Risk Aversion, Lay Risk Assessment and Oil Spill Externalities Andrea Bigano, Mariaester Cassinelli, Anil Markandya, Fa

1. Risk Aversion, Lay Risk Assessmentand Oil Spill Externalities Andrea Bigano, Mariaester Cassinelli,Anil Markandya, Fabio Sferra

2. Introduction: the project This research is part of the European integrated project NEEDS, aimed at improving on the ExternE results. • Objective of the Research Stream: To assess the externalities associated with the extraction and transportation of energy. • Tasks:Assessment of Externalities Concerning the Extraction and Transport of oil (WP1), gas (WP2), electricity transmission (WP3), other energy vectors (WP4), transferability and uncertainties related to these externality assessments (WP5). • Main topics covered by WP1: • Oil supply and demand scenarios and their breakdown into import routes and to Europe; • Critical passages along the routes and the assessment of the risk; reduction potential due to developments in tanker technology and safety regulation; • Burdens and impacts related to the extraction and transportation of oil; • Assessment of probabilistic externalities related to the extraction and transportation of oil.

3. Oil spill causes • Ship-related oil pollution is attributed mostly to operational discharges which have consistently overshadowed accidental discharges; • Less frequently, the cause of an oil spill from a tanker is an accidental event. The case study focuses on groundings, collisions and structural failure & foundering as these are the most relevant causes for the Aegean Islands.

4. Case study : Determination of impacts and damages • Impacts considered: • Tourism • Fisheries • Natural Enviroment • Evaluation Methods: • Tourism and Fisheries: direct costs • Natural environment: CVM + value transfer

5. Case study : impacts on local economies – Stage 3 shore Assumptions: • Population and workforce are evenly spread across each region; • Tourism and Fisheries will stop activities for a year (11 months) if affected; • Environmental damages are inferred from Bieryliet et al. (2006) using benefit transfer techniques; • The impacts will be more severe in the proximity of the spill. The area around the oil spill has been divided into three sub-areas, with increasing population and decreasing severity of the impacts:

6. Case study : Damages (Million €)

7. Case study : Conclusions • The value of this exercise is more in showing the feasibility of a more refined approach than in the actual numerical results. • Oil spill probabilities assessment is based on general, site–specific and even ship-specific causal factors. The general shape of the causal links that may lead to an oil spill can be portrayed, but case by case evaluation cannot be avoided. • On the other hand, introducing risk aversion and lay risk evaluation is a relatively simpler task, although careful calibration of the utility function is needed in order to arrive at realistic values. • Future work is needed to assess burdens, impacts and lay probabilities more carefully, and to examine more sites/routes to increase our understanding of accident costs of oil transportation by sea.

8. Assessment of most critical passages on routeswithin Europe • Sailing around a dangerous cape • Calling at a terminal • Waiting at anchor: Total 176 500 t spilled • Hamilton Trader, 1969, Liverpool Bay, Heavy crude, 700 t, ? ► Europe, Collided by other ship • Irenes Serenade, 1980, Pylos, Greece, Crude oil, 40 000 t, Irak ► Greece ?, Fire and explosion • Phillips Oklahoma, 1989, Humber Estuary, Crude oil, 800 t, ? ► Europe, Collided by other ship • Agip Abruzzo, 1991, Livorno bay, Crude oil, 2 000 t, Iran ► Europe, Collided by ferry, fire and explosion • Haven, 1991, Genoa bay, Crude oil, 133 000 t, Arabian Gulf ► Europe, Fire and explosion • Sailing in high seas • Sailing in a busy strait, canal, estuary • Others and undetermined

9. Assessment of most critical passages on routesto Europe • From the China Seas and Arabian Gulf through the Suez Canal • Along China Seas and Gulf routes round the cape of Good hope, 383 000 t spilled: • Venoil, 1977, South Africa, Crude oil, 27 000 t, ? ►Europe, Collision • Master Stathios, 1978, South Africa, Fuel, 22 000 t, ? ►Europe ? Fire and explosion • Castillo de Belver, 1983, NW of Capetown, South Africa, Light crude, 252 000 t, Arabic gulf ►Europe, Fire on board • Pacificos, 1989, South Africa, Crude oil, 10 000 t, ? ►Europe, Hull failure • Katina P, 1992, Mozambique, Fuel, 72 000 t, ? ►Europe, Hull failure in storm • Along Caucasian / Caspian routes through the Black Sea • Along Russian routes through the Arctic and Baltic Seas

10. Global assessment of most critical passages to and within Europe • Very high risk: those areas with a record of several major spills, namely • the tip of Brittany • the tip of Galicia • High risk: the capes, channels and ports approaches with a record of either one major spill or several medium ones, namely • the cape of Good Hope, • the Suez Canal, • the Bosphorus, • the Gibraltar strait, • the Dover strait, • Bantry bay • Milford Haven approaches

11. Work in progress on oil transport externalities • Accidents related to Oil transport by tankers: • Consideration of the effects on accidents frequency and importance of the Erika and Prestige packages • Case studies on other sea routes: • attribution of probability site specific weights: • Ras Tanura – Rotterdam • Primorsk - Baltic Sea – Rotterdam • Damage evaluation (value transfer + direct costs) • Generalisation to external cost of oil transport by tanker to Europe • Accidents related to oil transport by pipeline: • decision treeproposed (to be validate by an expert judgment): • differentiation between mechanical, operational, corrosion, third part, natural accident • site specific: depends by ground characteristics, depth of the pipeline, country. • Generalisation to external cost of oil transport by pipeline to Europe

12. Work in progress on oil extraction externalities • Offshore (sea) platforms: decision trees analysis(to value the accidents’ probabilities) proposed (to be validated by an expert judgment): Structural failure,Collision, Helicopter accident, Blowout, Fire and Explosion,Spill release, Other accidents • Onshore platforms: accidents less frequent and relevant than those connected to offshore platforms, but types of accidents and externalities to be considered soon.

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