Valuation Study

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Value of Externalities due to Electricity Generation

Attributes

Medium: Air

Country: China

Analytical Framework(s): Dose-Response Approach

Unit(s): Damages

Study Date: 1998

Publication Date: 1999

Major Result(s)

Resource/Environmental Good CNY
(1998)
Total damage due to sulfur dioxide (annual emissions: 22,500 tons) 211,742.00
Total damage due to nitrogen oxides (annual emissions: 4,710 tons) 71,560.10
Total damage due to particulate, PM10 (annual emissions: 299 tons) 16,742.40
Total damage due to lead (annual emissions: 1,010 lbs.) 9,991.41
Total damage due to mercury (annual emissions: 1,409 lbs.) 27.41
Damage per physical unit of particulate, PM10 (per ton) 6,872.40
Damage per physical unit of nitrogen oxides (per ton) 1,871.28
Damage per physical unit of sulfur oxides (per ton) 1,156.72
Damage per physical unit of mercury (per lb.) 329.54
Damage per physical unit of lead (per lb.) 36.51

Study Note: The study focused on estimating environmental costs associated with coal-fired electricity production. It was found that air pollution is the most significant contributor to the total damage, with 86.0% to 91.9% of the externalities resulting from atmospheric pollutants. The proponents also cited that the model developed in the study considers only the environmental damage produced by electricity generation and not the external costs associated with the transportation of coal and consumption of electricity.

Study Details

Reference: Zhang Shiqiu and Duan Yanxin. 1999. Marginal Cost Pricing for coal fired electricity in coastal cities of China: The case of Mawan Electricity Plant in Shenzhen, Guangdong Province. EEPSEA Research Report Series, No. 1, 1-41.

Summary: The study provided a detailed analysis of the damage and costs caused by different pollutants at varying distances from the Mawan Electricity Plant in Shenzhen, China. The major results of the study are: 1) significant environmental damage is caused by electricity production that is mainly imposed on regions far from the electricity plant; 2. the most significant contributor to the total damage is air pollution, and SO2, NOx and particulate matter are the three major pollutants having the highest damage; and 3. pollution treatment and prevention costs are much lower than the damage caused per unit of particulate, SO2, and NOx emissions. Moreover, the results show that China needs to have a more effective levy system on SO2, and a more manageable electricity tariff mechanism to internalize the environmental externalities. The findings also have implications on pollution control strategies, compensation schemes, and emission trading agreements.

Site Characteristics: The remarkable economic growth of China in recent years caused the nation to have a struggle in meeting its enormous energy needs. China's power plants are largely dependent on coal. In 1995, 32.2% of China's total coal consumption was attributed to the power sector. Thermal power output accounted for 80.2% of the total electricity produced, 86.8% of which was produced using coal. The government plans to continue to depend heavily on coal to meet its increasing demands for power. As such, it is expected that China's air pollution will increase substantially due to the expected increase in the use of coal for power generation. However, the power sector is plagued with problems regarding the supply mix, shortages and price distortions.

Comments: The performed economic valuation was economically and mathematically comprehensive.

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