transport system in the base year (such as the composition of the transport fleet, i.e. numbers of cars, buses, trucks, lorries etc.) and the policy context, such as tax and subsidy rates. Other core variables needed for projections include the level and growth rates of GDP per capita, GDP growth, population, and new vehicle registrations (see _Annex 1_ ).

The evaluation of fuel and energy consumption using information on transport activity and vehicle characteristics is calculated using a decomposition of fuel use into transport activity, energy intensity and structural components, such as the type of transport service (passenger versus freight), mode, vehicle class and powertrain group (generally termed ASIF). This is then extended to measure CO2 emissions. In developing long-term projections, the vehicle-based ASIF approach is supplemented with relationships that link economic parameters with transportrelated ones (such as changes in the cost of travel with variations in travel per vehicle, or changes in income per capita with variations in vehicle ownership), as well as other specifics (i.e. choice models). As such, the model generates estimates of transport activity, vehicle use, fuel consumption and CO2 emissions.

# **7.1 Applying the framework to Cairo**

Our main objective is to study the impact of policy measures – notably the domestic subsidy level for fuels as well as changes in international oil price - on CO2 emissions (as well as total energy use and vehicle stock) and based on that, to infer the level of PM10 emissions / concentrations and the likely impact on human health, using the measure already indicated in the discussion above, DALYs.

Our simulation exercises use 2014 as the base year and consider the impact of policy changes over both the medium term (up to 2024) as well as over the near term (up to 2020). We consider several scenarios in this exercise. For the medium term, we consider four cases in addition to the baseline:

- (i) gradual decrease in fuel subsidies by 50%;

- (ii) gradual elimination of fuel subsidies (100%);

- (iii) gradual drop in fuel subsidies by 50% coupled with an increase in international price of oil by 20%;

- (iv) gradual elimination of subsidies (100%) coupled with an increase in the international price of oil by 20%.

_Table 1_ provides CO2 emissions for all four scenarios and the baseline. ( _Annex Table 1_ also provides the corresponding changes in energy use associated with these emissions). There are a few empirical regularities that emerge. First, when a gradual fall in subsidies in the medium term is simulated, total CO2 emissions decrease by roughly 9 percent. A gradual elimination of subsidies results in CO2 emissions dropping by 16 percent when compared to the baseline scenario. A drop in energy use and CO2 emissions is also in evidence when there is a coupling of policies with external shocks. The third scenario couples a gradual decrease in energy subsidies with an increase in the international price of oil by 20 percent. This policy simulation results in a drop in total CO2 emissions of around 16%. Finally, as expected, the biggest change in energy use and CO2 emissions is observed when a policy of a gradual elimination of fuel subsidies is 29