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English summary

Under normal circumstances socio-economic analyses of projects and initiatives within the environmental field involve assessing both the costs and the benefits. It is, however, difficult to assess the benefits of environmental policy. It requires that an economic valuation of environmental goods has taken place, and that this economic valuation has been carried out in such a way that it makes sense to systematise their significance on this basis.

In this project it has been investigated whether it is possible to identify externality adders to describe the value of environmental goods. Externality adders have been used in the analyses of the environmental policy in the 1990's presented by e.g. the Danish Ministry of Finance and the Danish Economic Council. At the Danish Ministry of the Environment externality adders have been used correspondingly in analyses and project evaluations performed by e.g. external advisers.

With this preliminary project about externality adders it has been our desire to carry out a quality assessment of the used economic valuations. Furthermore it has been a desire to estimate whether it is possible to transfer externality adders from studies abroad or at EU level to be used in Denmark, so-called "benefit transfer".

The report presents both a general introduction to the issue of economic valuation, including the methods developed in the literature to perform economic valuation, as well as a more thorough assessment of the externality adders and economic valuations, which are available in the various environmental topics. The report is in the nature of a survey of the available externality adders and the methodological problems linked to these.

The report shows that especially in the air pollution field attempts to valuate the damages on a number of different emissions exist. These economic valuations have been made specifically for Denmark during the pan-European research project ExternE. The air pollution emission externality adders are relevant far beyond the sphere of air pollution itself, and in particular for the waste sector where recycling must be assessed against the damages of incineration and the emissions connected to this. When examining the applied externality adders for air pollution emissions a methodological inconsistency with regard to the underlying valuation of the price of a statistical life is evident. Such inconsistencies have been avoided in the latest benefit tables published by the European Commission (Benefit tables; BETA) but these prices are in need for adjustment to Danish price levels and for an update of several other underlying costs.

In other fields e.g. regarding the aquatic environment and chemicals no research or work exists which currently makes it possible to specify the externality adders with validity for Denmark. It would imply application of the multiple-pathway method, which is developed within ExternE, and moreover carrying through a number of original economic valuation studies in Denmark.

The issue climate change presents particular difficulties with regard to economic valuations because of the inherent uncertainties concerning the level of damages deriving from greenhouse gases.. The most authoritative judgement, which takes the greatest possible number of surveys into consideration, is regarded to come from the international Intergovernmental Panel on Climate Change (IPCC) whose members - with substantial reservations - estimate that the damages of CO2 emission in the near future are found to be in the interval of US$ 5 to 125 per tons of carbon.

The report reviews the international literature concerning economic valuation of nature goods and eco-systems. This literature is very comprehensive and in recent years several Danish studies have been carried out especially regarding the value of forests in the vicinity of urban areas. The results of the valuation surveys vary, however, and the foreign surveys are ambiguous too. As the preferences are not similar among citizens in Denmark and abroad it is difficult to conclude with validity for Denmark from the results of the international studies. It would require a rather comprehensive calibration of the results, and while such methods are at the cutting edge of international research within benefit transfer, they are not yet able to generate robust results. The authors of this report have not seen the possibility for indicating valid methods for benefit transfer.

The report concludes with suggestions for further research. In the short term it is necessary for the damages for air pollution emissions to be updated and calculated accurately on the basis of Danish data and prices. Furthermore there is a possibility to extend the number of externality adders to a number of other fields, but this will imply a longer-term effort where both original Danish economic valuation studies must be carried out and where these are linked to scientific data by use of the multiple-pathway method. In this connection it will be necessary to clarify a number of key issues including the underlying externality adder for statistical life in socio-economic analyses.

Full report in pdf. format (923 KB)
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Helle Thomsen

01.11.2007


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