Technical Report on Climate Change in Europe: an integrated economic and environmental assessment | RIVM

Hele tekst

(1)UHVHDUFKIRU PDQDQGHQYLURQPHQW. RIJKSINSTITUUT VOOR VOLKSGEZONDHEID EN MILIEU NATIONAL INSTITUTE OF PUBLIC HEALTH AND THE ENVIRONMENT. RIVM report 481505012 7HFKQLFDO5HSRUWRQ&OLPDWH&KDQJHLQ (XURSHDQLQWHJUDWHGHFRQRPLFDQG HQYLURQPHQWDODVVVHVVPHQW P. Capros, L. Mantzos, D.W. Pearce, A. Howarth, C. Sedee, B.J. Strengers May 2000. This Report has been prepared by RIVM, EFTEC, NTUA and IIASA in association with TME and TNO under contract with the Environment Directorate-General of the European Commission.. RIVM, P.O. Box 1, 3720 BA Bilthoven, telephone: 31 - 30 - 274 91 11; telefax: 31 - 30 - 274 29 71.

(2) Page 2 of 88. RIVM report 481505012. $EVWUDFW. The economic assessment of priorities for a European environmental policy plan focuses on twelve identified Prominent European Environmental Problems such as climate change, chemical risks and biodiversity. The study, commissioned by the European Commission (DG Environment) to a European consortium led by RIVM, provides a basis for priority setting for European environmental policy planning in support of the sixth Environmental Action Programme as follow-up of the current fifth Environmental Action Plan called ‘Towards Sustainability’. The analysis is based on an examination of the cost of avoided damage, environmental expenditures, risk assessment, public opinion, social incidence and sustainability. The study incorporates information on targets, scenario results, and policy options and measures including their costs and benefits. Main findings of the study are the following. Current trends show that if all existing policies are fully implemented and enforced, the European Union will be successful in reducing pressures on the environment. However, damage to human health and ecosystems can be substantially reduced with accelerated policies. The implementation costs of these additional policies will not exceed the environmental benefits and the impact on the economy is manageable. This requires future policies to focus on least-cost solutions and follow an integrated approach. Nevertheless, these policies will not be adequate for achieving all policy objectives. Remaining major problems are the excess load of nitrogen in the ecosystem, exceedance of air quality guidelines (especially particulate matter), noise nuisance and biodiversity loss. This report is one of a series supporting the main report: (XURSHDQ (QYLURQPHQWDO 3ULRULWLHV DQ ,QWHJUDWHG (FRQRPLFDQG(QYLURQPHQWDO$VVHVVPHQW. The areas discussed in the main report are fully documented in the various 7HFKQLFDOUHSRUWV. A background report is presented for each environmental issue giving an outline of the problem and its relationship to economic sectors and other issues; the benefits and the cost-benefit analysis; and the policy responses. Additional reports outline the benefits methodology, the EU enlargement issue and the macro-economic consequences of the scenarios..

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

(4) IURP&6HGHH 70(

(5) DQG%6WUHQJHUV 5,90

(6) 6HFWLRQ %HQHILWDVVHVVPHQW 3UHSDUHGE\':3HDUFH$+RZDUWK ()7(&

(7) 6HFWLRQ 3ROLF\DVVHVVPHQW 3UHSDUHGE\':3HDUFH$+RZDUWK ()7(&

(8) 5HIHUHQFHV $OO UHIHUHQFHV PDGH LQ WKH VHFWLRQV RQ EHQHILW DQG SROLF\ DVVHVVPHQW KDYH EHHQ EURXJKW WRJHWKHU LQ WKH 7HFKQLFDO 5HSRUW RQ %HQHILW $VVHVVPHQW 0HWKRGRORJ\ 7KH UHIHUHQFHV PDGH LQ WKH VHFWLRQ RQ HQYLURQPHQWDODVVHVVPHQWIROORZVDWWKHHQGRIVHFWLRQ. 7KH ILQGLQJV FRQFOXVLRQV UHFRPPHQGDWLRQV DQG YLHZV H[SUHVVHG LQ WKLV UHSRUW UHSUHVHQW WKRVH RI WKH DXWKRUVDQGGRQRWQHFHVVDULO\FRLQFLGHZLWKWKRVHRIWKH(XURSHDQ&RPPLVVLRQVHUYLFHV.

(9) 3DJHRI. 5,90UHSRUW.

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

(11) 3DJHRI. 3ROLF\$VVHVVPHQW &DXVDOFULWHULRQ (IILFLHQF\FULWHULRQ $GPLQLVWUDWLYHFRPSOH[LW\ (TXLW\FULWHULRQ -XULVGLFWLRQDOFULWHULRQ. 5,90UHSRUW. .

(12) 5,90UHSRUW. . 3DJHRI. (QYLURQPHQWDODVVHVVPHQW ,QWURGXFWLRQ $FFRUGLQJ WR WKH XQGHUWDNLQJV DW WKH .\RWR 3URWRFRO LQ 'HFHPEHU WKH (8 VKRXOG UHGXFH LWV JUHHQKRXVHJDV *+*V

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

(14) RU WKURXJK HPLVVLRQV VDYLQJV IURP ILQDQFLQJ DOORZDEOH SURMHFWV LQ GHYHORSLQJ QRQ $QQH[ %

(15) FRXQWULHV E\ XVLQJ WKH FOHDQ GHYHORSLQJ PHFKDQLVP )LQDOO\ WKH SURWRFROJLYHVWKHRSSRUWXQLW\WRWUDGHJUHHQKRXVHJDVHPLVVLRQSHUPLWVDFURVVDOO$QQH[%FRXQWULHV . . . . . $QRWKHUSRVVLELOLW\ ZRXOGEHWRWUDQVIHUWKHHPLVVLRQULJKWVDVSDUWRILQYHVWPHQWSURMHFWGHDOV LQYROYLQJ SDUWQHUV IURP GLIIHUHQW $QQH[ % FRXQWULHV ,Q WKH .\RWR 3URWRFRO WKLV LV FDOOHG MRLQW LPSOHPHQWDWLRQ 6LPLODUO\ $QQH[ % FRXQWULHV PD\ REWDLQ HPLVVLRQ ULJKWV WKURXJK LQYHVWPHQW SURMHFWV LQYROYLQJ D SDUWQHU IURP $QQH[ % DQG D SDUWQHU RXWVLGH $QQH[ % 7KLV LV FDOOHG FOHDQ GHYHORSPHQW PHFKDQLVP LQ WKH SURWRFRO $OO WKHVH PHFKDQLVPV PD\ ZHOO SURYH WR SURYLGH LPSRUWDQW ZD\V WR UHGXFH JUHHQKRXVH JDV HPLVVLRQVLQDQHIILFLHQWDQGIOH[LEOHPDQQHU $QXPEHURIVHULRXVXQFHUWDLQWLHVUHPDLQUHJDUGLQJWKHDSSOLFDWLRQRIWKH.\RWR3URWRFRODQGWKHUROHWKDW WKH HQHUJ\ V\VWHP RI WKH (8 ZLOO EH FDOOHG XSRQ WR SOD\ LQ PHHWLQJ WKH .\RWR REOLJDWLRQV )LUVWO\ WKH SUHFLVHPHDQVWKURXJKZKLFKWKHIOH[LELOLW\PHFKDQLVPVZLOORSHUDWHKDYHQRW\HWEHHQIXOO\DJUHHGXSRQ DPRQJ WKH SDUWLHV WR WKH 3URWRFRO 6LQFH WKHVH PHFKDQLVPV ZLOO GHWHUPLQH WKH DPRXQW RI *+* HPLVVLRQ UHGXFWLRQVWKDW(8DQGRWKHU$QQH[%FRXQWULHVZLOOEHDEOHWRDFKLHYH H[WHUQDOO\ LWLVQRWSRVVLEOHDWWKLV VWDJHWRGHWHUPLQHWKHWDUJHWIRUUHGXFWLRQVRI*+*HPLVVLRQVIURPZLWKLQWKH(8 6HFRQGO\ WKHUH LV VWLOO D JUHDW GHDO RI XQFHUWDLQW\ VXUURXQGLQJ WKH OLNHO\ GHYHORSPHQWV LQ QRQHQHUJ\ UHODWHG&2 HPLVVLRQV7KLVLVLPSRUWDQWEHFDXVHLWZLOOKHOSGHWHUPLQHWKHGHJUHHRIHPLVVLRQVUHGXFWLRQ WKDWZLOOQHHGWREHDFKLHYHGWKURXJKWKHHQHUJ\V\VWHP$VZLWKHQHUJ\UHODWHG&2 HPLVVLRQVWKHUHDUHD QXPEHURISRVVLEOHVFHQDULRVDQGSURMHFWLRQVIRUQRQ&2 *+*VWKDWLQDPRXQWHGWR 0W &2 'HYHORSPHQWV LQ QRQ&2 *+*V DUH YHU\ VLJQLILFDQW IRU WKH GHWHUPLQDWLRQ RI SROLF\ PHDVXUHV WKDW DUH OLNHO\WREHWDNHQLQRUGHUWRPHHWWKHWDUJHWVHWDW.\RWRIRUWRWDO*+*V . . . . . 7KLUGO\DQGSDUWO\EHFDXVHRIWKHDERYHWKHVSHFLILFSROLFLHVDQGPHDVXUHVWKDWZLOOEHDGRSWHGLQRUGHUWR UHDFKWKHWDUJHWVXQGHUWDNHQDW.\RWRKDYHQRW\HWEHHQDQQRXQFHGDQGDUHWKHVXEMHFWRIGHEDWHDWSUHVHQW &OHDUO\LIWKHVHSROLFLHVDQGPHDVXUHVKDGEHHQDQQRXQFHGWKHSURMHFWLRQVIRUWKHHQHUJ\V\VWHPZRXOGEH GLIIHUHQW IURP WKRVH RI WKH EDVHOLQH VFHQDULR 8QGHU UHDVRQDEOH DVVXPSWLRQV IRU WKH SHULRG WR WKH EDVHOLQH VFHQDULR

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

(18) . 6RXUFH&RXQFLOFRQFOXVLRQV-XQH3RVW.\RWR%XUGHQ6KDULQJILJXUHV 7KH VHFRQG RSWLRQ D IXOOWUDGH VFHQDULR DFFHSWV WKH IOH[LELOLW\ RI WKH .\RWR 3URWRFRO ZLWK UHVSHFW WR HPLVVLRQVWUDGLQJRI*+*VWRGHYHORSWKHPRVWHFRQRPLFDOO\HIILFLHQWDSSURDFKWRPHHWWKH.\RWRWDUJHW DOVRLPSOLFLWO\LQFOXGLQJ-RLQW,PSOHPHQWDWLRQDQG&OHDQ'HYHORSPHQW0HFKDQLVP

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

(21) ZRUOG HQHUJ\DQG&2 HPLVVLRQRXWORRNVZLWKGHPDQGVXSSO\DQGSULFHSURMHFWLRQVE\PDLQUHJLRQ7KHPRGHO VSOLWVWKHZRUOGLQUHJLRQV7KHGHWDLOHGUHVXOWVRQHPLVVLRQWUDGLQJFDQEHIRXQGLQ )LQDO3XEOLVKDEOH 5HSRUW RI (QHUJ\7HFKQRORJ\'\QDPLFVDQG$GYDQFHG(QHUJ\6\VWHP0RGHOOLQJ 7((0

(22) SURMHFWLQWKH IUDPHZRUN RI 1RQ 1XFOHDU (QHUJ\ 3URJUDPPH -28/( ,,, (XURSHDQ &RPPLVVLRQ ± '*;,, &RQWUDFW -26&7 6HSWHPEHU 2WKHU UHVXOWV ZHUH SXEOLVKHG LQ (XURSHDQ 8QLRQ XWORRN WR 6SHFLDO ,VVXH 1RYHPEHU (XURSHDQ &RPPLVVLRQ (QHUJ\ '* )RU WKH PRGHO GHVLJQ VHH WKH PRGHO UHIHUHQFHPDQXDO 32/(6(XURSHDQ&RPPLVVLRQ'*;,,'HFHPEHU . . . . .

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

(27) IRUHDFK WRQRI&2 DYRLGHGHTXDOWRWKHPDUJLQDODEDWHPHQWFRVWFRUUHVSRQGLQJWRWKDWWRQ7KHUHIRUHWKHWRWDOORVV RI ZHOIDUH LPSOLHG E\ DQ HPLVVLRQ FRQVWUDLQW LV HTXDO WR WKH DUHD WKH LQWHJUDO

(28) EHORZ WKH PDUJLQDO DEDWHPHQWFRVWFXUYH . :KHQTXDQWLI\LQJDPDUJLQDODEDWHPHQWFRVWFXUYHRQHPXVWEHFDUHIXOWRFODULI\ZKHWKHUWKHFDOFXODWLRQ UHODWHV WR SDUWLDO RU JHQHUDO HTXLOLEULXP FRQGLWLRQV %\ XVLQJ DQ HQHUJ\ V\VWHP PRGHO DV LV WKH FDVH RI 35,0(6

(29) WKHFDOFXODWLRQLVDWWKHOHYHORISDUWLDOHTXLOLEULXPDQGXVXDOO\FRQVLGHUVWKHUHVWRIWKHHFRQRP\ XQFKDQJHG $W D JHQHUDO HTXLOLEULXP OHYHO V\VWHP DGMXVWPHQWV RWKHU WKDQ WKRVH RFFXUULQJ LQ WKH HQHUJ\ V\VWHPPLJKWLQGXFHIXUWKHUORVVRIZHOIDUH %HFDXVHRIWKHHPLVVLRQFRQVWUDLQWWKHHFRQRPLFDJHQWVZLOOEHDUDGGLWLRQDOFRVWV IURPEDVHOLQH

(30) LQRUGHU WR REWDLQ WKH VDPH OHYHO RI VHUYLFHV REWDLQHG E\ XVLQJ HQHUJ\ ,Q RWKHU ZRUGV WKH HQHUJ\ V\VWHP ZLOO UHTXLUHDGGLWLRQDOIXQGLQJIURPWKHUHVWRIWKHHFRQRP\,WPLJKWEHDOVRWKHFDVHWKDWWKHHFRQRPLFDJHQWV UHGXFHWKHXVHRIHQHUJ\ E\VXEVWLWXWLQJRWKHUVHUYLFHVIRUWKHHQHUJ\VHUYLFH

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

(32) RU QHJOLJLEOH HYHQ PRUH SRVLWLYH

(33) IRU WKRVH DJHQWV WKDW IDFH DQ LQFUHDVHG DFWLYLW\ ZLWKLQ WKH QHZ DOORFDWLRQ +RZHYHU WKH EHQHILWV IURP WKH UHGXFWLRQ RI &2 HPLVVLRQV DUH QRW LQFOXGHGLQVXFKFDOFXODWLRQV .

(34) 5,90UHSRUW. . 3DJHRI. 6FHQDULR$QDO\VLVIRU&2 7KH%DVHOLQH6FHQDULR 7KHGHILQLWLRQRIWKHEDVHOLQHVFHQDULRLVLPSRUWDQWEHFDXVHLWFRQVWLWXWHVWKHEDVLVIRUDVVHVVLQJWKHSROLF\ VFHQDULRVDQGWKHHQVXLQJSROLF\WDUJHWV HJHPLVVLRQFHLOLQJV

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

(36). DYHUDJHFKDQJHSHU\HDU. . . . . . . . . . . . . . . 1DWXUDOJDV. . . . . . . . &RDO. . . . . . . . 7DEOHVXPPDULVHVWKHPDFURHFRQRPLFDVVXPSWLRQVLQWKHEDVHOLQHVFHQDULR(FRQRPLFJURZWKRIWKH (8LVSURMHFWHGWREHVLJQLILFDQW DERXWSHU\HDU

(37) 7KHVHFWRUDOSDWWHUQRIWKLVJURZWKLVSURMHFWHGWR FKDQJHVPRRWKO\RYHUWLPH7KHVKDUHRIPDQXIDFWXULQJLQ*'3GHFUHDVHVZKLOHWKDWRIWKHVHUYLFHVVHFWRU LQFUHDVHV :LWKLQ WKH PDQXIDFWXULQJ VHFWRU WKH FRQWULEXWLRQ RI HQHUJ\ LQWHQVLYH VHFWRUV IXUWKHU UHGXFHV 3RSXODWLRQLVLQFUHDVLQJYHU\VORZO\. 7KHVHVFHQDULRVKDYHQRWEHHQUXQIRU/X[HPERXUJ&RQVHTXHQWO\DOOUHVXOWVUHODWHWR(8ZLWKRXW /X[HPERXUJ+RZHYHUDQDO\VLVPDGHIRU/X[HPEXUJLQGLFDWHVWKDW&2 HPLVVLRQVLQ/X[HPERXUJ GHFUHDVHE\LQIURPOHYHOV 0W&2

(38) XQGHUEDVHOLQHDVVXPSWLRQV7KHFRUUHVSRQGLQJ ILJXUHVIRUWKH$3IXOOWUDGHDQG$3QRWUDGHVFHQDULRV VHHEHORZ

(39) DUHHVWLPDWHGDWDQG UHVSHFWLYHO\ . . .

(40) 3DJHRI. 5,90UHSRUW. 7DEOH0DFURHFRQRPLF$VVXPSWLRQVIRUWKH(8LQWKHEDVHOLQHVFHQDULR 0LOOLRQ. . VWUXFWXUHRI*'3. . . . . . . . . 1RQ(QHUJ\,QWHQVLYH0DQXIDFWXULQJ. . 6HUYLFHV 3RSXODWLRQ PLRSHUVRQV

(41). *URVV'RPHVWLF3URGXFW (QHUJ\,QWHQVLYH0DQXIDFWXULQJ. FKDQJHSHU\HDU. . . . . . . . . . . . . . . . . . . . . . . (QHUJ\ SROLFLHV QRW GLUHFWO\ UHODWHG WR .\RWR REMHFWLYHV DUH DVVXPHG WR FRQWLQXH WKHLU GHYHORSPHQW DQG WKHLUHIIHFWVDUHLQFOXGHGLQWKHEDVHOLQHVFHQDULR . 7KHOLEHUDOLVDWLRQRIHOHFWULFLW\DQGJDVPDUNHWVVWDUWVRSHUDWLQJDQGIXUWKHUGHYHORSVLQWKHEHJLQQLQJ RIWKHQHZFHQWXU\. . 7KHUHVWUXFWXULQJLVHQDEOHGE\PDWXUHJDVEDVHGSRZHUJHQHUDWLRQWHFKQRORJLHVWKDWDUHHIILFLHQW LQYROYHORZFDSLWDOFRVWVDQGDUHIOH[LEOHUHJDUGLQJSODQWVL]HVFRJHQHUDWLRQDQGLQGHSHQGHQWSRZHU SURGXFWLRQ. . (QHUJ\SROLFLHVWKDWDLPDWSURPRWLQJUHQHZDEOHHQHUJ\ ZLQGVPDOOK\GURELRPDVVDQGZDVWH

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

(44) . ,W PXVWEH PHQWLRQHGKHUHWKDWWKHFRQVWUXFWHG EDVHOLQH VFHQDULR IRU WKH SUHVHQW VWXG\ LV DOPRVW LGHQWLFDO YHUVLRQRI0D\

(45) WRWKDWGHILQHGXQGHUWKH6KDUHG$QDO\VLV3URMHFW 6HSWHPEHU

(46) 7KHUHDUHVOLJKW GLIIHUHQFHVLQWKHWZRVFHQDULRVGXHWRVOLJKWFKDQJHVLQVRPHDVVXPSWLRQV. )RUH[DPSOHIXOODEROLVKPHQWRIWKH .RKOHSIHQQLJ SROLF\LQ*HUPDQ\ 0XFKRIWKHLQIRUPDWLRQRQWKHDJUHHPHQWEHWZHHQWKH(8&RPPLVVLRQDQGWKH(XURSHDQDXWRPRELOH LQGXVWU\LVEDVHGRQLQIRUPDWLRQDYDLODEOHRQWKHODWWHU¶VZHEVLWHDVRIWKHRI0D\RI 6HH&DSURV3HWDO

(47) (XURSHDQ8QLRQ(QHUJ\2XWORRNWR (XURSHDQ&RPPLVVLRQ± 'LUHFWRUDWH*HQHUDOIRU(QHUJ\ '*;9,,

(48) VSHFLDOLVVXHRI (QHUJ\LQ(XURSH FDWDORJXHQXPEHU&6 (1&,6%1 . .

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

(51) LV JUDGXDOO\ H[SHFWHG WR LPSURYH DQG WR UHDFK DQ DQQXDO UDWH RI SD LQ VHH 7DEOH

(52) 6WUXFWXUDOFKDQJHLQWKHGHPDQG VLGH PDLQO\ H[SODLQV WKLV FKDQJH 7KH UROH RI HQHUJ\ WHFKQRORJ\ LV DOVR LPSRUWDQW 7KH (8 HQHUJ\ V\VWHP UHPDLQV GRPLQDWHG E\ IRVVLO IXHOV RYHU WKH QH[W \HDUV DQG WKHLU VKDUH ULVHV PDUJLQDOO\ IURP LWV OHYHO RI MXVW XQGHU LQ ,PSRUW GHSHQGHQF\ ZLOO LQFUHDVH IURP DURXQG LQWRLQ.

(53) 3DJHRI. 5,90UHSRUW. 7DEOH3ULPDU\(QHUJ\'HPDQG%DVHOLQHVFHQDULR 0WRH. $QQXDOJURZWKUDWHV. 6KDUHV. . . . . . . . . . . . 6ROLG)XHOV. . . . . . . . . . . . . /LTXLG)XHOV. . . . . . . . . . . . . 1DWXUDO*DV. . . . . . . . . . . . . 1XFOHDU. . . . . . . . . . . . . (OHFWULFLW\ WUDGHRXWVLGH(8

(54) 5HQHZDEOH(Q6RXUFHV 7RWDO (QHUJ\LQWHQVLW\ WRH0.

(55). (QHUJ\SHUFDSLWD WRHFDSLWD

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

(59) 7KH HIILFLHQF\RIWKHRYHUDOOSRZHUDQGVWHDPJHQHUDWLRQV\VWHPLVH[SHFWHGWRLQFUHDVHE\DURXQGSHUFHQWDJH SRLQWV DQG WR UHDFK E\ 7KH HIILFLHQF\ RI JHQHUDWLRQ RI HOHFWULFLW\ H[FOXGLQJ VWHDP LPSURYHV IURP WR EHWZHHQ DQG 7KLV LV WKH FRPELQHG HIIHFW RI WKH DGRSWLRQ RI PRUH HIILFLHQW WHFKQRORJLHV OLNH*7&&

(60) DQGRIFRJHQHUDWLRQ 7KH ULVLQJ VKDUH RI IRVVLO IXHOV ZLOO OHDG WR DQ LQFUHDVH LQ WKH FDUERQ LQWHQVLW\ RI WKH (8 HQHUJ\ V\VWHP 7RJHWKHUZLWKWKHPRGHVWLQFUHDVHLQHQHUJ\GHPDQGWKLVZLOOOHDGWRDQLQFUHDVHLQ&2 DQGRWKHUHQHUJ\ UHODWHGHPLVVLRQV&2 HPLVVLRQVDUHSURMHFWHGWRLQFUHDVHDQQXDOO\E\LQ LQ VHH7DEOH

(61) . . 7KHGHWDLOHGEUHDNGRZQRISRZHUJHQHUDWLRQSHUW\SHRIWHFKQRORJ\ZDVQRWDYDLODEOHIRULQWKH 35,0(6GDWDEDVH. .

(62) 3DJHRI. 5,90UHSRUW. 7DEOH&2 HPLVVLRQVE\VHFWRU%DVHOLQHVFHQDULR . 0W&2. 7RWDO. $QQXDOJURZWKUDWHV. . . . . . . . 6KDUHV. . . . . . . . . . . . . . . . . . ,QGXVWU\. . . . . . . . . . . . . 7HUWLDU\. . . . . . . . . . . . . +RXVHKROGV. . . . . . . . . . . . . 7UDQVSRUWV (OHFWULFLW\VWHDPSURGXFWLRQ (QHUJ\EUDQFK. &2HPLVVLRQLQGH[ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

(66) 5,90UHSRUW. . 3DJHRI. &2 LVWUDGHGWRWKH(8WKURXJKSROOXWLRQSHUPLWVDWDFRVWRI ELOOLRQ)RUWKHQRQ&2 *+*VWKH HPLVVLRQUHGXFWLRQVDUH IRUWKHZKROHRIWKH(8

(67) HTXDOWRWKH$3QRWUDGHVFHQDULR VHH6HFWLRQ

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

(69) DQGWKHUHVXOWLQJHPLVVLRQUHGXFWLRQWDUJHWIRU&2 HPLVVLRQV

(70) 7KH UHVXOWVREWDLQHGDUHZLWKLQWROHUDQFHOLPLWVIRUDQXPHULFDOPRGHO)RUH[DPSOHLQWKHFDVHRI6ZHGHQWKH HPLVVLRQFKDQJHFRPSXWHGE\WKHPRGHOLVLQVWHDGRIDVDJUHHGLQWKH%XUGHQ6KDULQJ $JUHHPHQW+RZHYHUWKLVGLIIHUHQFHFRUUHVSRQGVWRMXVWDGGLWLRQDO0WRI&2 HPLWWHGFRPSDUHGWRWKH $JUHHPHQW . . . .

(71) 3DJHRI. 5,90UHSRUW. ,PSDFWVRQSULPDU\HQHUJ\GHPDQG $WWKHDJJUHJDWHOHYHORIDQDO\VLVWKHHFRQRPLFV\VWHPKDVWZRPHDQVRIUHVSRQGLQJWRWKHLPSRVLWLRQRI WKHFDUERQFRQVWUDLQWZKLOHPDLQWDLQLQJWKHVDPHOHYHORI*'3,WFDQHLWKHUUHGXFHWKHOHYHORIHQHUJ\XVHG SHUXQLWRI*'3 WKHHQHUJ\LQWHQVLW\

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

(73) 5HQHZDEOH(Q6RXUFHV 7RWDO. . . . . . .

(74). . . . . . . (QHUJ\SHUFDSLWD WRHFDS

(75). . . . . . . &DUERQ,QWHQVLW\ WRI&2WRH

(76). . . . . . . 7RWDO&2 0W&2

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

(78) RIWKH.\RWR3URWRFRO.

(79) 5,90UHSRUW. . 3DJHRI. 7DEOH)LQDOHQHUJ\GHPDQG$3QRWUDGHVFHQDULR 0WRH. FKDQJHIURP. %DVHOLQH. . GLIILQ $3. . QRWUDGH. 6KDUHV. %DVHOLQH. $3. %DVHOLQH. QRWUDGH. $3 QRWUDGH. 7RWDO. . . . . . . . . ,QGXVWU\. . . . . . . . . . 7HUWLDU\. . . . . . . . . . +RXVHKROGV. . . . . . . . . . 7UDQVSRUWV. . . . . . . . . . . . . . . . . . . . 7RWDO&2 0W&2

(80). . ,QGXVWU\. . . . . . . . . 7HUWLDU\. . . . . . . . . . +RXVHKROGV. . . . . . . . . . 7UDQVSRUWV. . . . . . . . . . 6RXUFH35,0(6. ,Q WHUPV RI WKH UHDFWLRQ RI ILQDO HQHUJ\ GHPDQG VHFWRUV 7DEOH VKRZV WKDW WKH WHUWLDU\ VHFWRU LV WKH PRVW VHQVLWLYH WR WKH LPSRVLWLRQ RI WKH FDUERQ FRQVWUDLQW ,Q HQHUJ\ GHPDQG LQ WHUWLDU\ GHFOLQHV E\ DERXWWZRWLPHVWKHFRUUHVSRQGLQJUHGXFWLRQRIWRWDOILQDOHQHUJ\GHPDQG 7KHPRVWLQWHUHVWLQJDVSHFWRIWKHILJXUHVLQ7DEOHLVWKHFRQWUDVWEHWZHHQWKHVHFWRUVUHJDUGLQJWKH GLIIHUHQWLDOFKDQJHVEHWZHHQHQHUJ\GHPDQGDQGHPLVVLRQUHGXFWLRQV7KLVHIIHFWLYHO\UHIOHFWVWKHVFRSHIRU IXHOVXEVWLWXWLRQZLWKLQVHFWRUV$VH[SHFWHGWKHUHLVKDUGO\DQ\GLIIHUHQFHEHWZHHQWKHWZRFKDQJHVLQWKH WUDQVSRUWDWLRQ VHFWRU 7KLV LV EHFDXVH QR QHZ FRVWHIIHFWLYH IXHOV DUH H[SHFWHG WR HQWHU WKH WUDQVSRUWDWLRQ VHFWRULQDVLJQLILFDQWZD\LQWKHQHDUIXWXUH &RQVHTXHQWO\DQ\UHGXFWLRQVLQWKHHPLVVLRQVRIWKHVHFWRU DUHOLNHO\WREHGXHWRUHGXFWLRQVLQWKHHQHUJ\GHPDQGRIWKHVHFWRUUDWKHUWKDQWRDQ\FKDQJHVLQWKHIXHO PL[$OORWKHUVHFWRUVH[SHULHQFHVLJQLILFDQWO\IDVWHUGHFOLQHVLQFDUERQHPLVVLRQVWKDQLQHQHUJ\GHPDQG VXJJHVWLQJDODUJHUGHJUHHRIRSSRUWXQLW\IRUIXUWKHUFKDQJHVLQWKHIXHOPL[LQIDYRXURIHOHFWULFLW\DQGJDV . ,PSDFWVRQSRZHUDQGVWHDPJHQHUDWLRQ 7KHDQDO\VLVVKRZHGWKDWFKDQJHVDWWKHOHYHORIILQDOGHPDQGLQ LQFOXGLQJIXHOVWUXFWXUH

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

(82) 3DJHRI. 5,90UHSRUW. 7DEOH3RZHUDQGVWHDPJHQHUDWLRQ$3QRWUDGHVFHQDULR FKDQJHIURP. . %DVHOLQH. (OHFWULFLW\DQGVWHDPRXWSXW 7:K

(83). )RVVLO)XHOV. . GLIILQ. . $3. . QRWUDGH. 6KDUHV. %DVHOLQH. $3. %DVHOLQH. QRWUDGH. $3 QRWUDGH. . . . . . . . . . . . . . . . . . . 1XFOHDU. . . . . . . . . . +\GURDQG5HQHZDEOHV. . . . . . . . . . 7RWDO&2 0W&2

(84). . . . . . . . . . (OHFWULFLW\DQGVWHDP. . . . . . . . . . . . . . . . . . . . . . . . . . . . (QHUJ\VHFWRU )RVVLOIXHOLQSXWVLQHOHFWULFLW\DQG VWHDPJHQHUDWLRQ 0WRH

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

(86) DQGWKURXJKFKDQJHVLQWKHDOORFDWLRQRIWKHDYDLODEOHSODQWVLQ WKHPHULWRUGHURIGLVSDWFKLQJ 7KH RSHUDWLRQ RI DW OHDVW VRPH RI WKH DERYH PHFKDQLVPV FDQ EH VHHQ LQ 7DEOH ZKHUH D VKDUS GLIIHUHQFH FDQ EH VHHQ WR RFFXU EHWZHHQ WKH GHFOLQH LQ WKH V\VWHP V RXWSXW DQG IRVVLO IXHO LQSXWV 7KH GHFOLQHLQLQSXWVLVFORVHWRWLPHVWKHFRUUHVSRQGLQJGHFOLQHLQHOHFWULFLW\DQGVWHDPRXWSXWIRU 7KH IOH[LELOLW\ RI WKH SRZHU DQG VWHDP JHQHUDWLRQ VHFWRU WR UHVSRQG WR FDUERQ FRQVWUDLQWV LV VKRZQ PRVW GUDPDWLFDOO\ E\ WKH FKDQJHV DFKLHYHG LQ HPLVVLRQV 2Q DYHUDJH IRU HYHU\ RQH SHU FHQW UHGXFWLRQ LQ JHQHUDWLRQ RXWSXW WKHUH LV D PXOWLSOH GHFOLQH LQ &2 HPLVVLRQV 7KXV LQ WKH $3QRWUDGH VFHQDULR E\ UHGXFLQJHOHFWULFLW\DQGVWHDPJHQHUDWLRQE\MXVWWKHJHQHUDWLRQV\VWHPUHGXFHVLWVHPLVVLRQVE\ DQGWKLVDFFRXQWVIRUWZRWKLUGVRIWKHRYHUDOOV\VWHPUHGXFWLRQLQHPLVVLRQVLQRUGHUWRUHDFKWKHFDUERQ FRQVWUDLQW6LQFHDVZDVVHHQDERYHDURXQGKDOIRIWKLVUHGXFWLRQLVDFKLHYHGWKURXJKLPSURYHGHIILFLHQF\ DQG DQ LQFUHDVH LQ QRQIRVVLO IXHOV QHDUO\ KDOI RI WKH RYHUDOO UHGXFWLRQ LQ HPLVVLRQV LV DFKLHYHG WKURXJK FKDQJHVLQWKHJHQHUDWLRQIXHOPL[ . &RPSDUHGZLWKWKHGHYHORSPHQWVLQWKHEDVHOLQHDVPDOOGHFUHDVHRIFRJHQHUDWLRQRIKHDWDQGSRZHULV REVHUYHGLQWKH$3QRWUDGHVFHQDULR. 7KH$3IXOOWUDGH6FHQDULR ,QWKH$3IXOOWUDGHVFHQDULRWKH(8PHPEHUVWDWHVZLOOUHGXFHHPLVVLRQVE\LQVXFKDZD\WKDWVRPHRI WKHUHGXFWLRQVDUHFDUULHGRXWLQWKH(XURSHDQ8QLRQWHUULWRU\ZKLOHRWKHUVDUHFDUULHGRXWVLGHLWVERUGHUV )RU WKH ODWWHU WKH HQHUJ\ SURGXFHUV DQG XVHUV LQ WKH (8 ZLOO SD\ D FRPSHQVDWLRQ WKURXJK WKH HPLVVLRQ WUDGLQJ RU MRLQW LPSOHPHQWDWLRQ PHFKDQLVPV ZLWK RWKHU $QQH[ % FRXQWULHV ,Q WKH FRPSDULVRQ RI.

(87) 5,90UHSRUW. . 3DJHRI. FRPSOLDQFH FRVWV WKURXJK PHDVXUHV LQ WKH (8 WHUULWRU\ WKH DGGLWLRQDO FRVWV IURP SXUFKDVLQJ SHUPLWV DUH LJQRUHG ,QDFFRUGDQFHWR32/(6DQG35,0(6FRRUGLQDWHGPRGHOUHVXOWVIRUWUDGLQJZLWKLQ$QQH[%FRXQWULHVWKH SHUPLWSULFHKDVEHHQVHWDW SHUW&2 7KHPRGHOUHVXOWVLQGLFDWHWKDWXQGHUWKLVDVVXPSWLRQWKH(8 PHPEHUVWDWHVDUHSURMHFWHGWREHQHWEX\HUV RIHPLVVLRQSHUPLWVDPRXQWLQJWRWRQVRI&2 RI WKH WRWDO UHGXFWLRQ UHTXLUHPHQW DV DJUHHG LQ WKH .\RWR 3URWRFRO

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

(89) 3DJHRI. 5,90UHSRUW. 7DEOH3ULPDU\HQHUJ\GHPDQG$3IXOOWUDGHVFHQDULR 0WRH. FKDQJHIURP. %DVHOLQH. . GLIILQ $3. . IXOOWUDGH. 6KDUHV. %DVHOLQH. $3. %DVHOLQH. IXOOWUDGH. $3 IXOOWUDGH. 6ROLG)XHOV. . . . . . . . . . /LTXLG)XHOV. . . . . . . . . . 1DWXUDO*DV. . . . . . . . . . 1XFOHDU. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (OHFWULFLW\ WUDGHRXWVLGH(8

(90) 5HQHZDEOH(Q6RXUFHV 7RWDO. . . . . . .

(91). . . . . . . (QHUJ\SHUFDSLWD WRHFDS

(92). . . . . . . &DUERQ,QWHQVLW\ WRI&2WRH

(93). . . . . . . 7RWDO&2 0W&2

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

(96) 5,90UHSRUW. . 3DJHRI. ,PSDFWVRQSRZHUDQGVWHDPJHQHUDWLRQ ,Q WKH $3IXOOWUDGH VFHQDULR WKH FKDQJHV LQ GHPDQG VLGH LQ DFFRXQW IRU OHVV WKDQ RI WRWDO UHGXFWLRQLQHPLVVLRQV7KHEXONRIHPLVVLRQUHGXFWLRQFRPHVIURPWKHSRZHUVHFWRULQWKH$3IXOOWUDGH VFHQDULR7KHFKDQJHVFDQEHVHHQLQ7DEOH 7DEOH3RZHUDQGVWHDPJHQHUDWLRQ$3IXOOWUDGHVFHQDULR FKDQJHIURP. %DVHOLQH. (OHFWULFLW\DQGVWHDPRXWSXW 7:K

(97). )RVVLO)XHOV. . GLIILQ $3. . IXOOWUDGH. 6KDUHV. %DVHOLQH. $3. %DVHOLQH. IXOOWUDGH. $3 IXOOWUDGH. . . . . . . . . . . . . . . . . . . 1XFOHDU. . . . . . . . . . +\GURDQG5HQHZDEOHV. . . . . . . . . . 7RWDO&2 0W&2

(98). . . . . . . . . . (OHFWULFLW\DQGVWHDP. . . . . . . . . . . . . . . . . . . . . . . . . . . . (QHUJ\VHFWRU )RVVLOIXHOLQSXWVLQHOHFWULFLW\DQG VWHDPJHQHUDWLRQ 0WRH

(99) 6ROLGV. . . . . . . . . /LTXLGV. . . . . . . . . . *DV. . . . . . . . . . %LRPDVV:DVWH. . . . . . . . . . . . . . . . (IILFLHQF\UDWHVRI(OHFWULFLW\DQGVWHDP JHQHUDWLRQ. 6RXUFH35,0(6 :KLOH HOHFWULFLW\ DQG VWHDP JHQHUDWLRQ UHGXFHV E\ MXVW RYHU FRPSDUHG WR D UHGXFWLRQ RI IRU SULPDU\ HQHUJ\ GHPDQG

(100) WKH UHGXFWLRQ RI HPLVVLRQV LQ WKH VHFWRU UHDFKHV $ERXW RI WKLV UHGXFWLRQLVDFKLHYHGWKURXJKLPSURYHPHQWVLQWKHDYHUDJHHIILFLHQF\RISODQWV EHFDXVHRIXVLQJPRUHWKH SODQWVZLWKKLJKHUHIILFLHQF\OLNHWKH*7&&V

(101) DQGVKLIWVWRZDUGVWKHXVHRIUHQHZDEOHHQHUJ\IRUPV7KH UHPDLQLQJLVDFKLHYHGWKURXJKFKDQJHVLQWKHIXHOPL[PDLQO\LQIDYRXURIQDWXUDOJDVDQGWRWKHGHWULPHQW RIVROLGV.

(102) 3DJHRI. 5,90UHSRUW. 6FHQDULR$QDO\VLVIRUQRQ&2 7KH%DVHOLQHVFHQDULR 0HWKDQH ,QOLQHZLWK(($

(103) EDVHOLQHHPLVVLRQVGDWDDUHEDVHGRQDVWXG\IURP$($7HFKQRORJ\

(104) LQ ZKLFKVL[HPLVVLRQFDWHJRULHVDUHGLVWLQJXLVKHG (QWHULF)HUPHQWDWLRQ ()

(105) $QLPDO0DQXUH0DQDJHPHQW. $0

(106). /DQGILOORI:DVWH. /)

(107). &RDO0LQLQJ. &0

(108). 2LODQG*DV. 2 *

(109). 2WKHU (PLVVLRQV IURP /) LQ $($ 7HFKQRORJ\

(110) ZHUH WDNHQ IURP WKH 6HFRQG 1DWLRQDO &RPPXQLFDWLRQV +RZHYHULWWXUQHGRXWWKDWWKHVHHPLVVLRQVZHUHLQFRQVLVWHQWZLWKWKHDPRXQWVRIRUJDQLFDQGSDSHUZDVWH ODQGILOOHGDFFRUGLQJWRWKHDQDO\VLVLQWKH7HFKQLFDO5HSRUWRQ:DVWH0DQDJHPHQW7KHUHIRUHHPLVVLRQV IURP/)IRUWKH\HDUVKDYHEHHQDGMXVWHG7RWDOPHWKDQHHPLVVLRQVIURP/)LQWKH(8KDYH EHHQ WDNHQ IURP $($ 7HFKQRORJ\

(111) EXW WKH GLVWULEXWLRQ EHWZHHQ WKH FRXQWULHV DUH EDVHG RQ WKH DPRXQWVRIRUJDQLFSDSHUZDVWHODQGILOOHGLQWKHLQGLYLGXDOPHPEHUVWDWHV,WWXUQHGRXWWKDWWKHDGMXVWHG HPLVVLRQ GLVWULEXWLRQ DPRQJ WKH FRXQWULHV LV FORVH WR WKH PHWKDQH HPLVVLRQV DV UHSRUWHG E\ WKH ,3&& ,Q 7DEOHPHWKDQHHPLVVLRQIRUDUHSUHVHQWHGE\HPLVVLRQFDWHJRU\DQGIRUHDFKPHPEHUVWDWH ,Q7DEOH%DVHOLQHPHWKDQHHPLVVLRQVIRUDUHSUHVHQWHG7RWDOHPLVVLRQVDUHKLJKHUWKDQ UHSRUWHGE\$($7HFKQRORJ\

(112) 7KLVLVGXHWRKLJKHUDPRXQWVRIRUJDQLFDQGSDSHUZDVWHODQGILOOHG LQLQWKH7HFKQLFDO5HSRUWRQ:DVWH0DQDJHPHQW 7DEOH &RXQWU\ $XVWULD %HOJLXP 'HQPDUN )LQODQG )UDQFH *HUPDQ\ *UHHFH ,UHODQG ,WDO\ /X[HPERXUJ 7KH 1HWKHUODQGV 3RUWXJDO 6SDLQ 6ZHGHQ 8. (8. 0HWKDQHHPLVVLRQVLQ.WRQQHVSHU\HDULQ () $0 /) &0 2 * 2WKHU . . . . . . 7RWDO . 0WRQQHV&2 (T . . . .

(113) 5,90UHSRUW. . 3DJHRI. 7DEOH %DVHOLQHPHWKDQHHPLVVLRQVLQ.WSHU\HDULQ &RXQWU\ () $0 /) &0 2 * 2WKHU $XVWULD %HOJLXP 'HQPDUN )LQODQG )UDQFH *HUPDQ\ *UHHFH ,UHODQG ,WDO\ /X[HPERXUJ 7KH 1HWKHUODQGV 3RUWXJDO 6SDLQ 6ZHGHQ 8. (8 6RXUFH $($7HFKQRORJ\

(114) DGMXVWHGIRU/DQG)LOOV /)

No results found