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New External Costs Calculation for Extraction and Transport of Fuels

This study aims to assess the externalities associated with the extraction and transport of fuels, including oil, gas, electricity transmission, and hydrogen transport. The research focuses on operational and accidental externalities, with a special emphasis on oil spills. The assessment includes evaluating the environmental and socio-economic impacts along different routes and provides a comprehensive evaluation of external costs for each pollutant.

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New External Costs Calculation for Extraction and Transport of Fuels

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  1. SIXTH FRAMEWORK PROGRAMME [6.1] [ Sustainable Energy Systems] New External Costs Calculation for Extraction and Transport of Fuels Sohbet Karbuz Observatoire Mediterraneen de l’Energie, France External Costs of Energy Technologies EESC, Brussels, 17 February 2009

  2. Outline • Goal, methodology • Externalities concerning extraction and transport of • Oil • Natural gas • Externalities concerning • Electricity transmission • Transport of Hydrogen • Uncertainties and transferability • Further research

  3. Stream 1c: “New Externalities Associated to the Extraction and Transport of Energy” OME, FEEM, VITO, POLITO, ARMINES, SWECO, CEDRE, NTUA • Aim: Deepen methodology and assessment of activities which have not (or not sufficiently) been taken into account in the past for: • Oil & gas extraction and transport • Transport of electricity • Transport of hydrogen

  4. The context • General impact pathway methodology with risk analysis assessing • for each stage of the fuel cycle the activities • for each activity the burdens • for each burden the impact • for each impact the economic valuation • Special Focus: • Oil spills (probabilistic externalities) • Representative sample of case studies

  5. Research Stream 1c“New Externalities associated to the extraction and transport energy” • Supply/Demand scenarios • Flows & Routes • Critical passages • Extraction & Transport • OIL • NATURAL GAS • Transport • ELECTRICITY • HYDROGEN • New technology & regulation • Burdens • Impacts • Risk Analysis • Economic valuation • Externalities • Operational • Accidental Assessment of uncertainties and transferability

  6. For oil and gas • Under 3 sets of scenarios (high, low, ref) future oil/gas imports to the EU & their routes (pipelines and tankers) to 2030 have been assessed • Based on those scenarios, two kinds of external costs are computed (operational and probabilistic) • Total external costs are calculated in terms of GHG costs and non-GHG costs for per ton of oil/gas produced and transported to EU.

  7. Assessment of Externalities Concerning Extraction and Transportof Oil

  8. Refence case Crude oil imports to EU [10.7-13.9] Oil imports to EU

  9. Crude oil flows to EU (2004)

  10. External costs of European crude oil imports • Provide a comprehensive evaluation of the external costs (for each pollutant) associated with importing oil into Europe, by taking into account of burdens, environmental and socio-economic impacts along the different routes, for: • Operational externalities(caused by day to day operations), • Accidental externalities (probabilistic, caused by accidental oil spills),

  11. External cost of oil imports (€/ton of oil import/year) Operational Externalities (€/ km*ton oil) Probabilistic Externalities (€/year/route) Oil import flow model (tons/route/year) ECOSENSE unit external costs (€/ton pollutant) Extraction Transport LCA (ton pollutant/ km*ton oil) Onshore Offshore Pipelines Tankers Extraction Transport Onshore Offshore Pipelines Tankers The building blocks: The external cost of European crude oil imports

  12. Operational externalities • The unit externality values give an indication of how much external damage is caused by producing 1t of oil and by transporting it 1km • Combined them with the flows of oil produced for European consumption, and transported to Europe along the main import channels now and in the future • Calculated unit external costs in terms of impacts of nonGHG emissions on health, environment and crops&material, and of GHG as marginal damage costs

  13. Operational externalities: Oil Production Unit external costs (€/t), nonGHG, production, 2020 weighted average values of total externalities by pollutant Unit external costs (€/t), GHG, production, 2020

  14. Operational externalities: Oil Transport • Pipelines: poor/no LCI data on air emissions. Unit external costs are estimated • Tankers: Unit External Costs [€/tkm] for GHG emissions from oil transportation computed by combining Ecoinvest and Ecosense data

  15. Operational externalities: Oil Transportby tanker Unit External Costs [€/tkm] for non-GHG emissions in 2010

  16. Accidental externalities • Oil extraction • Onshore: very poor info on accidents • Offshore: accidents have either negligible impact or involves only the facility involved • Oil transport • Pipelines: no reliable assessment available. Major risks are related to explosion events, but risks for human lives are small • Tankers: An innovative methodology developed (allows risk aversion, subjective oil spill probabilities, adopts ex-ante perspective)

  17. Oil tanker traffic routes • The Novorossisk – Augusta route(Black Sea - Med) • The Ras Tanura–Rotterdam route (Persian Gulf – Europe) • The Primorsk -Rotterdam route • (Baltic - Europe) • Special emphasis on hotspots

  18. Probabilistic externalities of oil transportation by tanker route • Probabilities of occurrences of accidents by cause (groundings, collisions, structural failure & foundering) and oil spilt by hotspot along the selected routes • Base Case: 10-4 Worst Case: 10-6 • Impacts on • local economy (fishery, tourism) • EnvironmentWTP

  19. Probabilistic externalities of oil transportation by tanker route Environmental damage cost estimates (in €2007) for the hotspots

  20. Total expected utility losses including risk premiums at each hot spot • Risk premiums for each impact group, for each potentially affected sector at each relevant location around a hotspot have been evaluated • Computed according to the probabilities (perceptions by the public) of each accident cause Example: Total expected utility losses (Euro), incl. risk premiums, at each hotspot, assuming of lay public’s perception 20 times the experts’ probabilities

  21. External costs of oil extraction and transport. high demand scenario. €/t 0.74 0.035

  22. External costs of oil extraction and transport: main conclusions • The resulting externality costs are quite low, [2.3 €/t in 2030-Low demand scenarios to 2.6 €/t in 2010-High demand scenario] To put things in perspective: • Average direct cost of bringing oil to Europe is ~ 7.5 €/b (or 55 €/t) • Thus externalities represent about 5% of direct cost and about 1 % of today’s prices • Bringing oil to Europe is not the most noxious phase of the oil life cycle. Using oil as a fuel brings about, on average, much more serious consequences for the environment and for human health. • Probabilistic externalities account for a very small fraction of the total external cost. But this by no means should be used as a justification for relaxing pollution prevention and remediation standards in European waters since they indicate that the impact on local populations affected can be very substantial.

  23. Assessment of Externalities Concerning Extraction and Transportof Natural Gas

  24. Natural Gas Import Flows and Routes to EU-25, 2004. (in bcm)

  25. EU-25 future gas imports by transport mode, low case scenario

  26. Externalities of gas extraction and transport • Extraction • Operational: venting, flaring • Accidental: blow-outs • LNG plants: own use of gas • Transport • Pipeline: • Operational: linked to GHG emissions due to the compression of gas, leakage in the valves, cracks. • Accidental: pipeline breaks due to corrosion, third party. Poor data. • LNG • Operational: operational air emissions from the exhausts of the ship engines, own use of gas along the journey • Accidental: release of hazardous material. extremely rare, very low change of occurrence, very high safety. No data.

  27. Externalities of gas extraction and transport • Operational • Extraction: Calculated for offshore (Norway) and onshore (Algeria, Russia) • Pipelines: Considered Russian pipelines representative. Unit externality values (computed for GHG and VOC) by assuming • Russian pipelines will reach European standards by 2020 • Russian technical standards will not improve • Tankers: assumptions • Main engine fuel: natural gas • Auxiliary engine fuel: conventional diesel • Accidental: no complete assessment possible due to incomplete info. But likely to be very small due to high safety standards. Risks are diminishing.

  28. Externalities of gas extraction and transport Overall external costs (€/t) from natural gas extraction and transport, assuming Russian pipelines will reachEuropean technical standards by 2020 • Overall externality values range between • 0.32 €/t in 2020 in the Low demand scenario • 1.71 €/t in 2004

  29. Externalities of gas extraction and transport • Operational externalities: sulphur and particulate content of natural gas is negligible, their importance in terms of impacts human health, biodiversity and human activities is much lower than oil • GHG-related externalities are more substantial, especially where fugitive emissions of natural gas are high (Russian pipelines). Improving standards prompt hopes that these impacts will be substantially reduced in the coming years • Externalities related to the natural gas chain are not negligible, but still relatively quite small, and will slightly decline in the coming decades

  30. Assessment of Externalities of Electricity Transmission

  31. Externalities of Electricity Transmission External costs of transmission are small, if expressed per MWh electricity produced

  32. Externalities of Electricity Transmission • External costs for average grid (based on 30 year life time) are estimated to be in the range of 0.03 to 1.66 €/MWh • Electromagnetic fields’ impact on leukemia is uncertain but it is unlikely to be important • Visual intrusion can be important, although valuation is very uncertain and incomplete • Transmission losses can also be important, especially in urban areas

  33. Externalities of Electricity Transmission • The impacts of EMF - although uncertain - can be as high as the private costs for a km overhead lines. • External costs for land use are higher for cables

  34. Assessment of Externalities of import/transport of Hydrogen

  35. External costs of transportation of H2 • Burdens due to normal operations • trucks (gaseous & liquid) • according to different emission reduction standards defined by European standards Euro 1-3-4-5 • pipelines • Ships (large oceanic, fuelled only with H2) • Liquefaction considered as part of the transportation phase

  36. External costs of transportation of H2 • The model developed evaluates • marginal damage cost • marginal abatement cost • Externalities due to accidents calculated for several accidental event

  37. External costs of transportation of H2 Trucks:Gaseous hydrogen [€/kWh] Marginal abatement cost of GHGemissions[€/kWh]

  38. External costs of transportation of H2 Trucks:Liquid hydrogen [€/kWh] Marginal abatement cost of GHGemissions[€/kWh]

  39. External costs of transportation of H2 • Transport by ship: • H2 is liquefied. engines are fueled by H2. external costs of pollution are negligible • Marginal abatement cost is 1.5 10-5 €/kWh • Liquefaction • Marginal abatement cost is 1.74 10-3 €/kWh • Marginal damage cost 1.19 10-3 €/kWh

  40. External costs of transportation of H2 • Due to accidents • very variable due to the large range of risk values calculated for each accidental event • Highest cost might be caused by accident with a cryogenic ship (order of 10-6 €/kWh) when potentially affected people are numerous (compared to the most common transportation means)

  41. Externalities due to accidents in H2 transportation

  42. Estimation of Uncertaintiesandtransferability of the results

  43. Estimation of Uncertainties • Identify sources of uncertainty for each burden • Uncertainties arise mainly from • the transfer of dispersion calculations, • exposure-response functions, • of monetary values and • of technologies • Estimate distribution for each source: normal, lognormal • Combine the uncertainties to obtain uncertainty of the damage cost Better approximately right than precisely wrong! Damage cost of air pollutants: lognormal with geo. Std.dev ~3 (68% probability for true value to be between gmean/3 and gmean*3)

  44. Estimation of Uncertainties • For external costs based on LCA inventories the uncertainties are significantly larger than those of the external cost per kg of pollutant because of the uncertainties of LCA databases

  45. Transferability of the Results • Developed and applied a value transfer methodology (to value the external costs to ecosystems and tourism of transportation of oil in the Mediterranean) • Average transfer errors are in the same order of magnitude as we generally find in international value transfer studies (± 25-40%).

  46. Further Research • Oil and gas: making refinements on the issues where simplifying assumptions were used. (such as probabilistic externalities of extraction and pipeline transportation, range of operational externalities considered) • H2 and electricity, the analysis could be expanded and deepened with updated calculations concerning burdens in production phase • Externality calculations could be unified in such a way that it would have been possible to make some sort of comparison between energy vectors.

  47. Thank you

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