UNDERSTANDING ENERGY PRODUCTION ENVIRONMENTAL EXTERNALITIES-A LITERATURE REVIEW FROM AN ENGINEERING PERPECTIVE FRANK L.

1. 1 UNDERSTANDING ENERGY PRODUCTION ENVIRONMENTAL EXTERNALITIES-A LITERATURE REVIEW FROM AN ENGINEERING PERPECTIVE FRANK L. PARKER VANDERBILT UNIVERSITY ERICE, SICILY AUGUST 21, 2007

2. 2 BACKGROUND The ambitious undertaking to review the externalities of energy production came to a halt when the literature to be reviewed proved to be enormous. For example, when googling externalities of energy production, 950,000 sites were found. In addition, in Sterling�s excellent �Limits to the Value of External Costs� (Energy Policy, (25), 5, 1997), there are approximately 250 citations. Similarly, when googling ExternE, most likely the most ambitious study ever of environmental externalities of energy production, 68,500,000 sites were found. Further, consider that the EC initiated ExternE in 1991 and is still funding its extensions at a cost of greater than 10 million Euros. ExternE still has not produced a model that provides unambiguous answers to the �correct� energy mix even in an aggregated form. Therefore, in 20 minutes (hopefully), I shall give a brief overview of the history of such projections, look at a few results of a number of studies and conclude with where I think we are today. Of course, this review reflects my limited knowledge and prejudices or as I prefer to call them, My Assumptions

3. 3 MY ASSUMPTIONS EXTERNALITIES ARE DERIVED FROM WELFARE ECONOMICS (MAXIMIZATION OF HUMAN WELFARE) AND WERE FIRST INTRODUCED IN 1890 (ALFRED MARSHALL). THE THEORY HAS BEEN GREATLY MODIFIED SINCE BUT STILL HAS MANY LIMITATIONS. NUMEROUS ATTEMPTS HAVE BEEN MADE TO IMPROVE THE METHODOLOGY OF MAXIMIZING HUMAN WELFARE BUT HAVE FOUNDERED ON THE LACK OF DATA AND IMPOSSIBILITY OF ACCURATELY PREDICTING FUTURE EVENTS CLIMATE CHANGE: IPCC Report Lays Out Options for Taming Greenhouse Gases, John Bohannon, SCIENCE 11 MAY 2007 "The only reason for economists to make forecasts is to make astrologers look good," Martin Hoffert �Long run is a misleading guide to current affairs. In the long run we are all dead.� John Maynard Keynes A Tract on Monetary Reform, ch. 3 (1923). Therefore, the question is how do we get through the near term? Malthus, T. R., Essay on the principle of population. 1807 The Limits to growth; a report for the Club of Rome's project on the predicament of mankind, 1972, Donella H. Meadows, Dennis L. Meadows, Jorgen Randers, William W. Behrens III No heros for ex-post analyses! Search for the Holy Grail of perfect foresight. Tilting at windmills.

4. 4 "Reading the 30th-year update (of the Club of Rome Sudy-added) reminds me of why the systems approach to thinking about our future is not only valuable, but indispensable. Thirty years ago, it was easy for the critics to dismiss the limits to growth. But in today's world, with its collapsing fisheries, shrinking forests, falling water tables, dying coral reefs, expanding deserts, eroding soils, rising temperatures, and disappearing species, it is not so easy to do so. We are all indebted to the "Limits" team for reminding us again that time is running out." �Lester Brown, Earth Policy Institute