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Kansas corporation commission. Externalities in Benefit Cost Tests. EXTERNALITIES: DRAWING THE LINES. External to What? Changing Notions of Insult/Value Assessing Damages Assigning Costs. WATER. (LESS) WATER. AIR. CLIMATE. HEALTH. Concerns Asthma Stroke Heart Attack Lung Disease - PowerPoint PPT Presentation
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KANSAS CORPORATION COMMISSION
Externalities in Benefit Cost Tests
EXTERNALITIES: DRAWING THE LINES External to What? Changing Notions of Insult/Value Assessing Damages Assigning Costs
Adapted from Koomey and Krause, Lawrence Berkeley Laboratory, 1997
WATER
Source: USGS Circular 1268, March 2004
(LESS) WATER
Source: NOAA
AIR
Source: Brian McLean, U.S. EPA, "Experience with Cap-and-Trade Programs"
CLIMATE
Slide from Jon Anda, President of Environmental Markets Network
HEALTH
Concerns Asthma Stroke Heart Attack Lung Disease Mercury Poisoning (especially in utero) Insect-borne Disease (changing pathogen
vectors)
CDC, ALA, ACS, EPA, Harvard School of Public Health
IT’S NOT ZERO…
WHAT’S THE RIGHT COST?
EXTERNAL TO WHAT?
STAGES OF ENERGY SOURCES (“INTERNAL”) Exploration/Evaluation Harvesting Processing/Refining Transportation/Distribution Storage Conversion (electric generation) Marketing End UseHoldren, John P., "Energy and Human Environment: The Generation and Definition of
Environmental Problems," in Goodman, Kristoferson, Hollander: Academic Press.
EXTERNAL TO WHAT?
PHASES WITHIN A STAGE Research Development/Demonstration Commercial Construction Operation and Maintenance Dismantling Management of Long-Lived Wastes Environmental Controls Regulation and Monitoring
Holdren, John P., "Energy and Human Environment: The Generation and Definition of Environmental Problems," in Goodman, Kristoferson, Hollander: Academic Press.
INSULTS
To Physical Health and Human Environment Resources Used (land, water, energy) Material Effluents (Nox, SO2, CO2) Other Physical Transformations (dredging) Socio-political Influences (politics,
employment)
Holdren, John P., "Energy and Human Environment: The Generation and Definition of Environmental Problems," in Goodman, Kristoferson, Hollander: Academic Press.
PATHWAYS
Convert Insults to Stresses Media (air, water, ice, soil, rock, biota) Processes (evaporation, diffusion,
conduction)
Holdren, John P., "Energy and Human Environment: The Generation and Definition of Environmental Problems," in Goodman, Kristoferson, Hollander: Academic Press.
STRESSES
Physical or Social Consequences of Insults Magnitudes of Consequences Temporal Distribution of Harm Spatial Distribution of Harm Coincidence of Risks and Benefits Scaling (linear or nonlinear) Resistance to Remedy Irreversibility Visibility of Harm
Holdren, John P., "Energy and Human Environment: The Generation and Definition of Environmental Problems," in Goodman, Kristoferson, Hollander: Academic Press.
DOING THE MATH
EC= EF x HR x VED
EC = Externality Cost in ¢/kWhEF = Emission Factor, in lbs/Btu of fuel
consumedHR = Heat Rate of power plant, in Btus/kWhVED = Value of Environmental Damage, in ¢/lb
PITFALLS IN ANALYSIS
Inconsistent Boundaries Average v. Marginal Comparisons Illusory Precision Stochasticity “What’s Countable v. What Counts”
IMPLICATIONS FOR BENEFIT/COST Estimating value of externalities
challenging and not strictly necessary Societal Cost Test problematic Total Resource Cost Test more
conservative and, at this time, sensible Many states have years of experience,
results Ratepayer Impact Measure: Would new
generation withstand this test? Emphasis on lower bills
EFFICIENCY AS A RESOURCE
Efficiency is properly treated AS new generation assuming: Verified, permanent reductions Performance standards
Reasonable savings estimates: Years of empirical savings data by program is available
Ratio of benefits:costs – 2:1 or even 3:1 has been achieved elsewhere As long as efficiency is the least cost
resource, it should be pursued
If we choose not to provide incentives for investor-owned utilities that, added to avoided costs, rival ROI for new generation, then we need to look closely at the following map:
Perverse Incentives
STATES WITH PUBLIC BENEFIT FUNDS
Nancy Jackson Executive Director jackson@climateandene
rgy.org (785) 331-8743 www.climateandenergy.o
rg