Communication on External costs of electricity production A view from industry’s perspective

General comments Electricity Industry recognises the extensive and valuable work done on the estimation of external costs As others, EI has concerns on some scientific aspects of the approaches used Main EI’s concern is however about transparency of information: when figures are used, uncertainties and caveats are not accounted for. This has dramatic consequences for decision-making Two illustrations: site-specficity and uncertainties

Site specificity (1/2) The cost of one ton of emitted pollutant fully depends on the plant’s location For atmospheric pollutants, the main drivers for damages are meteorological conditions and population density However, present ExternE figures have been derived for one particular plant per country, and are thus site specific French exemple: Figures derived for Cordemais plant, located west of France, under dominant winds from the west Nothing to do with plants located south of France, near the mediterranean border, under dominant winds from the north

Site specificity (2/2) As a general principle, figures derived from a specific plant can not fit for generic uses However, policy-making requires generic values at national/european level: Cost Benefit Analysis for global air quality improvement (CAFÉ) Comparison of generation technologies Figures used so far (as in the CAFÉ CBA) are not the right ones

Uncertainties (1/2) The ExternE (1998) project has estimated uncertainties1, further revised by the MAXIMA (2005) project If the damage cost a pollutant is estimated to be 5000€/t, then the true value has 95% chance of being within2 [150 , 41000] €/kg 1 ExternE project, Externalities of Energy, vol. 7 methodology 1998 update 2 Figures expressed as mean, not median, values ; calculations developped by the MAXIMA team

Uncertainties (2/2) So far, Cost Benefit Analysis (as in CAFÉ) only consider variability of figures, but not their uncertainty Variability accounts for the fact that different studies give different values In the CAFÉ CBA, variability induces a factor of about 3 between the upper and lower damage estimates Uncertainty is responsible for ranges that are much larger (100 times for individual pollutants) than variability

Consequences for policy-making (1/2) Exemple of atmospheric pollution, National Emission Ceilings approach (NECD)1 Total cost beared by the society is the sum of Cost of compliance to achieve a given ceiling External cost due to the remaining emissions What is the uncertainty on the total cost due to the uncertainty on the external costs of one ton of emitted pollutant ? 1 Rabl, Spadaro, Zwaan 2005

NECD: SO2 ceiling for France – 2010

Consequences for policy-making (2/2) Total cost might be underestimated by 60% to 150% Underestimation of the total cost is much larger (up to 150%) and grows much faster when damage costs are overestimated than when they are underestimated This might change policy-making’s perspective

Conclusions Stakeholders have to be better informed that: In their present state of development, external costs are still a topic for research Many caveats are attached (as site specificity of present values) Uncertainties are quite large and have to be accounted for in CBA so as not to get biased decisions