- Email: [email protected]
The Assessment of Environmental Benefits of Low-emission Electricity Generation, the Case of Poland
Available online at www.sciencedirect.com
ScienceDirect Energy Procedia 107 (2017) 363 – 368
3rd International Conference on Energy and Environment Research, ICEER 2016, 7-11 September 2016, Barcelona, Spain
The assessment of environmental benefits of low-emission electricity generation, the case of Poland Magdalena Ligus* Wroclaw University of Economics, Komandorska Street 118/120, Wroclaw 53-345, Poland
Abstract The paper focuses on the valuation of environmental external benefits of low-emission electricity generation. The empirical research results of valuing benefits from improving air quality in Poland using contingent valuation method (CVM) and hedonic pricing method (HPM) are presented. The research is used to estimate the environmental benefits indicator of low-emission electricity generation, after the procedure proposed by the author. The result of the original research is confronted with the alternative research conducted in the CASES (Cost Assessment of Sustainable Energy Systems) Project of EC in 2008. © 2016 The Authors. Published by Elsevier Ltd. © 2017 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license Peer-review under responsibility of the scientific committee of the 3rd International Conference on Energy and Environment (http://creativecommons.org/licenses/by-nc-nd/4.0/). Research. Peer-review under responsibility of the scientific committee of the 3rd International Conference on Energy and Environment Research. Keywords: low-emission electricity generation; renewable energy; nuclear energy; valuation of environmental costs; contingent valuation; hedonic pricing.
1. Introduction The structure of electricity production in Poland is dominated by fossil fuels. First place belongs, and will most likely belong for a long time to hard coal and lignite, covering 81% of the demand. The share of other energy carriers is little [1]. In other European countries electricity generation is more diversified. Still world’s current energy system is dominated by fossil fuels, which pose serious threats to human health and natural environment and also leave us vulnerable to price spikes and supply shortages. With the threat of global warming becoming
* Corresponding author. Tel.: +48-606-392-295; fax: +48-71-36-80-646. E-mail address: [email protected]
1876-6102 © 2017 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/). Peer-review under responsibility of the scientific committee of the 3rd International Conference on Energy and Environment Research. doi:10.1016/j.egypro.2016.12.177
364
Magdalena Ligus / Energy Procedia 107 (2017) 363 – 368
increasingly urgent, there is need of looking for alternative sources of energy. Renewable energy sources can help reduce our dependence on polluting fossil fuels. Also nuclear is low-emission energy technology. To be developed both options still require financial support [2, 3]. The point is, that for shaping the future energy mix the full cost of power generation of different technologies should be taken into account. The full cost is obtained by summing external costs due to impacts on human health, environment, crops, materials and climate change impacts, to private generation costs. Private generation costs are easy to count. On the contrary, external costs are referred to as the problem of “missing markets”. The example of negative externality is air pollution caused by fossil-fired power plants. Investments in low-emission electricity generation cause external benefits because of the reduction of pollution emission (granted that low-emission energy replaces fossil fuels energy). The paper focuses on the valuation of environmental external benefits from low-emission electricity generation. The empirical research results of valuing benefits from improving air quality in Poland using contingent valuation method (CVM) and hedonic pricing method (HPM) are presented. The research is used to estimate the environmental benefits indicator from renewable energy production (potentially also nuclear energy production), after the procedure proposed by the author. The result of the original research is confronted with the alternative research conducted in the CASES (Cost Assessment of Sustainable Energy Systems) Project of EC in 2008. 2. Methods for valuing environmental costs Methods for measuring environmental costs can be generally classified as: indirect and direct [4]. Indirect methods are market prices methods and revealed preferences; direct methods are stated preferences. 2.1. Market prices methods Market prices methods, also called physical linkage methods, usually are related to damage function approach, and in the case of biological relationship to dose-response approach. Damage function approach assesses the estimated effects with the application of market prices – that, and also the simplicity of them, made them have a lot of supporters among economists. However, currently the imperfections of that group of methods are widely recognized [4]. First of all, damage functions are not directly related to the consumer’s utility function (unless averting behaviour and price changes are also modelled). Further, damage functions cannot be used to value the existence class of values, or even the indirect-use values. So the use of damage functions can be regarded as, at best, a first approximation to benefit/cost measurement. If the total benefits/costs of the good/externality being valued are much larger than those comprising the direct-use value categories, the damage function approach will result in seriously distorted benefit/cost estimates [8]. This study therefore seeks to avoid these problems and to derive a more theoretically and practically correct measure of the value of environmental costs by concentrating on evaluating the value of lost utility to society. Such an approach is based upon so-called behavioral linkage methods which are described below. 2.2. Revealed preferences methods, including hedonic pricing method (HPM) The methods of revealed preferences take advantage of information from so-called replacement markets, that is the market of good the consumption of which is somehow connected with the consumption of the non-market good being the subject of the price estimation. Most commonly used method is hedonic pricing method (HPM). The basic assumption of the hedonic pricing method is that the price of marketed goods is related to its constituent characteristics. The HPM could also effectively value environmental externalities [5,6]. The fundamental assumption is that in purchasing a house, the homebuyer is paying not only for the dwelling unit but also its surrounding environmental qualities. There are many aspects that contribute to environmental attributes, for instance air quality [7].
365
Magdalena Ligus / Energy Procedia 107 (2017) 363 – 368
2.3. Stated preferences methods, including contingent valuation method (CVM) The methods of stated preferences consist in an attempt to simulate the market of non-market goods. That is most frequently done by means of survey research. Respondents are directly requested to determine, with the application of the contingent valuation method (CVM), the amount of money which they are willing to pay (their willingness to pay, WTP) for a change in the quality or/availability of a non-market good or, alternatively the amount of money they are willing to accept as a compensation (their willingness to accept, WTA) for introducing certain changes in environmental quality. It bases on the assumption that people’s intended behavior in hypothetical market reflects preferences for non-market assets [8]. 3. Primary research on valuing benefits from improving air quality in Poland 3.1. Primary research based on contingent valuation The study tries to estimate how much Polish citizens value clean air. The contingent valuation and the hedonic pricing method were applied. The contingent valuation survey was held on a nation-wide random sample of 1000 adults. Face to face interviews were carried out by Ipsos, a professional polling agency in October 2015. The main goal of the research was to find the household’s average monthly willingness to pay in addition to electricity bill in order to improve air quality in Poland. In the analysis the author applied a system of contingent valuation questions in order to value the total effect of air pollution emissions. Each person was asked to consider individually the impact on mortality, morbidity, visibility loss, material damages, damages to cultural heritage (historical buildings and monuments) and ecosystem damages. This system approach helps to avoid embedding problem [9,10]. The value of the overall reduction in air pollution is equal to the sum of the values of the individual components. At the end respondents were given an opportunity to reconsider their total WTP. Valuation questions were followed by a set of attitudinal statements about the WTP questions. These questions were designed to identify protest voters. Protest voters should be excluded during analysis of CVM data because they can bias estimations of central tendency measures of WTP [9, 11]. Protesters were identified as respondents who declared zero on all valuation questions, and held at least one effective protest beliefs. The protest beliefs were that polluters (not respondents) should pay; electricity bills should not be used as a payment vehicle; and that the proposed policy would be ineffective at reducing air pollution. Identified protest voters represent 7,4% of the sample. The primary statistics of the WTP responses in the sample without protest voters are presented in Table 1. Table 1. The primary statistics of the WTP responses in the sample without protest voters Mortality
Morbidity
Visibility
Materials
Mean [PLN]
5,500
4,083
3,608
3,362
3,485
3,583
23,621
21,172
-2,449
% of total WTP Confidence interval 95%
23,284 4,505 6,494
17,285 3,624 4,543
15,275 3,097 4,118
14,233 2,874 3,851
14,754 2,955 4,016
15,169 3,061 4,104
100 20,672 26,569
89,632 18,605 23,739
-10,368 -2,067 -2,830
Historical Ecosystems
TOTAL WTP
TOTAL WTP after reconsideration Difference
Estimated parameter
Median [PLN]
2
2
1
1
1
1
8
8
0
Standard deviation.
15,411
7,119
7,912
7,572
8,224
8,083
45,692
39,786
-5,906
Min [PLN]
0
0
0
0
0
0
0
0
0
Max [PLN]
300
70
100
100
100
100
520
400
-120
Mortality has the highest mean WTP (23,3% of the total WTP). The mean WTP decreases further for each consecutive component: morbidity (17,3%), visibility (15,3%), materials (14,2%). The mean WTP then rises for the last two components: historical buildings (14,8%) and ecosystems (15,1%). It demonstrates that the responses were not just a reflection of the order of questions (a systematic bias quite common in CV surveys). Mean total WTP (after reconsideration final bids by respondents, in the sample without protest voters and after rejection of extreme
366
Magdalena Ligus / Energy Procedia 107 (2017) 363 – 368
values) is 21,172 PLN (polish zloty) per month. Meaningful is that median is definitely lower then mean. It is caused because of high percentage of zero bids (255 observations, that is 27,6% of the sample). Mean total WTP after reconsideration final bids by respondents is lower than the ordinary mean WTP. It means, that part of respondents decided to change their original bids. Most of them declared lower bids then original ones. If all respondents changing their bids would declare lower bids it meant that the embedding bias occurred. However, 15% of respondents changing their bids decided to declare higher bid, so the direction of change is ambiguous. That can be interpreted positively, as the evidence of respondents engagement in the valuation process. 3.2. Primary research based on hedonic pricing The HPM was conducted for the biggest cities in Poland: capital city Warsaw, Cracow and Wroclaw [12]. The air quality attributes tested were nitrogen dioxide (NO2) and particulate matter (PM10) concentrations. The econometric classical hedonic housing price models (linear, semi-log and model with Box-Cox transformation) and hedonic models with spatial adjustments were developed and estimated. The AMRON database of Polish Banks Association was used with observations between 2013 and 2014 years. The GIS technique and MATLAB tool were applied for implementation to the database location, environmental and spatial attributes. All classical models gave good explanatory power (adjusted R square more than 0,7). The spatial SEM model gave slightly better fitting than classical models. Most of structural and location attributes occurred to be statistically significant with expected signs of influence on prices, nevertheless analyzed air quality attributes occurred to be statistically insignificant. It seems that property market is not enough effective to ensure the applicability of HPM in Poland with respect to air quality valuation. 4. Environmental benefits indicator of low-emission energy production 4.1. Indicator based on contingent valuation survey The research finally was used to estimate the environmental benefits indicator of low-emission energy generation, after the simplified procedure proposed by the author. The procedure in the first variant was based on the share of coal electricity in SO2 annual total emission of this pollutant. Sulphur dioxide was chosen as the representative pollutant because it affects all the damage components examined in the CV research. External unit cost of coal electricity generation in Poland using CVM method is 1,63 EUR/MWh. The procedure in the second variant was based on energy air quality index (EAQI). EAQI connects air quality with the structure of energy consumption and requires the values of toxicity equivalents of emitted pollution. The toxicity equivalents were adopted from the work of Bagienski [13]. After taking into account the toxicity equivalents it turns out that the share of coal electricity in the "weighed" emissions, expressing the impact of emissions from the coal electricity sector on human health and environment is much lower and amounts to 13.02%. With these assumptions external unit cost of coal electricity generation in Poland is 0,7 EUR/MWh. Climate change cost was not included into the indicator due to limitations imposed by the methodology of CVM survey. There can be used the indicator calculated in the CASES Project of EC. For hard coal condensing power plant the indicator calculated based on abatement cost for the phase of plant operation is 15,376 EUR/MWh [14]. The total external cost indicator is 16 EUR/MWh in the variant based on the percentage of SO2 emission and 16,08 EUR/MWh in the variant based on EAQI. 4.2. Indicator based on CASES Project of European Commission The result of the original research was confronted with the alternative research of CASES project of EC [14]. According to this research external unit cost of coal electricity generation in examined EU-27 for the operation stage without the damage costs of greenhouse gases due to climate change impacts is 8,37 EUR/MWh and including the cost of climate change 23,96 EUR/MWh. The unit cost for Poland is available for the whole life cycle of electricity generation. Without GHG emissions the unit cost is 15,32 EUR/MWh and including the cost of GHG emissions 32,5 EUR/MWh.
Magdalena Ligus / Energy Procedia 107 (2017) 363 – 368
367
5. Conclusions Valuing environmental costs is difficult, even though they can be easily identified. Moreover, different methods give different numbers since the methodology used for calculating these costs varies from one study to another. The environmental cost of fossil-fired energy generation (being also environmental benefits indicators of lowemission energy generation) assessed in CVM study for Poland should be treated as the lowest (conservative) assessment of external costs. That is because Polish citizens are not used to participate in such surveys and also the environmental awareness is still very low. Also the fact that the real GDP per capita in Poland is still low is meaningful. The CVM survey is comparable with CASES study in that way that the bulk of the external costs (excluding the cost of GHG emissions) are costs of mortality and morbidity. Also in CASES Project these costs were estimated using CVM method, but the authors applied measures from the EU-15 ExternE study. That is the main reason why the results for Poland seem to be in some measure overestimated. Authors themselves noticed that a complete country detailed analysis of external costs should take into account that WTP varies across countries. However, they argue that in ExternE, and its successor CASES, values for the whole of Europe have been used for several reasons. One of the reasons is that for European policy it is useful to use harmonized values, because the WTP in different countries will be more homogeneous in the future. When it comes to low-carbon electricity generation, renewable energy technologies and nuclear power plants are competing to design the future energy supply of the World. As for the external environmental costs we will never be sure of their value since there is no market for these goods. However, it is crucial to develop valuation methods and strive for the most accurate estimates. Certainly conducting primary research for individual countries can contribute to achieving this objective. Acknowledgements This paper was prepared as part of the research projects “Value based management of investments in renewable energy sources” [UMO-2011/01/D/HS4/05925] and “Evaluation of the environmental effects in a cost-benefit analysis of the investments in low-emission energy sources” [UMO-2011/01/B/HS4/02322], executed by the Wroclaw University of Economics and financed by the National Science Centre, Poland. References [1] Energy Statistics in 2013 and 2014. Warsaw: Central Statistical Office; 2015. [2] Ligus M. The analysis of competitiveness and potential of renewable energy technologies in Poland. Energy & Environment 2015;26(8): 1247-1269. [3] Ligus M, Wisniewski G, et. al. Sea wind versus atom, Institute for Renewable Energy. Warsaw: Report drawn up by Institute for Renewable Energy commissioned by Greenpeace and the Heinrich Boell Foundation; 2011. [4] Freeman AM. The benefits of environmental improvement. Theory and practice. London: Johns Hopkins University Press; 1979. [5] Garrod G, Willis KG. Economic valuation of the environment: methods and case studies. Cheltenham: Edward Elgar;1999. [6] Freeman AM. The measurement of environmental and resource values: Theory and methods. 2d ed. Washington, DC: Resources for the Future;2003. [7] Hui ECM, Chau CK, Pun L, Law MY. Measuring the neighboring and environmental effects on residential property value: Using spatial weighting matrix. Building and Environment 2007;42:2333-2343. [8] Mitchell RC, Carson RT. Using surveys to value public goods: the contingent valuation method. Washington D.C.: Resources for the Future; 1989. [9] Dziegielewska DA, Mendelsohn R. Valuing Air Quality in Poland. Environmental and Resource Economics 2005;30:131-163. [10] Ligus M. The value of supply security. Contingent valuation survey on the costs of power interruptions for Polish enterprises. Conference proceedings: IEEE Advancing Technology for Humanity. IEEE PES Power and Energy Society 2015. p. 1846-1851. [11] Markowska A, ĩylicz T. Costing an international public good: the case of the Baltic Sea. Ecological Economics 1999;30:301-316. [12] Ligus M, Peternek P. Measuring structural, location and environmental effects: A hedonic analysis of housing market in Wroclaw, Poland. In: Kapounek S, Krutilova V, editors. Procedia - Social and Behavioral Sciences I, Volume 220; 2016. p. 251-260. [13] Bagienski Z. Emission from stationary combustion sources as the determinant of energy air quality index. Environment Protection Engineering 2011; 1:39-50.
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[14] CASES – Costs Assessment of Sustainable Energy Systems, WP 6 Report: Development of a set of full cost estimates of the use of different energy sources and its comparative assessment in EU countries. EC; 2008.
ScienceDirect Energy Procedia 107 (2017) 363 – 368
3rd International Conference on Energy and Environment Research, ICEER 2016, 7-11 September 2016, Barcelona, Spain
The assessment of environmental benefits of low-emission electricity generation, the case of Poland Magdalena Ligus* Wroclaw University of Economics, Komandorska Street 118/120, Wroclaw 53-345, Poland
Abstract The paper focuses on the valuation of environmental external benefits of low-emission electricity generation. The empirical research results of valuing benefits from improving air quality in Poland using contingent valuation method (CVM) and hedonic pricing method (HPM) are presented. The research is used to estimate the environmental benefits indicator of low-emission electricity generation, after the procedure proposed by the author. The result of the original research is confronted with the alternative research conducted in the CASES (Cost Assessment of Sustainable Energy Systems) Project of EC in 2008. © 2016 The Authors. Published by Elsevier Ltd. © 2017 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license Peer-review under responsibility of the scientific committee of the 3rd International Conference on Energy and Environment (http://creativecommons.org/licenses/by-nc-nd/4.0/). Research. Peer-review under responsibility of the scientific committee of the 3rd International Conference on Energy and Environment Research. Keywords: low-emission electricity generation; renewable energy; nuclear energy; valuation of environmental costs; contingent valuation; hedonic pricing.
1. Introduction The structure of electricity production in Poland is dominated by fossil fuels. First place belongs, and will most likely belong for a long time to hard coal and lignite, covering 81% of the demand. The share of other energy carriers is little [1]. In other European countries electricity generation is more diversified. Still world’s current energy system is dominated by fossil fuels, which pose serious threats to human health and natural environment and also leave us vulnerable to price spikes and supply shortages. With the threat of global warming becoming
* Corresponding author. Tel.: +48-606-392-295; fax: +48-71-36-80-646. E-mail address: [email protected]
1876-6102 © 2017 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/). Peer-review under responsibility of the scientific committee of the 3rd International Conference on Energy and Environment Research. doi:10.1016/j.egypro.2016.12.177
364
Magdalena Ligus / Energy Procedia 107 (2017) 363 – 368
increasingly urgent, there is need of looking for alternative sources of energy. Renewable energy sources can help reduce our dependence on polluting fossil fuels. Also nuclear is low-emission energy technology. To be developed both options still require financial support [2, 3]. The point is, that for shaping the future energy mix the full cost of power generation of different technologies should be taken into account. The full cost is obtained by summing external costs due to impacts on human health, environment, crops, materials and climate change impacts, to private generation costs. Private generation costs are easy to count. On the contrary, external costs are referred to as the problem of “missing markets”. The example of negative externality is air pollution caused by fossil-fired power plants. Investments in low-emission electricity generation cause external benefits because of the reduction of pollution emission (granted that low-emission energy replaces fossil fuels energy). The paper focuses on the valuation of environmental external benefits from low-emission electricity generation. The empirical research results of valuing benefits from improving air quality in Poland using contingent valuation method (CVM) and hedonic pricing method (HPM) are presented. The research is used to estimate the environmental benefits indicator from renewable energy production (potentially also nuclear energy production), after the procedure proposed by the author. The result of the original research is confronted with the alternative research conducted in the CASES (Cost Assessment of Sustainable Energy Systems) Project of EC in 2008. 2. Methods for valuing environmental costs Methods for measuring environmental costs can be generally classified as: indirect and direct [4]. Indirect methods are market prices methods and revealed preferences; direct methods are stated preferences. 2.1. Market prices methods Market prices methods, also called physical linkage methods, usually are related to damage function approach, and in the case of biological relationship to dose-response approach. Damage function approach assesses the estimated effects with the application of market prices – that, and also the simplicity of them, made them have a lot of supporters among economists. However, currently the imperfections of that group of methods are widely recognized [4]. First of all, damage functions are not directly related to the consumer’s utility function (unless averting behaviour and price changes are also modelled). Further, damage functions cannot be used to value the existence class of values, or even the indirect-use values. So the use of damage functions can be regarded as, at best, a first approximation to benefit/cost measurement. If the total benefits/costs of the good/externality being valued are much larger than those comprising the direct-use value categories, the damage function approach will result in seriously distorted benefit/cost estimates [8]. This study therefore seeks to avoid these problems and to derive a more theoretically and practically correct measure of the value of environmental costs by concentrating on evaluating the value of lost utility to society. Such an approach is based upon so-called behavioral linkage methods which are described below. 2.2. Revealed preferences methods, including hedonic pricing method (HPM) The methods of revealed preferences take advantage of information from so-called replacement markets, that is the market of good the consumption of which is somehow connected with the consumption of the non-market good being the subject of the price estimation. Most commonly used method is hedonic pricing method (HPM). The basic assumption of the hedonic pricing method is that the price of marketed goods is related to its constituent characteristics. The HPM could also effectively value environmental externalities [5,6]. The fundamental assumption is that in purchasing a house, the homebuyer is paying not only for the dwelling unit but also its surrounding environmental qualities. There are many aspects that contribute to environmental attributes, for instance air quality [7].
365
Magdalena Ligus / Energy Procedia 107 (2017) 363 – 368
2.3. Stated preferences methods, including contingent valuation method (CVM) The methods of stated preferences consist in an attempt to simulate the market of non-market goods. That is most frequently done by means of survey research. Respondents are directly requested to determine, with the application of the contingent valuation method (CVM), the amount of money which they are willing to pay (their willingness to pay, WTP) for a change in the quality or/availability of a non-market good or, alternatively the amount of money they are willing to accept as a compensation (their willingness to accept, WTA) for introducing certain changes in environmental quality. It bases on the assumption that people’s intended behavior in hypothetical market reflects preferences for non-market assets [8]. 3. Primary research on valuing benefits from improving air quality in Poland 3.1. Primary research based on contingent valuation The study tries to estimate how much Polish citizens value clean air. The contingent valuation and the hedonic pricing method were applied. The contingent valuation survey was held on a nation-wide random sample of 1000 adults. Face to face interviews were carried out by Ipsos, a professional polling agency in October 2015. The main goal of the research was to find the household’s average monthly willingness to pay in addition to electricity bill in order to improve air quality in Poland. In the analysis the author applied a system of contingent valuation questions in order to value the total effect of air pollution emissions. Each person was asked to consider individually the impact on mortality, morbidity, visibility loss, material damages, damages to cultural heritage (historical buildings and monuments) and ecosystem damages. This system approach helps to avoid embedding problem [9,10]. The value of the overall reduction in air pollution is equal to the sum of the values of the individual components. At the end respondents were given an opportunity to reconsider their total WTP. Valuation questions were followed by a set of attitudinal statements about the WTP questions. These questions were designed to identify protest voters. Protest voters should be excluded during analysis of CVM data because they can bias estimations of central tendency measures of WTP [9, 11]. Protesters were identified as respondents who declared zero on all valuation questions, and held at least one effective protest beliefs. The protest beliefs were that polluters (not respondents) should pay; electricity bills should not be used as a payment vehicle; and that the proposed policy would be ineffective at reducing air pollution. Identified protest voters represent 7,4% of the sample. The primary statistics of the WTP responses in the sample without protest voters are presented in Table 1. Table 1. The primary statistics of the WTP responses in the sample without protest voters Mortality
Morbidity
Visibility
Materials
Mean [PLN]
5,500
4,083
3,608
3,362
3,485
3,583
23,621
21,172
-2,449
% of total WTP Confidence interval 95%
23,284 4,505 6,494
17,285 3,624 4,543
15,275 3,097 4,118
14,233 2,874 3,851
14,754 2,955 4,016
15,169 3,061 4,104
100 20,672 26,569
89,632 18,605 23,739
-10,368 -2,067 -2,830
Historical Ecosystems
TOTAL WTP
TOTAL WTP after reconsideration Difference
Estimated parameter
Median [PLN]
2
2
1
1
1
1
8
8
0
Standard deviation.
15,411
7,119
7,912
7,572
8,224
8,083
45,692
39,786
-5,906
Min [PLN]
0
0
0
0
0
0
0
0
0
Max [PLN]
300
70
100
100
100
100
520
400
-120
Mortality has the highest mean WTP (23,3% of the total WTP). The mean WTP decreases further for each consecutive component: morbidity (17,3%), visibility (15,3%), materials (14,2%). The mean WTP then rises for the last two components: historical buildings (14,8%) and ecosystems (15,1%). It demonstrates that the responses were not just a reflection of the order of questions (a systematic bias quite common in CV surveys). Mean total WTP (after reconsideration final bids by respondents, in the sample without protest voters and after rejection of extreme
366
Magdalena Ligus / Energy Procedia 107 (2017) 363 – 368
values) is 21,172 PLN (polish zloty) per month. Meaningful is that median is definitely lower then mean. It is caused because of high percentage of zero bids (255 observations, that is 27,6% of the sample). Mean total WTP after reconsideration final bids by respondents is lower than the ordinary mean WTP. It means, that part of respondents decided to change their original bids. Most of them declared lower bids then original ones. If all respondents changing their bids would declare lower bids it meant that the embedding bias occurred. However, 15% of respondents changing their bids decided to declare higher bid, so the direction of change is ambiguous. That can be interpreted positively, as the evidence of respondents engagement in the valuation process. 3.2. Primary research based on hedonic pricing The HPM was conducted for the biggest cities in Poland: capital city Warsaw, Cracow and Wroclaw [12]. The air quality attributes tested were nitrogen dioxide (NO2) and particulate matter (PM10) concentrations. The econometric classical hedonic housing price models (linear, semi-log and model with Box-Cox transformation) and hedonic models with spatial adjustments were developed and estimated. The AMRON database of Polish Banks Association was used with observations between 2013 and 2014 years. The GIS technique and MATLAB tool were applied for implementation to the database location, environmental and spatial attributes. All classical models gave good explanatory power (adjusted R square more than 0,7). The spatial SEM model gave slightly better fitting than classical models. Most of structural and location attributes occurred to be statistically significant with expected signs of influence on prices, nevertheless analyzed air quality attributes occurred to be statistically insignificant. It seems that property market is not enough effective to ensure the applicability of HPM in Poland with respect to air quality valuation. 4. Environmental benefits indicator of low-emission energy production 4.1. Indicator based on contingent valuation survey The research finally was used to estimate the environmental benefits indicator of low-emission energy generation, after the simplified procedure proposed by the author. The procedure in the first variant was based on the share of coal electricity in SO2 annual total emission of this pollutant. Sulphur dioxide was chosen as the representative pollutant because it affects all the damage components examined in the CV research. External unit cost of coal electricity generation in Poland using CVM method is 1,63 EUR/MWh. The procedure in the second variant was based on energy air quality index (EAQI). EAQI connects air quality with the structure of energy consumption and requires the values of toxicity equivalents of emitted pollution. The toxicity equivalents were adopted from the work of Bagienski [13]. After taking into account the toxicity equivalents it turns out that the share of coal electricity in the "weighed" emissions, expressing the impact of emissions from the coal electricity sector on human health and environment is much lower and amounts to 13.02%. With these assumptions external unit cost of coal electricity generation in Poland is 0,7 EUR/MWh. Climate change cost was not included into the indicator due to limitations imposed by the methodology of CVM survey. There can be used the indicator calculated in the CASES Project of EC. For hard coal condensing power plant the indicator calculated based on abatement cost for the phase of plant operation is 15,376 EUR/MWh [14]. The total external cost indicator is 16 EUR/MWh in the variant based on the percentage of SO2 emission and 16,08 EUR/MWh in the variant based on EAQI. 4.2. Indicator based on CASES Project of European Commission The result of the original research was confronted with the alternative research of CASES project of EC [14]. According to this research external unit cost of coal electricity generation in examined EU-27 for the operation stage without the damage costs of greenhouse gases due to climate change impacts is 8,37 EUR/MWh and including the cost of climate change 23,96 EUR/MWh. The unit cost for Poland is available for the whole life cycle of electricity generation. Without GHG emissions the unit cost is 15,32 EUR/MWh and including the cost of GHG emissions 32,5 EUR/MWh.
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5. Conclusions Valuing environmental costs is difficult, even though they can be easily identified. Moreover, different methods give different numbers since the methodology used for calculating these costs varies from one study to another. The environmental cost of fossil-fired energy generation (being also environmental benefits indicators of lowemission energy generation) assessed in CVM study for Poland should be treated as the lowest (conservative) assessment of external costs. That is because Polish citizens are not used to participate in such surveys and also the environmental awareness is still very low. Also the fact that the real GDP per capita in Poland is still low is meaningful. The CVM survey is comparable with CASES study in that way that the bulk of the external costs (excluding the cost of GHG emissions) are costs of mortality and morbidity. Also in CASES Project these costs were estimated using CVM method, but the authors applied measures from the EU-15 ExternE study. That is the main reason why the results for Poland seem to be in some measure overestimated. Authors themselves noticed that a complete country detailed analysis of external costs should take into account that WTP varies across countries. However, they argue that in ExternE, and its successor CASES, values for the whole of Europe have been used for several reasons. One of the reasons is that for European policy it is useful to use harmonized values, because the WTP in different countries will be more homogeneous in the future. When it comes to low-carbon electricity generation, renewable energy technologies and nuclear power plants are competing to design the future energy supply of the World. As for the external environmental costs we will never be sure of their value since there is no market for these goods. However, it is crucial to develop valuation methods and strive for the most accurate estimates. Certainly conducting primary research for individual countries can contribute to achieving this objective. Acknowledgements This paper was prepared as part of the research projects “Value based management of investments in renewable energy sources” [UMO-2011/01/D/HS4/05925] and “Evaluation of the environmental effects in a cost-benefit analysis of the investments in low-emission energy sources” [UMO-2011/01/B/HS4/02322], executed by the Wroclaw University of Economics and financed by the National Science Centre, Poland. References [1] Energy Statistics in 2013 and 2014. Warsaw: Central Statistical Office; 2015. [2] Ligus M. The analysis of competitiveness and potential of renewable energy technologies in Poland. Energy & Environment 2015;26(8): 1247-1269. [3] Ligus M, Wisniewski G, et. al. Sea wind versus atom, Institute for Renewable Energy. Warsaw: Report drawn up by Institute for Renewable Energy commissioned by Greenpeace and the Heinrich Boell Foundation; 2011. [4] Freeman AM. The benefits of environmental improvement. Theory and practice. London: Johns Hopkins University Press; 1979. [5] Garrod G, Willis KG. Economic valuation of the environment: methods and case studies. Cheltenham: Edward Elgar;1999. [6] Freeman AM. The measurement of environmental and resource values: Theory and methods. 2d ed. Washington, DC: Resources for the Future;2003. [7] Hui ECM, Chau CK, Pun L, Law MY. Measuring the neighboring and environmental effects on residential property value: Using spatial weighting matrix. Building and Environment 2007;42:2333-2343. [8] Mitchell RC, Carson RT. Using surveys to value public goods: the contingent valuation method. Washington D.C.: Resources for the Future; 1989. [9] Dziegielewska DA, Mendelsohn R. Valuing Air Quality in Poland. Environmental and Resource Economics 2005;30:131-163. [10] Ligus M. The value of supply security. Contingent valuation survey on the costs of power interruptions for Polish enterprises. Conference proceedings: IEEE Advancing Technology for Humanity. IEEE PES Power and Energy Society 2015. p. 1846-1851. [11] Markowska A, ĩylicz T. Costing an international public good: the case of the Baltic Sea. Ecological Economics 1999;30:301-316. [12] Ligus M, Peternek P. Measuring structural, location and environmental effects: A hedonic analysis of housing market in Wroclaw, Poland. In: Kapounek S, Krutilova V, editors. Procedia - Social and Behavioral Sciences I, Volume 220; 2016. p. 251-260. [13] Bagienski Z. Emission from stationary combustion sources as the determinant of energy air quality index. Environment Protection Engineering 2011; 1:39-50.
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