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‚ExternE : Methodology and Results‘
Rainer Friedrich
IER, University of Stuttgart
and the ExternE team
www.ExternE .info
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External CostsDefinition
An external cost arises, when the social or economic activities of one group of persons have an impact on another group and when that impact is not fully accounted, or compensated for, by the first group.
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Aim of the ExternE methodology:= helps to take into account all
externalities in a consistent way when making decisions
- Investment decisions
- Technology assessment (subsidies, research support)
- Consumer decisions (e.g. by adjusting prices)
- Cost-benefit analyses, esp. for environmental and health regulation
- Green accounting
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Basic principles
1) Assessment or weighting of effects should as far as possible be carried out using quantitative figures and functions
->ensures transparency and reproducibility
2) Assessment of effects/damage (e.g. health risk), not of pressures (e.g. emissions of pollutants)
-> relation between pressure and effect is in general non-linear and
->effects depend on time and site of activity -> -> Bottom-up approach needed for the
complex pathways: the ‘impact pathway approach’
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Impact Pathway Approach – Part 1Differences of Physical
Impacts
Transport andChemical
Transformation;Noise Propagation
Pollutant/Noise Emission
Calculation is made twice: with and
without project!
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Quantification of Impacts and Costs
Exposure Response Function:
Additional Years of Life Lost
= 3.9 · 10-5 · Sulfate · Population
Quantified number of additional Years of Life Lost due to
one year operation : 103
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Impacts included (I)Impact Cat. Pollutant / Burden Effects Human Health mortality
PM10 SO2, O3
Benzene, BaP, 1,3-butad., Diesel part. Noise Accident risk
Reduction in life expectancy due to short and long time exposure Reduction in life expectancy due to short time exposure Reduction in life expectancy due to long time exposure Reduction in life expectancy due to long time exposure Fatality risk from traffic and workplace accidents
Human Health PM10, O3, SO2 Respiratory hospital admissions morbidity PM10, O3 Restricted activity days PM10, CO Congestive heart failure Benzene, BaP,
1,3-butad., Diesel part.
Cancer risk (non-fatal)
PM10 Cerebrovascular hospital admissions, cases of chronic bronchitis, cases of chronic cough in children, cough in asthmatics, lower respiratory symptoms
O3 Asthma attacks, symptom days Noise Myocardial infarction, angina pectoris, hypertension,
sleep disturbance Accident risk Risk of injuries from traffic and workplace accidents
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Impacts included (II)
Impact Category
Pollutant / Burden Effects
Building Material
SO2, Acid deposition
Combustion particles
Ageing of galvanised steel, limestone, mortar, sand-stone, paint, rendering, and zinc for utilitarian buildings
Soiling of buildings
Crops SO2 Yield change for wheat, barley, rye, oats, potato, sugar beet
O3 Yield change for wheat, barley, rye, oats, potato, rice, tobacco, sunflower seed
Acid deposition Increased need for liming
N, S Fertilising effects
Global Warming
CO2, CH4, N2O World-wide effects on mortality, morbidity, coastal impacts, agriculture, energy demand, and economic impacts due to temperature change and sea level rise
Amenity losses Noise Amenity losses due to noise exposure
Ecosystems SO2, NOx, NH3 Eutrophication, Acidification
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Impact Pathway Approach – Part 1Differences of Physical
Impacts
Transport andChemical
Transformation;Noise Propagation
Pollutant/Noise Emission
Calculation is made twice: with and
without project!
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Basic Approach of ExternE
This implies:- Available information should be explained
before measuring preferences
Assessment of impacts is based on the (measured) preferences of the affected
well-informed population
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Basic Approach
Preferences are expressed in, i. e. effects are transformed into monetary units (€2005)
->allows transfer of values, units are conceivable, direct use of results in CBA and for internalising via taxes possible
-> however: ‘utility points’ would give the same results
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Impact Pathway ApproachDifferences of Physical
Impacts
Transport andChemical
Transformation;Noise Propagation
MonetaryValuation
Pollutant/Noise Emission
Calculation is made twice: with and
without project!
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Valuation methods for non-market goods
Stated Preference (SP)surveys
Indirect valuation
assesses costs or efforts that can be linked to the non-market good
• Hedonic Price Method• Averting Behavior Method• Travel Cost Method• Contingent Behavior Method• Past behaviour of public decision makers
Direct valuation
• Contingent Valuation Method (CVM)
• Attribute Based Choice Modeling (ABCM)
• Participatory approaches
• Surveys for preferences of public decision makers
Revealed Preference (RP)behaviour (shown in the past)
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Monetary Valuation
Health end-point Recommended central unit values in € price year 2000
Value of a prevented Fatality 1,000,000 Year of Life Lost 50,000 / year lost Hospital admissions 2,000 / admission Emergency Room Visit for respiratory illness 670 / visit General Practicioner visits: Asthma Lower respiratory symptoms
53 / consultation 75 / consultation
Respiratory symptoms in asthmatics: Adults Children
130 / event 280 / event
Respiratory medication use – adults and children
1 / day
Restricted activity days 130 / day Cough day 38 / day Symptom day 38 / day Work loss day 82 / day Minor restricted activity day 38 / day Chronic bronchitis 190,000 / case
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Quantification of Impacts and Costs
Exposure Response Function:
Additional Years of Life Lost
= 3.9 · 10-5 · Sulfate · Population
Quantified number of additional Years of Life Lost due to
one year operation : 103
Monetary value
50 000 Euro2000 per Year of Life Lost
Damage costs per year:
5.1 Million Euro2000
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Some exemplary results of applying the ExternE tools:
The results of the ExternE research are the functions and tools that can be applied to answer individual questions!
Results of applying the tools depend on scenario, site, time and technology!
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Some exemplary results of applying the ExternE tools:
Possibly important effects that are not (yet) included:
Visual intrusion
Biodiversity losses (eutrophication and acidification), however new method developed within the NEEDS project
Biodiversity loss (local, however included in Environmental Impact Study)
Risk of nuclear proliferation and terrorism
Risk aversion resp. treatment of Damocles risks
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Quantified External Costs [Euro-Cent / kWh] of a Coal Fired Power Station (steam turbine)
0
1
2
3
4
Spain
Italy UK
Poland
Germ
any
France
Belgiu
m
[Eu
ro-C
en
t / k
Wh
] NMVOC
PM10
NOx
SO2
CO2eq
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External Costs of Power Stations [Euro-Cent / kWh] 19 Euro/t CO2, Nitrates = 0.5 PM10, YOLLchronic = 50.000 Euro
0
1
2
3
4
5
6
WECOffshore
Hydro PWR,reproc
PV sc-Si Naturalgas-CC
ORC-HKW
PAFC Lignite,IGCC
Coal,IGCC
Coal PFB
Ex
tern
al
Co
sts
[E
uro
-Ce
nt
/ k
Wh
]
Health impacts Crops Material Climate change
Sites in Germany;
2010 technologies!
CHP
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External Costs of Power Stations [Euro-Cent / kWh] 19 Euro/t CO2, Nitrates = 0.5 PM10, YOLLchronic = 50.000 Euro
0
1
2
3
4
5
6
WECOffshore
Hydro PWR,reproc
PV sc-Si Naturalgas-CC
ORC-HKW
PAFC Lignite,IGCC
Coal,IGCC
Coal PFB
Ext
ern
al C
ost
s [E
uro
-Cen
t / k
Wh
]
Health impacts Crops Material Climate change
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External Costs of Power Stations [Euro-Cent / kWh] Sc: Nitrates have no impact to human health
0
1
2
3
4
5
6
WECOffshore
Hydro PWR,reproc
PV sc-Si Naturalgas-CC
ORC-HKW PAFC Lignite,IGCC
Coal,IGCC
Coal PFB
Ex
tern
al C
os
ts [
Eu
ro-C
en
t / k
Wh
]
Health impacts Crops Material Climate change
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External Costs of Power Stations [Euro-Cent / kWh]Sc: 50 Euro/t CO2
0
1
2
3
4
5
6
WECOffshore
Hydro PWR,reproc
PV sc-Si Naturalgas-CC
ORC-HKW
PAFC Lignite,IGCC
Coal,IGCC
Coal PFB
Ex
tern
al C
os
ts [
Eu
ro-C
en
t / k
Wh
]
Health impacts Crops Material Climate change
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Quantification of Externalities of Heat SupplyCB = condensing boiler, MFH = multi family house, OFM = one family house
0
1
2
3
4
Gas-CB OFH
Solar-Gas-CBOFH
Gas-CB MFH
Fuel oil-LTMFH
Wood chipsMFH
Ex
tern
al C
os
ts [
Eu
ro /
GJ
]
Health others GHG
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Substance Years of Life Lost Damage Costs
(Million
Euro2000) PM 10 474 000 35 300
(primary and secondary)
03 and SO2 11 000 430
Total (rounded) 480 000 36 000
Human Health Effects due to Electricity Production
in the EU25 Countries
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Summary• The ExternE methodology estimates effects of technologies for
energy conversion and assesses them based on preferences of the affected population for a large number of impact pathways.
• The methodology is already 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…)
• More information on the ExternE website:
www.ExternE.info
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Relation between ExternE methodology and Multicriteria Decision Analysis
Both use preferences to weigh effects
Differences: •monetary vs. non monetary weighting factors•Preferences of stake holders (or decision makers?) vs. representative part of population
-> MCDA methodology can be used to close gaps (further effects, monetary weighting factors); explore very controversial issues
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The aim should be to integrate results of these approaches into an overall assessment framework !
Problems of MAUA:
-often decision makers are not willing to state their preferences
- stake holders tend to fix weighting so that the predefined result results
-As stake holders have different preferences, no overall decision can be deduced
- for each decision process new factors have to be estimated
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Criticisms
It is not appropriate or ethical to compare or express intangible values in monetary terms
-> explain, that monetary values are not principally different from other units, but have some practical advantages
Use of contingent valuation for assessing monetary values sometimes problematic
-> Use also other methods
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Criticisms IIUncertainties resp. the range of results are so large, that the results are not useful
-> often not true, as decisions often are robust; in other cases opportunity for structured discussion
Uncertainties from impact pathway modelling reflect uncertainty of current knowledge, can be reduced by further research.bandwidth of results caused by different assumptions and hypotheses (interest rate, choice of hypothesis with regard to exposure-response–relationship, choice of indicators)sensitivity analysisdetermination of hypotheses to be used by decision maker
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Criticisms III
Gaps, that might contribute significantly to external costs remain and are neglected
-> extension of considered effects
For very controversial issues a minority might not accept the result
-> sensitivity analysis, discourse
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Use of Multicriteria Decision Analysis and Participatory Approaches to
Extend/Amend the ExternE Methodology:Close Gaps, where no monetary value is available (e.g. social criteria)Carry out MCA resp. choice modelling (for representative part of population, decision makers?)
Deal with very controversial issues (nuclear):Explore and quantify opinion of stakeholders, try to convince them to quantify and generalise preferences; will result in range of results according to stake holders
-> Integrate results into a combined assessment framework
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Uncertainties of estimations of external costsBandwidth of results caused by different
assumptions and hypotheses (discount rate, model for assessing mortality risks) sensitivity analysisStated preference (esp. participative methods)Guidelines by decision maker, which hypotheses/assumptions to be used project HEATCO to propose harmonized guidelines for the transport sector for DG TREN,
recommendations for VSL and discount rates (DG Env)
Preparation of guidelines for the German ‚Umweltbundesamt‘
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