ExternE - Externalities of Energy potx

The internalisation of external costs is a key element for the implementation of sustainable development in Europe. The so-called “ExternE methodology” has been updated in order to better quantify the social and environmental damages of energy, especially those provoked by air pollution coming from energy produc- tion and consumption. In order to improve the quality of the environment and to reduce the negative impacts from pollution on human health, policy choices have to be made. These choices need to be based on a complete and coherent methodology for accounting for external costs. ExternE Externalities of Energy Methodology 2005 Update EUR 21951 ExternE — Externalities of Energy —Methodology 2005 Update KI-NA-21951-EN-C 2005 Directorate-General for Research Sustainable Energy Systems EUR 21951 ExternE Externalities of Energy Methodology 2005 Update Edited by Peter Bickel and Rainer Friedrich Institut für Energiewirtschaft und Rationelle Energieanwendung — IER Universität Stuttgart, Germany EUROPEAN COMMISSION Europe Direct is a service to help you find answers to your questions about the European Union Freephone number: 00 800 6 7 8 9 10 11 LEGAL NOTICE Neither the European Commission nor any person acting on behalf of the Commission is responsible for the use which might be made of the following information. The views expressed in this publication are the sole responsibility of the author and do not necessarily reflect the views of the European Commission. A great deal of additional information on the European Union is available on the Internet. It can be accessed through the Europa server (http://europa.eu.int). Cataloguing data can be found at the end of this publication. Luxembourg: Office for Official Publications of the European Communities, 2004 ISBN 92-79-00423-9 © European Communities, 2005 Reproduction is authorised provided the source is acknowledged. Printed in Luxemburg PRINTED ON WHITE CHLORINE-FREE PAPER FOREWORD Externalities are related to social welfare and to the economy. The idea is firstly to measure the damages to society which are not paid for by its main actors; secondly, to translate these damages into a monetary value; and thirdly, to explore how these external costs could be charged to the producers and consumers. Indeed, if the market takes into consideration the private costs, policy-makers should try to take account of the external costs. During the course of the last fifteen years, the European Commission has worked extensively – in particular through socio-economic research in the field of energy - to quantify the energy external costs. The European research allowed a multidisciplinary research team, composed of engineers, economists and epidemiologists, to develop an original methodology, the Impact Pathway Approach. The Impact Pathway Approach tackles issues such as the exposure-response functions; especially health impacts from air pollution, the monetary valuation of these impacts (“value of statistical life”), accidents in the whole energy supply chain, and the assessment of other impacts like global warming, acidification and eutrophication. Models for pollutant dispersion have also been developed and case studies have been performed all around Europe. Electricity – like transport – is a key factor for economic and social development. Nevertheless, its air pollutants (particles, oxides of nitrogen, sulphur dioxide, etc) provoke damages like morbidity or premature mortality (chronic bronchitis, asthma, heart failure,…). The ExternE research team has made an in-depth analysis of various fuels and technologies in the electricity sector with methodology and results published in 1995 and 1999. An update was necessary to take account of the latest developments both in terms of methods for monetary valuation and technological development. The ExternE methodology is widely accepted by the scientific community and is considered as the world reference in the field. With ExternE, and this new “green accounting framework”, a ranking of technologies can be made according to their social and environmental impacts. Internalising external costs, by taxing the most damaging technologies or by subsidising the cleanest and healthiest ones, can give an impetus to new technologies and could help to achieve a more sustainable world. Achilleas Mitsos Director-General for Research The editors would like to thank the many people who have contributed to this report either directly in the current phase of the ExternE Project series or in previous project phases. We thank them for the provision of data and for the many helpful discussions which have taken place during the course of the different projects. The authors would particularly like to thank Mr Pierre Valette and Dr. Domenico Rossetti- - di- - Valdalbero from Directorate General Research at the European Commission for their support for the project; and the European Commission for the financial support given under various Research Programmes. ACKNOWLEDGEMENTS CONTRIBUTORS Institut für Energiewirtschaft und Rationelle Energieanwendung (IER), Universität Stuttgart, Germany P. Bickel R. Friedrich B. Droste-Franke T. M. Bachmann A. Greßmann Ecole des Mines, Paris, France A. Rabl University of Bath, UK A. Hunt A. Markandya Universität Hamburg, Germany R. Tol Institute of Occupational Medicine (IOM), Edinburgh, UK F. Hurley E-CO Tech as, Oslo, Norway S. Navrud Paul Scherrer Institut (PSI), Villigen, Switzerland S. Hirschberg P. Burgherr T. Heck Vlaamse instelling voor technologisch onderzoek (VITO), Mol, Belgium R. Torfs L. de Nocker S. Vermoote L. IntPanis Swedish Corrosion Institute (SCI), Stockholm, Sweden J. Tidblad In addition, this work draws on the contributions and results of numerous colleagues, who have contributed to the development of the methodology in earlier projects of the ExternE project series. A list of the core teams involved in the development of the ExternE methodology (together with further documentation and results) can be found at www.externe.info. vii Contents 1 Executive Summary 1 1.1 Overview of the Methodology 1 1.2 The Impact Pathway Approach 2 1.3 Methods for Monetary Valuation 4 1.4 Uncertainties 5 2 Introduction 7 3 Purpose and General Methodology 9 3.1 Purpose of Quantifying External Costs 9 3.2 Basic Principles of the Methodology 11 3.3 Methods for Monetisation 16 3.3.1 Non-market valuation techniques for end-points of dose-response functions 16 3.3.2 Description of techniques used 18 3.3.3 Evaluation of environmental impacts based on preferences revealed in political negotiations 21 3.4 Benefit Transfer 23 3.4.1 Alternative benefit transfer methods 24 3.4.2 Validity and reliability 27 3.4.3 Validity tests 28 3.4.4 Conditions and limitations 29 3.5 Discounting 29 3.5.1 Discount rates 29 3.5.2 Theoretical rationale for declining discount rates 31 3.6 References 32 4 Assessment of Impacts Caused by Emissions to Air, Water and Soil: The Impact Pathway Approach 35 4.1 Introduction 35 4.2 Dispersion of Pollutants and Exposure 38 4.3 Dose-Response Functions 40 4.3.1 General considerations 40 4.3.2 Health Impacts 42 4.4 Monetary Valuation 43 4.4.1 General considerations 43 4.4.2 Mortality 43 4.5 Software 44 4.6 Calculation of Marginal Damage for Non-linear Impacts 45 4.7 The Effect of Uncertainties and Ways to Address Uncertainties 47 4.8 Presentation of Results 48 4.9 References 49 [...]... framework for assessing external costs of energy use In the ExternE (Externalities of Energy) project series, the impact pathway methodology has been developed, improved and applied for calculating externalities from electricity and heat production as well as transport The ExternE Project commenced in 1991 as the European part of a collaboration with the US Department of Energy in the ‘EC/US Fuel Cycles... endpoints of dose-response functions and alternative approaches for monetary valuation where no reliable impact estimates are possible 3.3.1 Non-market valuation techniques for end-points of dose-response functions Non-market valuation is a technical term used to describe the idea that a number of welfare components in the valuation of external costs or any project appraisals do not have the value of that... non-market good An example of a revealed preference direct method is based on observed choices in a referendum exercise, where individuals are offered a fixed quantity of a good at a given price on a ‘yes-no’ basis Individuals’ choices reveal if the value of the offered good is greater or less than individuals’ maximum willingness to pay for the offered good In order to use the results of this type of. .. of the dose-response function 6.2.2 Difficulties of epidemiological studies 6.2.3 Differences between results of different studies 6.2.4 Relative risk and CRF 6.2.5 Which pollutant causes how much health damage? 6.3 CRFs for Mortality 6.3.1 Loss of life expectancy vs number of deaths 6.3.2 Studies of chronic mortality 6.3.3 Loss of life expectancy for chronic mortality of adults 6.3.4 Loss of life expectancy... concentration, followed by calculation of impacts (damage in physical units) from this exposure using an exposure-response function, e.g cases of asthma due to this increase in O3; Cost: valuation of these impacts in monetary terms, e.g multiplication by the monetary value of a case of asthma SOURCE (specification of site and technology) emission (e.g., kg/yr of particulates) DISPERSION (e.g atmospheric... increase in concentration at receptor sites (e.g., μg/m3 of particulates in all affected regions) DOSE-RESPONSE FUNCTION (or concentration-response function) impact (e.g., cases of asthma due to ambient concentration of particulates) MONETARY VALUATION cost (e.g., cost of asthma) Figure 1.1 The principal steps of an impact pathway analysis, for the example of air pollution 2 Executive Summary Whereas only... Scope of the EcoSense model 5.1.4 The EcoSense modules 5.1.5 The air quality models integrated in EcoSense 5.2 Multi-Compartment (air/water/soil) Analysis 5.2.1 Uniform World Model 5.2.2 WATSON 5.3 Sound Propagation 5.4 References 6 Impact Pathway Approach: Exposure-Response Functions 6.1 Overview of Health Impacts of Air Pollution 6.2 Dose-response Functions and the Calculation of Impacts 6.2.1 Form of. .. of the important impact categories and externalities 2) Estimation of the impacts or effects of the activity (in physical units) In general, the impacts allocated to the activity are the difference between the impacts of the scenario with and the scenario without the activity 3) Monetisation of the impacts, leading to external costs 4) Assessment of uncertainties, sensitivity analysis 5) Analysis of. .. Monetary Valuation 7.1 Overview of General Approach 7.2 Valuation of Health Impacts of Air Pollution 7.2.1 Mortality 7.2.2 Morbidity 7.3 Valuation of Amenity Losses from Noise 7.3.1 Road traffic noise 7.3.2 Aircraft noise 7.3.3 Rail noise 7.3.4 Industrial noise and other types of noise 7.3.5 The potential for benefit transfer of existing studies 7.3.6 What should be the cut-off point for valuing noise... to represent these types of welfare changes, we have to adopt non-market valuation techniques to measure the size of the welfare changes Generally non-market valuation methods are classified according to the origin or source of the data analysed Mitchel and Carson (1989) observe that data on environmental use often come from either observations of individuals acting in real-world settings or from individuals’ . external costs. ExternE Externalities of Energy Methodology 2005 Update EUR 21951 ExternE — Externalities of Energy —Methodology 2005 Update KI-NA-21951-EN-C 2005 Directorate-General for Research Sustainable. Cataloguing data can be found at the end of this publication. Luxembourg: Office for Official Publications of the European Communities, 2004 ISBN 9 2-7 9-0 042 3-9 © European Communities, 2005. Approach: Exposure-Response Functions 75 6.1 Overview of Health Impacts of Air Pollution 75 6.2 Dose-response Functions and the Calculation of Impacts 76 6.2.1 Form of the dose-response function