Soot-free road transport in Indonesia: A cost-benefit analysis and implications for fuel policy

Vehicles are a major contributor to both poor air quality and climate change in Indonesia, which has the world’s fourth highest mortality rate due to air pollution and a rapidly growing vehicle market. Thus the stringency of the fuel quality and vehicle emission standards adopted will significantly influence the country’s progress toward improving air quality and public health. This working paper evaluates the costs and benefits, in the form of avoided social costs, of advanced vehicle emission and fuel quality standards in Indonesia. The authors compare two Euro 6/VI scenarios—one that takes effect by 2030 and another that takes effect earlier, in 2023—against a baseline without changes to already adopted Euro 4/IV standards. The results show substantial benefits: The Euro 6/VI scenarios would reduce the societal damages of 2050 emissions by approximately 60%. 

Implementation of Euro 6/VI vehicle standards with aligned fuel standards by 2030 would result in net societal benefits of approximately $81 billion (5% discounted) from 2020–2050. In the Leapfrog scenario, where these standards are implemented earlier, by 2023, would produce an additional $24 billion (5% discounted) in net societal benefits from 2020–2050, with a benefit-to-cost ratio of 9.2:1 (5% discounted) when compared with the baseline scenario. This is according to the the Global Strategy for Cleaner Fuels and Vehicles developed by the Climate and Clean Air Coalition's Heavy-Duty Vehicles Initiative. This study also demonstrates the importance and the cost-effectiveness of implementing a 10 parts per million fuel sulfur limit along with the advanced vehicle standards. The emissions reductions described and their associated benefits for public health and climate can only be achieved with qualified fuel available for all grades of fuel types.