The ExternE-Approach for Calculating External Costs – Methodology and Preliminary Results

1. The ExternE-Approach for Calculating External Costs – Methodology and Preliminary Results Peter Bickel IER - University of Stuttgart, Germany NEEDS FORUM 1 Accepting the Real Price for Sustainable Energy Brussels 24 May 2005

2. Historyof ExternE • Project ExternE = Externalities of Energy launched in 1991, financed by the European Commission, DG Research • scope: development of a framework for estimating environmental external costs of power plants • Follow-up projects until now • improving and extending the methodology, incorporating new knowledge • extending the field of applications: heat production, transport, industrial activities, agriculture, waste treatment

3. For what purpose are estimates of external costs needed? • to take account of external effects, when making decisions • Technology assessment: comparison of techniques, identification of weak points • Internalising external costs: getting the prices right (taxes), use of other instruments (standards, permits, subsidies …) • Cost-Benefit-Analyses, e. g. for measures and directives to protect the environment and human health • Sustainability and welfare indicator

4. Basic Concept of the Impact Pathway Approach • Assessment or weighting of impacts should as far as possible be carried out using quantitative figures and procedures • ensures transparency and reproducibility • Impacts are expressed in monetary units • allows transfer of values, units are conceivable, direct use of results in CBA and for internalising via taxes possible • however not essential: ‘utility points’ would give the same results

5. Basic Methodology of the Impact Pathway Approach Basis of assessment: (measured) preferences of the (potentially) affected, well-informed population This implies: valuation of physical impacts, not burdens/pressures (e.g. emissions of pollutants) as impacts depend on time and site of activityBottom-up approach needed: the ‘impact pathway approach’ available information should be explained before measuring preferences second best option: use of preferences of representatives (elected decision makers)

6. Differences of Physical Impacts Pollutant/Noise Emission Transport and Chemical Transformation; Noise Propagation MonetaryValuation The principle Calculation is made twice: with and without project

7. Illustration: A Fictitious Coal Fired Power Plant in Janin, China • (Reference plant defined in Hirschberg et al. (2003)) • Capacity: 925 MW • Electricity sent out: 860 MW • Full load hours per year: 5469 h • Stack height: 220m • SO2 emissions: 3.8 g/Nm3 • NOx emissions: 1.5 g/Nm3 • PM10 emission: 0.5 g/Nm3

8. Jinan power plant Location and Population Distribution

9. Jinan power plant Change in Concentration: PM10

10. Quantification of impacts and costs (I) Exposure Response Function:Number of new case of chronic bronchitis = 4.9 · 10-5· DPM10 · Population Additional cases of chronic bronchitis due to one TWh electricity produced in the fictive exemplary power plant due to primary and secondary particles: 710

11. Impacts included (I)

12. Impacts included (II)

13. Quantification of impacts and costs (II) Additional cases of chronic bronchitis due to one TWh electricity produced in the fictive exemplary power plant (primary and secondary particles): 710 /TWhel Monetary value (transferred using PPP adjusted income): 24 200 € per case of chronic bronchitis Damage costs of cases of chronic bronchitis per kWh electricity: 0.23 €-Cent per KWh

14. Health effects Monetary value (€ ) 2000 Value of a prevented fatality (VPF) 1,040,000 Year of life lost (chronic effects – long time exposure) 50,000 Cerebrovascular hospital admission 16,730 Respiratory hospital admission 4,320 Congestive heart failure 3,260 Chronic cough in children 240 Restricted activity day 110 Asthma attack 75 Cough 45 Minor restricted activity day 45 Symptom day 45 Bronchodilator usage 40 Lower respiratory symptom 8 Monetary Valuation

15. Marginal damage costs: 2,4 €2000 per t CO2 (ExternE 2000) – median value/ large range (ca. 0,1 to 16 € per t of CO2 in ExternE; up to 165 € per t of CO2 in other studies) Marginal avoidance costs for EU-Kyoto aim -8% CO2eq. 2008-2012 compared to 1990 ca 20 € per t CO2eq with emission trading(range ca. 5 – 42 € per t of CO2 ) Assessment of Greenhouse Gas Emissions

16. Uncertainties of estimations of external costs • Range of results caused by different assumptions and hypotheses (discount rate, model for assessing mortality risks) • sensitivity analysis • establish conventions on hypotheses/assumptions to be used • participative methods involving relevant social groups • guidelines by decision makers • project MAXIMA: aiming at consensus • project HEATCO to propose harmonised guidelines for the transport sector for DG TREN • recommendations for VSL and discount rates (DG Env)

17. Site Dependence of Quantifiable External Costs (Modern Coal Power Plant)

18. Quantifiable External Costs of New Power Plants in Germany (near future technologies)

19. Quantifiable External Costs of New Power Plants in Germany (near future technologies)

20. Quantifiable External Costs - Core 19 Euro/t CO2, Nitrates = 0.5 PM10, YOLLchronic = 50.000 Euro Sites in Germany

21. Quantifiable External CostsSensitivity: 50 Euro/t CO2

22. Quantifiable External Costs - Core

23. Quantifiable External CostsSensitivity: YOLLchronic = 151.110 Euro

24. Quantifiable External Costs - Core

25. Quantifiable External CostsSensitivity: Nitrates have no impact on human health

26. Summary • The Impact Pathway Approach helps to estimate impacts of technologies for energy conversion and to assess them based on preferences of the affected population/environment for a large number of impact pathways. • The methodology has been widely used for decision aid in the fields of energy conversion, transport and environmental protection. • Gaps and uncertainties exist, however will be more and more reduced due to ongoing research (e.g. on pathways involving toxic substances, heavy metals, biodiversity, water and soil contamination…).