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ANNEX 2: EXTERNALITY ADDERS USED IN THE ANALYSIS

There are a number of studies that have looked at the external costs associated with different air pollutants in particular. We have not made a completely thorough investigation of these. Below, we list studies we have looked at and the values for the unit damage costs, or externality adders, that have been derived. Note that in the studies reviewed in Chapter 5, there is some, though not complete, consistency in estimates. This is perhaps unsurprising given the fact that some of the studies involved similar personnel.

For some key pollutants, we show some of the studies consulted. For others, we simply present the ranges used and the sources consulted.

Particulate Matter (PM₁₀) We have looked at UK and European studies (see Table 1). For comparison, RPA and Metroeconomica site US- based studies by Rowe et al (1995) and Thayer et al (1994) which give values of 20534 ECU (approx £12,800) per tonne and 46825 ECU (approx £29,000) per tonne), respectively.

Note that some estimates are for all particulates or Total Suspended Particulate matter (TSP), whilst some are for PM₁₀ specifically. We have used low and high values of £6,000 per tonne and £200,000 per tonne respectively. We accept that not all these studies are strictly comparable - they tackle pollutants arising in different contexts. The variation is therefore very significant. Clearly, one could seek to adjust values for rural and urban areas, especially in respect of transport if the ECMT (1998) study is to be believed.

Sulphur Dioxide

See Table 2 for studies reviewed. Note not all studies include all effects. We have used a low value of £2000 per tonne and high value of £10,000.

Oxides of Nitrogen (NO_x) See Table 3 for studies reviewed. The values used in this study are £1,000 at the low end and £22,000 at the high end.

Table 1. Estimates of Damages from Recent European Studies

Table 2. Estimates of Damages from Recent European Studies

^a Includes acute health, chronic health and materials impacts.

^b Includes impacts on health, buildings, crops and forests.

Table 3. Estimates of Damages from Recent European Studies

^a Includes acute health, chronic health and materials impacts.

^b Includes impacts on health, buildings, crops and forests.

Tropospheric Ozone and Volatile Organic Carbon

Key ozone precursors are NO_x and organic carbon (TOC) (see below). It is not always completely obvious whether ozone damages are included in assessments of the damages due to these products. The AEA (1997) report gives a value of 2,530 ECU/tonne of ozone. The CIEMAT (1998) report, acknowledging the complexity of the reactions involved, gives a value for the EU of 1,500 ECU / tonne NO_x. Estimates for damage costs from volatile organic carbons do not always obviously include estimates for creation of tropospheric ozone. For Volatile Organic Carbon compounds, ECMT (1998) use a figure of 4,000 ECU/tonne in rural areas and 8,000 ECU per tonne in urban areas.

Because of the complexity of the chemistry involved, damage estimates are difficult to arrive at. Since, in the contexts we are dealing with, we are looking to understand the ozone-related effects of emissions from NO_x and TOC, we have estimated low and high values of £500 and £2,000 per tonne of NO_x and the same for VOCs. For VOCs, we use high and low values of £500 and £4,000 (since these are suspected of having carcinogenic effects beyond their impacts on crops and health via ozone formation). Evidently, these numbers are somewhat arbitrary.

Greenhouse Gases (Carbon Dioxide, Methane and Nitrous Oxide)

Evidently, placing values on greenhouse gas emissions presents particular problems. Theoretically, one needs to know how climate will change because of anthropogenic emission of gases (relative to the counterfactual). The uncertainty surrounding climatic projections and the dynamic path by which climate changes, specifically, the frequency and severity of extreme events, makes easy quantification a rather distant prospect.

Carbon Dioxide

Marginal Social Costs for CO₂ emissions from a number of studies are given in Fankhauser and Tol (1995). Note that these vary over time so that typically, the shadow price of a tonne of CO₂ rises over time. Where ranges were given, they were given for 90% confidence intervals. Examples of these are:

• from Nordhaus (1991) $0.3 to $65.9;

• from Cline (1992) $5.8 to $124; and

• from Fankhauser (1994) $6.3 to $45.2.

All these are valued in $1,990 and are per tonne of carbon (so for values for CO₂, one has to multiply by the relative molecular weights, that is (12/44). Other studies include ECMT (1998) which, in the spirit of precautionary approach, used 50,000 ECU / tonne CO₂. Davidson and Wit (1997) (cited in ECOTEC 1999) estimate damage costs at £30 / tonne CO₂.

We have taken values ranging from £3 to £90 per tonne of Carbon. Ecobalance and Dames and Moore (1999) used £3 to £109 in their recent DTI report.

Methane

The two extreme values that we have made use of effectively come from Fankhauser (1995) and Davidson and Wit (1997). Fankhauser's range for a 90% confidence interval is £36.6 to £136.4 /tonne CH₄ . This was the range used in work done for us by CSERGE in ECOTEC (1999). The same study mentioned the work by Davidson and Wit (1997). We have used the £700 per tonne value as an upper bound estimate. Hence, our range is, at the low end, £36.6, and at the high end, £700.

Nitrous Oxide

These come from the earlier work carried out for us by CSERGE (in ECOTEC 1999). The values are taken from Fankhauser (1995) and cover a 90% confidence range as estimated there. The low value is £614.30, the high value, £5,534.78 per tonne of N in N₂O.

Carbon Monoxide

The damage costs for carbon monoxide come from Fankhauser (1994). The central estimate as given in Powell et al (1996) is 0.6p/kg. We have used values of £2 to £10 per tonne. This is highly arbitrary. However, the influence of carbon monoxide under these assumptions is minimal in our analysis.

Heavy Metals and Dioxins

A fairly comprehensive treatment of benefits assessment associated with heavy metals from incineration plants under different assumptions is given in AEA (1997). The reader is directed there for details of the derivations and the discussions surrounding specific pollutants. The greatest variation is witnessed in the case of dioxins. Here, the assumption concerning the absence or otherwise of thresholds has a massive influence on the results. The values we have used reflect the variation with the assumptions employed by AEA (all values are £/tonne):

• For dioxins, a low of 0, a high of 6.8 billion;

• For cadmium, a low of 50,000 and a high of 700,000

• For arsenic, a low of 6,000 and a high of 4,000,000;

• For mercury, AEA use a value of 0;

• For chromium, a low of 600,000 and a high of 4,200,000;

• For nickel, a low of 11,000 and a high of 450,000. These reflect not just variation in assumptions about effects, but also stack height (note these were derived for an incinerator in Birmingham). For lead, we have used a range from EFTEC (1996) of £3,000 to £9,000 per tonne.

CFCs, Water Pollutants incl. Leachate

We do not have data on emissions from any of the treatment routes for CFCs, and we do not feel that the valuation work available allows for an easy quantification of impacts from water pollution. These are omitted from the valuation work undertaken.

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