Quantifying environmental externalities with a view to internalizing them in the price of products, using different monetization models

Thu Lan Thi Nguyen, Bertrand Laratte, Bertrand Guillaume and Anthony Hua

Resources, Conservation & Recycling, 2016, vol. 109, issue C, 13-23

Abstract: In this paper, we first conduct an exhaustive literature review on how environmental externalities in a life cycle model could be valued and, through a case study, we check the consistency of the results obtained based on different monetization models. Then we compare the two approaches for internalization of externalities in the price of products: (1) to introduce a corrective tax equal to the externalities and (2) to apply reduced value added tax rates on environmentally friendly goods based on their relatively low externalities compared to less friendly alternatives. A typical product category is selected for the case study, i.e., electrical energy derived from the two distinct primary energy sources, renewable and non-renewable. The results comparing the three monetization methods illustrate that the choice of method used can influence not only the resulting monetary value of the externalities, or marginal social costs, of a single product but also the relative ranking among alternatives in the same product category. Our results also show that internalizing externalities by means of either a corrective tax (approach 1) or a reduced value added tax rate (approach 2) eliminates the price disadvantage of green products like electricity from biomass, making them a preferable choice over cheap conventional ones like coal.

Keywords: Life cycle assessment; Monetization; Internalization; Value added taxes (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0921344916300180
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:recore:v:109:y:2016:i:c:p:13-23

DOI: 10.1016/j.resconrec.2016.01.018

Access Statistics for this article

Resources, Conservation & Recycling is currently edited by Ming Xu

More articles in Resources, Conservation & Recycling from Elsevier
Bibliographic data for series maintained by Kai Meng ().