Economic valuation of environmental damage: the case of nonwoven fabric in Denmark

Sacchi, Romain

4. Term

Urban, Energy and Environmental Planning, Master

2012

2012-06-07

75 pages

Hydrocarbon-based substances represent 80% of today's fuels production. Energetically dense and easy to handle, their sub-products, e.g. plastics, rubber, oil, are present in most of industrial applications. Yet, its over-use is associated with social and environmental impacts. They often lead to public goods degradation, which enhances environmental endpoint issues: global warming, human health impairment, biodiversity loss and others. These damages are mostly omitted by actual market mechanisms: they are external costs, borne by the society as a whole. Ecological Economics gives a conceptual framework that stresses the need for assessing and internalizing these externalities. Industrial Ecology gives means to assess them. And economic valuation studies give the data to monetize them. Combined, these techniques may be used to analyse envi- ronmental policy eciency and design. This study details the Danish manufacture of 1 ton of hydrocarbons-based nonwoven fabric, taken as a functional unit. The environmental impacts during its Cradle-to-Gate assembly are assessed through two robust Indus- trial Ecology's tools: Life Cycle Assessment and Input-Output analysis with Environmental Accounts. Based on EU's economic valuation methods for environmental degrada- tion, the impacts are monetized in terms of damage and avoidance costs. Marginal costs are derived for each impact category considered: climate change, human health impairment, agricultural and material loss. Results show an external marginal cost interval of 197{344e per functional unit produced in 2011. The comparison of this estimate with Denmark environmental scal instruments reveals that these externalities are only partially covered (around 217 e). Based on the results, Denmark environmental taxes system is assessed: while the overall taxation level remains high, some specic emissions-related degradation do not, or poorly, have any tax counterpart. Additionally, sug- gestion are made to improve the policy design.

ecological economics, industrial ecology, lca, life cycle, externality, nonwoven, denmark

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