Guidance

Air quality appraisal: damage cost guidance

Updated 16 December 2025

This guidance details the process for assessing the air quality impact of a policy or project using damage costs. Read the ‘Assess the impact of air quality’ and ‘choosing an approach’ pages to determine which appraisal approach is most appropriate before using this page.

1. Description

The Department for Environment, Food and Rural Affairs (Defra) have developed ‘damage costs’ and ‘activity costs’ to enable proportionate analysis when assessing air quality. Damage costs and activity costs are a set of pre-calculated values, which are derived using the more detailed Impact Pathways Approach (IPA).

Damage costs are measured per tonne of emissions and activity costs are expressed in pence per kilowatt hour or pence per litre of fuel consumed. They only consider impacts within the UK and don’t include damage from transboundary effects of UK emissions in other countries.

For further details on the development of these costs go to the 2025 damage cost report.

2. Damage costs

When you know the changes in pollutant emissions and do not require the full IPA users should apply damage costs per tonne of emissions, which can be combined with emission change estimates or forecasts to provide an approximate valuation of the aggregate impacts of a policy.

Use the damage costs per tonne of emissions toolkit to calculate the net present value of the change in air pollution for your scheme. Damage costs are produced for 5 pollutants:

  • Nitrogen oxides (NOx)
  • Particulate matter (PM2.5)
  • Sulphur dioxide (SO2)
  • Volatile organic compounds (VOCs)
  • Ammonia (NH3)

There are three sets of damage costs per tonne of emissions available depending on what is most appropriate for your policy:

  • national damage costs
  • sector specific damage costs
  • large industrial processes damage costs

Sector specific damage costs and large industrial processes damage costs are only available for emissions of NOx and PM2.5. Therefore, for emissions of SO2, VOCs and NH3 the national damage costs should be used.

When the sector that PM2.5 or NOx emissions are sourced from is not known then the national average damage costs should be used. When PM2.5 or NOx emissions are sourced from a particular sector then the sector specific damage costs should be used. When PM2.5 or NOx emissions are from large industrial processes, you should use the ‘Part A sector’ damage costs.

Go to annex 1 for all damage costs per tonne of emissions data.

2.1 National damage costs

If your policy covers SO2, VOCs and NH3 emissions or PM2.5 or NOx emissions where the sector is not known then use the national average damage costs. Go to table 3 in annex 1 for the national damage costs data.

2.2 Sector specific damage costs

The impact of emissions on exposure to ambient concentrations varies for different sources and geographically, since it depends on the release characteristics of the emissions and the proximity of these emissions to centres of population. If your policy covers emissions particular to a sector (other than from large industrial processes) then use the sector specific damage costs. Go to tables 4 and 5 in annex 1.

When the specific sector the emissions are sourced from is known but the geographical area type is not, users should apply the relevant average sectoral value. For three sectors (road, rail and domestic), damage costs are provided at an additional level of granularity, split across 10 area types varying in population density from ‘Inner London’ to ‘Rural’. Please see TAG unit A5-4 marginal external costs for a detailed definition of the area types and apply the relevant damage costs when both the sector and geographical area type of the emissions are known.

2.3 Part A large industrial processes damage costs

If your policy covers emissions from large industrial processes, you should use the ‘Part A sector’ damage costs. Go to tables 6 and 7 in annex 1.

‘Part A processes’ refer to emissions from large industrial processes. Exposure to these emissions is variable, depending on the proximity and size of the population affected and the size of the chimneystack. In the case of NOx and PM, damage costs are provided for a breakdown of Part A sector emissions. This allows a more accurate analysis of impacts linked to air pollutants from large industrial processes.

There are 9 different categories of Part A sector emissions. You can find the relevant damage cost category for your analysis using Table 2. To identify the correct category, use the average population density over which the air pollutant changes are assessed and the height of the stack for the industrial installation.

Table 1: Part A categories

Average population density (persons per km squared) Stack height is less than or equal to 50m and all small point Stack Height more than 50m, but less than or equal to 100m Stack height more than 100m
less than or equal to 250 Category 1 Category 4 Category 7
More than 250, but less than or equal to 1000 Category 2 Category 5 Category 8
More than 1000 Category 3 Category 6 Category 9

The population density has been calculated for different areas for each stack height range. The population density areas are listed in Table 2.

Table 2: Population density areas for Part A categories

Stack Height <= 50 m and all small points Stack Height > 50, Stack Height <= 50 m and all small points
11 km x 11 km 21 km x 21 km 31 km x 31 km

2.4 Uncertainty and sensitivity analysis

The estimation of the impacts of air pollution on both health and non-health pathways is inherently uncertain. The methodology for assessing the different impact pathways is based on a number of assumptions around which there is a distribution of probable outcomes.

The IPA methodology (and therefore the damage costs) have been developed based on expert recommendations, in particular from the Committee on the Medical Effects of Air Pollution (COMEAP) and attempts to estimate the impact of air pollution based on the most up to date evidence available.

You should note that the evidence base around air quality impacts is continuously developing and therefore these costs do not necessarily account for the exhaustive list of all the potential health and non-health impacts of air pollution.

The central damage costs represent a best estimation of the current evidence, however there is uncertainty around: the emissions dispersion modelling, the interpretation of changes in air pollution concentrations into impacts and the valuation of those impacts. To account for this uncertainty a sensitivity range has been developed.

The low sensitivity range incorporates the lower bound concentration response function values, lower bound unit values for the valuation of health impacts and a lower level of life years lost assumed from short term exposure. The high sensitivity range incorporates the higher bound concentration response function values, higher bound unit values for the valuation of health impacts, a higher level of life years lost assumed from short term exposure and additional impact pathways.

For more information on the sensitivity range and additional sensitivity analysis conducted on three key parameters, go to the 2025 damage cost report.

2.5 Step-by-step guide

Use this step-by-step guide, along with the damage costs toolkit, if you want to apply damage costs. A worked example can be found in annex 2.

Step 1: identify and quantify the change in emissions

Estimate the impact on emissions from the change in activity at their source. The relationship between the activity and pollution produced is known as the ‘emissions factor’. For example, an emissions factor for road traffic is the amount of pollution produced per vehicle distance travelled.

Estimates of emissions factors are developed by the National Atmospheric Emissions Inventory (NAEI), presented in their Emissions Factor Database.

Damage costs for particulate matter are expressed in terms of emissions of PM2.5 (particles of diameter 2.5µm or less). For some activities it’s more common for emissions to be expressed in terms of PM10 (particles of diameter 10µm or less) so these must be adjusted to PM2.5 emissions and then monetised using the PM2.5 damage costs. You can find a list of adjustment factors for different sectors, based on the ratio between these emissions in the NAEI, in annex 1.

Step 2: Identify which damage cost values to use

Choose whether the national, sector specific or large industrial Part A processes damage costs are most appropriate for your policy.

Step 3: Convert damage cost values to relevant base year prices

The damage cost values presented in annex 1 are in 2025 prices. You must account for inflation by using the Gross Domestic Product (GDP) deflator, adjusting the values to the price base year for the project appraisal (that’s the year in which all costs and benefits are being accounted).

Step 4: Calculate benefits for each year

Use the inflation adjusted damage costs to estimate the impact of a change in emissions for each year of the appraisal period. Multiply the expected change in emission figures from Step 1 (in tonnes) by the adjusted damage cost figures from step 3 in each year to get the annual benefit.

Step 5: Discount benefits across the period of the policy appraisal and calculate total present value

To calculate the annual present value of air pollution, multiply the undiscounted value of impacts for each year (calculated in Step 4) by the relevant annual discount factor. Discount factor for year t = 1/(1+0.015)*t, where:

  • 0.015 is the 1.5% discount rate (in line with HMT’s Green Book guidance)
  • t is the number of years into the future that value is from the base year (year 0)

Present value = valued benefit x discount factor

The base year should be the current year in which the appraisal is being carried out. The discount factor for the base year is 1, and the following year (year 1) the discount factor is 0.985 after discounting at 1.5%”. The total present value is the sum of the present value of impacts in all appraisal years.

Step 6: Sensitivity analysis

In addition to the central damage cost estimates, use low and high damage cost estimates for sensitivity analysis. Repeat steps 3 to 6 using the high and low sensitivity damage cost values to generate present values of impacts for those sensitivities.

3. Activity costs

When you do not know the changes in pollutant emissions but do know the changes in fuel consumption, use ‘activity costs’ to estimate the impact of air quality.

The activity costs are calculated by combining NAEI emission factors for NOx, PM2.5 and SO2 with the appropriate damage costs. The total costs summed across the three pollutants calculate the activity cost values for each fuel type.

The activity costs are published by the Department for Energy Security and Net Zero (DESNZ) as part of the Energy Use and Greenhouse Gas Emissions Supplementary Guidance to the Green Book. The activity costs are listed in ‘Data tables 1 to 19: supporting the toolkit and the guidance’, specifically tables 14 and 15 (note that DESNZ align the price base with other values within their workbook).

Activity costs are expressed in pence per kilowatt hour (p/KWh) and associated with specific fuel types:

  • Electricity
  • Gas
  • Coal
  • Oil
  • Biomass
  • LPG
  • Peat
  • Petroleum
  • Coke

Data on each fuel type is provided across geographical specifications: National average, Inner conurbation, Urban big, Urban medium, Urban small and Rural)

Activity costs are also provided for the transport sector, expressed in pence per litre consumed (p/litre) by vehicle type:

  • Car, petrol
  • Car, diesel
  • LGV, petrol
  • LGV, diesel
  • Rigid LGV, petrol
  • Articulated HGV, diesel

Data on each vehicle type is provided across geographical specifications: Transport average, Central London, Inner London, Outer London, Inner conurbation, Outer conurbation, Urban big, Urban large, Urban medium, Urban small and Transport rural.

4. Annex 1: 2025 damage costs data

4.1 Damage costs per tonne of emissions data

The following tables show the full set of updated damage cost values, in 2025 prices, alongside the low and high sensitivities. In Tables 4 and 6 the final column also displays the conversion factor required to estimate impacts of PM10 emissions.

Table 3: national damage costs (2025 prices)

Pollutant emitted Central damage cost (£/t) Damage cost sensitivity range (£/t): low Damage cost sensitivity range (£/t): high
NOx £10,193 £1,671 £34,546
SO2 £26,193 £9,158 £72,022
NH3 £9,900 £3,376 £27,868
VOC £150 £90 £277
PM2.5 £114,411 £40,026 £371,654

Table 4: PM source sector damage costs (2025 prices)

Pollutant emitted Central damage cost (£/t) Damage cost sensitivity range (£/t): low Damage cost sensitivity range (£/t): high PM2.5/PM10 conversion factor
PM2.5 industry (area) £170,576 £61,511 £787,110 0.220
PM2.5 commercial £146,671 £50,747 £404,555 0.929
PM2.5 domestic £109,172 £37,747 £297,946 0.977
PM2.5 solvents £182,830 £63,652 £554,483 0.633
PM2.5 road transport £121,222 £42,305 £380,527 0.564
PM2.5 aircraft £146,743 £51,084 £444,486 0.636
PM2.5 offroad £89,066 £30,825 £246,788 0.909
PM2.5 rail £111,755 £38,690 £311,294 0.888
PM2.5 ships £65,693 £22,723 £180,426 0.947
PM2.5 waste £106,862 £36,976 £295,121 0.923
PM2.5 agriculture £35,416 £12,934 £184,157 0.177
PM2.5 other £149,541 £51,762 £415,338 0.899
PM2.5 road transport central London £648,110 £226,292 £2,048,400 0.551
PM2.5 road transport inner London £628,530 £219,583 £2,002,690 0.537
PM2.5 road transport outer London £353,225 £123,383 £1,123,061 0.541
PM2.5 road transport inner conurbation £253,612 £88,530 £798,916 0.557
PM2.5 road transport outer conurbation £159,099 £55,524 £499,532 0.563
PM2.5 road transport urban big £152,869 £53,356 £480,719 0.561
PM2.5 road transport urban large £122,884 £42,888 £386,116 0.562
PM2.5 road transport urban medium £99,639 £34,775 £313,066 0.562
PM2.5 road transport urban small £84,998 £29,664 £266,921 0.563
PM2.5 road transport rural £49,192 £17,163 £153,912 0.570
PM2.5 rail transport central London £558,441 £193,113 £1,527,561 0.966
PM2.5 rail transport inner London £709,957 £245,507 £1,941,808 0.966
PM2.5 rail transport outer London £456,691 £157,929 £1,249,411 0.965
PM2.5 rail transport inner conurbation £266,139 £92,033 £728,001 0.966
PM2.5 rail transport outer conurbation £145,097 £50,181 £397,628 0.957
PM2.5 rail transport urban big £158,795 £54,916 £434,845 0.961
PM2.5 rail transport urban large £119,759 £41,449 £332,076 0.906
PM2.5 rail transport urban medium £89,462 £30,949 £246,241 0.938
PM2.5 rail transport urban small £73,313 £25,389 £205,259 0.868
PM2.5 rail transport rural £45,868 £15,892 £129,411 0.839
PM2.5 domestic central London 862,547 £298,193 £2,348,976 0.987
PM2.5 domestic inner London £733,939 £253,754 £2,001,566 0.980
PM2.5 domestic outer London £394,288 £136,326 £1,075,708 0.978
PM2.5 domestic inner conurbation £292,459 £101,120 £798,172 0.977
PM2.5 domestic outer conurbation £182,873 £63,230 £499,094 0.977
PM2.5 domestic urban big £156,677 £54,173 £427,606 0.977
PM2.5 Domestic urban large £143,176 £49,504 £390,775 0.976
PM2.5 domestic urban medium £107,392 £37,132 £293,097 0.977
PM2.5 domestic urban small £86,151 £29,788 £235,129 0.976
PM2.5 domestic rural £50,279 £17,384 £137,214 0.977

Table 5: NOx source sector damage costs (2025 prices)

Pollutant emitted Central damage cost (£/t) Damage cost sensitivity range (£/t): low Damage cost sensitivity range (£/t): high
NOx industry (area) £12,228 £1,868 £41,837
NOx commercial £21,315 £2,747 £74,389
NOx domestic £18,998 £2,523 £66,089
NOx solvents £21,796 £2,794 £76,114
NOx road transport £13,631 £2,004 £46,863
NOx aircraft £17,172 £2,346 £59,547
NOx offroad £11,431 £1,791 £38,982
NOx rail £13,241 £1,966 £45,465
NOx ships £3,623 £1,036 £11,011
NOx waste £11,422 £1,790 £38,949
NOx agriculture £4,724 £1,142 £14,956
NOx other £4,442 £1,115 £13,945
NOx road transport central London £72,737 £7,721 £258,606
NOx road transport inner London £71,618 £7,613 £254,598
NOx road transport outer London £40,048 £4,559 £141,501
NOx road transport inner conurbation £28,927 £3,483 £101,658
NOx road transport outer conurbation £18,365 £2,462 £63,823
NOx road transport urban big £17,655 £2,393 £61,279
NOx road transport urban large £14,307 £2,069 £49,286
NOx road transport urban medium £11,630 £1,810 £39,695
NOx road transport urban small £10,012 £1,654 £33,899
NOx road transport rural £5,944 £1,260 £19,323
NOx rail transport central London £83,509 £8,764 £297,196
NOx rail transport inner London £80,591 £8,483 £286,738
NOx rail transport outer London £51,611 £5,681 £182,916
NOx rail transport inner conurbation £31,508 £3,737 £110,898
NOx rail transport outer conurbation £17,233 £2,357 £59,752
NOx rail transport urban big £18,074 £2,439 £62,763
NOx rail transport urban large £14,422 £2,087 £49,677
NOx rail transport urban medium £10,937 £1,750 £37,191
NOx rail transport urban small £8,867 £1,551 £29,774
NOx rail transport rural £5,960 £1,271 £19,355
NOx domestic central London £92,180 £9,612 £328,231
NOx domestic inner London £87,005 £9,113 £309,690
NOx domestic outer London £53,260 £5,849 £188,798
NOx domestic inner conurbation £34,167 £4,003 £120,397
NOx domestic outer conurbation £22,755 £2,900 £79,511
NOx domestic urban big £20,114 £2,645 £70,045
NOx Domestic urban large £17,188 £2,363 £59,561
NOx domestic urban medium £13,097 £1,968 £44,902
NOx domestic urban small £10,618 £1,730 £36,020
NOx domestic rural £6,403 £1,323 £20,916

Table 6: PM Part A sector damage costs (2025 prices)

Pollutant emitted Central damage cost (£/t) Damage cost sensitivity range (£/t): low Damage cost sensitivity range (£/t): high PM2.5/PM10 conversion factor
PM2.5 Part A category 1 £12,917 £4,478 £36,781 0.807
PM2.5 Part A category 2 £59,137 £20,486 £166,364 0.850
PM2.5 Part A category 3 £230,713 £80,004 £659,233 0.795
PM2.5 Part A category 4 £5,329 £1,848 £15,289 0.782
PM2.5 Part A category 5 £8,098 £2,810 £23,389 0.761
PM2.5 Part A category 6 £25,534 £8,857 £73,279 0.781
PM2.5 Part A category 7 £1,481 £513 £4,234 0.792
PM2.5 Part A category 8 £4,177 £1,450 £12,082 0.757
PM2.5 Part A category 9 £9,173 £3,195 £28,040 0.616

Table 7: NOx Part A sector damage costs (2025 prices)

Pollutant emitted Central damage cost (£/t) Damage cost sensitivity range (£/t): low Damage cost sensitivity range (£/t): high
NOx Part A category 1 £3,612 £1,035 £10,972
NOx Part A category 2 £4,896 £1,159 £15,572
NOx Part A category 3 £10,258 £1,678 £34,779
NOx Part A category 4 £3,097 £985 £9,125
NOx Part A category 5 £3,532 £1,027 £10,685
NOx Part A category 6 £5,255 £1,194 £16,855
NOx Part A category 7 £2,961 £972 £8,639
NOx Part A category 8 £3,364 £1,011 £10,083
NOx Part A category 9 £3,650 £1,038 £11,105

4.2 Activity costs data

For activity costs data refer to  ‘Energy Use and Greenhouse Gas Emissions Supplementary Guidance to the Green Book’.

The activity costs data is within ‘Data tables 1 to 19: supporting the toolkit and the guidance’, specifically tables 14 and 15 (note that DESNZ align the price base with other values within their workbook).

5. Annex 2: Damage costs worked example

This section uses a hypothetical policy measure to show how the impact of NOx is calculated using damage costs per tonne of emissions.

5.1 The hypothetical policy

A measure introducing more efficient NOx controls from vehicles and applied nationally, where:

  • one of the expected benefits of implementing this measure is the reduction of NOx emissions
  • this measure is being assessed for 10 years, with the first year of impacts in 2026
  • the scheme is expected to reduce emissions of NOx by 12 tonnes per year until 2028 and 3 tonnes per year thereafter, compared to a ‘do nothing’ scenario
  • the price base year for appraisal is 2023
  • the discounting year is 2026

5.2 Step 1: identify and quantify change in emissions

Table 8 shows the level of change that is expected from this hypothetical policy.

If you’re quantifying the impacts of PM10, convert your emissions to PM2.5 using the conversion factors set out in Annex A.

Table 8: level of change in NOx emissions

Year NOx emissions reduction (tonnes)
2026 12
2027 12
2028 12
2029 3
2030 3
2031 3
2032 3
2033 3
2034 3
2035 3

5.3 Step 2: identify which damage cost values to use

For this example, as the policy is impacting vehicles and applied nationally, we’ve used the NOx road transport damage cost of £13,631 is used.

5.4 Step 3: convert NOx damage costs to base year

The price base year for the appraisal is 2023 in this case, so the damage costs will need to be adjusted to the new price base using GDP deflators (note these are likely to change over time, see ‘Annual Parameters’ tab in the TAG Data Book).

Multiplying the ratio of the index values for 2023 (100) and 2025 (107.14) - so, 100.00 / 107.14 = 0.93 - by the damage cost value, gives a rebased value of £12,723.

Table 9: change in emissions (t), appropriate damage cost (£) and rebased damage cost

Year NOx emission reduction (tonnes) NOx national average road transport damage costs, central (2025 prices) Rebased to 2023 prices
2026 12 £13,631 £12,723
2027 12 £13,631 £12,723
2028 12 £13,631 £12,723
2029 3 £13,631 £12,723
2030 3 £13,631 £12,723
2031 3 £13,631 £12,723
2032 3 £13,631 £12,723
2033 3 £13,631 £12,723
2034 3 £13,631 £12,723
2035 3 £13,631 £12,723

5.5 Step 4: calculate benefits for each year

Multiply the price year adjusted damage cost values by the change in emissions (tonnes) for the corresponding years.

Table 10: calculating the total undiscounted benefit of the change in emissions

Year NOx emission reduction (tonnes) NOx national average road transport damage costs, central (2023 prices) Total undiscounted benefit
2026 12 £12,723 £152,676
2027 12 £12,723 £152,676
2028 12 £12,723 £152,676
2029 3 £12,723 £38,169
2030 3 £12,723 £38,169
2031 3 £12,723 £38,169
2032 3 £12,723 £38,169
2033 3 £12,723 £38,169
2034 3 £12,723 £38,169
2035 3 £12,723 £38,169

5.6 Step 5: discount benefits across the period of the policy appraisal to calculate total present value

Table 11 shows the present values for the hypothetical policy scenario, calculated using the 1.5% discount rate (in line with HMT’s Green Book guidance).

The total present value of air quality impacts can then be calculated as the sum of present values across the appraisal period. For this example, the central estimate of the present value is £621,217 over the 10-year appraisal period.

Table 11: total discounted benefits of the change in emissions

Year NOx emission reduction (tonnes) Total undiscounted benefit Discount Factor Total discounted benefit
2026 12 £152,676 1 £152,676
2027 12 £152,676 0.985 £152,420
2028 12 £152,676 0.971 £148,197
2029 3 £38,169 0.956 £36,502
2030 3 £38,169 0.942 £35,962
2031 3 £38,169 0.928 £35,431
2032 3 £38,169 0.915 £34,907
2033 3 £38,169 0.901 £34,391
2034 3 £38,169 0.888 £33,883
2035 3 £38,169 0.875 £33,382
Total 57 £725,211   £695,751

5.7 Step 6: sensitivity analysis

The sensitivity range can be calculated using the same procedure but applying the low and high damage costs.

For the hypothetical policy, the high estimate of the present value is £2,391,900 and the low estimate of the present value is £102,260.

6. Annex 3: Health metrics

6.1 Health metrics description

This section discusses health outcomes which capture the underlying health effects of air pollution in non-monetary terms.

These metrics represent the intermediate health outcomes estimated as part of (or underpinning) the damage cost calculations. As with the damage cost values, the health metrics and the pathways captured are derived from the Impact Pathway Approach and can be broadly split into 3 metrics:

  • Mortality – Life Years Lost (LYL) per tonne of emissions  

  • Morbidity – Quality-Adjusted-Life Years (QALYs) lost per tonne of emissions  

  • Morbidity – Number of hospital admissions per tonne of emissions  

In section 6.2, data is presented for each of the above metrics for the national damage cost values with separate tables presenting low and high estimates based on the sensitivity range. Please note that some of the hospital admission values are negative due to pathways where increased pollutant emissions result in reductions of ozone concentrations and consequently reduced estimated admissions.

These health metrics can be used for the purposes of a simplified assessment to approximate the health impacts of marginal changes in air pollution in the absence of concentration data and provide an evidence-based narrative to accompany the valuation of air pollution impacts using damage costs.

Please note there are multiple steps between these health metrics and their corresponding damage costs values, as the monetised damage costs also include environmental, materials and productivity pathways and apply discounting techniques.

For further information or any questions about these health metrics and how they should be used, email igcb@defra.gov.uk.

6.2 Health metrics data

Table 12: intermediate health metrics associated with national damage costs (central)

Pollutant emitted LYL / tonne QALYs / tonne Hospital admissions / tonne
NOx 0.11 0.070 0.0044
SO2 0.31 0.14 0.0069
NH3 0.11 0.050 0.0025
VOC 0.00015 - 0.0020
PM2.5 1.4 0.60 0.030

Table 13: intermediate health metrics associated with national damage costs (low sensitivity)

Pollutant emitted LYL / tonne QALYs / tonne Hospital admissions / tonne
NOx 0.43 0.0092 0.0026
SO2 0.24 0.038 -0.0045
NH3 0.086 0.014 -0.0016
VOC 0.000027 - 0.00080
PM2.5 1.0 0.17 -0.020

Table 14: intermediate health metrics associated with national damage costs (high sensitivity)

Pollutant emitted LYL / tonne QALYs / tonne Hospital admissions / tonne
NOx 0.21 0.22 0.012
SO2 0.35 0.47 0.022
NH3 0.13 0.18 0.0081
VOC 0.00038 - 0.0034
PM2.5 1.5 2.6 0.098