the CGE to estimate the health impacts expected to occur during the same period: the potential mortality and morbidity effects of such small particles.<sup>10</sup> The pollution impact on health is characterized by mortality and morbidity figures for three different pollution scenarios (―upper‖, ―central‖ and ―lower‖).<sup>11</sup> These reflect the uncertainties about the magnitude of the impacts of PM10 and other small particles.

8. The main analysis carried out was to evaluate the economic and environmental impacts of a 10 percent reduction or a 30 percent reduction in PM10 and other small particle emissions relative to what they would be in 2030 under a Business As Usual scenario. To achieve these targets, two different types of policy instruments in addition to an increase in autonomous energy efficiency and investment in clean energy were considered:

- (a) a tax on coal alone; and

- (b) a tax on PM10 and other small particles, translated into a tax on the fuels that generate PM10,<sup>12</sup> namely coal and oil.

In each case, the model was run to look at the effects of the taxes on conventional GDP, and their impacts on particulate emissions. The health damages and the welfare impacts of the tradeoffs are dealt with outside of the model.

9. The application of tax policies in the model should not be construed as an endorsement of these specific policy approaches. Tax policies are an analytically convenient way to represent a broader class of policies that use economic incentives to change behavior, including an emissions trading system. However, our approach can less readily be interpreted as showing the impacts of more prescriptive emission control policies, such as specific technology standards, which generally are costlier – sometimes much more so – than incentive-based policies. On the other hand, the CGE approach has limitations in its ability to fully reflect the potential for ―low hanging fruit,‖ notably improvements in thermal and end-use energy efficiency that can yield reduced emissions as a co-benefit (i.e between CO2 and PM10). This point plays an important part in our analysis, as described below.<sup>13</sup> 10. In terms of environmental impacts the model was expanded to estimate PM10 emissions and generation of sulfates and nitrates of similar diameter up to 2030

> 10 The Cost of Environmental Degradation study which complements this study (Strukova et. al. 2011) finds that the health effects from particulate matter represent a loss of 1.7% of GDP –higher than any other type of environmental impact..

> 11 Recognizing the general uncertainty regarding the estimates, upper, central  and lower bound estimates are provided to indicate the ranges within which the actual health effects are likely to fall (Ostro, 1994). This is standard in environmental health literature.

> 12 The tax on PM10 also applies to secondary particles.  Relatively generic coefficients are used to translate between fuel use and emissions, as distinct from more detailed and site-specific emissions coefficients – that is beyond the scope of the current model.

> 13 In this study we also conducted an extensive research on cost and benefits of CO2 mitigation and converted them to PM10 mitigation equivalents when needed. Our assumptions/results are aligned with the literature on critical parameters such as GDP elasticities of CO2 mitigation, historical autonomous energy efficiency increase in India etc.

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