The Social Costs of Energy Consumption

Transcription

1 The Social Costs of Energy Consumption Literaturliste Prof. Dr. Olav Hohmeyer Universität Flensburg Rio 02 World Climate & Energy Event Copacabana Palace, Rio de Janeiro January 2002 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 1 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 1

2 Bob Watson (Chairman of IPCC), Marrakech 2001: The Challenge - Sustainable Management of an Ever-Changing Planet: Sustainable Energy Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 2 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 2

3 Why talk about Social costs? In market economies the structure and decisions of the energy system are determined by market prices and politics If we find substantial cost elements not reflected in market prices, decision makers get wrong signals and will take wrong decisions The larger the share of costs not reflected in the prices of any one energy technology, the more will be over invested in such technology As these costs not reflected in prices typically are environmental or health costs, this has lead to non sustainable energy use in the past Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 3 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 3

4 What are Social costs? Definition: Social costs arise when any costs of production or consumption are passed on to third parties, like future generations or society at large. Examples of social costs are: man-made climate change and its resulting damages forest damages due to acid rain health damages from major nuclear reactor accidents Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 4 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 4

5 Social costs of climate change (Bob Watson, Chairman of IPCC, Marrakech 2001): The Earth s climate is warming -- human activities are primarily responsible -- further climate change is inevitable without actions to reduce GHG emissions Greenhouse gas emissions in the 21 st century can set in motion large-scale, high-impact, non-linear, and potentially abrupt changes in physical and biological systems over the coming decades to millennia Sustained warming of a few o C over millennia is projected to lead to an increase in sea level of several meters due to loss of Greenland and Antarctic Ice Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 5 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 5

6 Two definitions of costs not included in the prices: External costs (neo-classical economic theory): External costs + internal costs = social costs Aim: Pareto-optimal allocation, maximum welfare External costs are used to find optimal levels of pollution ( arrange the deckchairs on the sinking Titanic ) Social costs (Hohmeyer/Kapp): Social costs + private costs = costs to society Aim: full internalisation of all effects not transported through prices to guide for sustainable development Given environmental and resource limitations social costs are used to secure a sustainable level of economic activity at minimal cost ( avoid sinking ) Concerning environmental and health damages both definitions coincide Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 6 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 6

7 The two cost concepts and sustainable development: The concept of external costs is geared towards optimal economic welfare. It is blind for major aspects of strong sustainability like the maximum sustainable scale of the economic system and intertemporal equity. The concept of social costs is broader by definition. It can include: limits to scale of the economic system to reflect strong sustainability costs of keeping resource stocks functionally constant structural economic effects aspects of intergenerational and international equity in resource distribution. Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 7 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 7

8 Market prices may lead to non sustainable energy systems if substantial differences in the social or external costs of different energy systems exist: Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 8 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 8

9 Since the early 1990s it has become a standard to demand the internalisation of such costs (include them in the prices) Bob Watson (IPCC), Marrakech, 2001: Internalisation Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 9 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 9

10 Two basic questions on social or external cost of energy: Is there a substantial difference in the social costs of different energy systems? If so, does it impact on the competitive position of clean energy technologies? Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 10 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 10

11 The methodological background of the analysis I: Competitive position of a new versus an established technology Source: Hohmeyer 1988 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 11 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 11

12 The methodological background of the analysis II: Changed competitive position due to social costs Source: Hohmeyer 1988 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 12 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 12

13 Empirical research started about 15 year ago What do we know today? Where do we still need substantial research? Where do results converge? Where do we fundamentally disagree? What are latest results on social or external costs? What are the policy implications of our knowledge? Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 13 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 13

14 What do we know today? Categories of social costs analyzed so far: 1. Environmental damages like: - Forest damages (flora) - Materials damaged (like buildings) - Global climate change (damage and mitigation cost) 2. Human health damages 3. Structural macroeconomic effects 4. Intertemporal misallocation of resources 5. Subsidies without adequate return Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 14 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 14

15 Where do we still need substantial research? Categories of social costs insufficiently analyzed so far: 1. Long term damages of global warming 2. Full costs of nuclear accidents 3. Damages due to intermediate production 4. Damages presently unknown Source: Hohmeyer 1988 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 15 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 15

16 Where do results converge? Standard air pollutants SO 2 NO x PM 10 Impact pathway analysis Health effects Damages to flora and fauna Material damages Use of contingent valuation methods Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 16 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 16

17 Where do we fundamentally disagree? Use of social or external cost concepts Treatment of scale and equity Long term discounting of irreversible damages Discounting of damages to human health Valuation of loss of human lives in developing countries caused by global warming Treatment of nuclear risks Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 17 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 17

18 Latest results for Germany (Upper estimates) (1998 emissions of all power plants >100 MW el and renewables installed, VSL and 590 US$/tC) 35 Euro Cent 2000 /kwh Lignite max Hard coal max Gas max Fuel oil max Hydro max Wind max PV max Biomass max 0 Total 1Euro Cent = 0. 9 USc Source: Hohmeyer 2001 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 18 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 18

19 Latest results for Germany (lower estimates) (1998 emissions of all power plants >100 MW el and renewables installed, YOLL and 32 US$/tC) 5 Euro Cent 2000 /kwh 4,5 4 3,5 3 2,5 2 1,5 1 0,5 0 Total Lignite min Hard coal min Gas min Fuel oil min Small Hydro min Wind min PV min Biomass min 1Euro Cent = 0. 9 USc Source: Hohmeyer 2001 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 19 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 19

20 Intermediate load replaced by renewables in Germany % 50% Fuel oil Natural gas Hard coal Lignite 0% R98M Fuel oil 4,45% Natural gas 28,89% Hard coal 53,35% Lignite 13,33% Source: Hohmeyer 2001 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 20 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 20

21 Net reductions in external costs by renewables (1998 emissions of all power plants >100 MW el and renewables installed) Euro Cent 2000/kWh Euro Cent = 0. 9 USc 32$/tC / YOLL 32$/tC / VSL 590$/tC / YOLL 590/tC / VSL EU cap for external cost inclusion 5 Euro Cent 2001/kWhel Hydro Wind PV Biomass Source: Hohmeyer 2001 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 21 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 21

22 First conclusions Rio 02 Word Climate & Energy Event 1 The net external cost avoided by the use of renewable energy sources in Germany are still very substantial (mean value) Small hydro: Euro Cent/kWh Wind: Euro Cent/kWh PV: Euro Cent/kWh Biomass: Euro Cent/kWh 2 This is three to four times the substituted internal costs of conventional electricity generation replaced (about 3 Euro Cent/kWh) 3 Renewables should be paid Euro Cent/kWh feed into the public grid in Germany Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 22 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 22

23 Policy responses and their impacts in Germany 1 Feed law 1991: 8.5 Euro Cent/kWh (instead of 3.5) 2 Renewable energy law 2001: Euro Cent/kWh for small hydro Euro Cent/kWh for wind energy Euro Cent/kWh from biomass and 50 Euro Cent/kWh for photovoltaics Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 23 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 23

24 The impact of a first rough internalisation on wind energy in Germany (installed capacity in MW) Renewable energy law MW MW programme Feed law Building privilege Source: BWE 2001 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 24 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 24

25 Final conclusions Rio 02 Word Climate & Energy Event 1 Even a rough internalisation of the difference in external or social costs may tip the balance for renewables 2 Wind energy has seen its break through in Germany due to a first internalisation 3 Biomass will experience a similar boom due to the new provisions of the Germany renewable energy law 4Internalisation may be one way to switch to a sustainable energy future based on renewable energy sources Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 25 Prof. Dr. Olav Hohmeyer Social Costs of Energy Consumption 25