A Weighted Average Incorporation of Pollution Costs into the Electrical Expansion Planning

Nir Becker, David Soloveitchik and Moshe Olshansky

Energy & Environment, 2012, vol. 23, issue 1, 1-15

Abstract: In this paper we use the WASP-IV model to estimate the impact of internalizing several environmental external costs on the electricity sector's development plan. The major impact of internalizing the external cost is on fuel use. In the current electricity generation system, more natural gas and less coal have been used. A Cost Benefit Analysis (CBA) of three scenarios has been performed focusing on taxing only one pollutant and looking at its overall implication. The benefit cost ratio was in the range of 4.32 – 5.57 while the net benefit was estimated to be in the range of 82–341 million USD annually. Greenhouse gases (GHG) contribute about 25% of these estimates hence; ancillary benefits are large enough to justify reducing those gases by between 7–12 percents compared to the baseline projection. We also carried a multi-objective analysis among the different scenarios. The weights were on the 3 pollutants (NOx, SO 2 and PM) and CO 2 . Seven scenarios appear in the non-dominated set. Out of them, five appear in every year and hence policy makers ought to place higher weights on them. Out of those five, two are a single tax on one pollutant. Interestingly, most of the non-dominating strategies carry a 0 weight on CO 2 . This gives another justification to internalize externalities based on only local pollutants and so disregards the debate over the desirability of GHG reduction.

Keywords: Externalities; capacity expansion planning; decision making (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:engenv:v:23:y:2012:i:1:p:1-15

DOI: 10.1260/0958-305X.23.1.1

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