External Cost Internalization Model of Waste Gas on Upstream Oil and Gas Fields ( A Case study of PT. Chevron Pacific Indonesia – Sumatera Light North Operations)

Donny Yoesgiantoro, Chandra Wijaya, Haryoto Kusnoputranto and Widjajono Partowidagdo
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Haryoto Kusnoputranto: Interdisciplinary Postgraduate Program, University of Indonesia, Jakarta
Widjajono Partowidagdo: Faculty of Mining and Petroleum Engineering, Bandung Institute of Technology, Bandung

Economics and Finance in Indonesia, 2011, vol. 59, 279-296

Abstract: This research aims at formulating an effective policy proposal regarding the management of externalities in the upstream oil and gas sector in order to support sustainable development. The applied research instrument covers the economic value and Marginal Cost Control (MCC). The economic value is measured from the economic values of the follozving aspects: ecology, and social and economic factors, which are representing the negative externality value (external cost) that resulted from tlie production activities of oil and gas production activities. This economic value can be measured by a contingent valuation method and the market price approach. The result of this research shows that: (i) pollution and environmental impacts persist; (ii) in order to suppress the environmental impacts at the optimal level, the quantity of manageable waste gas has to be added for 1.2 billion SCF/year; (Hi) the alternative policy that can be applied is by levying environmental taxes on waste gas to the amount oflDR 0.6 /SCF, from which the collected fund is dedicated to environmental items, such as new pollution abatement technology, which is known as the earmarking process.

Keywords: external cost; waste gas; economic value; environmental taxes (search for similar items in EconPapers)
JEL-codes: Q4 Q5 (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:lpe:efijnl:201114

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