ExternE : externalities of energy : methodology 2005 update

The ExternE methodology provides a framework for transforming impacts that are expressed in different units into a common unit - monetary values. It has the following principal stages: 1) Definition of the activity to be assessed and the background scenario where the activity is embedded. Definition of the important impact categories and externalities. 2) Estimation of the impacts or effects of the activity (in physical units). In general, the impacts allocated to the activity are the difference between the impacts of the scenario with and the scenario without the activity. 3) Monetisation of the impacts, leading to external costs. 4) Assessment of uncertainties, sensitivity analysis. 5) Analysis of the results, drawing of conclusions. The ExternE methodology aims to cover all relevant (i.e. not negligible) external effects. The purpose of ongoing research is to cover more effects and thus reduce gaps and in addition refine the methodology to reduce uncertainties. Currently, the following impact categories are included in the methodology and described in detail in this report: 1) Environmental impacts: Impacts that are caused by releasing either substances (e.g. fine particles) or energy (noise, radiation, heat) into the environmental media air, soil and water. The methodology used here is the impact pathway approach. 2) Global warming impacts: For global warming, two approaches are followed. First, the quantifiable damage is estimated. However, due to large uncertainties and possible gaps, an avoidance cost approach is used as the recommended methodology. 3) Accidents: Accidents are rare unwanted events in contrast to normal operation. A distinction can be made between impacts to the public and occupational accident risks. Public risks can in principle be assessed by describing the possible accidents, calculating the damage and by multiplying the damage with the probability of the accidents. An issue not yet accounted for here is the valuation so-called ‘Damocles’ risks, for which high impacts with low probability are seen as more problematic than vice versa, even if the expected value is the same. A method for addressing this risk type has still to be developed.