Jan Melichar

Internalization of External Costs of Energy Generation in Central and Eastern European Countries

In this article a bottom-up approach to quantification of air pollution externalities from electricity generation is used to show that market-based instruments are not very effective in internalizing these external costs in six CEE countries. Although governments in CEE countries have regulated air emissions by imposing strict command-and-control measures, most of them have also introduced air emission charges and more recently taxes on electricity. We find however that the level of internalization by these two economic instruments is fairly low for existing fossil-fired power plants ranging from 3% for coal- and lignite-fuelled plants to 31% for gas-fuelled plants. The picture improves if cross-subsidies for renewable electricity are accounted for but the internalization level is still below air pollution–related external costs, between 9% and 55% for coal- and oil-fired power plants. A substantial overinternalization by these three instruments is however encountered in the case of gas-fired power plants.

Quantifying the Ancillary Benefits of the Representative Concentration Pathways on Air Quality in Europe

This paper presents estimates of the economic benefit of air quality improvements in Europe that occur as a side effect of GHG emission reductions. We consider three climate policy scenarios that reach radiative forcing levels in 2100 of three Representative Concentration Pathways (RCPs). These targets are achieved by introducing a global uniform tax on all GHG emissions in the Integrated Assessment Model WITCH, assuming both full as well as limited technological flexibility. The resulting consumption patterns of fossil fuels are used to estimate the physical impacts and the economic benefits of pollution reductions on human health and on key assets by implementing the most advanced version of the ExternE methodology with its Impact Pathway Analysis. We find that the mitigation scenario compatible with +2°C reduces total pollution costs in Europe by 76%. Discounted ancillary benefits are more than €2.5 trillion between 2015 and 2100. The monetary value of reduced pollution is equal to €22 per abated ton of CO2 in Europe. Less strict climate policy scenarios generate overall smaller, but still considerable, local benefits (14 € or 18 € per abated ton of CO2). Without discounting, the ancillary benefits are in a range of €36 to €50 per ton of CO2 abated. Cumulative ancillary benefits exceed the cumulative additional cost of electricity generation in Europe. Each European country alone would be better off if the mitigation policy was implemented, although the local benefits in absolute terms vary significantly across the countries. We can identify the relative losers and winners of ancillary benefits in Europe. In particular, we find that large European countries contribute to as much as they benefit from ancillary benefits. The scenarios with limited technology flexibility do deliver results that are similar to the full technology flexibility scenario.

Valuing environmental health for informed policy-making

Abstract Background: Monetized environmental health impact assessments help to better evaluate the environmental burden of a wide range of economic activities. Apart from the limitations and uncertainties in physical and biological science used in such assessments, assumptions taken from economic valuation may also substantially influence subsequent policy-making considerations. Aim: This study attempts to demonstrate the impact of normative policy assumptions on quantified external costs using a case study of recently discussed variants of future coal mining and use of extracted coal in electricity and heat generation in the Czech Republic. Methods: A bottom-up impact-pathway approach is used for quantification of external costs. Several policy perspectives are elaborated for aggregating impacts that differ in geographic coverage and in how valuation of quantified impacts is adjusted in a particular perspective. Results: We find that the fraction of monetized external impacts taken into policy-making considerations may vary according to choice of decision perspective up to a factor of 10. Conclusion: At present there are virtually no hard rules for defining geographical boundaries or adjusting values for a summation of monetized environmental impacts. We, however, stress that any rigorous external cost assessment should, for instance in a separate calculation, take account of impacts occurring beyond country borders.