Economic Research Forum (ERF)

Policies to reduce air pollution in Cairo

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Vehicle exhaust fumes are a major cause of air pollution in megacities like Cairo. This column outlines the policies that the Egyptian authorities have introduced in an effort to cut emission rates and raise the costs to users of polluting vehicles. Air pollution has been reduced but much remains to be done, notably investing in an effective public transport system.

In a nutshell

Egyptian authorities have taken measures to reduce vehicle emission rates and change relative user costs using policies that are consistent with evidence on the appropriate economic instruments for controlling air pollution.

Other potential measures include congestion charges, economic instruments, such as taxes or subsidies, and regulatory instruments, such as emission standards.

Development of a mass transit system as a viable transport mode is essential to provide an alternative to motor vehicles.

Egypt’s Environmental Affairs Agency has adopted a number of measures to deal with atmospheric pollution from motor vehicles in Greater Cairo. These can be classified into four categories: reduction of emission rates for existing vehicles; retrofitting fleets with less polluting vehicles; development of alternative transport modes; and modification of relative user costs.

In the first category, conversion of public sector vehicles to natural gas started in 2004 and about half of them were converted by 2012. Moreover, since 2008, personal vehicles can be inspected on the road, and owners not complying with emission standards have to follow a procedure of mandatory repair and technical inspection.

In the second category, a scheme was launched in 2007 to replace private taxis older than 35 years with natural gas taxis. This was extended in 2008 to cover taxis aged between 29 and 48 years. By August 2009, almost a fifth of old taxis had been replaced, and an additional phase targeted all taxis aged 20 years or more.

In the third category, the Greater Cairo Urban Transport Master Plan has projected investments of $17 billion for an integrated urban transport system, including mass rapid transit, a suburban railway and expressways. Lines 1, 2 and 3 of the underground network are already completed, with a commitment to complete line 4 by 2017.

Finally, to modify relative user costs, the licensing tariff scheme was revised in May 2008, with tariff increases of two to ten times the previous levels, depending on the power of the vehicle. This was coupled with an increase in fuel prices of 35% to 57%, depending on octane level. Although those rises were implemented to raise government revenues, they had a strong impact on the car market with a 35% decrease in car sales.

Effects of policies on pollution

To what extent have these measures been effective in reducing air pollution? Since they rely on modifying the behaviour of transport users, two ingredients are necessary to answer this question: first, the relationship between air pollution and the number and distribution of vehicles; and second, how individual choice of transport mode is made in light of the availability and cost of alternatives.

Our research collected data on air quality from monitoring stations in Greater Cairo between 2001 and 2008, and used a household survey on transport habits and unit costs for the year 2007 (Abou Ali and Thomas, 2012).

Among our results, we find that households that do not own a car are more sensitive to transport unit costs. The change in demand for a transport mode following an increase in user cost according to whether a household owns a car provides an indication of the likely shifts if car use is discouraged.

If driving a car becomes more costly, car owners will tend to act as non-car owners for their trips within Greater Cairo and switch to other modes. But because households without a car are more reactive to changes in the cost of taxis, a policy of reducing the use of private cars is likely to encourage greater use of public transport but less for taxis.

Most of the regulatory policies were initiated in 2008, a year when there was a reduction in the concentration level of suspended particulate matter (PM10) in Greater Cairo. So our research tests whether the post-implementation period is truly associated with that reduction.

Our results show that it is associated with a reduction of about 3% in PM10 concentration when controlling for the change in the number of vehicles per year. A 10% increase in the number of vehicles would lead to an increase of around 4%, while PM10 emissions are about 8% higher during peak hours compared with lower congestion periods.

What would be the impact of a change in the unit cost of public transport on PM10 emissions? Consider a policy that aims at diverting households from taxis to metro and public bus, by raising the cost of taxi fares by 10%.

Our results on transport modes reveal that a 10% increase would lead to a decrease of 6% in the use of taxis, and a 0.8% increase in bus demand. Since the proportion of taxis in the total stock of motor vehicles is about 5%, and assuming households do not divert to private cars or other vehicles, we should expect a reduction in emissions of about 0.12%.

Additional regulatory measures

Given the success of these policy measures in controlling air pollution, the authorities should consider additional regulatory measures. First, schemes based on a congestion charge or a fuel tax have proved successful in cities such as London and Singapore, generating revenues that can be devoted to subsidies for cleaner vehicles and the development of public transport networks.

Congestion charges generate a significant amount of revenue with moderate management cost, while the policy can target specific areas where congestion (and the resultant pollution) is more severe. This requires public transport systems to be expanded to cope with the shift away from private vehicle use.

By contrast, a fuel tax would not target specific areas of Greater Cairo in terms of traffic congestion, but would provide revenue for public transport plans.

Subsidies for replacing motor vehicles with cleaner models can also be considered, but participation in a vehicle exchange programme assumes that the replacement cost is affordable for the majority of households and taxi drivers in Egypt. Cheaper alternatives include engine modifications to switch to lead-free fuel or natural gas.

Finally, policies based on economic instruments, such as taxes or subsidies, and regulatory instruments, such as emission standards, aim to modify relative costs between transport modes. They must therefore be implemented only when there are transport alternatives to avoid negative effects on households. This points to the need for investment in public mass transit systems and associated urban infrastructure.

An important issue is how private vehicles or taxis compete with public transport, as the latter is associated with much less impact on pollution. In the short run, when the number of car trips and the mass transit infrastructure are constant, the reduction in emissions from a retrofitting policy will be immediate.

In the longer run, however, with an expected increase in population as well as the number of car trips, emissions due to congestion will increase (because of idling time in traffic jams). This implies that extensions of the existing public transit infrastructures must be planned well in advance and they need to match the expected increase in road traffic. Otherwise, the reduction in emissions allowed by vehicle retrofitting programmes is likely to be offset by the increase in traffic congestion.

Further reading

Abou Ali, Hala, and Alban Thomas (2012) ‘Regulating Traffic as a Means of Reducing Greenhouse Gas Emissions: The Case of Greater Cairo, Egypt’, in Economic Incentives and Environmental Regulation: Evidence from the MENA Region edited by Hala Abou Ali, Edward Elgar.

Thomas, Alban (2016) ‘Reducing Air Pollution in Cairo: Raise User Costs and Invest In Public Transit’, ERF Policy Brief No. 12.

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