Valuation of Environmental Cost by Heat Emissions from Pollution Control

Abstract

Recently, several attempts have been made to estimate the external costs of the West German energy system, i.e. the harmful effects of energy conversion processes in the country not charged to the producers but to third parties or the general public. The studies of Herz et al. [1], Wicke [2], Hohmeyer [3] and Friedrich et al. [4] indicated annual pollution damages of many billions Deutsche Mark. They also showed how sensitively external cost estimates depend on controversial valuation criteria [3,4]. Apart from the difficulties of valuating in monetary terms very different risks like radiation from nuclear waste, on the one hand, and global warming because of carbon dioxide (CO₂) emissions from fossil fuel burning, on the other hand, there is the big problem of how to determine the full intertemporal external costs of a given energy system, i.e. the opportunity cost to future energy users resulting from limitations on energy consumption [3,4]. The important and theoretically novel problem here is that limitations will not only result from depletion of energy resources but also from the finite capacity of the environment to absorb the pollution associated with energy conversion. The seriousness of this problem is illustrated by the greenhouse effect and the limits it may impose on the burning of carbon which presently satisfies about 60 % of the world’s energy needs (whereas approximately 30 % of the world’s energy consumption is covered by the oxidation of the hydrogen in the fossil fuels): In order to stabilize the climate the “fossil carbon budget for the period from 1985 to 2100 (should)... be about btC (billion tons of carbon...), equivalent to about 55 years of fossil releases at current rates” [5].