Transcript Methodologies - Needsproject

NEEDS FORUM 1
Accepting the Real Price for
Sustainable Energy
NEEDS – New approaches to externalities
Andrea Ricci – ISIS
24 May 2005
This presentation
Introduction
Policy relevance of external costs
State of the art and main outstanding
issues
The NEEDS Integrated Project (EU –
FP6)
Introduction
Policy relevance of external costs
State of the art and main outstanding issues
The NEEDS Integrated Project (EU – FP6)
Externalities
Externalities are changes of welfare generated by a given
activity without being reflected in market prices. They may
be positive (benefits) or negative (costs)
A cost (benefit) is external when it is not paid (enjoyed) by
those who have generated it
Negative externalities are borne by society: they should
be reduced, and passed on to those who generate them
(application of the “users pay principle” through
internalisation)
Examples of external costs
Air pollution increases hospital admissions for
respiratory illness
• Costs of healthcare
• Lost productivity
• Own pain and suffering
• Pain and suffering of others
Water pollution leads to loss of fish
• Reduced recreational opportunity
• Commercial losses
• Impact on biodiversity
Intrroduction
Policy relevance of external costs
State of the art and main outstanding issues
The NEEDS Integrated Project (EU – FP6)
External costs are quantitatively relevant
Unpaid costs (externalities) can be as large as
private (internal) costs

Important market distorsions calling for corrections
(internalisation)
Alternative technology options can differ very
substantially in terms of their external costs

Immediate input to investment decisions
Sustainable energy policies
Actions on
demand
Actions on
supply
Provision and enhancement of
infrastructure, products & technologies for the
extraction, transport, conversion and use of
energy
LCA
(impacts and use of
resources)
Pricing
(structure and
level of taxes
and charges)
SCBA
(of energy
investments)
Valuation of external costs
Regulatory
interventions
(prescriptive,
restrictive, etc.)
Assessment of the real costs
of energy provision and use
Policy relevance of external cost
accounting
Supply side policies (infrastructure, other products
and services)
• Extended accounting framework for CBA
• Comparison between alternative investment
options (differential values)
Demand side policies (regulation, pricing and
taxation)
• Mitigation/abatement
• Internalisation (absolute values)
Examples of input to EU policies
Directive on non-hazardous waste
incineration
Large Combustion Plant Directive
EU strategy to combat acidification
National Air Quality Strategy
Emission Ceilings Directive
External costs valuation methods
Control costs (top-down)
• compliance costs
• abatement costs
• mitigation costs
Damage costs (bottom-up)
• market prices
• hedonic pricing
• contingent valuation (WTP/WTA)
Top-down Vs Bottom-up
+
-
Topdown
Simplicity
 Circularity
Data availability  Inaccuracy
Direct link to
(context
policy
independent)
 Over/under
estimation
Bottomup
Accuracy
Context
dependency
Sensitivity
Complexity
Data
requirements
Monetary
valuation
Linearity?
Introduction
Policy relevance of external costs
State of the art and main outstanding issues
The NEEDS Integrated Project (EU – FP6)
Basic concepts and principles
Definition of external costs (= costs not yet
internalised?)
Inclusion/exclusion (security of supply,
accidents, depreciation of infrastructure
publicly funded…)
Boundaries of the LCA and how to fully
integrate it into the external cost accounting
frameworks
External benefits?
Methodologies and uncertainties
Additional burdens and impacts (sub-micron
PM, ecosystem damages, land use/land take,
soil and water pollution...)
Refining, validating and improving the accuracy
of models (dispersion, deposition…)
Improving monetary valuation techniques
Monetary valuation of life
Very long term effects (e.g. discount rates…)
Data and knowledge base
Energy technologies coverage
More bottom-up studies (to cope with time and
site variability)
Consolidation and continuous updating of a
reference knowledge base (technological
change, update of E/R functions…)
Practical implementation
Generalisation and transferability
• Assessing and representing context
dependency (clustering techniques, reconciling
bottom-up with top-down estimates...)
• extrapolating data Vs generalising (and
simplifying) methodologies
How to pass the costs on to the users
Inter-sectoral implementation problems (phased
approach?…), but also intra-sectoral
Selling external costs to policy makers
Transparency and communication
Consensus, credibility, etc
Ethical issues (value of life, PPP,…)
Public acceptability
Introduction
Policy relevance of external costs
State of the art and main outstanding issues
The NEEDS Integrated Project (EU – FP6)
SIXTH FRAMEWORK PROGRAMME
[6.1]
[ Sustainable Energy Systems]
NEEDS
New Energy Externalities Developments
for Sustainability
NEEDS: an Integrated Project of FP6
 Duration: 48 months, starting September 2004
 66 partners (15% are SMEs), representing Universities, Research
Institutions, Industry and NGOs from 27 Countries (19 EU members, 3 MED,
5 ‘Other’)
 Leading partners:
 ISIS (IT) - Coordinator
 DLR (DE)
 IER Stuttgart (DE)
 OME (FR)
 Uni Prague (CZ)
 CNR-IMAA (IT)
 PSI (CH)
 ECO (NO)
 ISI-FRAUNHOFER (DE)
 1118 m/m; 11.7 MEuro (7.6 MEuro financed by EC)
Overall objective
To evaluate the full costs and benefits
(i.e. direct + external) of energy policies
and of future energy systems, both at
the level of individual countries and for
the enlarged EU as a whole
Objectives and targeted innovation
• Life Cycle Assessment (LCA) of energy technologies
analysis of new energy technologies options for which the
current LCA knowledge is insufficient
• Monetary valuation of externalities associated to energy
production, transport, conversion and use, targeting major
innovation in terms of:
methods
impacts so far insufficiently addressed
the availability and reliability of quantitative evidence
• Development of a consistent and robust analytical platform
allowing to integrate the full range of information and data on
LCA and external costs into a Pan-European modelling
framework
Objectives and targeted innovation (2)
Acceptability and stakeholders perspective
• To identify the terms and conditions for an effective
formulation and implementation of long term strategies
based on the internalisation of external costs
• To examine the robustness of the research results under
various stakeholder perspectives
Transferability and generalisation
• to develop a simple way of calculating, transferring and
present the uncertainty of default values for
average/aggregate external costs
Integration
• To develop a structured “protocol” to facilitate the
widespread use of the integrated analysis framework
Integration
1b
1c
1d
New and
improved
methods to
estimate external
costs
Externalities
associated
to extraction
and transport
of energy
Extension of
geographical
coverage
2a
1a
Modelling
internalisation
strategies and
scenario
building
LCA/costs of
new
technologies
2b
Stakeholders acceptability and assessment
& Energy technology roadmap and forecast
3b
Communication
&
Dissemination
3a
Transferability
&
generalisation
For further information
Andrea Ricci: [email protected]
www.isis-it.com