email protected]

Date of report: 31 December 2015 Author(s) of report: Pat Swords The content of this report is the sole responsibility of the Consultant and can in no way be taken to reflect the views of the European Union. Adjustments imposed to the report – made during the consultations on the draft text – without the consent of the

Consultant fall under the responsibility of those who imposed these adjustments.

mailto:[email protected]






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Table of Contents

TABLE OF CONTENTS ......................................................................................................................... 5

GLOSSARY OF TERMS ........................................................................................................................ 7

EXECUTIVE SUMMARY ...................................................................................................................... 10

1. ADMINISTRATIVE PROCEDURE OF REGULATORY IMPACT ANALYSIS ................................ 10

1.1 Turkish Guidelines on Regulatory Impact Analysis .............................................................. 10 1.2 Consulted institutions, organizations, and other partners .................................................. 10 1.3 Comments received on the overall structure of RIA report ................................................. 11

2. PROBLEM DEFINITION .............................................................................................................. 12

2.1 Pollution from Large Combustion Plants ................................................................................ 12 2.2 Impact of Pollutants .................................................................................................................... 13 2.3 Planned Improvement ................................................................................................................. 14

3. OBJECTIVES .............................................................................................................................. 16

4. ALTERNATIVE SOLUTIONS / OPTIONS .................................................................................... 18

5. ANALYSIS OF IMPACTS ............................................................................................................ 19

5.1 Effects – Environmental ............................................................................................................. 19 5.2 Uncertainty in Estimates of Impacts – Environmental .......................................................... 20 5.3 Effects - Financial ........................................................................................................................ 23 5.3.1 General ........................................................................................................................................... 23 5.3.2 Compliance of LCP Sector ............................................................................................................ 24 5.3.3 Impact on Smaller LCPs ................................................................................................................ 25 5.3.4 Impact on Gas Turbines ................................................................................................................ 27 5.4 Compliance Burden ..................................................................................................................... 28 5.5 Uncertainty in Estimates of Impacts – Financial .................................................................... 29

6. COMPARISON OF OPTIONS ...................................................................................................... 30

6.1 Cost and Benefits of Implementing the Industrial Emissions Directive ............................ 30 6.2 Costs and Benefits of Implementing the Large Combustion Plant Directive ................... 31 6.3 Costs and Benefits of Implementing the Turkish Bye-Law on LCPs ................................. 31 6.4 Evaluation ..................................................................................................................................... 31 6.5 Preferred Option .......................................................................................................................... 31

7. IMPLEMENTATION, MONITORING AND EVALUATION ............................................................ 32

7.1 Conditions necessary to achieve objectives .......................................................................... 32 7.2 Control and evaluation of the implementation ....................................................................... 33 7.3 Responsible Administrative Unit .............................................................................................. 33 7.4 Informing affected shareholders............................................................................................... 33 7.5 Applicable penalties .................................................................................................................... 33 7.6 Time period for review ................................................................................................................ 33

ANNEX A CIRCULAR OF TURKISH PRIME MINISTER (2007) ON RIA .......................................... 35

ANNEX B IMPACT ASSESSMENT.................................................................................................. 37

1. INTRODUCTION .......................................................................................................................... 38

2. IMPACT ASSESSMENT OF NOX, SO2 AND PARTICULATES ................................................... 41

3. EXTERNAL COSTS OF AIR POLLUTION IN TURKEY ............................................................... 47


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3.1 GENERAL .......................................................................................................................................... 47 3.2 ASSESSMENT OF HEALTH BENEFITS................................................................................................. 48 3.3 ASSESSMENT OF DAMAGE COST PER TONNE OF PARTICULATE MATTER.......................................... 50 3.4 ASSESSMENT OF DAMAGE COST PER TONNE OF NOX ...................................................................... 53 3.5 ASSESSMENT OF DAMAGE COST PER TONNE OF SO2 ...................................................................... 55 3.6 RELATIVE IMPORTANCE OF PARTICULATE MATTER .......................................................................... 58 3.7 CONCLUSIONS ON POLLUTANT DAMAGE COSTS .............................................................................. 59

4. REFERENCES ............................................................................................................................ 62

ANNEX C TIMESCALES FOR IMPLEMENTING THE LCP DIRECTIVE ......................................... 65

1. INTRODUCTION .......................................................................................................................... 66

2. CHALLENGES - TECHNICAL ..................................................................................................... 66

2.1 GENERAL .......................................................................................................................................... 66 2.2 DESIGN PHASE ................................................................................................................................. 66 2.3 PERMITTING PHASE .......................................................................................................................... 67 2.4 INSTALLATION PHASE ....................................................................................................................... 68 2.5 CONCLUSION ..................................................................................................................................... 68

3. CHALLENGES - ECONOMIC ................................................................................................................ 69

3.1 UNFAIR COMPETITIVE ADVANTAGE IF INVESTMENT IS DELAYED ......................................................... 69 3.2 VIABILITY OF INVESTMENT DECISION ................................................................................................. 69 3.3 ECONOMIC VIABILITY OF SECTOR ...................................................................................................... 69 3.4 SECURITY OF SUPPLY ....................................................................................................................... 70 3.5 EFFICIENT USE OF RESOURCES ......................................................................................................... 70

4. EXPERIENCES IN OTHER JURISDICTIONS ...................................................................................... 71

4.1 GERMANY ......................................................................................................................................... 71 4.2 THE ORIGINAL LARGE COMBUSTION PLANT DIRECTIVE AND UK EXPERIENCE .................................. 72 4.3 REVISED LARGE COMBUSTION PLANT DIRECTIVE AND THOSE COUNTRIES IMPLEMENTING A NERP 72 4.4 THE INDUSTRIAL EMISSIONS DIRECTIVE, THE TRANSITIONAL NATIONAL PLAN AND OTHER

FLEXIBILITY ARRANGEMENTS............................................................................................................ 73

5. POSSIBLE OPTIONS ............................................................................................................................. 77

5.1 OPTION 1: FIXED TIMESCALE WITH NO ADDITIONAL MEASURES ........................................................ 77 5.2 OPTION 2: FIXED TIMESCALE WITH ADDITIONAL FLEXIBILITY MEASURES .......................................... 77 5.3 OPTION 3: NATIONAL PLAN WITH TIMESCALES TAILORED TO EACH LCP ......................................... 77 5.4 CONCLUSIONS.................................................................................................................................. 78


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Glossary of Terms

Acquis Environmental Acquis – the collective body of EU Environmental Legislation

BAT Best Available Techniques

BATNEEC BAT Not Entailing Excessive Cost

BREF BAT Reference Document

CAPEX Capital Expenditure

CO2 Carbon Dioxide

DeNOx Emissions control technology for removal of Nitrogen Oxides (NOx)

DM Deutsche Mark – predated the Euro in Germany (€ 1 = 1.96 DM)

EEA European Environment Agency

EGTEI UNECE Expert Group on Techno-Economic Issues

EMEP Geneva Protocol on Long-term Financing of the Cooperative Programme for Monitoring and Evaluation of the Long-range Transmission of Air Pollutants in Europe

EPA Environmental Protection Agency

ESP Electrostatic Precipitator

EU European Union

EU-28 28 Member States of the European Union

EÜAŞ Elektrik Üretim A.Ş – The Turkish State owned electricity generating company

EÜD Association of Electricity Producers

FF Fabric Filter

FGD Flue Gas Desulphurisation

GDP Gross Domestic Product

GFA-VO ‘Grossfeuerungsanlagenverordnung’ – First German Ordinance regulating LCPs

GWe Gigawatt of Electrical Energy

GWh Gigawatt hour (Equal to 109 Watts acting over an hour)

ICP International Cooperative Programme

IEA International Energy Agency

IED Industrial Emissions Directive

LCP Large Combustion Plant

LCPD Large Combustion Plant Directive

LYL Life Years Lost

MENA Middle East and North Africa

MRAD Minor Restricted Activity Days

MW Megawatt

MWe Megawatt of Electrical Energy – 1 MW equals a million Watts (106)

MWth Megawatt of Thermal Energy

NASA National Aeronautics and Space Administration


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NERP National Emission Reduction Plan

NGO Non-Governmental Organisation

NH3 Ammonia

NMVOC Non-Methane Volatile Organic Compound

NOx Nitrogen Oxides

O3 Ozone

OECD Organisation for Economic Co-operation and Development

LCP Large Combustion Plant

OPEX Operational Expenditure

PM Particulate Matter

PM10 Particulate Matter sub 10 microns

PM2.5 Particulate Matter sub 2.5 microns

POPs Persistent Organic Pollutants

PPP Purchasing Power Parity

RIA Regulatory Impact Assessment

SCR Selective Catalytic Reduction – a widely used DeNOx technology involving ammonia reaction over a catalyst

SNCR Selective Non-Catalytic Reduction – a widely used DeNOx technology involving ammonia reaction without a catalyst. While a less effective method it is of lower cost

SO2 Sulphur Dioxide

SOx Sulphur oxides, generally a combination of sulphur dioxide and some sulphur trioxide. Note: In the atmosphere sulphur dioxide emissions can be further oxidised to sulphur trioxide

TRY Turkish Lira

TWh Terawatt hour (Equal to 1012 Watts acting over an hour)

UK United Kingdom

UNECE United Nations Economic Commission for Europe

US United States

VOLY Value of a Life Year

VSL Value of Statistical Life

WHO World Health Organisation


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Executive Summary

This report documents the Regulatory Impact Assessment (RIA) report for the project: ‘Technical Assistance for Better Air Quality by Transposing the Large Combustion Plant (LCP) Directive in Turkey’. The data collection phase of the project has identified that there are 238 LCPs1 in Turkey at 89 different sites. LCPs are characterised by high air emission levels, mainly of Sulphur Dioxide (SO2), Nitrogen Oxides (NOx) and Particulate Matter (PM), which are associated with adverse environmental impacts, particularly to the human respiratory system.

The project aims to support Turkey in approximating towards the EU acquis2 in the sector of LCPs. The project’s overall objective is to improve the protection of human health and the environment in Turkey by implementation and enforcement of the EU’s Large Combustion Plant Directive. This overall objective will be reached through the project purpose that aims to support Turkey with establishing the necessary capacity to implement the LCP Directive in the country. In practical terms, this concerns the implementation of the new emission standards for LCPs, which under the EU’s new Directive on Industrial Emissions apply from the 1st of January 2016, replacing those previously applicable under the LCP Directive of October 2001.

One of the project results as per Terms of Reference is the preparation of a Regulatory Impact Assessment report, not only including social, environmental and economic analysis, but also covering such issues as investment plans, feasibility studies for plants, etc. so as to evaluate the compliance of each LCP with regard to the criteria in the applicable legislation.

1. Administrative Procedure of Regulatory Impact Analysis

1.1 Turkish Guidelines on Regulatory Impact Analysis

Turkey has institutionalized an elaborate system of Regulatory Impact Analysis (RIA), based on a

2006 regulation on RIA3 of the Prime Minister’s Office and various line ministries, as the driving forces of RIA activity. According to the 2006 By-law, RIA studies should include:

- Justification of drafting the legislation;

- Benefit-cost analysis, cost-effectiveness analysis, impacts on the budget;

- Assessment of necessity for creating a new agency or institution development;

- Analysis of impact on economy, business, social life, environment and administrative

procedures / bureaucracy;

- Results of stakeholder consultation;

- Feasibility of the proposed legislation;

The Circular of the Prime Minister of 2007 on RIA4 contains a 10 pages Guideline on Regulatory Impact Assessment. See Annex A for more details.

1.2 Consulted institutions, organizations, and other partners

As regards the project beneficiaries, who were consulted extensively during the course of the project, the main beneficiary institution was the General Directorate of Environmental Management of the Ministry of Environment and Urbanisation. Co-beneficiaries included the

1 Combustion plants with a rated thermal input equal or greater than 50 MW irrespective of the type of fuel used 2 The EU Acquis is the total body of European Union law applicable in the EU, comprising treaties, international agreements, EU legislation, court verdicts, standards, etc. 3 2006 By-Law on ‘Principles and Procedures of Drafting Legislation’ 4 Genelge 2007/6, Düzenleyici Etki Analizi Çalışmaları. Circular signed by Prime Minister RecepTayyip Erdoğan


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Ministry of Energy and Natural Resources, the State Privatisation Institute and the Electricity Generation Company (EÜAŞ).

Other stakeholders identified and consulted with during the course of the project included:

- The provincial directorates of the Ministry of Environment and Urbanisation;

- The Ministry of Health; the Ministry of Economy;

- The Ministry of Science, Industry and Technology;

- The Ministry of Development; The Association of Electricity Producers (EÜD);

- Sugar industry.

1.3 Comments received on the overall structure of RIA report

A Regulatory Impact Assessment workshop was held on the 7th and 8th April 2016, in advance of which the draft RIA report was made available through the project website. At the workshop itself the findings were both presented and discussed. Following the workshop, which was attended by representatives of the stakeholders above, an additional period was provided for comments to be sent to the project team. Comments on the draft RIA report received during the workshop, and additionally post the workshop from the Ministry of Environment and Urbanisation, have been incorporated into the finalised report.


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2. Problem Definition

2.1 Pollution from Large Combustion Plants

The European Union’s legislation on controlling pollution from Large Combustion Plants (LCPs) can be traced back to the United Nations Economic Commission for Europe’s (UNECE) Convention on Long-range Transboundary Air Pollution, which entered into force in 1983. From that point on, a number of protocols led to measures to both assess and reduce sources of pollution. Indeed, UNECE’s own data from 1990 showed that at that time in the EU-28, 56% of total SO2 emissions originated from energy production and distribution, 22% of NOx emissions, 17% of PM10 emissions and 14% of PM2.5 emissions. This shows the importance of the Large Combustion Plant sector to the overall pollution problem, which then prevailed.

If we consider data from the same data source for Turkey in the year 2013, then Figure 2.1 shows that 60% of total SO2 emissions originated from energy production and distribution, 25% of NOx emissions and 2.5% of PM10 emissions (PM2.5 emissions not recorded). It is clear to see the impact LCPs involved in energy generation currently have on the total national impact.

While Turkey ratified the UNECE Convention on Long Range Transboundary Air Pollution in 1983, it did not ratify and participate in the various implementing protocols, such as the 1999 Gothenburg Protocol to Abate Acidification, Eutrophication and Ground-level Ozone, since amended in 2012, which established national emission ceilings for 2010, and then later up to 2020, for four pollutants: sulphur dioxide (SO2), nitrogen oxides (NOx), volatile organic compounds and ammonia. As such then many of the measures implemented in the EU-28 to control these pollutants, such as the emission standards of the Large Combustion Plant Directive, were only partly implemented in Turkey. If one then considers Figure 2.2 below, relating to the mass emissions of SO2, NOx and PM10 from electricity production in the EU-28 and Turkey for the

Figure 2.1: Data from European Environment Agency for percentage share of National Total Emissions for Turkey for the year 2013, where the bottom colour represents the percentage contribution from energy production and generation


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year 2013, then it is clear that the pollutant emissions from electricity production in Turkey are disproportionately high compared to other countries of similar size, such as Germany and the UK.

Note: From the data in Figure 2.2, the emissions for 2013 for Turkey for public electricity and heat production amounted to: 1,152,000 tonnes of SO2, 248,500 tonnes of NOx and 6,935 tonnes of PM10. However, it is also necessary to point out that the Turkish Government has developed policies to secure continuous supply of energy, as one of the prerequisites of its rapidly developing economy. The aim is to ensure less dependence on imported fuels including the use of domestically available lignite, although the latter is known as one of the most serious causes of emissions of the above pollutants. There is therefore a balance to be achieved.

2.2 Impact of Pollutants

Annex B contains the Impact Assessment, which establishes the impact emissions that SO2, NOx and PM10 are having on the environment. In general, the most significant impacts of air pollution are on human health and ecosystems, for which it is generally possible to establish a dose response relationship, such as with regard to health effects, if the pollutant concentration goes up, an increase can be observed in hospital admissions, sick leave, purchase of asthma medication, etc. As part of the UNECE process referred to previously, several decades of monitoring of emissions and their resulting concentrations in the ambient air has occurred. In addition, impacts have been assessed and quantifications made as to the external costs.

The concept of an ‘internal price’ is easily understood; it’s the price you pay on your bill. The external cost is the hidden cost that society pays through increased environmental degradation, increased exposure to industrial accidents, etc. These externalities can be reflected though impacts on human health, reduced vegetation growth, degradation of building structures, etc. While Turkey did not participate directly in this UNECE process, it is possible to extrapolate from the external costs derived for similar countries, the appropriate external costs for the Turkish situation. This was completed in Annex B and is summarised in Table 2.1 overleaf.

Note: The costs are presented in ranges, further explained in Section 5.2, in which the Low VOLY figure corresponds better to true world conditions, as it reflects the demographics most affected by air pollution, namely the population profile, which are already in their elderly years. As regards

Figure 2.2: Data from European Environment Agency for 2013 emissions of SO2, NOx and PM10 from public electricity and heat production in the EU-28 and Iceland, Liechtenstein, Norway, Switzerland and Turkey. Emissions in Gg (1,000 tonnes)


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the two figures for Particulate Matter, the finer the particle size, such as sub 2.5 micron, the more it penetrates the lungs with the resulting greater health impact. This PM2.5 figure corresponds more closely to the particulate profiles from Large Combustion Plants fitted with filtration systems for emissions control.

Pollutant Recommended Damage Cost in Turkish Lira per Tonne (adjusted to 2015 prices)

Low VOLY High VSL

PM10 114,100 326,000

PM2.5 179,300 521,600

NOx 32,600 81,500

SO2 81,500 211,900

Table 2.1: Summary of recommended Environmental Damage Costs in Turkish Lira (2015 price basis)

If we take the previous tonnage of emissions established for the Turkish public electricity and heat production for the year 2013 and we multiply it by the Low VOLY figures above, the estimate for the total external (environmental damage) cost for the pollutants above in Turkish Lira is 100 billion per year. However, as is discussed in further in Section 5.2, this is solely a theoretical figure.

2.3 Planned Improvement

Technology or to be more accurate ‘techniques’, which incorporate both ‘the technology used and the way in which the installation is designed, built, maintained, operated and decommissioned5’, is simply not in a position to eliminate all pollution. This principle is illustrated below in relation to ‘Best Available Techniques’, where as defined in EU Legislation:

- ‘available techniques’ means those developed on a scale which allows implementation in

the relevant industrial sector, under economically and technically viable conditions, taking

into consideration the costs and advantages, whether or not the techniques are used or

produced inside the Member State in question, as long as they are reasonably accessible

to the operator;

- ‘best’ means most effective in achieving a high general level of protection of the

environment as a whole;

5 As defined in the Industrial Emissions Directive 2010/75/EC


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Certainly, an operating company would be required to invest in techniques reflected by position A. However, at point B the cost per mass of pollutant avoided starts to rise rapidly and under normal circumstances, an operator would not be required to invest in the high cost techniques reflected by position C, i.e. one has ‘hit the wall’ in that considerable additional financial investment is required for very marginal returns in pollution abatement. “Best Available Techniques” therefore represent the identification and application of Point B on Figure 2.3.

The goal of the project is therefore to apply, what are now recognised as current “Best Available Techniques”, to the Turkish LCP sector, to minimise the impact of emissions in a cost effective manner. This will improve the current situation, where it is generally recognised that not all Turkish LCPs comply with the “Best Available Techniques” identified in the relevant EU legislative framework. The manner of implementation comprises:

- Identification of the Turkish LCPs and their compliance status with respect to the relevant

emission standards of the current Turkish Industrial Air Pollution Control Bye-law

(repealed the Large Combustion Plants Bye-law), the LCP Directive and new Industrial

Emissions Directive

- Completion of a ‘Needs Assessment’ for the harmonisation of the relevant EU Legislation

- A cost analysis of the harmonisation of the EU Legislation, including options for

compliance

The outcome of this RIA will enable Turkey to take the necessary regulatory steps at national and local level to implement these new emission control standards.

Figure 2.3: Identification of ‘Best Available Techniques’


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3. Objectives

Turkey’s general energy policy objectives target comprehensive liberalisation, the establishment of competitive markets and an investor-friendly environment. Furthermore, the legislative environment is being upgraded to be compatible with that of EU member countries. As the

International Energy Agency’s (IEA) latest 2009 report on Turkey highlights6:

- Turkey will likely see the fastest medium to long-term growth in energy demand among the

IEA member countries. It has a young and urbanising population and energy use is still

comparatively low. Therefore, ensuring sufficient energy supply to a growing economy

remains the government’s main energy policy concern. Turkey has also progressed

significantly in all other areas of energy policy in recent years. Large investments in energy

infrastructure, especially in electricity and natural gas, are needed to avoid bottlenecks in

supply and to sustain rapid economic growth.

This 2009 report further stated that: “according to conservative projections – electricity consumption will double by 2020”. Indeed, Figure 3.1 overleaf shows how electricity consumption has risen in the period 2012 to 2014.

Indigenous energy sources are essentially limited in Turkey to lignite and smaller amounts of hard coal. According to the Turkish Statistical Institute, the total cost of Turkish energy imports amounted to $239 billion between 2009 and 2013, while $37 billion was spent in the first eight months of 2014. This considerable cost is approximately a quarter of the country’s annual import bill. In particular, natural gas, which in 2013 produced 43.8% of Turkey’s electricity supply, is almost 99% imported from adjoining countries. A major Government objective is therefore to reduce energy imports, particularly through the use of lignite in electricity production, for which considerable domestic reserves are available.

6 Energy Policies of IEA Countries; Turkey; 2009 Review: https://www.iea.org/publications/freepublications/publication/turkey2009.pdf

Figure 3.1: Turkish Electricity Consumption for 2012, 2013 and 2014; Source IEA Statistics for December 2014: http://www.iea.org/statistics/relatedsurveys/monthlyelectricitysurvey/

https://www.iea.org/publications/freepublications/publication/turkey2009.pdf

http://www.iea.org/statistics/relatedsurveys/monthlyelectricitysurvey/


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The Ministry of Energy and Natural Resources’ Strategic Plan for 2015-20197 sets 11 strategic goals and 32 strategic objectives under 5 strategic themes, which include:

- Theme 1: Security of Energy Supply states: “The structure of electricity generation

dependent on natural gas bears important risk, therefore it is necessary that the share of

natural gas in electricity generation should be decreased and countries for imports should be

diversified”.

- Goal 2: Optimum Resource Diversity then clarifies: “The most effective utilization of domestic

coal resources has been specified as one of the basic objectives and it has been further

aimed that by the future investments, the electricity generation from domestic coals should

reach a level of 60 billion kWh/year by the end of the plan period8. For accomplishing this

objective, these investments are to be accelerated and new resources shall be explored –

Objective 1”. “It is aimed that the share of the natural gas in electricity generation should be

reduced to 38% by the end of the plan period – Objective 9”.

In addition, the overarching Mission is to provide: “the highest contribution to national welfare by utilizing energy and natural resources in the most efficient and environmentally-conscious manner”.

Therefore, the project’s specific objective, of applying the EU’s currently applicable emissions control standards to the Turkish LCP sector, is very much in compliance with the general strategy of the Turkish Government.

7 http://www.enerji.gov.tr/File/?path=ROOT%2f1%2fDocuments%2fStrategic+Plan%2fStrategicPlan2015-2019.pdf 8 Note: For 2013 this figure stood at 35 billion kWh/year

http://www.enerji.gov.tr/File/?path=ROOT%2f1%2fDocuments%2fStrategic+Plan%2fStrategicPlan2015-2019.pdf


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4. Alternative solutions / options

As regards the ‘do-nothing’ scenario, electricity production in Turkey will continue to rise, such that by failing to ensure currently applicable emissions control standards, the already high pollution load will only increase. This option can therefore be excluded without any further evaluation. LCPs provide ‘dispatchable generation’, which can be dispatched on demand to meet the requirements of the grid. Intermittent renewables are not dispatchable and cannot replace LCPs; the wind does not blow all the time and when people are turning on their lights, the solar panels are no longer working. Therefore, this option can be excluded without any further evaluation. Nuclear plants can replace LCPs, but this is a very long strategy, due to the lead in time for implementation of this technology. As nuclear is already incorporated into the Turkish energy strategy, it does not need to be considered further.

As regards the alternative solutions / options which are available, then these focus primarily on; (i) the emission standards to be implemented and; (ii) the timescales for compliance.

In regard to (i), the following three options exist with regard to emission control standards to be applied:

- Option 1: The Turkish Industrial Air Pollution Control Bye-law (repealed the Large

Combustion Plants Bye-law)

- Option 2: The Large Combustion Plant Directive (2001/80/EC)

- Option 3: The Industrial Emissions Directive (2010/75/EC)

As regards (ii), the timescales for compliance, then this is discussed further in Annex C, but essentially three options exist for implementation by means of.

- Option A: Fixed timescale with no additional measures

- Option B: Fixed timescale with additional flexibility measures involving a degree of emissions

trading within the Turkish LCP sector

- Option C: National Plan with timescales tailored to each LCP

All options above are related to regulatory measures, there are no non-regulatory options identified.


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5. Analysis of Impacts

5.1 Effects – Environmental

Air pollution affects all citizens. The European Environment Agency’s “Air quality in Europe - 2013 Report” summarised with respect to the impacts on human health:

- Particulate Matter (PM): Can cause or aggravate cardiovascular and lung diseases, heart

attacks and arrhythmias, affect the central nervous system, the reproductive system and

cause cancer. The outcome can be premature death.

- Sulphur oxides (SOX): Aggravates asthma and can reduce lung function and inflame the

respiratory tract. Can also cause headache, general discomfort and anxiety.

- Nitrogen oxides (NOx): NO2 can affect the liver, lungs, spleen and blood. Can also aggravate

lung diseases leading to respiratory symptoms and increased susceptibility to respiratory

infection.

- Ozone (O3): Can decrease lung function; aggravate asthma and other lung diseases. Can

also lead to premature mortality.

If we consider effects on ecosystems, the same report from the European Environment Agency clarifies that:

- Particulate Matter (PM): Can affect animals in the same way as humans. Affects plant growth and ecosystem processes. Can cause damage and soiling of buildings. Reduced visibility.

- Sulphur oxides (SOx): Contributes to the acidification of soil and surface water. Causes injury to vegetation and local species losses in aquatic and terrestrial systems. Contributes to the formation of particulate matter with associated environmental effects. Damages buildings.

- Nitrogen oxides (NOx): Contributes to the acidification and eutrophication of soil and water, leading to changes in species diversity. Acts as a precursor of ozone and particulate matter, with associated environmental effects. Can lead to damage to buildings.

- Ozone (O3): Damages vegetation, impairing plant reproduction and growth and decreasing crop yields. Can alter ecosystem structure, reduce biodiversity and decrease plant uptake of CO2.

The ozone above is not to be confused with the upper atmospheric (stratospheric) ozone layer, but rather that the ground level ozone, which is formed at low level due to the complex interplay between intense sunlight, NOx and Non-Methane Volatile Organic Compounds. Ozone is therefore a secondary pollutant, as it is not emitted directly by any emission source. Of direct relevance to Turkey is the interplay with intense sunlight. The monitoring data of the European Environment Agency shows the highest ground level ozone readings are to be found in the Southern areas of Europe, characterised by intense summer sunshine. In contrast, the British Isles, at latitude of over 50⁰N, are not exposed to that level of intense sunshine, and hence the

chemical reactions which lead to the concentrations of ground level ozone. In summary, Turkey’s susceptibility to ozone related pollution is high.


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Pyramid of effects caused by ozone: The relationship between the severity of the effect and the proportion of the population experiencing the effect can be presented as a pyramid. Many individuals experience the least serious, most common effects shown at the bottom of the pyramid. Fewer individuals experience the more severe effects such as hospitalization or death.

The human aging process is associated with reduced fitness and health, as such air pollution is more likely to affect older people and younger persons who are already ill. In many respects it can be considered to be a cause of “accelerated ageing”, i.e. the impacts associated with air pollution are more pronounced among the older-aged groups in society,

5.2 Uncertainty in Estimates of Impacts – Environmental

Two significant uncertainties occur with estimating the benefits of pollution control measures. First it is necessary to consider, that just because an LCP is upgraded to new emission control standards, does not mean that it will necessarily operate with the projected number of hours per year and remaining lifespan used as the justification for that upgrade. The electricity market is competitive, quite rightly so, particularly where it is growing at a rapid rate, such as in Turkey. As is explained in the following sections, older LCPs with less efficient technologies are displaced by newer more efficient LCPs. There is no guarantee that the projected emission savings will occur, as for an older LCP the run hours and remaining economic lifespan are inherently uncertain.

Secondly, the estimation of external costs, see Section 2.2 and Annex B, is inherently associated with a degree of uncertainty, not least in relation to; (i) the collection of the necessary data related to the environmental damage and; (ii) the appropriate metrics to be used for the monetisation of that damage. The European Investment Bank’s 2010 publication: “Public and private financing of infrastructure. Policy challenges in mobilizing finance Infrastructure and infrastructure finance9” clarifies:

- Environmental externalities are multiple – in terms of greenhouse gases, other forms of air

pollution, water pollution and runoff, noise and land use and biodiversity. For example, a new

runway or airport will raise greenhouse gas emissions, increase local air pollution, result in

9 http://www.eib.org/attachments/efs/eibpapers/eibpapers_2010_v15_n02_en.pdf

Figure 5.1: US Environmental Protection Agency - Pyramid of effects caused by ozone

(http://www.epa.gov/apti/ozonehealth/population.html)

http://www.eib.org/attachments/efs/eibpapers/eibpapers_2010_v15_n02_en.pdf

http://www.epa.gov/apti/ozonehealth/population.html


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significant water runoff, create significant noise affecting local people and their house prices,

and take up land which can often include areas with considerable biodiversity value, such as

marshes and open spaces.

- In theory, the “correct” solution is to price each and every externality. In practice, this is

impractical and politically impossible. The result is that decisions are based on politics and

planning, and very much open to political and regulatory failures.

While this is undoubtedly true, political decision making can be greatly enhanced where the estimation of the external costs (externalities) is reasonably robust. The EU’s legislation on air quality dates back to 1980, from which time it was necessary for Member States to establish a network of ambient air quality monitoring for the pollutants SO2, NOx and Particulate Matter, see for instance Figure 5.2. As such then, the knowledge basis we now have on air quality throughout Europe is extremely comprehensive, plus in recent years that network has included Turkey. Furthermore, the causal relationship between elevated levels of pollutants and adverse health impacts is extremely robust. For instance, the London smog of December 1952 resulted in more than 4,000 deaths over a four days’ period. There is a therefore a definite tangible relationship, which can then be monetised, such as increased costs to the health service, loss of work days through illness, etc.

However, there is also the intangible aspect, in that human beings do not want to be subjected to unnecessary suffering. Therefore, the goal in the assessment of external costs is to quantify both the market and non-market costs. For example, there is a market cost associated with the medical treatment associated with an asthma attack, but there is also a non-market cost associated the ‘Willingness-To-Pay’ to avoid the residual suffering. Ultimately life is about ‘trade-offs’ and the quantification of these trade-offs will never be a precision tool; we expend wealth to avoid potentially fatal risks, but we also accept wealth to take such risks.

Economists, such as in the OECD, have established standardised methods associated with quantifying the ‘Willingness-To-Pay’. For assessing the justification for typical investment scenarios, such as improved road infrastructure to reduce traffic accidents or improved medical services, the ‘Willingness-To-Pay’ is based on the fact that the human being is a 40-year-old. There is therefore a considerable remaining lifespan. However, for air pollution, the impacts occur predominately with the elderly, such that this standardised estimation based on a 40-year-old, denoted by the acronym ‘Value of Statistical Life’ (VSL), has limited justification. A more accurate approach, which economists are now starting to use is the ‘Value of a Life Year’ (VOLY), which is generally defined as the constant annual sum which, taken over a remaining life span, has a discounted value equal to the estimated VSL.

Ultimately the decision on the choice of metric to use, has a degree of politics to it, which is why, as in Table 2.1, the European Environment Agency is reporting the figures in both ‘Low VOLY’ and ‘High VSL’. Although as highlighted previously, given the demographic profile of the impact of air pollution, the ‘Low VOLY’ figure would appear to be more suitable.

As UNECE pointed out in their 2004 report on “25 years of the Convention on Long-range Transboundary Air Pollution10”:

- There has long been interest from Parties in estimating the economic benefits of emission

controls and to this end the Task Force on Economic Aspects of Abatement Strategies was

established in 1991. It identified that the major benefits were associated with the protection

of human health and building materials, and in the preparations for the Gothenburg Protocol

benefits were calculated for the most prominent abatement scenarios. For practically all

countries the benefits were two to five times the calculated costs.

In their 2007 report on the “Review of the Gothenburg Protocol11” they conclude:

10 http://www.unece.org/fileadmin/DAM/env/lrtap/ExecutiveBody/BOOKscreen.pdf 11http://www.unece.org/fileadmin/DAM/env/lrtap/TaskForce/tfiam/TFIAM_ReportReviewGothenburgProtocol.pdf

http://www.unece.org/fileadmin/DAM/env/lrtap/ExecutiveBody/BOOKscreen.pdf

http://www.unece.org/fileadmin/DAM/env/lrtap/TaskForce/tfiam/TFIAM_ReportReviewGothenburgProtocol.pdf


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- The benefits of current efforts under the Protocol exceed abatement costs. According to new

scientific insights, however, efforts under the Protocol lead to less improvement towards the

ultimate objectives of the Protocol, in terms of the protection of ecosystems and health, than

originally estimated.

In the United States, the Environmental Protection Agency there has published a report on: “The

Benefits and Costs of the Clean Air Act from 1990 to 2020”12. As they concluded:

- The results of our analysis, summarized in the table below, make it abundantly clear that the

benefits of the Clean Air Act exceed its costs by a wide margin, making the Clean Air Act a

very good investment for the nation.

While, this US legislation is directed towards a multitude of pollution sources, not just LCPs. it is interesting to note that they estimated a compliance cost of approximately $65 billion by 2020. However, the benefit was estimated at somewhere between four and eighty-eight times the cost

- The very wide margin between estimated benefits and costs, and the results of our

uncertainty analysis, suggest that it is extremely unlikely that the monetized benefits of the

Clean Air Act over the 1990 to 2020 period reasonably could be less than its costs, under

any alternative set of assumptions we can conceive

However, there are others, with some validity, who challenges the methodology, which is used to derive the benefits above, in particular for the October 2015 introduction of a lower US National

Ambient Air Quality Standards for ground-level ozone to 70 parts per billion13. As they point out, since 1980 in the US childhood asthma has increased by 131%, despite SO2 concentrations decreasing by 81%, NOx concentrations by 60%, ground level ozone by 33% and PM10 and PM2.5 by 34%. Furthermore, a recent study by the Johns Hopkins Children's Center of more than 23,000 U.S. children reveal that income, race, and ethnic origin may play far more potent roles in asthma risk than children’s physical surroundings. The study, based on comparison of childhood asthma rates in cities and outside of them, found no differences in asthma risk between children

living in urban areas and their suburban and rural counterparts14. This serves as a useful reminder that economic circumstances play a major role in public health and that the dose response relationship of an ambient air pollutant is a complex issue.

While politics is inherently about consensus and robust science is evidence based, there will always be a significant degree of uncertainty in assessing the monetised benefits of air pollution control measures; although the scientific consensus is clear in that they are positive. As to how the effects of air pollution and resulting impacts change over time, there is no doubt as concentrations are reduced, so too are the resulting health impacts, while simultaneously the financial cost of further emission control measures become higher. Therefore, the cost benefit ratio starts to become less favourable.

However, the evidence to date, such as in the monitoring data for PM10, is that the concentrations of air pollutants in Turkey are high in comparison with most of Western Europe, see example in Figure 5.2 below. Therefore, the current cost benefit ratio of pollution control in Turkey should be more positive. One could also add in relation to the statement made previously in Section 2.2 in relation to the external cost for pollutants emitted from the Turkish LCP sector being 100 billion Turkish Lira per annum, that this is a figure, which does not account for the fact that as the pollution load on the environment is progressively reduced towards zero, so too does the appropriate external costs to be used in the calculation of impacts. This is only logical as the pollutants themselves are significantly less damaging at lower concentrations, i.e. the dose response is not linear, such that a calculation of 100 billion Lira based an inherently simplified analysis of externalities is of limited value in complex decision making.

12 http://www.epa.gov/cleanairactbenefits/feb11/fullreport_rev_a.pdf 13 http://instituteforenergyresearch.org/wp-content/uploads/2015/08/EE-Legal-Comment-on-Ozone-Proposal.pdf 14 http://hub.jhu.edu/2015/01/21/rethinking-inner-city-asthma

http://www.epa.gov/cleanairactbenefits/feb11/fullreport_rev_a.pdf

http://instituteforenergyresearch.org/wp-content/uploads/2015/08/EE-Legal-Comment-on-Ozone-Proposal.pdf

http://hub.jhu.edu/2015/01/21/rethinking-inner-city-asthma


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In conclusion, the environmental benefit of regulating for improved emissions control should in theory be estimated by quantifying the annual reduction in emissions and multiplying it by the relevant external costs for that pollutant. However, in practice, this is fraught with inherent uncertainties, both in relation to the actual operating regime, which in practice occurs for the upgraded LCPs, and in the monetisation methodologies used for quantifying the external costs.

5.3 Effects - Financial

5.3.1 General

The Turkish electricity generating companies will have to fund the necessary Capital Expenditure (CAPEX) and Operational Expenditure (OPEX) to meet the new emission control standards. This financial cost will then be passed on to the electricity consumer, both industrial and domestic, in terms of higher electricity charges. Therefore, all elements of Turkish society will be financially affected by the proposed measures.

As the Ministry of Energy and Natural Resource’s Strategic Plan 2015-2019 demonstrates, the Turkish electricity market has grown rapidly in the last decade or more, from about 129 TWh in 2002 to 240 TWh in 2013. This has been accompanied by a parallel increase in generation capacity, see Figure 5.3 below. Of note is that half of the current thermal generation capacity has been installed since 2002, at which stage the emission standards of the Large Combustion Plant Directive (2001/80/EC) were already established. Note: It would have been negligent of an operator to install in this period an LCP, which was not in compliance with these standards, as the cost of retrofitting a plant is always considerably greater than incorporating the control measure into the initial design, installation and commissioning.

Figure 5.2: Ambient air quality monitoring data from the European Environment Agency Source: http://www.eea.europa.eu/data-and-maps/figures/airbase-exchange-of-information-5

http://www.eea.europa.eu/data-and-maps/figures/airbase-exchange-of-information-5


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5.3.2 Compliance of LCP Sector

Component 1 of the project involved the preparation of an inventory of LCPs in Turkey, which identified a final LCP Inventory of 238 existing LCPs operated at 89 sites by different companies. Note: Some larger sites had a number of LCPs, sometimes of different age and technologies. These were then assessed for compliance against the three relevant legislative measures, namely the LCP Directive, the Industrial Emissions Directive and the Turkish Bye Law on LCPs (see Annex D). This was based on a ‘traffic lights’ system, where an LCP was determined to be either:

- ‘Green’: Generally, in compliance with the legislative norm, in which the CAPEX and OPEX

impacts, if any, were considered of negligible significance.

- ‘Yellow’: In which compliance issues were identified, but the CAPEX and OPEX was

considered to be of a limited nature, such as where a limited burner modification would

suffice.

- ‘Red’: Compliance issues were identified and considered to involve significant CAPEX and

OPEX.

Note: The above was based on engineering judgement of the data provided by the operators and knowledge of the technology types. This allowed the more detailed technical and financial assessment of the individual LCPs, which followed, to be focused on those which had a significant financial impact, i.e. assigned the colour ‘Red’.

Compliance Status LCP Directive Industrial Emissions Directive

LCP Bye-Law

Green 71 sites (80%) 55 sites (62%) 71 sites (80%)

Yellow 11 sites (12%) 22 sites (25%) 8 sites (9%)

Red 7 sites (8%)* 12 sites (13%) 10 sites (11%)

Table 5.1: Summary of Compliance Status of Turkish LCPs

* Based on legislative requirements applicable prior to 1st Jan 2016, post this date the number of reds increases to 10 sites (11%). However, as is discussed in Annex D, under the EU’s transition from the LCP Directive to the IED, those LCPs which changed status on the 1st Jan 2016 could continue to operate, but with increasing restrictions on operating hours.

Figure 5.3: Ministry of Energy and Natural Resources Strategic Plan 2015-2019, Development of Electricity Installed Capacity


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What is immediately clear is that Turkey has benefitted from a growing electricity market, which since 2001 delivered a new fleet of modern compliant LCPs, the current compliance challenge therefore being generally restricted to a more limited number of older LCPs. The additional CAPEX and OPEX for ensuring full compliance with the legislative measures associated above were then assessed. This was based on the information provided in the LCP inventory, followed by a technical review meeting with each of the operators, which were assigned a ‘Red’ category. Table 5.2 summarises the compliance requirements for each of these ‘Red’ sites. See Appendix D for more details.

………………………….

As can be seen, the twelve LCPs are primarily older lignite fired power generation stations. If we consider the additional compliance issues identified, such as those classified as ‘Yellow’, then these primarily relate to:

- Smaller LCPs to be found in industrial sites, many of which are lignite fired in the sugar

industry sector, and which provide local heat and power to that industrial site.

- Older gas turbines used for power generation.

5.3.3 Impact on Smaller LCPs

If we consider the impact on smaller LCPs, there is a disproportionate financial cost associated with retrofitting these, as the economy of scale associated with complex process control equipment, such as desulphurisation equipment, is simply punitive for smaller combustion units. The UNECE’s Convention on Long Range Transboundary Air Pollution has an Expert Group on Techno-Economic Issues. The following Figure 5.4 is a representation of investment costs for

emissions control on a coal fired LCP15, which demonstrates the size effect. For example, the specific cost for a flue gas desulphurisation upgrade for a 100 MWe LCP is twice that for the same upgrade at a 1,000 MWe LCP.

15 http://www.citepa.org/old/forums/egtei/EGTEI%20Emerging%20Technologies%20sub-Group-JP-RIVRON.pdf

http://www.citepa.org/old/forums/egtei/EGTEI%20Emerging%20Technologies%20sub-Group-JP-RIVRON.pdf


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The other factor with such sugar plants is their limited operating period of five months corresponding to the beet harvest. In effect they are only operational for a period of 3,600 hours versus 8,760 hours per year, which results in a more limited period to recoup the capital investment of upgrading their small LCP. This effect can be seen in Figure 5.5 below, taken from a

Eurelectric position paper on the draft Industrial Emissions Directive16, where Eurelectric is the sector association representing the common interests of the electricity industry at Pan-European level. The figure, using actual data from a study for NOx reduction at Dutch gas plants, shows costs are substantially increased when plants are used less frequently.

This effect is of considerable significance when the legislative regime moves from that of the Large Combustion Plant Directive to that of the Industrial Emissions Directive. With the older legislation

16 http://www.eurelectric.org/media/43373/finaleurelectricpositionpaperippc-2008-410-0002-2-.pdf

Figure 5.4: UNECE data on relationship of specific cost of Flue Gas Desulphurisation (FGD) and Selective Catalytic Reduction (SCR) DeNOx with LCP size

Figure 5.5: Eurelectric Position Paper on Draft Industrial Emissions Directive: Increase in cost of

generation of electricity due to implementation of NOx reduction measures in Dutch gas plants

http://www.eurelectric.org/media/43373/finaleurelectricpositionpaperippc-2008-410-0002-2-.pdf


27

there was recognition given that smaller sized LCPs required less onerous emission limit values, such as an older fired pre-2003 LCP of less than 500 MWth would be licensed to a NOx emission limit of 600 mg/Nm3. Note: This could often be achieved by control of combustion conditions, which has more limited cost implications. However, with the Industrial Emissions Directive, the applicable emission limit for an LCP in the capacity range of greater than 100 MW th would now be 200 mg/Nm3, which would most likely require significant additional investment in Selective Catalytic Reduction DeNOx technology.

A parallel situation occurs with respect to control of SO2 emissions, the net result being that small lignite fuelled LCPs in the sugar sector, are financially ‘squeezed’ by the transition from compliance with the LCP Directive to that of the Industrial Emissions Directive. In many respects the only realistic option for compliance is to abandon lignite and burn natural gas, if available, or otherwise

diesel17.

5.3.4 Impact on Gas Turbines

While the above partly explains why with the requirements of the Industrial Emissions Directive, there is an increase in the total number of non-compliant LCPs, particularly in the ‘Yellow’ category. The other reason is the manner in which the EU legislation treats gas turbines. When the original version of LCP Directive was issued in 1988, gas turbines technology was still in its infancy for electrical power generation. However, from that point on there was a rapid implementation of this technology, coupled with a refinement in performance, both in terms of efficiency and emissions. In the 2001/80/EC LCP Directive, gas turbines operational post 2003 were for the first time regulated with specific emission limit values, but no emission limits were set for those which pre-dated 2003. With the Industrial Emissions Directive, the gas turbine emission standards were applied to all gas turbines, regardless of their age, with the exception of those which operate for ‘emergency use’, which is defined as less than 500 hours per year.

Since natural gas has little or no sulphur, the emissions challenge for gas turbines is NOx, for which the main technology solution was combustion control. Initially this was done by means of water or steam injection, which carried a slight penalty in overall efficiency, but later designs incorporated more sophisticated computer controlled dry Low NOx burners. Furthermore, EU legislation does not specify an emission limit for gas turbines, when they operate below 70% of their design load, as due to the loss of combustion efficiency NOx levels rise and fuel efficiency drops, an inherent technology characteristic. With the Turkish LCP Bye-Law, a NOx limit of 300 mg/m3 was generally applied to gas turbines which predated 2004, but with no load factor specified. For new turbines the EU legislative approach was adopted where for greater than 70% load, a general limit of 50 mg/Nm3 applied.

As regards the LCP inventory and the compliance status with the various legislative requirements, quite ‘a mismatch’ occurred with gas turbine LCPs. Some because of their age i.e. pre-2003 complied with the LCP Directive, but not the Industrial Emissions Directive, and due to the absence of NOx control technology could be facing an upgrade. However, retrofits based on combustion control, such as water injection, are available, which would not be of excessive financial cost. In addition, there is an exemption in Industrial Emissions Directive for pre-2003 gas turbines to operate to higher emission limit values, provided they are restricted to a maximum of 1,500 hours per year. Therefore, the cost category for these pre-2003 gas turbines falls into the ‘Yellow’ category rather than ‘Red’. Another situation was evident with gas turbines fitted with water or steam injection, where the NOx levels reported complied with Turkish emission standards, but not the relevant EU standards. It was assumed based on the technology details that these were being operated with less water input, and hence slightly higher efficiencies, than they would be if a lower NOx emission limit applied. As such then, these gas turbines could be assigned to the ‘Green’ category.

17 In theory very low sulphur imported coals could also be used to meet the SO2 limits for small boilers, see UK Department of Trade and Industry Report ‘UK Coal Production Outlook: 2004 -2016’: http://webarchive.nationalarchives.gov.uk/20060821030533/dti.gov.uk/files/file14151.pdf

http://webarchive.nationalarchives.gov.uk/20060821030533/dti.gov.uk/files/file14151.pdf


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5.4 Compliance Burden

From a financial perspective, the main financial burden for compliance of the LCP sector in Turkey will be carried by the twelve large LCPs previously identified, which primarily represent larger and older lignite fired plants. However, while in absolute terms a far smaller financial burden, the impact of the Industrial Emissions Directive will be particularly felt by a limited number of industrial sites with small LCPs burning coal and lignite, particularly in the sugar industry, where annual operating hours are low. In other words, it will be a disproportionately high financial burden for these sites. Indeed, a competitive advantage will be given to competitor industrial sites, which by fortune are located on the Turkish natural gas grid.

Older power generation plants can also find themselves caught in a viscous circle. Due to their age they have inherently lower efficiencies. As such then they are less likely to be called upon by the grid, as the grid operators will use the most efficient generation for base load and the less efficient generation for mid-load and peaking duties. Secondly, they have a limited remaining lifespan to ‘write-off’ their investment in emissions control. The EU’s draft Best Available Techniques

Reference Document (BREF) for the LCP sector18 explains this clearly, where for the retrofitting of a 500 MWth coal plant with Selective Catalytic Reduction DeNOx technology, the cost per MWh for an LCP, which is operating at a 30% load factor and with five years remaining life, is seven times greater than that for a base load, long-lifetime, plant. Indeed, the BREF provides the following graph:

A double edged sword results, the electricity cost of the older LCP increases significantly, which results in it being less likely to be called upon by the grid operator. As a result, the projected emissions savings, which were used to justify the upgrade, do not materialise, as the run times do not occur. EU legislation has recognised this, both the 2001/80/EC LCP Directive and its successor, the 2010/75/EU Industrial Emissions Directive, contains an ‘opt out’ clause or ‘limited life time’ derogation. In the latest legislation, an exemption from new emission limit values, where the operator declares, not to operate the LCP more than 17,500 hours, in the period January 2016 to December 2023. In the Turkish situation, given the age of some of the LCPs identified in Table 5.2, plus the rapid development in new generation capacity, some form of ‘opt out’ clause is highly appropriate to limit the compliance burden and maximise the cost benefits.

18 Latest Draft June 2013: http://eippcb.jrc.ec.europa.eu/reference/BREF/LCP_D1_June_online.pdf

Figure 5.6: EU draft LCP BREF - Relationship of abatement cost to remaining plant life

0

2000

4000

6000

8000

10000

12000

14000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Abatement Cost(€ Tonne Removal)

Remaining Plant Life (Years)

Abatement Cost as a Function of Remaining Life

http://eippcb.jrc.ec.europa.eu/reference/BREF/LCP_D1_June_online.pdf


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5.5 Uncertainty in Estimates of Impacts – Financial

In engineering terms, the accuracy of a project estimate is fundamentally linked to the stage of the project. The Association for the Advancement of Cost Engineering has a Recommended Practice No. 18R-97 on Cost Estimate Classification System, this defines the following:

- Concept Screening: Low: -20% to -50% and High: +30% to +100%

- Study or Feasibility: Low: -15% to -30% and High: +20% to +50%

- Control or Bid / Tender: Low: -5% to -15% and High: +5% to +20%

The level of cost estimate applied to the twelve ‘Red’ category LCPs would be in the ‘Concept Screening’ stage, except where the operators themselves had completed more detailed studies in order to reach the ‘Study of Feasibility’ stage. Factors which can significantly influence the accuracy of the cost estimate for a large project at a LCP include:

- Currency fluctuations and inflation

- Maturity of technology

- Workload of key equipment suppliers

With regard to the first, the World Bank’s overview of Turkey is that the “economic outlook remains favourable compared to the rest of Europe or indeed the MENA region”. With regard to the second, the emissions control technology required is generally mature, the exception being its application to some of the lignite resources in Turkey, which have significantly higher ash content then other geographical regions.

There is no doubt that the EU’s renewable energy programme, which has resulted in major investment in intermittent wind and solar generation, has had many unfortunate side effects. Not least, as due to this highly intermittent input to the grid, conventional LCPs have to operate in an inefficient ‘stop – go’ manner, with reduced run times. As a result, in many Member States, which have pursed an aggressive wind and solar programme, the financial viability and the integrity of the national grid is under severe strain. The German State news agency Deutsche Welle was reporting

in August 201519, as to how fifty-seven (57) traditional coal and gas plants were set to close, and as to how the head of the German Association of Energy and Water Industries (BDEW) reported:

- ‘The situation for existing power plants is getting worse. An ice age is looming for the

construction of new plants too. Every second planned facility is hanging by a hair.’

The net result is that in terms of those seeking to invest in new LCPs and related infrastructure, the market place is very buoyant, as equipment suppliers are suffering a current ‘drought’ in orders.

19 http://www.dw.com/en/renewables-shift-wallops-traditional-power-plants/a-18668018 Based on the published power plant list of the Federal Grid Agency ‘Bundesnetztagentur’: http://www.bundesnetzagentur.de/cln_1422/EN/Areas/Energy/Companies/SecurityOfSupply/GeneratingCapacity/List_of_closure_notifications/List_of_closure_notifications_node.html

http://www.dw.com/en/renewables-shift-wallops-traditional-power-plants/a-18668018

http://www.bundesnetzagentur.de/cln_1422/EN/Areas/Energy/Companies/SecurityOfSupply/GeneratingCapacity/List_of_closure_notifications/List_of_closure_notifications_node.html

http://www.bundesnetzagentur.de/cln_1422/EN/Areas/Energy/Companies/SecurityOfSupply/GeneratingCapacity/List_of_closure_notifications/List_of_closure_notifications_node.html


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6. Comparison of Options

6.1 Cost and Benefits of Implementing the Industrial Emissions Directive

The base case was assumed to be the implementation of the Industrial Emissions Directive. In Annex E the ‘Cost Benefit Analysis’, both the financial costs of implementation and benefit in terms of the external costs of reduced emissions were estimated in detail. The financial appraisal included a capital cost estimate of the upgrades identified for the twelve ‘Red’ LCPs in Table 5.2 completed by the Power Engineering Division of AMEC Foster Wheeler. This estimate came to $1,856 million. Note: Details in previous section in relation to the uncertainty of financial estimates and concept screening.

For the LCPs identified as ‘Yellow’, these can be divided into those which are within the sugar sector and those which are outside that sector. For the latter, the main capital investment implications occur in the gas turbine sector, as in other circumstances improved control of fuel specification would suffice for compliance, such as improved sulphur content of fuel oil burned in refineries. Of the five gas turbine LCPs identified as ‘Yellow’, the largest of these, the Hamitabat Gas Turbine power plant, is in the process of being rebuilt with the modern Siemens technology. For the other four, which are not large LCPs, an allowance of $20 million was made for improved NOx controls.

For the sugar industry there are three lignite fired boiler plants in Afron, Elbistan and Ilgin. The cost of upgrading these three boiler plants with flue gas treatment would be the order of $65 million, which is disproportionate in relation to their small size and the fact that they only have a circa 4-month operational window in the sugar beet processing season. Furthermore, the option of converting these boilers to operate on a low sulphur diesel grade fuel oil would also be disproportionately expensive; amounting to an additional fuel bill of some 22 to 45 million TRY per annum for each of the sugar plants. This is clearly not a feasible option.

- In conclusion, a round figure of $2 billion is representative for the capital cost

implications for the Turkish LCP sector, which is equivalent under current exchange

rates to 5.8 billion TRY.

For the operating costs, the UNECE Expert Group on Techno-Economic Issues (EGTEI) have published a database, which while it is more representative of the financial costs associated with the combustion of hard coal, can be used for estimating the operating costs associated with the new abatement systems required for the twelve ‘Red’ LCPs.

- This operating cost amounts to €267 million per year, which is equivalent under current

exchange rates to 880 million TRY per year.

The analysis of the benefits follows from estimating the tonnage of emissions reduced and multiplying it by the previously identified external cost for that pollutant on a Low VOLY basis. Note: One could alternatively articulate that if one did not implement the abatement measures identified and included in the financial cost estimate above; the following would be the environmental costs, which would result instead.

- For the sulphur dioxide reduction measures the benefit in terms of external costs is

estimated at 168 billion TRY per year.

…………………………...

- For the NOx reduction measures the benefit in terms of external costs is estimated as

2.9 billion TRY per year.

However, in this case the individual LCPs are more evenly represented, and that of the largest contributor, again Afsin Elbistan A, is only 20% of the total.


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- For the particulate reduction measures the benefit in terms of external costs is

estimated as 18.8 billion TRY per year.

………………………

In conclusion, what this analysis demonstrates, that when the option of implementing the Industrial Emissions Directive is compared with that of the ‘do nothing’ scenario, the benefits are several multiples of the financial costs involved, even when the level of

uncertainties discussed previously are allowed for.

6.2 Costs and Benefits of Implementing the Large Combustion Plant Directive

In many respects the analysis of the ‘Red’ LCPs is little changed as with the reduction in the NOx limits for coal fired LCPs post 1st January 2016, the overall financial costs and benefits as derived above would occur. The difference though would be discernible with regard to small LCPs, such as in the sugar industry, where the same level of upgrades would not be required, due to the less stringent emission limit values applied by this legislation to smaller LCPs.

6.3 Costs and Benefits of Implementing the Turkish Bye-Law on LCPs

In a similar manner to the above, the same conclusions can be derived. The overall cost benefit analysis completed for the Industrial Emissions Directive would be little changed, except for the position of the small LCPs, where the less stringent emission limit values applied by this legislation would be discernible in their financial analysis.

6.4 Evaluation

The rationale for implementing this improved emissions legislation is indisputable from the perspective of cost benefit analysis. However, from the perspective of smaller LCPs, in particular for lignite fired LCPs operated for reduced hours in the sugar industry, it could potentially be difficult to justify the financial costs incurred in terms of benefit gained, as this benefit to cost ratio is by no means as clear cut and decisive, as it is for larger coal and lignite fired LCPs in the power generation sector.

In terms of the options identified in Section 4 for implementation by means of:

- Option A: Fixed timescale with no additional measures

- Option B: Fixed timescale with additional flexibility measures involving a degree of emissions

trading within the Turkish LCP sector

- Option C: National Plan with timescales tailored to each LCP

This is discussed in more detail in Appendix C, essentially Option A is considered inflexible and associated with higher costs than would otherwise occur. Option B is considered to be of limited viability, as the characteristics of the Turkish LCP sector is such that there are probably too few LCPs requiring significant upgrades to enable a viable trading market to develop. Option C appears to be the most suitable, as it would allow an individual solution to be developed for such as the smaller lignite fired LCPs, where some flexibility in the legislative approach is desirable.

6.5 Preferred Option

While certainly for the power generation sector the implementation of the Industrial Emissions Directive is very justifiable, from a legislative perspective, some allowance or negotiation will have to be made for the smaller lignite fired LCPs in the sugar sector on an individual basis.


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7. Implementation, Monitoring and Evaluation

7.1 Conditions necessary to achieve objectives

There are a number of conditions, which will need to be implemented to achieve the objective. The first will be the necessary legislative adjustments for transposition of the Industrial Emissions Directive. This will have to be accompanied by administrative arrangements with respect to the flexibility mechanisms associated with this legislation, such as related to those LCPs which may choose to ‘opt out’ on ‘limited life time’ derogations, those which may choose to operate on reduced hours with less stringent emission limit values, and those LCPs for which it may be necessary, given the characteristics of their indigenous fuel, to negotiate some additional flexibility. Note: During the RIA workshop held in April 2016 considerable discussion occurred in relation to the necessity to develop a national implementation plan, which would address for each LCP requiring compliance measures, the scope of the measures and their schedule for implementation. While the general concepts of that plan are contained within this RIA report, the finalisation of the necessary legislative adjustments should be accompanied by an implementation plan agreed between the authorities and the operators.

The second condition reflects the increased legislative burden on the authorities, who will have to implement the necessary permitting arrangements to give effect to this new legislation. The timely resolution of this permitting is essential from the position of the operators, who require surety in their regulatory arrangements, such they can then take the necessary measures to finance and construct the required LCP upgrades.

The third condition relates to the development of the necessary expertise in Turkey to complete the complex continuous emissions monitoring of the power plant stacks. While expertise is developing in this area, such as the provision of expert calibration laboratories, the current situation is far short of the ideal, in which each LCP is being monitored continuously and accurately. Such data is not just necessary for demonstration of compliance; it is also needed in many cases in order to design the necessary LCP emissions upgrades.

The fourth condition relates to the lignite plants in Alfsin-Elbistan. In Section 2.2 on ‘Impact of Pollutants’ it was pointed out that the theoretical impact (external cost) of the existing LCPs in Turkey was 100 billion TRY per year. If we then consider Section 6.1 on ‘Costs and Benefits of Implementing the Industrial Emissions Directive’, the benefit is completely dominated by the reduction in external costs related to sulphur dioxide emissions, evaluated at 168 TRY per year, of which 80% of this external costs is related to upgrading Afsin-Elbistan A. In other words, increasing the number of operational units there from the current one unit to a future six units, and failing to ensure effective desulphurisation, would have completely unacceptable environmental impacts.

It is not exaggerating, to stress that the whole success of Turkey’s LCP compliance strategy, hinges on the successful implementation of reliable abatement technology to the power generation in the Afsin-Elbistan basin. Yet as is discussed in more detail in Appendix C, there has to date been a regretful ‘hands off’ approach to actually developing the necessary technology to successfully combust this lignite to the required desulphurisation rates.

This hands-off approach cannot be allowed to continue; rather the successful development of the necessary abatement technology has to be prioritised, such as scheduling the necessary design work, with appropriate test work as required, and then ensuring adherence to this schedule. That conventional ‘technical solutions’ for abatement equipment may have to be adapted for the difficult lignite circumstances at Afsin-Elbistan is now known, but the ‘laissez faire’ attitude to emissions control there has to stop and be replaced by rigorous project management to ensure compliance going forward. Indeed, during the RIA workshop in April considerable discussion occurred in relation to the potential establishment of a cross party working group, combining regulatory, technical and financial expertise, which would investigate the most suitable technology approaches for combustion of the difficult indigenous fuels to be found in Turkey. This group would also need to include representatives of those mining this indigenous fuel, as currently there seems to be some disconnect between those


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combusting this fuel and those supplying this indigenous fuel, which does not reflect what should be a joint responsibility to ensure optimal operation.

7.2 Control and evaluation of the implementation

Control and evaluation of the implementation is essentially one of permitting and ensuring compliance with the permit requirements. Suggestions for potential modifications to the institutional structure and procedural arrangements to strengthen existing systems are under consideration and will be reported separately (Institutional guideline under Component 3).

7.3 Responsible Administrative Unit

The responsible Administrative Unit will be confirmed in the Institutional Guideline being prepared under Component 3. Any suggestions for strengthening capacity of this unit will be included there.

7.4 Informing affected shareholders

The power generation sector is Turkey is the most affected shareholder in this regulatory implementation. It is well aware of developments in this area and has been engaged on the RIA process. The other stakeholder in the process is of course the Turkish public, who are affected by the emissions from these LCPs. In EU Member States the provisions of the Aarhus Convention, and its requirements in relation to access to and dissemination of environmental information, regulate both the availability of information on emissions and public participation on permitting arrangements.

7.5 Applicable penalties

LCPs are no different than the regulation of any industrial facility, which has a major pollution potential. Enforcement has to be both effective and proportionate, with the ultimate sanction that a facility, which is a consistent offender, will be denied an operating license. This last step is necessary, as if other operators are investing considerable sums in ensuring compliance with the necessary regulatory requirements, they should not be put at a competitive disadvantage by those, who are consistently failing to make the necessary investments in LCP upgrades. Note: The Industrial Emissions Directive specifies that Member States will determine penalties, which shall be effective, proportionate and dissuasive. Similar requirements would have to be adopted in any future implementation of the IED by Turkey.

7.6 Time period for review

The implementation of the Industrial Emissions Directive is subject to review by the EU Commission on a three yearly basis, while Best Available Techniques, upon which the permitting arrangements are based, are subject to an on-going dialogue and review process at the European Integrated Pollution Prevention and Control Bureau in Seville. This is a formalised exchange of information between regulators, industry, NGOs, academia, etc. Turkish officials already participate in this process and it is recommended that this level of participation be increased to be inclusive of the requirements of the Turkish administration, Turkish industry and Turkish environmental NGOs.


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ANNEX A Circular of Turkish Prime Minister (2007) on RIA

The Circular of the Prime Minister of 2007 on RIA20 contains a 10 pages Guideline on Regulatory Impact Assessment. Accordingly, RIA studies should have the following structure:

Chapter (0) Brief Summary: Contents:

- A brief description of the problem to be solved

- Main objectives of the planned measure

- Summary of options

- Achieved results.

Chapter (1) Administrative Procedure of the RIA Project: This Chapter outlines the following issues:

- The procedure followed in the RIA process and timeline

- Consulted institutions, organizations, and other partners

- Comments received on-the overall structure of RIA report

Chapter (2) Problem Definition: This Chapter consists of the answers given to the following questions:

- What is the problem that needs to be resolved?

- What are the main causes of the problem?

- Who are the affected groups, and the rate and intensity are affected by the way in which

affected?

- How will the planned measures improve the current situation?

- Are there any problems with the existing government policies and regulations related to the

field?

- In order to solve the problem, intervention at what level is necessary: at the central level and

/or at the local level?

Chapter (3) Objectives: This Chapter consists of the answers given to the following questions:

- What are the general policy objectives?

- What are the specific policy objectives?

- Are the specific policy objectives compatible with the general strategy of the government?

Chapter (4) Alternative solutions / Options: This Chapter consists of the answers given to the following questions:

- What are the possible options for solving the problem identified? (Regulatory and non-

regulatory options included)

- Which of the above options can be excluded without further investigation? (E.g. due to

inefficiency or due to incompatibility with other policies and strategies, etc.)

Chapter (5) Analysis of Impacts: This is the most important Chapter. It consists of the answers given to the following questions:

- Which social groups, economic sectors or regions will be affected by this arrangement?

- What are the positive / negative, direct / indirect effects?

- What uncertainties are included in the data and parameters?

20 Genelge 2007/6, Düzenleyici Etki Analizi Çalışmaları. The circular was signed by Prime Minister RecepTayyip Erdoğan.


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- How do these uncertainties affect the estimated impacts?

- What effects will change over time and how?

The Guideline also specifies the types of impacts to be assessed and also the main stakeholders for whom these impacts should be possibly identified by the RIA. If possible, all impacts, such as benefits, costs and risks should be quantified, monetized and measured on an annual basis. Increasing or decreasing risks for any stakeholders (e.g. companies or citizens) should be considered. The main stakeholders for whom / for which the impacts should be assessed / considered, are the State, the economy as a whole, businesses, the society as a whole, various social strata and the environment, including air, water and soil pollution, land use change, biodiversity loss and the potential impact on climate change.

Chapter (6) Comparison of the options: This Chapter consists of the answers given to the following questions:

- For each of the options: what is the balance of negative and positive effects?

- Evaluation What are the consequences?

- For each of the options: what conflicts and synergies are involved?

- If possible, evaluate every option according to previously defined evaluation criteria.

- What should be the preferred option?

Chapter (7) Implementation, Monitoring and Evaluation. This Chapter consists of the answers given to the following questions:

- What are the basic conditions of achieving the objectives identified?

- Is it possible / is it necessary to control and evaluate the implementation of the regulation in a

broad and comprehensive program?

- Which administrative unit will be responsible for the implementation of the Regulation?

- How will the affected stakeholders receive information about the regulation?

- What are the penalties applicable to infringements of the rules?

- Is there a specified time period after which the regulation will be reviewed? Is such a review

planned?


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ANNEX B Impact Assessment

Table of Contents

1. Introduction

2. Impact Assessment of NOx, SO2 and Particulates

3. External costs of Air Pollution in Turkey

3.1 General

3.2 Assessment of Health Benefits

3.3 Assessment of Damage Cost per tonne of Particulate Matter

3.4 Assessment of Damage Cost per tonne of NOx

3.5 Assessment of Damage Cost per tonne of SO2

3.6 Relative importance of Particulate Matter

3.7 Conclusions on Pollutant Damage Costs

4. References

Appendix

Conversion of quoted damage costs in Euros per tonne (2005) to Turkish Lira (2015)


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1. Introduction

The impact of pollution from the combustion of fuels has a long history. The London smog of the 19th Century was so notorious that it had its own name; the ‘pea-souper’. Indeed, it is estimated that sulphur dioxide levels occurring then, primarily from the domestic combustion of coal, were over a hundred times the now accepted air quality limit value. This situation continued to worsen, such that the London smog of December 1952 resulted in more than 4,000 deaths over a four days’ period. It was the greatest officially recognised urban air pollution disaster in modern history and contributed to the increasing demands for effective environmental controls. These controls initially took the approach of restricting the combustion of domestic fuels to those, which were relatively ‘smokeless’, along with the use of higher stacks to achieve dilution at industrial sites, such as power stations.

However, this approach of ‘dilution is the solution’ was clearly not the proper solution and the late 1970s and 1980s in Central Europe, Germany in particular, was characterised by growing public concern over damage to forests, the so called ‘Waldsterben’ or dying forests, a circumstance which was referred to as ‘acid rain’ in the English speaking world. It was the central ‘dogma’ in Germany that an unprecedented decline in all tree species in central European forests was occurring, as a result of a complex disease of forest ecosystems triggered by air pollution. However, the results of a decade of research are not compatible with the central dogma of the ‘Waldsterben’ concept in that such forestry losses, often due to natural variations, were not directly linked to power station emissions. Despite this, the public outcry at the time led to Germany in 1983 fast tracking legislation with stringent emission limit values, which meant that 70 large coal fired power stations were in a short period of time retrofitted with emissions controls for sulphur dioxide, amounting to some 14.3 billion DM in investment (€1 = 1.96 DM).

One can look back at this and draw a number of lessons learnt, decision making solely on the basis of public reaction can lead potentially to large scale investment in environmental controls, which could be ineffective or indeed simply rushed, such that the implementation costs are significantly higher than they should be. Ideally, there should be a scientific basis to help formulate a cost benefit analysis to justify the political decision making. If we consider the United Nations Economic Commission for Europe’s UNECE ‘Geneva Convention on Long-range Transboundary Air Pollution’, which entered into force in 1983, there are eight Protocols to this Convention, dealing with various pollutants and emission reduction targets.

- 1984 Geneva Protocol on Long-term Financing of the Cooperative Programme for

Monitoring and Evaluation of the Long-range Transmission of Air Pollutants in Europe

(EMEP);

- 1985 Helsinki Protocol on the Reduction of Sulphur Emissions on their Transboundary

Fluxes by at least 30 per cent;

- 1988 Sofia Protocol concerning the Control of Emissions of Nitrogen Oxides or their

Transboundary Fluxes;

- 1991 Geneva Protocol concerning the Control of Emissions of Volatile Organic

Compounds or their Transboundary Fluxes;

- 1994 Oslo Protocol on Further Reduction of Sulphur Emissions;

- 1998 Aarhus Protocol on Heavy Metals;

- 1998 Aarhus Protocol on Persistent Organic Pollutants (POPs);

- 1999 Gothenburg Protocol to Abate Acidification, Eutrophication and Ground-level Ozone.

The first of these Protocols was the 1985 Helsinki Protocol on the ‘Reduction of Sulphur Emissions or their Transboundary Fluxes by at least 30 per cent’. This was in effect a political comprise of that time, in that a 30% reduction in sulphur emissions was to be achieved by the twenty-one (21) countries ratifying the Protocol by 1993, based on a very simple calculation, which convinced policy people at their meeting during one afternoon and evening in Munich in 1984 that:

- Flue gas desulphurization yielded 80 to 95% sulphur dioxide emission reduction at power

plants fired by coal or by high sulphur coal oil;


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- Flue gas desulphurization applied to all new and existing power plants would decrease

national sulphur emissions by 30% in most countries; and

- Continuing fuel switching, particularly to natural gas would further decrease national

emissions.

However, as a consequence of the 1984 Protocol for Monitoring and Evaluation of the Long-range Transmission of Air Pollutants in Europe, an increasing body of scientific knowledge was developed both within EU and the further European area. This supported the Convention by providing emission inventories and measures and model calculations concerning atmospheric concentrations, depositions and cross-border transport of air pollutants. It was also recognised that a good understanding of the harmful effects of air pollution was a prerequisite for reaching agreement on effective pollution control. To develop the necessary international cooperation in the research of and the monitoring of pollutant effects, the Working Group on Effects was established under the Convention in 1980.

Its six International Cooperative Programmes (ICPs) and the Task Force on Health continue to identify the most endangered areas, ecosystems and other receptors by considering damage to human health, terrestrial and aquatic ecosystems and materials.

- ICP Waters (programme for the evaluation and monitoring of the effects of air pollutants

on rivers and lakes);

- ICP Materials (programme for studying the effects on materials, including historic and

cultural monuments);

- ICP Modelling and Mapping (programme for modelling and mapping critical loads and

levels);

- ICP Integrated Monitoring (Integrated Monitoring of Air Pollution Effects on Ecosystems);

- ICP Forests (programme for evaluating the impacts of air pollutants on forests);

- ICP Vegetation (programme for the evaluation of the impacts of air pollutants on natural

vegetation and agricultural crops);

- Task Force on the Health Aspects of Air Pollution (quantifies the contribution of

transboundary air pollution to human health risks and help define priorities for guiding

future monitoring and abatement strategies).

The above work is underpinned by scientific research on dose-response, critical loads and levels and damage evaluation. In particular, the development of specific dose-response relationships between loads and adverse effects, where the critical load is defined as the highest annual deposition level at which adverse effects on natural ecosystems are unlikely to result in the long term. Critical loads vary greatly with soil type and other local characteristics. This critical load concept has also contributed to the cost-effectiveness of European air pollution policies, since impacts (benefits) can be compared to the economic and technical consequences (costs) of policy alternatives.

By the time the 1994 Oslo Sulphur Protocol was adopted, replacing the previous 30% Protocol of 1985, the scientific element was far more developed, such that this Protocol established a general obligation on Best Available Technology, imposed emission limit values on new and existing large stationary combustion sources, and made energy management measures and fuel standards, e.g. sulphur content in oils, obligatory. This effects-based approach, which aimed at gradually attaining critical loads, set long-term targets for reductions in sulphur emissions, which differed for each country, as specified in the Protocol.

There was also at this time an increasing focus, not only in Europe but also in North America, on the concept of ‘externalities’. The concept of an ‘internal price’ is easily understood; it’s the price you pay on your bill. The external cost is the hidden cost that society pays through increased environmental degradation, increased exposure to industrial accidents, etc. These externalities can be reflected though human health impacts, reduced vegetation growth, degradation of building structures, etc.

As the ‘polluter pays principle’ is a key element of EU environmental policy, this requires that external costs would increasingly become internalised, i.e. end up on your bill. In order for this


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to be achieved, a successful assessment of external costs would be required to support and justify new environmental policies. As the European Investment Bank in their 2010 publication on: ‘Public and private financing of infrastructure. Policy challenges in mobilizing finance Infrastructure and infrastructure finance21’ clarified:

- Environmental externalities are multiple – in terms of greenhouse gases, other forms of air

pollution, water pollution and runoff, noise and land use and biodiversity. For example, a

new runway or airport will raise greenhouse gas emissions, increase local air pollution,

result in significant water runoff, create significant noise affecting local people and their

house prices, and take up land which can often include areas with considerable

biodiversity value, such as marshes and open spaces.

- In theory, the “correct” solution is to price each and every externality. In practice, this is

impractical and politically impossible. The result is that decisions are based on politics and

planning, and very much open to political and regulatory failures.

However, despite the pessimism of the European Investment Bank above, with regard to the impact of air pollution from Large Combustion Plants (LCPs), quite some success has been achieved in assessing the externalities associated with emissions of Nitrogen Oxides (NOx), Sulphur Dioxide (SO2) and particulates (dust). This is discussed in the next sections. As UNECE pointed out in their 2004 report on ‘25 years of the Convention on Long-range Transboundary Air Pollution22’:

- There has long been interest from Parties in estimating the economic benefits of emission

controls and to this end the Task Force on Economic Aspects of Abatement Strategies

was established in 1991. It identified that the major benefits were associated with the

protection of human health and building materials, and in the preparations for the

Gothenburg Protocol benefits were calculated for the most prominent abatement

scenarios. For practically all countries the benefits were two to five times the calculated

costs.

In their 2007 report on the “Review of the Gothenburg Protocol23” they conclude:

- The benefits of current efforts under the Protocol exceed abatement costs. According to

new scientific insights, however, efforts under the Protocol lead to less improvement

towards the ultimate objectives of the Protocol, in terms of the protection of ecosystems

and health, than originally estimated.

On a positive side they also concluded, based on assessments done in the EU in 2006 on the implementation of the Large Combustion Plant Directive and other environmental legislation24:

- Studies indicate that costs to realize the Protocol obligations could turn out to be lower

than originally estimated. Economics of scale and technological progress can reduce real

costs (estimated ex-post) by 50 percent compared to the ex-ante estimates.

21 http://www.eib.org/attachments/efs/eibpapers/eibpapers_2010_v15_n02_en.pdf 22 http://www.unece.org/fileadmin/DAM/env/lrtap/ExecutiveBody/BOOKscreen.pdf 23http://www.unece.org/fileadmin/DAM/env/lrtap/TaskForce/tfiam/TFIAM_ReportReviewGothenburgProtocol.pdf 24 http://ec.europa.eu/environment/enveco/ex_post/pdf/costs.pdf

http://www.eib.org/attachments/efs/eibpapers/eibpapers_2010_v15_n02_en.pdf

http://www.unece.org/fileadmin/DAM/env/lrtap/ExecutiveBody/BOOKscreen.pdf

http://www.unece.org/fileadmin/DAM/env/lrtap/TaskForce/tfiam/TFIAM_ReportReviewGothenburgProtocol.pdf

http://ec.europa.eu/environment/enveco/ex_post/pdf/costs.pdf


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2. Impact Assessment of NOx, SO2 and Particulates

As a result of air quality legislation introduced in 1980 through Directive 80/779/EEC, a comprehensive network of ambient air quality monitoring stations has been functioning throughout the Member States for more than thirty years. The UNECE Protocols on Transboundary Air Pollution have also contributed to this knowledge base. See for example the extract below from the European Environment Agency’s ‘Air quality in Europe - 2013 Report’ (EEA, 2013).

In general, the most significant impacts of air pollution are on human health and ecosystems, for which it is generally possible to establish a dose response relationship, such as with regard to health effects, in which if the pollutant concentration goes up, an increase can be observed in hospital emissions, sick leave, purchase of asthma medication, etc. These health impacts are best summarised by the World Health Organisation’s (WHO) ‘Review of evidence on health aspects of air pollution – REVIHAAP project: Final technical report’ (WHO, 2013a) and ‘Health risks of air pollution in Europe – HRAPIE project: New emerging risks to health from air pollution – results from the survey of experts’ (WHO, 2013b). While it is noteworthy that both ‘identified road transport as the major air pollution source affecting health in Europe’, they also identified that:

- The adverse effects on health of Particulate Matter (PM) are especially well documented.

There is no evidence of a safe level of exposure or a threshold below which no adverse

Figure 2.1: European Environment Agency Report (EEA, 2013) – Measurements of SO2


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health effects occur. More than 80% of the population in the WHO European Region

(including the European Union, EU) lives in cities with levels of PM exceeding WHO Air

Quality Guidelines. Only a slightly decreasing trend in average concentrations has been

observed in countries in the EU over the last decade. Pollution from PM creates a

substantial burden of disease, reducing life expectancy by almost 9 months on average in

Europe. Since even at relatively low concentrations the burden of air pollution on health is

significant, effective management of air quality that aims to achieve WHO Air Quality

Guidelines levels is necessary to reduce health risks to a minimum.

The 2013 European Environment Agency’s report on air quality summarised:

- Particulate Matter (PM): Can cause or aggravate cardiovascular and lung diseases, heart

attacks and arrhythmias, affect the central nervous system, the reproductive system and

cause cancer. The outcome can be premature death.

- Sulphur oxides (SOX): Aggravates asthma and can reduce lung function and inflame the

respiratory tract. Can also cause headache, general discomfort and anxiety.

- Nitrogen oxides (NOx): NO2 can affect the liver, lung, spleen and blood. Can also

aggravate lung diseases leading to respiratory symptoms and increased susceptibility to

respiratory infection.

- Ozone (O3): Can decrease lung function; aggravate asthma and other lung diseases. Can

also lead to premature mortality.

The ozone above is not to be confused with the upper atmospheric (stratospheric) ozone layer, but rather that the ground level ozone, which is formed at low level due to the complex interplay between intense sunlight, NOx and Non-Methane Volatile Organic Compounds (NMVOCs). The latter arising primarily from solvent and petroleum related vapours. Ozone is therefore a secondary pollutant, as it is not emitted directly by any emission source. Of direct relevance to Turkey is the interplay with intense sunlight, where it can be seen from the monitoring results of the European Environment Agency in Figure 2.2, that the highest ground level ozone readings are to be found in the Southern areas of Europe, characterised by intense summer sunshine. In contrast, the British Isles, at latitude of over 50⁰N, are not

exposed to that level of intense sunshine, and hence the chemical reactions which lead to the concentrations of ground level ozone.


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If we consider effects on ecosystems, the same report from the European Environment Agency clarifies that:

- Particulate Matter (PM): Can affect animals in the same way as humans. Affects plant

growth and ecosystem processes. Can cause damage and soiling of buildings. Reduced

visibility.

- Sulphur oxides (SOx): Contributes to the acidification of soil and surface water. Causes

injury to vegetation and local species losses in aquatic and terrestrial systems.

Contributes to the formation of particulate matter with associated environmental effects.

Damages buildings.

- Nitrogen oxides (NOx): Contributes to the acidification and eutrophication of soil and

water, leading to changes in species diversity. Acts as a precursor of ozone and

particulate matter, with associated environmental effects. Can lead to damage to

buildings.

- Ozone (O3): Damages vegetation, impairing plant reproduction and growth and

decreasing crop yields. Can alter ecosystem structure, reduce biodiversity and decrease

plant uptake of CO2.

Figure 2.2: European Environment Agency Report (EEA, 2013) – Measurements of O3


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With regard to sulphur dioxide, considerable progress has been made through UNECE’s Convention on Long-range Transboundary Air Pollution and associated EU legislation in reducing emissions of sulphur dioxide in Europe, see Figure 2.3.

While Turkey ratified the Convention on Long-range Transboundary Air Pollution, it did not adopt any of the protocols that impose limitations on emissions on transboundary pollutants. Indeed, indications are that emissions of sulphur dioxide in Turkey grew 76% in the period 1990-200525. Turkey is currently in the process of ratification of the UNECE Gothenburg Protocol and transposing the EU’s National Emissions Ceilings Directive (2001/81/EC), which in support of this Protocol, has set national ceilings for SO2, NOx, NMVOC and ammonia (NH3) for each EU Member State. However, as Figure 2.1 previous shows, the monitoring data for sulphur dioxide in Turkey is showing the presence of higher concentrations than now prevalent in Western Europe, although some of this could be transboundary in nature.

As Figure 2.4 overleaf shows, the monitoring for Particulate Matter in Turkey is also showing high values, although as previously mentioned, road transport is a major contributor in this regard and air monitoring stations are also in general located in urban agglomerates.

25 http://www.eea.europa.eu/data-and-maps/indicators/emission-trends-of-sulphur-dioxide-so2/emission-trends-of-sulfur-dioxide-so2

Figure 2.3: Sulphur Dioxide Emissions in Europe – Taken from ‘Clearing the Air, 30th Anniversary brochure’ (UNECE, 2009); Source: http://www.unece.org/index.php?id=31345

http://www.eea.europa.eu/data-and-maps/indicators/emission-trends-of-sulphur-dioxide-so2/emission-trends-of-sulfur-dioxide-so2

http://www.eea.europa.eu/data-and-maps/indicators/emission-trends-of-sulphur-dioxide-so2/emission-trends-of-sulfur-dioxide-so2

http://www.unece.org/index.php?id=31345


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In conjunction with the monitoring of air quality, it is also possible to model the dispersion of emissions from both point sources, such as industrial and power station stacks, and the more disperse emissions such as from traffic. In this way a model can be built up, which predicts the concentration to which the receptor will be exposed, such as the sensitive human being. The dose response relationship, such as for human health or ecosystems, can then be used to predict the adverse impacts which occur, impacts which are then monetised. In this manner an estimate of the externalities associated with the air pollution can be derived. See schematic in Figure 2.5 overleaf of the ‘impact pathway approach’ taken from the European Environment Agency’s ‘Cost of Air Pollution from European Industrial Facilities 2008-2012’ (EEA, 2014).

Figure 2.4: European Environment Agency Report (EEA, 2013) – Measurements of Particulate Matter

sub 10 micron (PM10)


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It is the monetary equivalent of the impact of each pollutant, which will allow an estimation of its external cost. While this will never be a precision figure, it is important for decision making on policy, as to the degree of investment justified. In other words, if it can be demonstrated that the benefits outweigh the costs, then clearly there is a strong justification for that investment. As such therefore, the next section summarises the current state of knowledge on the external costs associated with pollutants from Large Combustion Plants, namely SO2, NOx, and particulates.

Figure 2.5: ‘The Impact Pathway Approach’ (EEA, 2014)


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3. External Costs of Air Pollution in Turkey

3.1 General

The actual external cost of a pollutant is a complex issue affected by geographical location, such as the role of sunlight highlighted before, and complex dispersion process based on prevailing meteorological conditions. The European Environment Agency’s Report on Cost of Air Pollution (EEA, 2014) addresses these issues in its Annex 2 based on the latest Impact Assessment26 completed by the EU Commission in 2013 to support its Clean Air Policy Package27, which drew on expertise built up over several decades of air quality assessments, management and review activities in the EU and internationally. The latter of course referring to the UNECE process and its EMEP Protocol for Monitoring and Evaluation of the Long-range Transmission of Air Pollutants in Europe. Of interest in the Cost of Air Pollution (EEA, 2014) is the statement that:

- Ozone effects generate only a small amount of the overall pollution damage, with effects of fine Particulate Matter being far more significant. Recent analysis for the Gothenburg Protocol suggests that over 95 % of health damage from the main air pollutants is attributable to Particulate Matter. It may be argued that the role of ozone is being underestimated, perhaps through the omission of some types of effect, but ozone-related damage would need to increase very markedly for this to be a problem.

The report then presents in tabular form the estimates damage of pollution, expressed as Euros per tonne of emissions for the primary pollutants ammonia (NH3), nitrogen oxides (NOx), Particulate Matter sub 2.5 micron (PM2.5), Particulate Matter sub 10 micron (PM10), sulphur dioxide (SO2) and Non-Methane Volatile Organic Compounds (NMVOCs). The emission scenario used for the EMEP modelling to derive these values was 2010 and the output was expressed in Euros relative to a base year of 2005. This price year of 2005 was used for consistency with, for example, the cost benefit analysis, performed by the European Commission in support of the proposed Clean Air Policy Package. Note: The damage cost values per tonne pollutant will change with time, such as when emissions change, as new vehicles replace older vehicles with higher emissions, and should therefore not be assumed to be constant.

There are complex economics used to derive a monetary value for these forms of cost benefit analysis, so it is worthwhile reviewing this subject in some more detail. As the ‘Cost-benefit Analysis of Final Policy Scenarios for the EU Clean Air Package: Version 2’ (Holland, 2014) explains:

- The general form of the equation for the calculation of impacts is:

Impact = Pollution level x Stock at risk x Response function

Pollution may be expressed in terms of:

Concentration, for example in the case of impacts to human health where exposure to the pollutants of interest to this study occurs through inhalation, or;

Deposition, for example in the case of damage to building materials where damage is related to the amount of pollutant deposited on the surface.

The term ‘stock at risk’ relates to the amount of sensitive material (people, ecosystems, materials, etc.) present in the modelled domain. For the health impact assessment, account is taken of the distribution of population and of effects on demographics within the population, such as children, the elderly, or those of working age. Incidence and prevalence rates are used to modify the stock at risk for each type of impact quantified. Improved data availability has enabled this report to use country-specific rate data to a much greater degree than before.

26 http://ec.europa.eu/environment/archives/air/pdf/Impact_assessment_en.pdf 27 http://ec.europa.eu/environment/air/clean_air_policy.htm

http://ec.europa.eu/environment/archives/air/pdf/Impact_assessment_en.pdf

http://ec.europa.eu/environment/air/clean_air_policy.htm


48

3.2 Assessment of Health Benefits

Health benefits, in the form of reduced premature mortality and reduced morbidity, figure prominently in cost-benefit studies of actual and proposed European Directives on environmental quality control, indeed they 'drive' the positive benefit-cost results. As to how exactly these health-benefits are to be monetised, has led to some different approaches, but no one simple figure, which is applicable. In the nineties and early 2000s, there was a joint EU and US project over a period of fifteen years, called ExternE28, which through socio-economic research in the field of energy, set out to quantify the external costs associated with energy. In its ‘ExternE, Externalities of Energy Methodology 2005 Update’ (EU Commission, 2005)29, it clarified:

- The goal of the monetary valuation of damages is to account for all costs, market and non-

market. For example, the valuation of an asthma attack should include not only the cost of

the medical treatment but also the Willingness-To-Pay (WTP) to avoid the residual

suffering. It turns out that damage costs of air pollution are dominated by nonmarket

goods, especially mortality. If the WTP for a non-market good has been determined

correctly, it is like a price, consistent with prices paid for market goods. Economists have

developed several tools for determining non-market costs.

The Organisation for Economic Cooperation and Development (OECD) in their report ‘Valuing lives saved from Environmental, Transport and Health Policies: A meta-analysis of stated preference studies’ (OECD, 2010) clarify in relation to a WTP for a risk reduction that will extend that life:

- WTP is defined as the maximum amount that can be subtracted from an individual’s

income to keep his or her expected utility unchanged. Individuals are assumed to derive

well-being, or utility, from the consumption of goods.

However, as regards setting a non-market price, air pollution is somewhat unique in that it is more likely to affect older people and, perhaps because of correlation, persons who are already ill. In many respects it can be considered to be a cause of ‘accelerated ageing’. Therefore, the concentration of risks, such as those associated with air pollution, among the older-aged groups in society, might appear to suggest that the relevant aggregate social value should in turn be very low, due to the short periods of life that are saved by reducing those risks. Typically, such as for socio-economic studies related to accident injuries and mortality, an age profile of 40 years of age is assumed. However, for air pollution there has to be some legitimacy, to adjust downwards the Willingness to Pay (WTP), typically estimated for a 40-year-old, for those over 70 years of age. These are some of the complex and to a certain extent unresolved issues with assessing the monetised impact of air pollution.

As a result, the EU Commission and others use two approaches in monetising heath impacts based on the ‘Value of Statistical Life’ (VSL) and ‘Value of a Life Year’ (VOLY). As the US EPA explains30:

- The EPA does not place a dollar value on individual lives. Rather, when conducting a

benefit-cost analysis of new environmental policies, the Agency uses estimates of how

much people are willing to pay for small reductions in their risks of dying from adverse

health conditions that may be caused by environmental pollution.

- In the scientific literature, these estimates of willingness to pay for small reductions in

mortality risks are often referred to as the ‘value of a statistical life’. This is because these

values are typically reported in units that match the aggregate dollar amount that a large

group of people would be willing to pay for a reduction in their individual risks of dying in a

year, such that we would expect one fewer death among the group during that year on

average. This is best explained by way of an example. Suppose each person in a sample

28 http://www.externe.info/externe_d7/ 29 http://www.externe.info/externe_d7/sites/default/files/methup05a.pdf 30 http://yosemite.epa.gov/EE%5Cepa%5Ceed.nsf/webpages/MortalityRiskValuation.html

http://www.externe.info/externe_d7/

http://www.externe.info/externe_d7/sites/default/files/methup05a.pdf

http://yosemite.epa.gov/EE%5Cepa%5Ceed.nsf/webpages/MortalityRiskValuation.html


49

of 100,000 people were asked how much he or she would be willing to pay for a reduction

in their individual risk of dying of 1 in 100,000, or 0.001%, over the next year. Since this

reduction in risk would mean that we would expect one fewer death among the sample of

100,000 people over the next year on average, this is sometimes described as ‘one

statistical life saved’. Now suppose that the average response to this hypothetical question

was $100. Then the total dollar amount that the group would be willing to pay to save one

statistical life in a year would be $100 per person × 100,000 people, or $10 million. This is

what is meant by the ‘value of a statistical life’. Importantly, this is not an estimate of how

much money any single individual or group would be willing to pay to prevent the certain

death of any particular person.

This ‘Value of Statistical Life’ (VSL), also called the ‘Value of a Prevented Fatality’ (VPF), is an unfortunate term that often evokes hostile reactions among non-economists. However, while this approach is relevant for accidental deaths, it is not directly appropriate for air pollution mortality, as the 2005 ExternE Report clarifies (EU Commission, 2005):

- But whereas Value of a Prevented Fatality (VPF) is relevant for accidental deaths, it is not

appropriate for air pollution mortality; the latter is primarily cardio-pulmonary and the

associated loss of life expectancy per premature death is much shorter than for accidents.

Furthermore, one can show (Rabl, 2003) that the total number of premature deaths due to

air pollution cannot even be determined. One of the reasons is that air pollution cannot be

identified as cause of any individual death; it is only a contributory, not a primary cause of

death. Epidemiological studies of total (as opposed to acute) air pollution mortality cannot

distinguish whether the observed result is due to a few people suffering a large loss of life

expectancy or many suffering a small loss. It is quite plausible that everybody’s life is

shortened to some extent by pollution, in which case every death would be a premature

death due to pollution. Number of deaths is therefore not a meaningful indicator of the total

air pollution mortality (even though several authors who do not understand this point have

published numbers). Rather one has to use loss of life expectancy which is indeed a

meaningful indicator.

For the valuation of life expectancy one needs the Value of a Life Year (VOLY). However, it wasn’t until the 2000s, that VOLY started to receive attention, while a considerable number of studies had existed previously in relation to VSL / VPF. Often economists estimate VOLY as the constant annual sum which, taken over a remaining life span, has a discounted value equal to the estimated VSL. As to why the two values are currently used in the assessing air pollution? As the OECD Report (OECD, 2010) clarifies:

- Consider for example two alternative public programs, and suppose that both save 100

lives. But suppose that with one, the lives saved are those of young adults, whereas the

other saves the lives of the elderly. As long as the VOLY is constant with respect to age,

the policy that saves young adults, who have a longer life expectancy, would be concluded

to offer greater benefits if the VOLY is used. By contrast, if the VSL is used, and a single

figure is applied to people of all ages, the two policies would be concluded to provide the

same benefits.

In their ‘Cost of Air Pollution’ report (EEA, 2014), the European Environment Agency used Median VOLY and mean VSL values. For instance, the following data was used for assessing the impacts of PM2.5:


50

In contrast for NOx, while the valuations were broadly similar, the relative risk per 10 µg/m3 was different, such as the VOLY relative risk of acute mortality being 1.0027.

In addition to health impacts, the European Environment Agency Report on Cost of Air Pollution (EEA, 2014) took partial account of damage to crops from ozone and to materials from acid deposition. The former being based on a proportional change in yield per ppm of ozone per hour for a selected range of agricultural crops. Finally, the estimated damage of pollution, expressed as Euros per tonne of emissions of ammonia (NH3), nitrogen oxides (NOx), Particulate Matter sub 2.5 micron (PM2.5), Particulate Matter sub 10 micron (PM10), sulphur dioxide (SO2) and Non-Methane Volatile Organic Compounds (NMVOCs), were presented in a series of tables.

3.3 Assessment of Damage Cost per tonne of Particulate Matter

Figure 2.7 overleaf presents the relevant table for the damage cost in Euros for a tonne of particulate emissions. In general, the ‘Low VOLY’ costs were about two to three times smaller than the ‘High VSL’ generated costs, but as explained previously, this is due the economic assumptions used in the two different economic methodologies. However, what is more dramatic is the wide variability in the figures from country to country, the ‘High VSL’ monetary value for PM10 emission ranging from about €10,000 per tonne for Norway and the island nations of Cyprus and Malta, to over €100,000 per tonne for Belgium, the Netherlands, Italy and Switzerland, a factor of ten in the difference.

This discrepancy obviously needs some explanation, in particular given that such an assessment has not been completed for Turkey and a suitable value therefore needs to be selected for Turkey, based on an analogous country or countries. If we go back to the original equation in this section:

- Impact = Pollution level x Stock at risk x Response function

Figure 3.1: European Environment Agency Report (EEA, 2014) – Response Functions and Valuations

for PM2.5


51

The Response Function we have established in Figure 2.6, which is a uniform value. However, the ‘pollution level’ and ‘stock at risk’ are location specific. It was also highlighted previously with regard to the same report (Holland, 2014) that: ‘Improved data availability has enabled this report to use country-specific rate data to a much greater degree than before’. If a country is characterised by a high percentage of its population living in large urban centres, then clearly the ‘pollution level’ and ‘stock at risk’ values are both going to show a tendency to be high. Conversely, if the population dynamics are characterised by rural conditions and small urban centres, then the ‘pollution level’ is low due to the good dispersion available, as is the ‘stock at risk’, because the population density is also low. Indeed, if we consider Figure 2.7

below in this context, then one does see a trend, in that countries characterised by large cities demonstrate higher Particulate Matter damage estimates that those, which are both less densely populated and have an absence of large cities.

Figure 3.2: Damage per tonne (Euro) estimate from European Environment Agency Report (EEA,

2014) for Particulate Matter


52

The United Nations also provides details on population densities, such as percentage urbanisation and the size of cities, which is summarised in the map overleaf31.

Reviewing an expanded version of this map for the European Area shows that there is a trend, which can also be supplemented by reviewing the air pollution fact sheets for each country. These fact sheets are available on the website of the European Environment Agency32. For instance, Oslo, Norway’s largest city has a population of only 625,000, while Norway’s Particulate Monitoring network is comprehensive, involving thirty-two (32) monitoring stations. This monitoring demonstrated for 2010, that less than 0.5% of the urban population were exposed to PM10 levels above the relevant EU air quality objectives. Similarly, Malta’s population is less than half a million, while there is one city in Cyprus with a population over 100,000; the Limassol metropolitan area’s population amounting to 185,000. The low Particulate Matter damage per tonne estimates for these countries can therefore be explained on this basis.

Conversely, if we consider those countries with high damage costs; the Netherlands, Belgium and Italy, are characterised by large cities containing a high percentage of the population. Even Switzerland, has a low percentage of its population in the rural mountainous regions, the bulk of its eight million population being concentrated into a number of larger urban areas. Indeed, the Swiss EEA air pollution fact sheet shows for 2011 that 23% of the Swiss urban population were exposed to PM10 levels above the relevant EU air quality objectives.

31 http://esa.un.org/unpd/wup/Maps/CityDistribution/CityPopulation/2014_City_Urban.pdf 32 http://www.eea.europa.eu/themes/air/air-pollution-country-fact-sheets-2014

Figure 3.3: United Nations Department of Economics and Social Affairs Population Division -

Percentage urban and urban agglomerations by size class: 2014

http://esa.un.org/unpd/wup/Maps/CityDistribution/CityPopulation/2014_City_Urban.pdf

http://www.eea.europa.eu/themes/air/air-pollution-country-fact-sheets-2014


53

Clearly, if we seek an analogous country(s) for estimating the damage cost for Turkey, it should be from the top end of the scale, as Turkey is characterised by several large cities. In particular Istanbul alone, at a population of over twenty million, hosts more than a quarter of the country’s population. One could argue that the economic circumstances are different in Turkey than in Western Europe, but if we consider again the ‘Cost-benefit Analysis of Final Policy Scenarios for the EU Clean Air Package: Version 2’ (Holland, 2014), then this clarifies:

- For the Cost Benefit Analysis of the Gothenburg Protocol both estimated average EU-values and average values for the wider UNECE region (adjusted using population weighted Purchasing Power Parity (PPP) - adjusted GDP/capita) were used to demonstrate sensitivity to assumptions made at this point. The difference between the original EU valuations and the UNECE-Europe equivalent was shown to be small; the latter being lower by 18%.

Therefore, considerations of GDP per capita differences between the EU-28 and Turkey are not likely to be of significance.

It is therefore on this basis for Turkey recommended to use the following damage costs in Euros per tonne for the impacts of Particulate Matter. Note: The 2015 adjusted prices are based in a conversion of Euros in 2005 to Turkish Lira in 2005, which is then corrected for the annual inflation rate for the years 2005 to 2015. See calculation basis in the Appendix to this Annex B.

Recommended Damage Cost in Euros per Tonne (2005 prices) for Particulate Matter - Turkey

PM2.5 PM10

Low VOLY High VSL Low VOLY High VSL

55,000 160,000 35,000 100,000

Recommended Damage Cost in Turkish Lira per Tonne (adjusted to 2015 prices)

Low VOLY High VSL Low VOLY High VSL

179,300 521,600 114,100 326,000

Table 3.1 Recommended Damage Cost for Particulate Matter - Turkey

3.4 Assessment of Damage Cost per tonne of NOx

The assessment of the damage cost of NOx follows in the same manner, in that the European Environment Agency’s Report on Cost of Air Pollution from Industrial Facilities 2008 – 2012 (EEA, 2014) also provides a similar Table for the damage costs related to NOx, see Figure 3.4 overleaf. In an analogous fashion to the previous conclusions, there is also a trend related to countries characterised by large cities, to which is added a Northern European / Southern European divide. The latter related to the fact that the impact of NOx emissions is also heightened by the presence of intense sunshine and the resulting conversion to ground level ozone. As a result, one would expect that the countries in the Southern European would have high damage costs compared to those in more northerly locations, where there is an absence of this intense sunlight. Indeed, if we consider the United Kingdom, which despite its large city populations, has a relatively low NOx damage cost, then the EEA air pollution fact sheet for the UK shows that it has eighty-two (82) monitoring stations for ozone. For each year 2010, 2011, and 2012, the estimate of the urban population exposed to ozone levels above the relevant EU air quality objectives was zero percent.


54

On the other hand, Switzerland has a very high damage cost for NOx, while its air pollution fact sheet shows thirty-one (31) monitoring stations for ozone, and that for 2010, 51.5% of its urban population were exposed to concentrations of ozone above the reference level. In a similar fashion, the fact sheets for Slovenia and Italy also demonstrate high ozone results, which is what one would expect also for Turkey.

On the basis of the damage costs for countries in the Southern European basin characterised by large cities, the following is recommended as the damage cost in Euros per tonne of NOx for the situation prevalent in Turkey:


2014) for NOx


55

Recommended Damage Cost in Euros per Tonne (2005 prices) for NOx - Turkey

Low VOLY High VSL

10,000 25,000


Low VOLY High VSL

32,600 81,500

Table 3.2 Recommended Damage Cost for NOx - Turkey

It is noteworthy that these damage costs are considerably lower than those for Particulate Matter, which is consistent with several published analyses on the impact of air pollution.

3.5 Assessment of Damage Cost per Tonne of SO2

The sulphur dioxide damage cost is somewhat more complex, in that while there is a human health issue, there is also a significant impact on vegetation. As such then EU air quality standards, currently from Directive 2008/50/EC, set two limits for SO2, one based on health protection and the other based on protection of vegetation. Indeed, if we see from Figure 2.1 previously, the South Eastern region of Europe, including Turkey, has high values of SO2 relative to the limit value for protection of vegetation, a situation which does not occur to the same extent in Western Europe. Given the prevailing wind, there are probably transboundary effects occurring, but in the past emissions of sulphur dioxide in Western Europe were also considerably higher, but on the basis of both economic and political reasons, pollution control measures in Western Europe have reached a more advanced stage than the countries in Eastern Europe, which are still somewhat in the process of economic transition.

If we again consider the European Environment Agency’s Report on the Cost of Air Pollution (EEA, 2014), it provides a similar table as previous for the damage cost related to sulphur dioxide, see Figure 3.5 overleaf.


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If there is a pattern to be discerned in the range of figures above for the different countries, then it does have a linkage to Europe’s population density, see Figure 3.6 below reproduced from NASA’s Socioeconomic Data and Applications Centre33. Note: Turkey also has a high population density in many regions.

33 http://sedac.ciesin.columbia.edu/data/set/nagdc-population-landscape-climate-estimates-v2/maps


2014) for SO2

http://sedac.ciesin.columbia.edu/data/set/nagdc-population-landscape-climate-estimates-v2/maps


57

A trend towards higher damage costs is also to be seen for those countries in Eastern Europe. On this basis the following is recommended as the damage cost in Euros per tonne of SO2 for the situation prevalent in Turkey:

Recommended Damage Cost in Euros per Tonne (2005 prices) for SO2 - Turkey

Low VOLY High VSL

25,000 65,000


Low VOLY High VSL

81,500 211,900

Table 3.3 Recommended Damage Cost for SO2 - Turkey

Figure 3.6: Population Density in Europe reproduced from NASA’s Socioeconomic Data and

Applications Centre.


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3.6 Relative Importance of Particulate Matter

It is useful to consider some of the analysis completed in the “Cost-benefit Analysis of Final Policy Scenarios for the EU Clean Air Package: Version 2” (Holland, 2014). Table 3.4 below is a monetised equivalent of health impacts due to air pollution, 2025, EU28, €million/year, 2005 prices, for scenarios describing current legislation.

Impact Parameter Damage, €M/year

Acute Mortality (All ages) median VOLY O3 1,027

Acute Mortality (All ages) mean VOLY O3 2,468

Respiratory hospital admissions (>64) O3 42

Cardiovascular hospital admissions (>64) O3 187

Minor Restricted Activity Days (MRADs all ages) O3 3,595

Chronic Mortality (All ages) LYL median VOLY PM 156,315

Chronic Mortality (All ages) LYL mean VOLY PM 375,752

Chronic Mortality (30yr +) deaths median VSL PM 334,132

Chronic Mortality (30yr +) deaths mean VSL PM 680,525

Infant Mortality (0-1yr) median VSL PM 724

Infant Mortality (0-1yr) mean VSL PM 1,475

Chronic Bronchitis (27yr +) PM 12,967

Bronchitis in children aged 6 to 12 PM 456

Respiratory Hospital Admissions (All ages) PM 233

Cardiac Hospital Admissions (>18 years) PM 179

Restricted Activity Days (all ages) PM 30,365

Asthma symptom days (children 5-19yr) PM 343

Lost working days (15-64 years) PM 10,635

Total: Core median VOLY 217,818

Total: Core mean VOLY 439,082

Total: Core median VSL 394,569

Table 3.4 Monetised equivalent of health impacts due to air pollution, 2025, EU28, € million/year, 2005 prices

It is not the actual numeric values which are important, but the relative values. The key issue here is that health impacts are primarily driven by the impacts of Particulate Matter. This is a point also recognised by the WHO in their publication: “Health effects of particulate matter: Policy implications for countries in Eastern Europe, Caucasus and Central Asia” (WHO, 2013)34. This was developed in conjunction with UNECE’s Convention on Long Range Transboundary Air Pollution. As the document explains as to where Particulate Matter (PM) comes from:

- Particles can either be directly emitted into the air (primary PM) or be formed in the atmosphere from gaseous precursors such as sulphur dioxide, oxides of nitrogen, ammonia and non-methane volatile organic compounds (secondary particles).

34 http://www.unece.org/fileadmin/DAM/env/documents/2013/air/Health-effects-of-particulate-matter-final-Eng.pdf

http://www.unece.org/fileadmin/DAM/env/documents/2013/air/Health-effects-of-particulate-matter-final-Eng.pdf


59

- Primary PM and the precursor gases can have both man-made (anthropogenic) and natural (non-anthropogenic) sources.

- Anthropogenic sources include combustion engines (both diesel and petrol), solid-fuel (coal, lignite, heavy oil and biomass) combustion for energy production in households and industry, other industrial activities (building, mining, manufacture of cement, ceramic and bricks, and smelting), and erosion of the pavement by road traffic and abrasion of brakes and tyres. Agriculture is the main source of ammonium.

- Secondary particles are formed in the air through chemical reactions of gaseous pollutants. They are products of atmospheric transformation of nitrogen oxides (mainly emitted by traffic and some industrial processes) and sulphur dioxide resulting from the combustion of sulphur-containing fuels. Secondary particles are mostly found in fine PM.

- Soil and dust re-suspension is also a contributing source of PM, particularly in arid areas or during episodes of long-range transport of dust, for example from the Sahara to southern Europe.

Large Combustion Plants are therefore not the only significant anthropogenic source, but they are a contributing factor. Furthermore, the epidemiological evidence in relation to Particulate Matter is very conclusive, as the two examples to follow demonstrate, the first taken directly from the WHO guidance document.

- A copper smelter strike in 1967–1968 in four states, and the closure and reopening of a steel mill in Utah Valley in 1986–1987, are two examples of unplanned events which had a positive impact on health by decreasing air pollution concentrations in specific areas.

- The copper smelter strike led to a 60% drop in regional sulphur dioxide concentrations over eight months and was associated with a 2.5% decrease in mortality. In the Utah Valley, the closure of the steel mill, which was the primary source of PM10 in the area, lasted for 13 months and led to a decrease in PM10 levels of approximately 50% during the closure in winter compared to the previous winter when the mill was operating. Hospital admissions for children were approximately three times lower and bronchitis and asthma admissions were halved when the mill was closed. Furthermore, the reported 3.2% drop in daily numbers of deaths was associated with a simultaneous fall in PM10 levels of approximately 15 μg/m3 while the steel mill was closed, the strongest association being with respiratory deaths.

The second relates to a lignite fired 1,650 MW Power Station called TENT A in Serbia. This had fallen into considerable disrepair, due to the economic and political crises at the time, in particular the particulate control systems were operating to a standard, which was well below what is recognised as good practice. In the mid-2000s a programme of improvement started focusing on each of the individual combustion units and their particulate control technology. The Table overleaf records some medical data from the local area in the vicinity of the Plant.

Respiratory illness as a percentage of total illness

Cat. of inhabitant

Year

2001 2002 2003 2004 2005 2006 2007 2008 2009

Preschool children 74.4 66.1 62.8 68.1 63.3 64.4 63.9 58.4 52.7

School children 82.6 85.3 86.2 76.7 75.6 77.1 69.3 52.7 46.2

Adults 43.8 41.5 43.2 41.1 44.0 25.3 25.7 20.4 23.4

Table 3.5 Medical Data from the vicinity of the Serbian lignite fired plant TENT A

3.7 Conclusions on Pollutant Damage Costs

The following Table summarises the environmental damage costs which are recommend to be used for assessing emission savings from Turkish Large Combustion Plants:


60

Pollutant


Low VOLY High VSL

PM10 114,100 326,000

PM2.5 179,300 521,600

NOx 32,600 81,500

SO2 81,500 211,900

Table 3.6 Summary of recommended Environmental Damage Costs in Turkish Lira (2015 price basis)

As has been previously highlighted, the Low VOLY figure corresponds better to true world conditions, as it reflects the demographics most affected by air pollution, namely the population profile, which are already in their elderly years. As regards the two figures above for Particulate Matter, the finer the particle size, such as sub 2.5 micron, the more it penetrates the lungs with the resulting greater health impact. The majority of power stations use electrostatic precipitators for particulate control and provided these are maintained to a high standard, they are very effective at controlling particulate emissions. As the industry group the Institute of Clean Air Companies clarifies35:

- Electrostatic precipitator overall (mass) collection efficiencies can exceed 99.9%, and

efficiencies in excess of 99.5% are common. Precipitators with high overall collection

efficiencies will have high collection efficiencies for particles of all sizes, so that excellent

control of PM10 and PM2.5 will be achieved with well-designed and operated electrostatic

precipitators.

- Precipitator collection efficiencies will be somewhat lower for particles with diameters near

0.3 microns. The reason for a minimum in collection efficiency for 0.3 micron particles is

that both particle charge and the resistance of the gas to particle motion both increase

with particle size. Near 0.3 micron, the particle charge is low enough and the resistance to

particle motion is high enough that particles are collected relatively poorly. In practice,

however, this effect means only that a precipitator with a 99.9% overall mass collection

efficiency will collect over 90% of 0.3 micron particles, and over 97-98% of all 0-5 micron

particles.

Therefore, the control technology is less efficient for the smaller sized particulates, as is shown in the below, which is a graph of typical coal plant emission profiles from Electrostatic Precipitators (ESP) and Fabric Filters (FF):

35 http://www.icac.com/?Particulate_Controls

http://www.icac.com/?Particulate_Controls


61

This then would justify, for assessments of environmental damage costs for particulate emissions from power stations, that the relevant monetary values assessed for PM2.5 should be applied.

Figure 3.7: Electrostatic Precipitator (ESP) and Fabric Filter emission – source Indigo Technologies LLC; Source: http://www.powermag.com/the-problem-of-fine-particles/?pagenum=4

http://www.powermag.com/the-problem-of-fine-particles/?pagenum=4


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4. References

EEA, 2013: European Environment Agency’s ‘Air quality in Europe – 2013 Report’. EEA

website36

EEA, 2014: European Environment Agency’s ‘Cost of Air Pollution from European

Industrial Facilities 2008-2012’. EEA website37

EU Commission, 2005: ‘ExternE, Externalities of Energy Methodology 2005 Update’.

Available on the website of the ExternE project38

Holland, 2014: ‘Cost-benefit Analysis of Final Policy Scenarios for the EU Clean Air

Package: Version 2’. Available on the website of the International Institute for Applied

Systems Analysis (IIASA)39

OECD, 2010: ‘Valuing lives saved from Environmental, Transport and Health Policies: A

meta-analysis of stated preference studies’ Available on the website of the Organisation

for Economic Cooperation and Development (OECD)40

WHO, 2013: ‘Review of evidence on health aspects of air pollution – REVIHAAP project:

Final technical report’. WHO website41

WHO, 2013b: ‘Health risks of air pollution in Europe – HRAPIE project: New emerging

risks to health from air pollution – results from the survey of experts’. WHO website42

36 http://www.eea.europa.eu//publications/air-quality-in-europe-2013 37 http://www.eea.europa.eu/publications/costs-of-air-pollution-2008-2012 38 http://www.externe.info/externe_d7/sites/default/files/methup05a.pdf 39http://www.iiasa.ac.at/web/home/research/researchPrograms/MitigationofAirPollutionandGreenhousegases/TSAP_CBA_corresponding_to_IIASA11_v2.pdf 40http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?doclanguage=en&cote=env/epoc/wpnep%282008%2910/final 41 http://www.euro.who.int/__data/assets/pdf_file/0004/193108/REVIHAAP-Final-technical-report-final-version.pdf?ua=1 42 http://www.euro.who.int/__data/assets/pdf_file/0017/234026/e96933.pdf?ua=1

http://www.eea.europa.eu/publications/air-quality-in-europe-2013

http://www.eea.europa.eu/publications/costs-of-air-pollution-2008-2012

http://www.externe.info/externe_d7/sites/default/files/methup05a.pdf

http://www.iiasa.ac.at/web/home/research/researchPrograms/MitigationofAirPollutionandGreenhousegases/TSAP_CBA_corresponding_to_IIASA11_v2.pdf

http://www.iiasa.ac.at/web/home/research/researchPrograms/MitigationofAirPollutionandGreenhousegases/TSAP_CBA_corresponding_to_IIASA11_v2.pdf

http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?doclanguage=en&cote=env/epoc/wpnep%282008%2910/final

http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?doclanguage=en&cote=env/epoc/wpnep%282008%2910/final

http://www.euro.who.int/__data/assets/pdf_file/0004/193108/REVIHAAP-Final-technical-report-final-version.pdf?ua=1

http://www.euro.who.int/__data/assets/pdf_file/0004/193108/REVIHAAP-Final-technical-report-final-version.pdf?ua=1

http://www.euro.who.int/__data/assets/pdf_file/0017/234026/e96933.pdf?ua=1


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Appendix - Conversion of quoted damage costs in

Euros per tonne (2005) to Turkish Lira (2015)

Given damage costs quoted on a 2005 basis in Euros per tonne, it is necessary to convert these to Turkish Lira at a current (2015) cost basis. In this regard there are two variables, one of which is the fluctuating exchange rate and the second of which is the variable inflation rate, the latter of course being location specific to the region chosen. The most relevant methodology in terms of conversion is to take the 2005 costs in Euros per tonne and convert them to Turkish Lira using the conversion rate which applied in 2005. Then by applying Turkish inflation rates convert the prices from 2005 to a 2015 basis.

Exchange rates for Euros to Turkish Lira are readily available on the internet, including historical data43. On the 1st January 2005, €1 was worth 1.869 Turkish Lira (TRY). However, if we review the trend for the year 2005, this was a somewhat peak value with the exchange rate being around €1 to 1.55 TRY at the end of 2005. A representative value from the historical data is therefore about €1 equal to 1.65 TRY.

Average annual historical inflation rates are also readily available on the internet from the Turkish Government sources44, which is provided below:

Year Average Inflation Rate %

2015 Assumed 8.17 as per 2014

2014 8.17

2013 7.19

2012 4.31

2011 11.89

2010 7.64

2009 6.23

2008 9.09

2007 7.17

2006 10.06

2005 5.19

43 Such as: http://www.xe.com/currencycharts/?from=EUR&to=TRY&view=10Y 44 Column 3 being the inflation rate for commercial and Column 5 for households, the average being taken: http://evds.tcmb.gov.tr/anaweb/enflasyonTR.html

http://www.xe.com/currencycharts/?from=EUR&to=TRY&view=10Y

http://evds.tcmb.gov.tr/anaweb/enflasyonTR.html


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The method of calculating the cost is based on incremental steps:

Cost 2006 = Cost 2005 (1 + Inflation Rate for 2005)

Cost 2007 = Cost 2006 (1 + Inflation Rate for 2006)

Cost 2008 = ……..

On this basis if we started with 1 TRY in 2005; by the end of 2015 it should be equivalent to 2.1 TRY.

The final conversion from Euros in 2005 basis to Turkish Lira in 2015 is:

€1 x 1.55 x 2.1 = 3.26 TRY

Note: The exchange rate in early 2015 is about €1 equals 2.8 TRY. Using the same formula as before, if €1 in 2005 prices is converted to a Euro in 2015, it equates to €1.21 given the low inflation rate which prevailed of 0.3 to 2.2%. Therefore, if we convert a €1 in 2005 to TYR in 2015 by this methodology, we get:

1 x 1.21 x 2.8 = 3.39 TRY

This is very similar to that derived previously. However, as the first methodology was more detailed, it will be the one which will be used.


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ANNEX C Timescales for Implementing the LCP Directive

Table of Contents

1. Introduction

2. Challenges – technical

2.1 General

2.2 Design Phase

2.3 Permitting Phase

2.4 Installation Phase

2.5 Conclusions

3. Challenges – economic

3.1 Unfair competitive advantage if investment is delayed

3.2 Viability of investment decision

3.3 Economic viability of the sector

3.4 Security of supply

3.5 Efficient use of resources

4. Experience in other Jurisdictions

4.1 Germany

4.2 The original Large Combustion Plant Directive and UK experience

4.3 Revised Large Combustion Plant Directive and those countries implementing a

NERP

4.4 The Industrial Emissions Directive and the Transnational Plan

4.5 Conclusions

5. Possible options

5.1 Option 1: Fixed timescale with no additional measures

5.2 Option 2: Fixed timescale with additional flexibility measures

5.3 Option 3: National Plan with timescales tailored to each LCP

5.4 Conclusions


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1. Introduction

This document addresses the key considerations, which would influence the setting of timelines to implement the emission standards of the Large Combustion Plant Directive or the Industrial Emissions Directive to the Large Combustion Plant (LCP) sector in Turkey. It then proposes the various options for these timelines, which are relevant to the Regulatory Impact Assessment process.

In doing so it is necessary to first consider the various challenges, which the implementation of this legislation presents, then to review the experience to date, which has been gained in existing Member States with the implementation of this legislation. Finally, it is appropriate to conclude with a number of options, by means of which the necessary compliance timelines could be achieved.

2. Challenges - Technical

2.1 General

Large Combustion Plants are not only large in size, but require considerable specialist man hour and material input into the design, permitting, component manufacture, installation and commissioning phases. As such therefore any major upgrade has a timeframe of several years, the number of years being also related to technology characteristics of the LCP, such as whether it is gas fired or coal fired. While in theory such timeframes could be shortened, such as by applying more resources, for example 24-hour shift work, what results is less than optimum: Costs rise, inefficiencies occur, quality suffers and most critically when any form of construction work is ‘rushed’, there is a regretful rise in construction related accidents. As such therefore from the outset, any timeframe for compliance set in legislation must be realistic and readily achievable, indeed it should also lead to a situation in which resources are applied in a manner to minimise cost and maximise benefit.

From the technical perspective the relevant project phases and associated challenges can be summarised by the following:

2.2 Design Phase

Any emissions upgrade for existing thermal plants requires a unique design solution, custom made to the characteristics of the plant technology and site environment. This will require the power plant engineers interfacing with a number of different technology vendors, vendors which have a proven track record in delivering solutions for desulphurisation, DeNOx, etc. In some cases, the technology choice will be relatively straightforward, in that proven designs are available, such as for LCPs fired on imported coal. However, for those fired on indigenous Turkish lignite, the ash and moisture content are generally far higher than to be found in lignite deposits in other countries. In particular, with lignite from the Afsin-Elbistan basin, the experience to date with particulate removal and desulphurisation systems operating on this lignite has been less than satisfactory.

A proven ‘off the shelf’ design does not exist and is still awaiting development, a process which will have to occur with the input of local engineering resources, who have the practical experience of this lignite. A process of design and development is therefore recommended for emissions control systems for LCPs combusting lignite from the Afsin-Elbistan basin, where a combustion unit in one LCP should be upgraded and proven in actual service, before further replication occurs to other combustion units. The alternative of completing an ‘all in one go’ upgrade, with the same design applied to all combustion units at once, is not recommended in this case, as the risk of getting it wrong with the resulting large sale and costly replication of mistakes, is considered too high. Note: Germany’s KfW Development Bank produced a report in 2009 evaluating the desulphurisation upgrades it assisted in funding and which were completed in the mid-nineties


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for the 210 MWe EÜAS lignite power station in Orhaneli and the 630 MWe lignite power station in Yatağan45. As it reported:

- ‘The Flue Gas Desulphurisation (FGDs) are generally capable of effectively

desulphurising the flue gas at both power station sites.

- The requisite sulphur dioxide separation rate of 95% has not been consistently

reached, though, and there have been frequent shutdowns of the FGDs, because the

flue gases of the power stations did not correspond with the specifications of the

FGDs or technical defects arose in the FGDs themselves, particularly at Yatağan.

- Although long-standing operational experience with the FGD in Orhaneli has revealed

substantial technical problems, the operator has credibly demonstrated that it has

identified the causes of the problems and is working successfully to eliminate them.

No completely trouble-free operation can presumably be expected in future either, but

sustainability is graded as sufficient (Subrating 3). Due to the multiple problems and

the resulting operation downtimes in the FGDs in Yatağan, project sustainability has

been unsatisfactory till now. Considering the high priority, the executing agency now

attaches to the FGDs, the Yatağan plant can be expected to remain in long-term

future use with the attendant benefits (Sustainability for Yatağan: Subrating 3)’.

In some cases, as part of the privatisation process, preliminary designs would have been completed of the necessary emissions upgrades required. However, even where the relevant technology solution is known, the detailed design and tendering process necessary to reach a position where contracts could be awarded would have a timeframe of at least a year.

Finally, while the problematic nature of Turkish lignite is acknowledged, it is also disappointing to date, that what can be described as ‘technical ownership’ of the issue has not occurred. If we consider the KfW Development Bank mentioned above, they also in the same period in the mid-nineties funded desulphurisation upgrades to the large lignite fired power station in Mae Moh in Thailand. The lignite there has a high ash content of 11% and a moisture content of 35%, which while high, are not as high as the Alfsin-Elbistan basin, which can have ash content of double that value and moisture content of 55%. As the similar ex-post report, produced in 2006 by the Kfz Bank for the Mae Moh project,46 discussed in relation to the power plant blocks upgraded with desulphurisation units:

- In terms of the overall objective indicator, the project was also successful as there

have been no emission-related restrictions in the power plant operation since 2001.

The average annual time availability of blocks 4-7 was 87.3% and their capacity

utilisation was almost 86%.

In contrast with Afsin-Elbistan B, when it was found that the desulphurisation units were being overloaded with particulates from the high ash lignite, they were simply by-passed. No effort was made to rectify the problem at source by suitable modifications to the power plant or at least a phase of design development, with appropriate test work as required. From a compliance perspective, this is simply unacceptable. The lignite from the mine is not going to change and it is up to those responsible for the power plant operation to implement Best Available Techniques for its combustion, if that means refining and optimising existing technical solutions, which are on the market place, then this is their obligation.

2.3 Permitting Phase

Large Combustion Plants are regulated not only in the operational phase, but also as projects they fall within the scope of Turkey’s legislation on Environmental Impact Assessment, which

45 https://www.kfw-entwicklungsbank.de/migration/Entwicklungsbank-Startseite/Development-Finance/Evaluation/Results-and-Publications/PDF-Dokumente-R-Z/Turkey_Orhaneli_2009.pdf 46 https://www.kfw-entwicklungsbank.de/migration/Entwicklungsbank-Startseite/Development-Finance/Evaluation/Results-and-Publications/PDF-Dokumente-R-Z/Thailand_Mae_Moh_Flue_2006.pdf

https://www.kfw-entwicklungsbank.de/migration/Entwicklungsbank-Startseite/Development-Finance/Evaluation/Results-and-Publications/PDF-Dokumente-R-Z/Turkey_Orhaneli_2009.pdf

https://www.kfw-entwicklungsbank.de/migration/Entwicklungsbank-Startseite/Development-Finance/Evaluation/Results-and-Publications/PDF-Dokumente-R-Z/Turkey_Orhaneli_2009.pdf

https://www.kfw-entwicklungsbank.de/migration/Entwicklungsbank-Startseite/Development-Finance/Evaluation/Results-and-Publications/PDF-Dokumente-R-Z/Thailand_Mae_Moh_Flue_2006.pdf

https://www.kfw-entwicklungsbank.de/migration/Entwicklungsbank-Startseite/Development-Finance/Evaluation/Results-and-Publications/PDF-Dokumente-R-Z/Thailand_Mae_Moh_Flue_2006.pdf


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is aligned to the EU’s legislation in this area. For the purpose of this legislation, a ‘project’ means “the execution of construction works or of other installations or schemes” and if a change or an extension to a thermal power plant of over 300 MW thermal input occurs, which may have significant adverse effects on the environment, then the legislation on Environmental Impact Assessment is engaged. As such then, a major emissions’ upgrade at an LCP will, as a minimum, engage a planning process and potentially also an Environmental Impact Assessment procedure.

The permitting timeframe therefore includes preparation of the application, submission of the application and a period of consideration by the authorities before the final permit award. If an Environmental Impact Assessment is required, then not only is the complexity of the documentation increased, but also the time period of consideration is increased, as it has to include sufficient periods for public participation. Indeed, the steps involved include:

- screening;

- consultations with the public and relevant authorities;

- scoping;

- preparation of the Environmental Impact Assessment report;

- evaluation of the report;

- final decision; and

- monitoring and control.

While there is some overlap between the design phase and the preparation of the permit documentation, it is not until the end of the design phase when the final design is agreed that the submission of the permit application, with Environmental Impact Assessment report if required, could occur. It is likely that at least a further six months would need to be allowed for, until such time as the final permit is achieved.

2.4 Installation Phase

Specialist equipment will have to be manufactured by the suppliers, delivered to site, installed and commissioned. In advance of this during the manufacturing phase, the local site will have to be prepared, such as by the completion of the civil works, electrical and utility interfaces, etc. An important consideration impacting an existing LCP is that units have to be taken off-line during this construction phase. This is not always readily practical, as in Turkey the grid demand is very high during both the winter heating and summer cooling periods.

It may well be for a large LCP that the installation phase may have to be staggered in order to maintain security of supply, such that the individual combustion units on the site would have to be upgraded sequentially, in order that the whole LCP is not taken off line, only the individual units one at a time. The scheduling of such outages for a large LCP, ideally during periods where grid demand is lowest, may have to occur over a period of several years. Regardless of these scheduling considerations, the component manufacture, delivery, installation and commissioning of a large emissions control system for an LCP has a timescale of the order of two years.

Note: The KfW Development Bank’s report for the desulphurisation upgrades completed at the EUAS lignite power stations in Orhaneli and Yatağan reported implementation periods of 45 and 126 months respectively, the latter being the subject to protracted legal disputes.

2.5 Conclusion

The timescales required will depend on the size of the LCP and its technical characteristics. However, a significant emissions control upgrade will have a timescale of the order of three and a half years. This could easily be extended depending on the complexity of the permitting requirements and any requirements related to having to stagger the outage periods on the individual combustion units comprising the LCP. For LCPs operating on indigenous Turkish lignite which has proven problematic to date, in particular that from the Afsin-Elbistan basin, it is recommended that the emissions control technology be developed and proven in use on one combustion unit, before replication occurs to other combustion units.


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3. Challenges - Economic

3.1 Unfair competitive advantage if investment is delayed For the circumstances of sizeable LCPs operating in the power generation market, the environmental upgrade costs will be of the scale of hundreds of millions of Turkish lira. This alone dictates that if an extended period of compliance is available, a company will seek, as much as possible, to wait to the end of the compliance period before completing the necessary investment. In other words, putting at a competitive disadvantage those early movers, who have already implemented the necessary CAPEX and OPEX.

3.2 Viability of investment decision If the effectiveness of the investment is expressed in cost per tonne of pollutant removed, then a quite dramatic picture evolves in relation to older LCPs, which are approaching the end of their lifespan. First of all, any CAPEX has to be justified over the limited remaining lifespan of an older LCP, which would be far less than the typical 35-year lifespan, which would occur if the same emissions control technology was being installed on a newly constructed LCP. Secondly, as the LCP technology is already aged, its energy efficiency is likely to be lower than more modern LCPs it is in competition with. The tendency therefore is that the grid operators will dispatch such an older less efficient LCP less frequently, namely in mid-merit operation rather than the near continuous base load operation. As such then, both on an annual basis and in relation to the remaining lifespan, the number of hours of operation will be considerably lower than that of a similar emissions control investment at a new LCP. For instance, analysis in Finland has shown that cost per tonne of NOx removed for an LCP upgrade with a five-year amortisation period is twice that for a similar upgrade amortised over a twenty-year period.

Therefore, before engaging in a ‘one size fits all’ strategy of upgrading each LCP to the same emissions control performance, the question has first to be asked as to whether for older LCPs with limited lifespan, the investment is justified in the first place. A longer term strategy for such older LCPs could potentially be to direct investment instead to a replacement new LCP, which would not only be fully compliant with the emissions requirements, but also more energy efficient. Indeed, when considering locations to build new LCPs, an existing LCP site with its connection to electricity grids, water supplies and a pool of experienced labour, is a highly desirable location. However, there is an extended time period require to design, permit, construct and commission a new LCP, which depending on technology type and location could exceed five years. For an LCP compliance strategy to be effective in terms of optimum use of financial resources, the compliance period should be long enough to incorporate sufficient time for the delivery of a modern replacement LCP rather than constraining to solely the option of an emissions’ control upgrade, to an older LCP with limited remaining lifespan.

3.3 Economic viability of sector The EU’s pollution control legislation is based on the implementation of Best Available Techniques, where available is defined as:

‘Available techniques shall mean those developed on a scale which allows implementation in the relevant industrial sector, under economically and technically viable conditions, taking into consideration the costs and advantages, whether or not the techniques are used or produced inside the Member State in question, as long as they are reasonably accessible to the operator’.

Therefore, economic viability is a key consideration for the sector. While one could consider the power generation sector in Turkey as to be a ‘sector’ in its own regard, in reality it is useful to break it down into those which are gas fired, i.e. predominately gas turbines, those which use imported coal and finally those which are fired on indigenous lignite. While all of these are


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competing in the same electricity market, there are very different technical characteristics, which greatly impact on the costs for emissions control.

If we consider gas turbines, the emissions compliance issues are limited to NOx, which are controlled by modern burner designs. Even for older gas turbines, which would not meet future NOx requirements, the CAPEX requirements of an emissions upgrade are of a manageable scale. For imported coal with good calorific value and relatively low sulphur content, the CAPEX and OPEX is higher, as investment in both desulphurisation and DeNOx is required. However, the technology solutions are readily available, both from the viewpoint of being proven technology and having been shown in numerous electricity markets to be affordable for the imported coal generation sector, i.e. it has not put it at a competitive disadvantage.

The same though does not directly apply to indigenous lignite. As has been mentioned already there is for some Turkish lignite resources, such as the Afsin-Elbistan basin, concerns as to whether the required emissions control technology itself could at this moment in time be considered ‘reasonably accessible to the operator’. A period of design and development being first required.

There is also the fact that as the moisture content of the indigenous lignite is so high and its calorific value so low, the volume of flue gas generated in order to produce each unit of electrical output is disproportionally high. Note: Both the CAPEX and OPEX of the emissions control system are directly related to the volumetric flow of flue gas. Therefore, as the compliance of the indigenous lignite power generation sector is primarily connected with very large desulphurisation and DeNOx systems, a disproportionate financial burden falls on this sector.

The speed of implementation of emissions controls in a sector, which requires large financially onerous engineering upgrades, is of paramount importance with respect to the economic viability of that sector.

Note least, as the ability to raise large financial sums on the capital markets is always constrained. Large and relatively old lignite fired LCPs, faced with a short timeframe for emissions compliance, could simply find themselves no longer financially viable. On the other hand, the financial viability could be significantly improved if the upgrade occurred on a staggered basis, such as by one combustion unit at a time.

3.4 Security of supply Turkey has an electricity market, for which targets have been set to decrease the current share of generation by imported natural gas, which is about 40%, down to 30% by 2020. At the same time, it is planned to increase the utilisation of domestic lignite and hard coal resources and continue to benefit from imported coal usage. From the opposite perspective, gas turbine technology offers the lowest CAPEX and quickest roll out time for compliance with new emissions standards.

It is financially attractive to consider replacing aging coal plants with modern Combined Cycle Gas Turbines, as has been done in many other countries to date. Naturally this is in conflict with the aims of Turkey’s energy strategy, which has to consider security of supply and the implications of increasing dependency on imported natural gas. The conclusions are therefore obvious, if the promotion of coal and domestic lignite is a key policy objective, then any resulting compliance strategy has to accommodate the longer timescales required for implementing emissions control systems to coal fired LCPs.

3.5 Efficient use of resources The implementation of emissions control technologies to the Turkish LCP sector in order to comply with the relevant EU legislation will result in significant expenditure of some several billion Turkish Lira. It is of course desirable that this expenditure is not only optimised, but also


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contains a high domestic content, rather than a high reliance on imported components and labour.

While there are a number of internationally recognised suppliers of flue gas desulphurisation and DeNOx systems, there is no indigenous Turkish supplier, although Turkish contractors, such as Gama, have worked extensively on power plant projects, which have included such emissions control equipment. A time frame for compliance for the LCP sector, which was of short duration, would first of all have the tendency to overload the equipment suppliers and contractors with the available experience in this area. As a result, tender prices would increase, due to the ready availability of work, and there would also be a potentially loss in quality. Another consequence which would result would that there would be a greater tendency to rely on imported pre-fabricated equipment sections, labour and expertise.

On the other hand, a longer time frame would lead to a more competitive situation with regard to both equipment vendors and installation contractors. It would also allow Turkish resources time to up-skill in this technology area and potentially supply a greater percentage of the specialist equipment components, such as fabricating corrosion resistant vessels. Indeed, as has been highlighted already, the problematic features associated with Turkish lignite really require an element of local design expertise to be developed, such that standard designs, already developed for lignite resources in other countries, can be optimised for the process conditions to be expected at a Turkish lignite fired LCPs.

4. Experiences in other Jurisdictions

4.1 Germany

Germany in the late seventies and eighties was characterised by a media and public outcry related to ‘Waldsterben’ or dying forests, which was attributed to the sulphur dioxide emissions of power plants and heavy industry. While from a scientific perspective the assumptions of forest damage were not in time substantiated as being related to the so called ‘acid rain’, it resulted in considerable political pressure to be seen to be taking effective action. As a result, the German GFA-VO, an ordinance which regulated Large Combustion Plants, was enacted on 1st July 1983 and was a classic piece of ‘command and control legislation’, setting uniform emissions limits and a fixed timetable for upgrading existing LCPs.

New plants were required to comply with an emissions limit for sulphur dioxide of 400mg/m3 or 650mg/m3 sulphur dioxide for plants using high sulphur coal. In addition, the legislation required new plants to achieve an 85% rate of desulphurisation. For existing plants interim emissions limits were set out, which were based upon their capacity and remaining operating time. These plants were required to meet the new plant sulphur dioxide standards by 1st April 1993. In effect all German large combustion plants were required to fit flue gas desulphurisation equipment by the 1993 deadline or close down.

At the time the GFA-VO was enacted, knowledge of the use of Flue Gas Desulphurisation (FGD) technologies was fairly limited, while in order to meet the legislative deadlines, operators had to plan, construct and commission the FGD facilities much quicker than would normally have been the case. As a result, many plant operators experienced additional difficulties. The construction of an FGD plant had to be planned in parallel to the licensing procedures.

As a result, operators faced significant uncertainties and risked being forced to discard or alter their plans if the licensing authority came up with new requirements. Because all German LCPs had to be retrofitted more or less at the same time, FGD suppliers were overburdened. This led to a loss of quality and the subsequent need for additional repair work. It also resulted in a failure to optimise the operation of the FGD systems introduced across the entire fleet of power stations, as there was no opportunity to learn from earlier mistakes, such as equipment faults that might otherwise have been avoided.

In West-Germany as a whole more than 70 power stations with a total capacity of 109,792 MWth (roughly 75% of the total 145,000 MWth) were retrofitted with FGD, amounting to some


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14.3 billion DM in investment (€1 = 1.96 DM). Note: It was the later opinion of one analyst that if this investment had been done later, as was the case in other Member States, it could have been done a third cheaper. However, on the other hand ‘Made in Germany’ is a big brand and there is a cultural tendency there to be ‘technology forcing’, such that it is foreseen that they will then become the resulting ‘technology providers’ elsewhere.

4.2 The original Large Combustion Plant Directive and UK experience The original Large Combustion Plant Directive 88/609/EEC was introduced as a ‘daughter’ directive to the 1984 Air Framework Directive and came into force in 1990 as a regulation on emissions from new and existing LCPs. It was a ‘command and control’ instrument for new plants, which set uniform emission limit values, differentiated by plant size and fuel type for sulphur dioxide, nitrogen oxides and dust. For existing plants, it was a flexible instrument, establishing progressive national emissions reduction targets and leaving the choice of implementing the targets to individual Member States. For sulphur dioxide the legislation required for the UK a reduction in total emissions from existing combustion installations, of 20% by the end of 1993, 40% by 1998 and 60% by 2003, taking 1980 emissions as the baseline.

The 1988 Large Combustion Plant Directive was transposed into UK legislation through the ‘Large Combustion Plant (New Plant) Directions 1991’ and the ‘UK plan for the Reduction of Emissions into the Air of Sulphur Dioxide and Oxides of Nitrogen from Existing Large Combustion Plants’. The latter was a result of extensive consultations between the government and the privatised electricity industry. The reduction targets in the EU Directive were formally set out in the UK's National Plan for reducing emissions from large combustion plants. This National Plan (the Plan) allocated emission reductions for all four nations in the UK and by sector – the electricity supply industry, refineries, iron and steel works and ‘other industry’.

The Plan included the electricity sector’s targets sub-divided into company ‘bubbles’ or quotas for the two main non-nuclear generators in the UK, namely PowerGen and National Power. Annual reduction targets were allocated to each sector up to 2003. While the EU Directive required aggregate emissions to be less than the targets set for 1993, 1998 and 2003, the UK National Plan required individual sectors to meet their targets annually. Hence the overall reductions required by the plan were more stringent than those required by LCPD.

Annual emission limits were included for each plant, and for each sector, the sum of their limits had to remain within the Plan’s overall sector total for each year. In England and Wales, each National Power and PowerGen plant was assigned a fixed emission limit based on Best Available Techniques Not Entailing Excessive Cost (BATNEEC) and a separate quota application, which was lower than the limit, with the sum of each plant’s quota being equal to its annual total under the Plan. Each company was allowed to swap quotas between their plants so long as neither of the limits were exceeded.

4.3 Revised Large Combustion Plant Directive and those countries implementing a NERP The revised Large Combustion Plant Directive 2001/80/EC contained for existing plants a number of flexibility mechanisms. Plants can for instance ‘opt out’ with operating hours limited to a fixed timeframe, Directive 2001/80/EC, defining this timeframe as 20,000 operational hours between the beginning of 2008 and the end of 2015. For other existing plants compliance can be achieved in two ways. The first option being a ‘one size fits all’ approach, involving application of the Emission Limit Values (ELVs) in the Directive in the same manner to every LCP.

Alternatively, a flexible approach to those existing plants, or indeed to some of those existing plants, can be achieved by including them in a National Emission Reduction Plan (NERP). In this way a form of emissions trading ensues, in that emissions reductions exceeding the LCP


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Directive requirements in some sites can be offset by allowing LCPs at some other locations, to operate at higher emissions than those ELVs prescribed in the LCP Directive. In this way the operators can optimise their investments and achieve the same benefits in overall emissions for a lower investment cost.

Such a plan ‘shall reduce the total annual emissions of nitrogen oxides, sulphur dioxide and particulates from existing plants to the levels that would have been achieved by applying the emission limit values ... to the existing plants in operation in the year 2000, ... on the basis of:

- each plant's actual annual operating time,

- fuel used and,

- thermal input, averaged over the last five years of operation up to and including 2000’.

In addition, the closure of a plant included in the national emission reduction plan shall not result in an increase in the total annual emissions from the remaining plants covered by the plan. The NERP shall comprise objectives and related targets, measures and timetables for reaching these objectives and targets, and a monitoring mechanism. The EU Commission has issued a guidance document on the preparation of these NERPs47, as this clarifies:

- Compliance with the plan can be achieved by fuel switching, combustion

modifications, abatement techniques, load factor management, etc. The process of

determining the actual compliance measures will be a matter for individual Member

States, taking into account, for example, cost-effectiveness, practicability, impact on

security and diversity of their energy supplies, obligations under other Community

legislation and other relevant constraints.

The UK, Finland and Ireland were the first Member States to submit a National Emission Reduction Plan to the EU Commission by the end of 2003. Other Member States which have submitted plans include Czech Republic, Hungary, Greece, France, Spain and the Netherlands48, while as part of its later EU accession in 2007 Romania also submitted a plan. Furthermore, Serbia as part of its current accession process is proceeding with this format.

In the UK, 11.3 GWe of older coal and heavy fuel oil fired LCPs, totalling some seventeen LCPs opted out49, it being decided by their owners that the investment in emissions control to these older plants was not justified. By mid-2015 most of these plants were closed, having exhausted their 20,000 hours, and in many cases were already in the demolition phase. Ninety-four (94) LCPs out of a total of some one hundred and twenty-two (22) existing LCPs in the UK, and operated by some forty different operators, opted for the NERP.

4.4 The Industrial Emissions Directive, the Transitional National Plan and other flexibility arrangements The Industrial Emissions Directive 2010/75/EC was adopted in 2010 and incorporated and consolidated a number of emissions related Directives, particular that of Integrated Pollution Prevention and Control and on Large Combustion Plants. Chapter III of the Industrial Emissions Directive relates to the permitting arrangements for Large Combustion Plants, which apply from 1st January 2016. Article 32 of this Directive establishes a Transitional National Plan…

‘1. During the period from 1 January 2016 to 30 June 2020, Member States may draw up and implement a transitional national plan covering combustion plants which were granted the first permit before 27 November 2002 or the operators of which had submitted a complete application for a permit before that date, provided that the plant was put into operation no later than 27 November 2003. For each of the combustion plants covered by the plan, the plan shall

47 http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32003H0047 48 http://www.eurelectric.org/AppEvents/LCP-NEC/LCP-NECCountries.asp?EventType=b5 49 See data for opted out plants in the EU:

http://forum.eionet.europa.eu/x_reporting-guidelines/library/lcp_reporting/opted_out_plants

http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32003H0047

http://www.eurelectric.org/AppEvents/LCP-NEC/LCP-NECCountries.asp?EventType=b5

http://forum.eionet.europa.eu/x_reporting-guidelines/library/lcp_reporting/opted_out_plants


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cover emissions of one or more of the following pollutants: nitrogen oxides, sulphur dioxide and dust. For gas turbines, only nitrogen oxides emissions shall be covered by the plan.’

Note: LCPs which had already ‘opted out’ under the previous 2001/80/EC Directive could not be included in the above and were required to close by 1st January 2016.

‘3. For each of the pollutants it covers, the transitional national plan shall set a ceiling defining the maximum total annual emissions for all of the plants covered by the plan on the basis of each plant’s total rated thermal input on 31 December 2010, its actual annual operating hours and its fuel use, averaged over the last 10 years of operation up to and including 2010.

The ceiling for the year 2016 shall be calculated on the basis of the relevant emission limit values set out in Annexes III to VII to Directive 2001/80/EC or, where applicable, on the basis of the rates of desulphurisation set out in Annex III to Directive 2001/80/EC. In the case of gas turbines, the emission limit values for nitrogen oxides set out for such plants in Part B of Annex VI to Directive 2001/80/EC shall be used. The ceilings for the years 2019 and 2020 shall be calculated on the basis of the relevant emission limit values set out in Part 1 of Annex V to this Directive or, where applicable, the relevant rates of desulphurisation set out in Part 5 of Annex V to this Directive. The ceilings for the years 2017 and 2018 shall be set providing a linear decrease of the ceilings between 2016 and 2019.’

Note: In the circumstances of IED implementation by Turkey, while the principles above in relation to a Transitional National Plan would apply, the actual timeframes would be different and set by the new legislation to be agreed.

Transitional National Plans have in spring 2016 been formally adopted for Ireland, Slovenia, Greece, Slovakia, Hungary, Spain, Bulgaria, Lithuania, Croatia, Czech Republic, Finland, Portugal, Romania and Poland. The application for the UK, which included one hundred and fourteen (114) LCPs was rejected by the EU Commission before being finally accepted, but only after compliance proceedings in the European Court had occurred in relation to a plant in Wales burning indigenous coal, which had been permitted with very high ELVs for NOx (see case C-304/15). If we consider the Irish Transitional National Plan, then this includes twelve LCPs and sets the following emissions ceilings:

Emission ceilings (tonnes)

2016 2017 2018 2019 1.1 – 30.6.2020

SO2 15 202 12 076 8 950 5 824 2 912

NOx 8 811 7 853 6 896 5 938 2 969

dust 1 514 1 196 878 560 280

As can be seen there is a year on year reduction in the emissions ceiling available in order to bring full compliance with the emission limit values by mid-2020. In many respects this is an important flexibility mechanism with respect to any national implementation plan, which would be developed to implement the IED, see Section 7.1 of the main RIA report. In particular, as to the practical necessity of phasing in engineering modifications to individual combustion units at larger LCPs, see Section 2.4 of this Annex. For such larger LCPs this will occur over an extended period, but provided an appropriate implementation schedule is adhered to; then on a national basis, the bubble of emissions will be steadily reducing. Indeed, by appropriately designing a national implementation plan, it could be co-ordinated with any the Transitional National Plan, which would be negotiated by Turkey with the EU, and thereby provide the timeframes necessary to complete the considerable engineering modifications, which will be required to these larger LCPs.

There are other flexibility arrangements contained in the IED. Under Article 33 of the Industrial Emissions Directive a ‘limited life time’ derogation applies, where:

‘1. During the period from 1 January 2016 to 31 December 2023, combustion plants may be exempted from compliance with the emission limit values referred to in Article 30(2) and with the rates of desulphurisation referred to in Article 31, where applicable, and from their inclusion in the transitional national plan referred to in Article 32 provided that the following conditions are fulfilled:


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(a) the operator of the combustion plant undertakes, in a written declaration submitted by 1 January 2014 at the latest to the competent authority, not to operate the plant for more than 17 500 operating hours, starting from 1 January 2016 and ending no later than 31 December 2023;’. This is a very useful derogation with respect to an older LCP, where it is not economically justifiable to complete a large costly emissions upgrade, given that the core combustion plant is already aged and only has a limited remaining lifespan. While, as previously, the timeframes above would have to be negotiated with the EU and adopted in any new legislative structure for Turkey, in principle this derogation provides an economic operator with the opportunity to begin a new investment cycle and replace the ‘end of life’ LCP with a new LCP, which should in theory be ready to adopt that older plant’s market share by the time the derogation period is expired. Indeed, of special relevance to Turkey is that for low grade indigenous fuels, the IED allows for the 17,500 hours defined above to be increased to 32,000 hours. Note: There are 8,760 hours in a year. While the number of LCPs which have availed of this derogation is not reported to date on the EU’s website, as the reporting there is in a transition from the older LCP Directive to the new IED, it appears from media reports in the UK that of the order of nine coal fired LCPs there, amounting to some 7 GW in capacity, have applied for this derogation. There is also one further derogation in the IED related to ‘limited running’ in that if an LCP formally agrees to restricting its operating hours, calculated over a five year running average, to less than 1,500 hours per year, then less stringent Emission Limit Values (ELVs) are applied in the permitting process. This is of significance with respect to ‘peaker’ plants, which typically run for very limited periods, such in cases of very high grid demand or a failure of other LCPs on the grid. Indeed, a subset of this derogation is that for gas turbines and gas engines, which operated in emergency use, defined as less than 500 hours per year, essentially no ELVs are applied. If we consider the situation for the then 27 Member States, when the IED was adopted, there was first prior to 2010 a period of development of this legislation with the associated Impact Assessment and public consultation. The IED itself was then adopted by the EU in November 2010 and for existing LCPs compliance with the new requirements was required by 1st Jan 2016, essentially five years later. From 2016 operators of such existing LCPs had the following four options with respect to compliance:

i) Compliance with the ELVs specified in Annex V of the IED having, if required,

completed the necessary modifications to enable this to be achieved.

ii) Restricting the LCP’s operating timeframe to the 1,500 hours per year specified for the

‘limited running’ derogation or the 500 hours per year specified for gas turbines and

gas engines for emergency use. As such then less stringent ELVs apply or in the case

of gas turbines and gas engines for emergency use, essentially no ELVs.

iii) Having included the LCP in a Transitional National Plan operation could continue,

within a steadily decreasing national ‘bubble’ of emissions. To comply with this

steadily reducing ‘bubble’ of emissions, either plant improvements could be made or

the LCP would operate on steadily reducing number of hours per year. By mid-2020

the situation would occur that either (i) above was complied with, i.e. the LCP was

compliant with the ELVs in Annex V or the ‘limited running’ derogation in (ii) was

adopted.

iv) The ‘limited life time’ derogation is applied and the LCP operates up to a maximum of

17,500 hours (32,000 hours for indigenous fuels) with full closure by December 2023.


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Currently the situation in Turkey corresponds to that which applied in the EU prior to 2010, in which the Regulatory Impact Assessment, associated consultation and development of the legislation was taking place. As can be seen above with respect to the then 27 Member States, a considerable period post-2010 was provided for existing LCPs to, (a) either reach compliance with the IED emission control standards; (b) continue to operate on a limited number of hours per annum or; (c) by the end of 2023 close altogether. Similar time periods, which are yet to be negotiated, would have to be incorporated in any future Turkish legislation related to IED implementation.

4.5 Energy Community

The Energy Community is based on around an International Treaty, which entered into force in 2006 and brings together the European Union, on one hand, and countries from the South East Europe and Black Sea region. It has the aim to extend the EU’s internal energy market to South East Europe and beyond on the basis of a legally binding framework. As of October 2013, the Energy Community has nine members: the European Union and eight Contracting Parties - Albania, Bosnia and Herzegovina, Kosovo, the former Yugoslav Republic of Macedonia, Moldova, Montenegro, Serbia and Ukraine. Georgia, Armenia, Norway and Turkey participate as Observers. In terms of the environment, the contracting Parties have committed themselves to the implementation of the IED standards for Large Combustion Plants. While the EU Member States discussed in this section to date have all been through a period of implementation of this legislation, in some cases extending back to the1980s, the Energy Community represents a different perspective, in that it is still at the early phase of such implementation. A detailed study has been completed as to what upgrades are required at individual LCPs and the associated costs and benefits50. This identified that due to the age of the thermal generation in these countries, major investments would be necessary in order to carry out the necessary environmental upgrades that could safeguard the proper implementation of the LCP and Industrial Emissions directives. Overall compliance costs were estimated at €6,701.6 million for the LCP Directive and € 7,843.8 million for the IED. According to the cost-benefit analyses carried out in the study, benefits significantly outweigh the costs in the case of each and every Contracting Party, reaching an average benefit / cost ratio of 17 at the regional level. Finally, the Energy Community produces implementation reports on an annual basis reporting progress, which has occurred with respect to implementing these legislative requirements.51

4.6 Conclusions The approach adopted by Germany in 1983 with its GFA-VO and ten-year (10) period to achieve compliance was effective in achieving a result in a short period of time, but led to high costs and inflexible solutions. With the original Large Combustion Plant Directive in 1988, flexible solutions were employed by other Member States to reach the progressively reducing ceiling limits specified, such as in the UK, where fuel switching occurred to lower sulphur coals and in conjunction with the construction of new gas fired generation to replace older coal plants.

With the revised LCP Directive in 2001, a number of older LCPs choose to ‘opt out’ with restricted running hours until 1st January 2016. Others existing LCPs choose to implement emission control upgrades, with the implementation date set for 1st January 2008, namely a period of not much more than six years from the adoption of the legislation. However, flexibility was allowed in this regard in that existing LCPs could also enter the NERP and its trading mechanism. With the IED of 2010 even more stringent emission limit values were introduced, which apply from 1st January 2016, namely a period of just over five years from the adoption of the

50 https://www.energy-community.org/portal/page/portal/ENC_HOME/DOCUMENTS/Studies/Sustainable#ENV 51 https://www.energy-community.org/portal/page/portal/ENC_HOME/AREAS_OF_WORK/Implementation

https://www.energy-community.org/portal/page/portal/ENC_HOME/DOCUMENTS/Studies/Sustainable#ENV

https://www.energy-community.org/portal/page/portal/ENC_HOME/AREAS_OF_WORK/Implementation


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legislation. However, the option of a Transitional National Plan for existing LCPs was also introduced with a time frame up until mid-2020, while the ‘limited life time’ derogation applied up until 2023.

In summary then the EU approach uses a timescale of about six years for compliance with new emission limit values, but also introduces flexibility mechanisms for existing plants, which allow a form of emissions trading to be utilised to achieve those limits, in conjunction with an ‘opt out’ derogation for older LCPs, which continue to run on existing emissions limits with restricted hours leading to a final closure about ten years later.

5. Possible options

5.1 Option 1: Fixed timescale with no additional measures

In essence this would replicate the German approach in which a fixed timeframe would be set with no flexibility. This timeframe would have to be chosen in order that for economic reasons the companies do not leave investments until the end of the period. Therefore, it should reflect the average timeframe required to upgrade an LCP, say five to six years. The disadvantage of this option is the high cost and inflexibility associated with it.

5.2 Option 2: Fixed timescale with additional flexibility measures

This option would reflect the implementation of the revised Large Combustion Plant Directive and Directive on Industrial Emissions in which a fixed timescale of five to six years is applied, but additional flexibility measures are introduced. These would effectively establish a form of emissions trading between the LCPs incorporated in National Plan, plus an ‘opt out’ arrangement for plants operating on limited hours with a view to closure. Those LCPs which are early movers can benefit from the ability to trade allowances to those which are late movers, so they are not put at a financial disadvantage, while for ‘opt out’ plants, longer term arrangements can be made for closure and replacement with new generation capacity.

5.3 Option 3: National Plan with timescales tailored to each LCP

In comparison with for instance the UK, where for the implementation of the Large Combustion Plant Directive some ninety-four (94) LCPs entered the National Emission Reduction Plan (NERP) and seventeen opted out, Turkey has seen a major expansion and hence modernisation of its power generation sector. As a result, the number of sizeable LCPs facing major emissions upgrades is limited to about a dozen, while there are also a number of much smaller LCPs, such as in the sugar industry, also facing some upgrades. Well over half these sizeable LCPs are burning indigenous lignite, which as has been highlighted previously presents a technical challenge. Furthermore, as the number of LCPs is limited, the resulting benefits inherent from the emissions trading approach of the NERP would be limited, as the available technical options for achieving compliance are limited to a small pool of LCPs.

It may then make sense to develop a National Plan with individual timeframes, custom made to each of the relevant sizeable LCPs based on the technical and economic characteristics applicable, which were discussed previously in Sections 2 and 3. In particular for indigenous fuel with difficult technical characteristics, this National Plan approach might well incorporate some derogation to the five to six year timeframes for simple implementation of the ELVs inherent in the Large Combustion Plant Directive and Industrial Emissions Directive. In particular, as discussed in Section 4.4 the use of the flexibilities inherent in the IED’s Transitional National Plan, ‘limited life time’ derogation and ‘limited running’ derogation, which can allow for existing plants to continue to operate in restricted circumstances past the


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implementation date, without having fully completed the necessary upgrades to meet the specified Emission Limit Values.

5.4 Conclusions

While the ultimate choice of which option is selected is a political one, some simple conclusions can be drawn:

Option 1 would not be considered favourable, as it is inherently inflexible and would lead to

higher expenditures than would otherwise be incurred.

Option 2 is more favourable, but its effectiveness would be limited by the fact that there are

a limited number of sizeable LCPs requiring upgrades. Therefore, it may well be

ineffective in creating a proper market in emissions trading under the NERP approach.

Option 3 would be more onerous to develop and negotiate, but given the applicable

characteristics in Turkey, especially with respect to indigenous lignite, it may well be the

most suitable.