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From: Tom Gray <tomgray@igc.org>

TELLUS SEES HIGHER VALUES
WITH EXTERNALITIES MODEL

     Researchers from the Tellus Institute, of Boston, Mass.,
using a new computer model, have found that externality values
for greenhouse gas emissions can have a substantial impact on the
costs of various energy options.

     A recent WIND ENERGY WEEKLY article reported that A. Myrick
Freeman of Bowdoin College and Robert Rowe of the consulting firm
Hagler Bailly said externalities would have only a small effect
on energy prices (see WIND ENERGY WEEKLY #685, February 19,
1996), but noted that the two had assigned very low or no costs
in their two scenarios to carbon dioxide emissions.  The two used
a computer program, EXMOD, that was developed by Tellus and
Hagler Bailly, and their scenarios assumed, respectively, costs
of $0/ton and $1/ton for CO2.

     An article by Bill Dougherty in the February issue of
Tellus's "Energy Report" newsletter appears to agree with the
criticism, and notes that even for a new coal-fired power plant,
the impact of a $25/ton tax on CO2 emissions would be to raise
the cost of power by 30 mills/kWh (3 cents/kWh), a substantial
penalty.

     Says Dougherty, "Some analysts have recently used EXMOD to
conclude that externalities are either low or don't significantly
affect the ranking of new electric resources (Hirst and Eto,
1995; Freeman and Rowe, 1995).  These conclusions, based on the
EXMOD default data, are not robust across a range of reasonable
assumptions."

     Tellus researchers developed some examples of EXMOD's use
for a paper presented to the International Atomic Energy Agency
last December.  Looking at options for coal-fired power in New
York's lower Hudson Valley, they found total externalities for a
new plant to be over 4 cents/kWh.  Adds Dougherty, "For an
existing plant, with much higher emissions rates . . . the
alternative assumptions result in a total externality cost of
about 70 mills [7 cents/kWh].  These costs are high enough to
affect decisions on plant additions, retirements, and operation."

     EXMOD's default values, which provide low levels of
valuation for pollutants and $0/ton for CO2, Dougherty continues,
are based on market forces, or consumer willingness to pay.  Such
values are, however, difficult to determine and "particularly
problematical . . . as the basis for policy on environmental and
health conditions of broad public interest.

     "For at least some types of human and ecological impact--
affecting near- and long-term conditions of life--the
sustainability paradigm, in which constraints or targets are set
for pollution or ecological preservation, would serve as a better
basis for resource and environmental policy."

     For further information, contact Tellus Institute, 11
Arlington Street, Boston, MA 02116, USA, phone (617) 266-5400.
_______________________________________________________________________________

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____________________________________________________________________________

Tom Gray 					          tomgray@econet.org
____________________________________________________________________________

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