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Quantifying
Environmental Impacts
*
Analytic Center
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QUANTIFYING ENVIRONMENTAL IMPACTS
C.A. SHENK
Analytic Center
WILLIAM RILEY
Environmental Evaluation Branch
May 1981
U.S. Environmental Protection Agency
Region 10
1200 Sixth Avenue
Seattle, Washington 98101
U.S. EPA LIBRARY REGION 10 MATERIALS
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TABLE OF CONTENTS
EXECUTIVE SUMMARY
I. INTRODUCTION 1
II. PROBLEMS ENCOUNTERED IN QUANTIFYING ENVIRONMENTAL IMPACTS ... 3
Measuring Environmental Impacts and Their Health Effects .... 3
Valuing Impacts 4
Lack of information 4
Survey techniques 5
Double counting 6
Equity 6
Summary 7
III. SPECIFIC QUANTIFICATION TECHNIQUES 9
Techniques for Measuring Impacts 9
Health 9
Materials damage and soiling 11
Crop and natural vegetation loss 12
Aesthetics/visibility 13
Recreation/fish and wildlife 13
Techniques for Valuing Impacts 14
Health 14
Materials damage and soiling 18
Crop and natural vegetation loss 18
Aesthetics/visibility 19
Treatment costs 20
Recreation/fish and wildlife 20
Can Dollar Values be Used to Measure Impacts? 21
IV. MITIGATION COSTS . 26
V. ENVIRONMENTAL VALUES AND THE POWER PLANNING PROCESS 29
Alternative Evaluation Systems 29
Goals Achievement Matrix 29
Energy Analysis 30
Land-Suitabi1ity Analysis 30
Environmental Evaluation System 30
Judgmental Impact Matrix 31
Structuring the Decision-Making Process .32
Conclusions 32
REFERENCES 34
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EXECUTIVE SUMMARY
The Pacific Northwest Electric Power Planning and Conservation Act
outlines general procedures for power planning and for selecting specific
power generation and conservation sources. The procedures are to include
a methodology for determining the most cost-effective means of generating
power, giving precedence to conservation and renewable resources over
conventional thermal sources (coal and nuclear). Quantifiable
environmental impacts are to be included in the methodology. The
Bonneville Power Administration (BPA) is charged with developing the
cost-effectiveness methodology for interim use until the Northwest Power
Council (established by the Act) can modify it, or develop its own.
The problems inherent in developing such a methodology can be divided
into three categories:
1. How can environmental impacts be measured (physically)?
2. Can dollar values be placed on environmental impacts?
3. Can the decision-making process be structured to avoid comparisons
of projects having unlike impacts?
Our review of the literature on environmental impact quantification first
focused on physical measurement of impacts. There is a significant lack
of research on the cause and effect relationships between changes in
pollutant levels and alterations in the physical and human environment;
the mixing, diffusion, and transport of pollutants is not well
understood. As a result, only crude estimates of magnitude can be made
for most categories of impacts.
Knowledge of the physical and cultural setting in the project area, as
well as ambient air and water conditions, is virtually mandatory to
obtain any meaningful estimates. Similar projects can have widely
divergent impacts in different areas. However, site-specific information
can be expensive to collect, and is often unavailable.
Even where impacts can be measured, we lack agreement on the dollar
values of specific types of impacts. Valuing human lives, pain and
suffering, and aesthetics, for example, have been frequently researched.
However, no consensus has developed for these and many other values. In
addition, many valuation techniques have serious weaknesses involving
double counting, equity considerations, and the needs of future
generations.
It is not impossible to quantify environmental impacts. We can often
determine the amount of natural vegetation/wildlife habitat that will be
cleared or inundated by a project, as well as other resulting land use
changes. Fish loss can be calculated, and several widely-accepted
methods of projecting recreation benefits are available. However,
reliably quantifiable impacts represent only a small portion of expected
impacts. A methodology that quantifies them and ignores the rest may not
be accurate in determining the most cost-effective projects.
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The following guidelines for quantifying environmental impacts are
suggested:
1. Values should only be calculated for impact categories that can be
measured in absolute terms.
2. All assumptions and techniques should be clearly stated.
3. Sensitivity analysis should be performed on all major assumptions
4. All values should be presented as a range, representing a high and
low estimate.
5. Up-to-date site-specific information should be used whenever
possible.
Impact mitigation costs provide valuable information for the
quantification process. Although just one element of environmental costs
and benefits, mitigation costs tend to be among the most readily
calculated, and should be determined at the time project construction
costs are calculated. They can then be included in total "system costs,"
required by the Act to be used in cost-effectiveness assessments.
While it may not be possible to enumerate or value all impacts,
techniques have been developed that use expert judgment to determine
relative impacts of alternative projects. These techniques frequently
utilize scoring systems to rate the magnitude of a project's positive and
negative environmental consequences. These values are often weighted
(using experts' opinions of importance), and in some cases are displayed
on a matrix. In this manner, a greater variety of impacts can be
considered than by using traditional quantification systems. However,
the results cannot be added to financial costs to derive total system
costs; they would require a subjective analysis.
Quantification is most difficult when we must compare very unlike
alternatives. The impacts of a hydro facility are quite different from
those of a solid waste-fueled thermal plant: How do we compare a loss of
fish with decreased visibility? The problem would be alleviated if we
could place a dollar value on all impacts, but this is simply not
realistic. We can significantly reduce the problem, however, by properly
structuring the decision-making process, as shown in the suggestions made
below.
The first step should be a determination of power need. By using a
detailed end-use forecast to determine the amount and quality of energy
required in each sector and subsector, the most effective distribution of
conservation measures and direct-application renewables (first priorities
under the Act) can be determined. Remaining deficits broken into energy
and capacity requirements, within certain timeframes, can provide
categories for distinguishing alternative renewable baseload and capacity
resources whose availability and power factors best match the deficits.
The same procedure would apply to cogeneration and high-efficiency
technologies (third priority). Any remaining deficits would involve an
examination of alternative thermal resources.
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At each stage, the environmental evaluation process would be applied to
determine the most environmentally preferable alternatives within each
priority class. Alternatives not meeting certain minimum financial,
technological, and environmental criteria would be gradually eliminated.
Detailed information gathering and subsequent application of an
evaluation methodology would thus be applied to a more manageable set of
feasible alternatives that were similar in power characteristics and
availability, and had the same priority under the Act. Such a process
would help minimize the number of comparisons between dissimilar
technologies.
In summary, a sound methodology should have the following basic
characteristics:
1. Environmental costs and benefits that are directly measurable, and
that can accurately be expressed in dollar values, should be
calculated. Such costs constitute a legitimate component of total
system costs that can be computed with relative ease.
2. To account for those impacts that cannot be expressed in dollars,
the project evaluation process should be structured to minimize
comparisons among unlike projects. This can be achieved by grouping
feasible alternatives first by priority under the Act and second by
power characteristics and availability, by examining similar
alternatives collectively, and by using an end-use analysis forecast.
3. An evaluation methodology should be applied to each group of
similar projects. This process should be applied successively to each
priority group to identify acceptable alternatives that best match the
nature and timing of remaining resource deficits over the planning
period. The methodology should employ an interdisciplinary team of
recognized experts as well as citizen involvement.
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I. INTRODUCTION
Consider two power projects—one a coal fired thermal plant, the other a
dam on a river. Both produce electricity. In addition, the coal plant
emits sulfur dioxide and particulates, affecting the health, cleaning
bills, and visibility of nearby residents. The dam, on the other hand,
alters the ecology of a river, eliminating free-flowing stretches and
salmon-rearing habitat, creating a barrier to fish migration, and causing
unusual fluctuations in downstream water levels.
The Pacific Northwest needs electricity, and needs to obtain it at the
least cost to consumers and to the environment. Which project should we
choose?
This is the type of decision facing the Northwest Regional Power Council
and the Bonneville Power Administration in the years ahead. As part of
the Pacific Northwest Electric Power Planning and Conservation Act,
Congress has required that a methodology be developed for determining the
cost-effectiveness of proposed energy conservation and power generation
projects. As part of this methodology, the Act requires that "a method-
ology for determining quantifiable environmental costs and benefits"
related to conservation measures and resource projects be developed.
These costs are to be considered as part of the "system costs" of the
projects. BPA staff are presently developing an interim methodology for
integrating environmental impacts into their cost-effectiveness methodol-
ogy; the Regional Council will have to adopt some methodology as part of
its Plan.
EPA wishes to bring its experience in dealing with environmental decision-
making to bear on this difficult task. Environmental impacts must be
given due consideration during Northwest power planning, a process made
simpler if decision-making is structured so as to ease the task of making
comparative judgments among unlike projects.
This report assesses various techniques used to quantify environmental
costs and benefits (both physical measurement and dollar values). Its
purpose is to aid BPA and the Regional Council in their methodology
development.
To understand the structure of this report, let us return to the coal
plant/hydroelectric dam example. In order to choose between these
projects, we need to know the following:
1. The direct costs of each project (these will be estimated by BPA
as part of its cost-effectiveness analysis).
2. The environmental impacts of each project—how many tons of sulfur
dioxide emitted, how many tons of particulates, how many fish killed
during migration, how much fish habitat destroyed, how much visibility
degradation occurs.
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3. The value of those impacts--how much it is worth to prevent a
given amount of sulfur dioxide emissions, or to protect a given number of
fish, or to preserve visibility.
4. How to compare cost differences (from item (1)) with) differences
in environmental impacts (items (2) and (3)).
The first of these issues is not directly the concern of this report.
The second is covered in Chapter II, "Problems Encountered in Quantifying
Environmental Impacts." These are generic practical and conceptual
problems typically encountered in both measuring and valuing impacts.
The problems described include the shortage or nonexistance of
pollutant/impact data, limitations of models, expense of site-specific
information, double counting, and equity considerations.
Next, Chapter III, "Specific Quantification Techniques," discusses
specific techniques used to measure and assign dollar values,to the
different categories of environmental costs and benefits. The problems
here include difficulties in attributing cause and effect (e.g., how much
does a given amount of sulfur dioxide affect human health), and
difficulties in valuing ultimate effects (how much should we .pay in order
to reduce illness caused by air pollution).
Chapter IV, "Mitigation Costs," investigates using the cost of mitigating
specific impacts to gauge the values of those impacts to society. The
results of this technique are useful indicators of the ease of correcting
environmental problems caused by a project.
Chapter V, "Environmental Values and the Power Planning Process," surveys
alternatives to placing dollar values on impacts. Matrix techniques, and
other environmental assessment systems, have been employed in recent
years to summarize impacts and provide a framework for analyzing (often
dissimilar) alternative projects.
It is crucial that a methodology be developed that portrays environmental
impacts as accurately as possible, and allows careful comparison of
impacts of different projects. However, it is unrealistic t'o assume that
all environmental impacts can be precisely quantified; subjectivity will
inevitably play a major role. The value placed on impacts can vary by
several orders of magnitude, depending on the assumptions and methodology
employed. One must consequently proceed with great caution when
simultaneously considering environmental and financial costs, taking care
to communicate the uncertainties, and specific assumptions to both
decision-makers and the public.
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II. PROBLEMS ENCOUNTERED IN QUANTIFYING ENVIRONMENTAL IMPACTS
This chapter discusses several generic difficulties encountered in the
quantification of impacts- Some of these problems develop when we
attempt to measure the magnitude of the impacts, while others crop up as
we try to place a dollar value on these same impacts. It is critical to
understand and disclose the problems inherent in whatever methodology is
ultimately chosen, so that the decision-making process will be better
served. After discussion of these generic problems, we will turn in
Chapter III to a review of specific techniques.
Measuring Environmental Impacts and Their Health Effects
The measurement of environmental impacts conceals substantial
uncertainty. One source of uncertainty is the lack of reliable data on
the exact magnitude of impact caused by specific pollutants. This data
is ordinarily lacking on a national scale, and especially lacking on a
site-specific basis. Empirical impact data would normally be very
expensive to generate for each small proposed energy project. Therefore,
much extrapolation and subjectivity are a necessary part of most impact
calculations. This fact must be made clear to the user of such
information.
A second source of uncertainty is the scarcity of scientific knowledge
and theory necessary for predictions of increased pollution effects,
particularly health effects. A 1980 U. S. Senate report on Benefits of
Environmental, Health, and Safety Regulation lists five issues to weigh
in predicting the effects of exposure to hazards:
1. Cause-and effect is hard to demonstrate. Because of time lag
between exposure and effect, the existence of intervening
factors, and imperfect data, the relationships between the
exposure of a hazard and its effects are difficult to ascertain.
2. Epidemiological data is scarce or nonexistant. Multiple
exposure to hazards makes it difficult to pinpoint effects of
individual hazards.
3. Availability of models for environmental pollutant diffusion and
transport is very limited for most areas. Often, little is
known about the way a substance moves through the environment or
how it interacts with other compounds.
4. Dose-response relationships are uncertain in the low exposure
ranges likely to be encountered. Frequently, data on dose and
responses are available for only very high exposure levels, and
conjectural extrapolation techniques are necessary.
5. Inferring human health effects from animal test data is very
imprecise. Much of the scientific dose-response research has
been performed with animals, and translating that data to human
terms can be very speculative.
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A third source of uncertainty is change over time. In order to make any
predictions, impacts must usually be assumed consistent over time. This
implies the following assumptions:
1. Technological advances will not alter the magnitude of pollution
coming from a plant, nor will they alter the cost of resultant
damage to society. This is an important frailty when we are
comparing the impacts of completely different types of
facilities, or where impact costs relative to financial costs
associated with diverse projects vary markedly from each other.
2. There will be no new regulations controlling stationary source
pollution, and existing regulations will not be modified
substanti ally.
3. Enforcement of permit levels and standards will be the same for
a small number of large conventional thermal plants as it would
be for a large number of renewable resource projects. Given
recent staff cutbacks and potentially long-term budget
difficulties in at least some northwestern states, this point is
debatable.
Valuing Impacts
Lack of information
Placing dollar values on impacts can be somewhat more troublesome than
simply measuring them. It is virtually impossible to price all external
impacts of a power plant, since we do not know, or understand, the true
extent of these unpaid costs. Moreover, the pollution level/impact
relationships that we understand best indicate that the use of simple
formulas to place dollar values on pollutant levels can be very
misleading. Impacts are not necessarily linear, nor will a given amount
of added pollution have the same effect in all areas. Some site-specific
information will be necessary at least to determine the relative
magnitude of impacts of different projects, even if the values are only
very rough estimates.
A frequent difficulty encountered in pricing impacts is that the values
chosen normally reflect personal biases and perceptions of the analyst,
rather than those of the public or decision-makers. A preferable
approach would employ more widely accepted values, such as market
prices. No market exists, however, for impacts affecting "public goods"
(goods enjoyed in common), such as visibility and natural habitat. Most
studies seemingly understate the value of these impacts, or neglect it
entirely. This is a result of the near impossibility of accounting for
all impacts. For example, how do we determine the value of preserving a
habitat to the millions of people who will never even be near it, but who
still attach some personal value to its preservation? These types of
costs are normally omitted.
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Survey techniques
Several related approaches have been used to infer the value of improving
an environmental condition, or the cost incurred from degrading it. The
"willingness-to-pay" method is perhaps the most widely used. This
approach deduces market values from individuals' actual or predicted
reactions to environmental modifications. The procedures most commonly
used to derive these values include travel costs, property values, and
personal interviews. These techniques all have the disadvantage of
requiring a significant amount of site-specific information in order to
provide reasonable estimates. For example, the U.S. Congress has
accepted travel costs as a partial measure of the value of water
resources recreational facilities. This assumes the amount of money
people are willing to spend in getting to a particular area, and the user
fees they pay upon arrival, are an indication of that resource's value as
a recreation site. However, estimating future demand for a proposed
site, giving consideration to population growth, intervening
opportunities, and many other local characteristics, can prove quite
costly when assessing a number of projects.
Personal interviews have also been frequently used by analysts as a means
of obtaining values for environmental/psychological impacts that have few
relevant market transactions. People are asked how much they feel a
particular environmental condition is worth, or how much they would be
willing to pay to avoid environmental damage (and perhaps the concurrent
personal distress or injury). This enables analysts to derive estimates
of the value of aesthetics, wilderness, even life itself. However,
responses to interviews can often be considered unreliable. For
instance, it is difficult for people to accurately perceive a
hypothetical situation dealing with air pollution. What would a 10%
increase in particulates and sulfur dioxide in the air be like? Or more
specifically, how might people perceive a three mile reduction in their
visibility under certain atmospheric conditions? People may give
extremely high or low values to an impact in the hopes of affecting the
outcome of the survey. People also tend to value consequences of a
hypothetical situation significantly less than they do those of an actual
circumstance. These items add a significant degree of uncertainty to the
results of the surveys.
In addition, it has been shown that various survey techniques can be used
to generate completely different values for the same type of impact. The
value of a life (very frequently studied) has been given values between
$20,000 and $6 million by various analysts.
Persons attempting to value environmental impacts for a particular
project are prone to latching onto willingness-to-pay values generated
for other projects located in completely unrelated areas. These values
can be misleading, since site-specific information is normally required
for these values to have any real significance. Knowledge of local
ambient air and water conditions, physical setting, number of people to
be affected, etc., are all critical in determining the magnitude of
impacts of a project.
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In the: event no other information is available, at least willingness-
to-pay values provide something. However, extreme caution must be
exercised in their use and interpretation.
Double counting
Marke't value estimations are often flawed by double counting. As an
example, the value of health impacts are often calculated using total
health expenditures in an area and combining that with an estimate of the
increase (or decrease) in illness that is expected to result from a
particular pollution-related action. Then, property value differentials
are employed to determine what people are willing to pay for aesthetic
qualities. Property values in parts of a community with clean air are
compared to those with relatively dirtier air (other differential factors
affecting values are normally subtracted out). However, people's
perception of health problems associated with poor air quality may affect
property values. Therefore, health impacts may be counted twice, an
important weakness.
Equity
The distribution of financial and environmental costs and benefits of
electric power facility development is a key factor that can probably be
determined in only a very superficial manner for purposes of the Regional
Act. Important considerations include the financial cost to persons
paying for facility construction, the unequal burden imposed on persons
according to their financial situation, and the distribution of
construction benefits. However, BPA's system of spreading the costs of a
facility among all purchasers of BPA power simplifies the problem by
mandating that every BPA power user will pay for the construction of the
most cost-effective facilities. Since everyone must pay whether they
personally will use the power from the proposed project or not, financial
equity can be best served by choosing the least cost power. This assumes
that there are no hidden financial costs associated with the
environmental impacts of that power.
Even though every user of BPA power helps pay for a particular facility,
not all persons are exposed to the same beneficial or negative
environmental impacts, even in a very localized situation. Impacts are
rarely felt uniformly across areas or income groups. Equity
considerations only magnify the difficulty of placing dollar values on
environmental impacts. However, they should be given some weight in the
decision-making process, at least in cases where a particular group will
be forced to incur an inordinate proportion of the impact.
A related equity problem stems from discounting. In virtually all
long-term projects, costs and benefits are discounted to a present worth
value. This enables us to compare project costs occurring at one time
with benefits that (normally) occur at another. Since most projects are
deemed to have a useful life of 50 years or-less, and since discounting
virtually negates the value of any cost or benefit occurring more than 50
years in the future, almost all cost-benefit and cost-effectiveness
analyses are performed for a 50 year period or less. We virtually
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ignore the concerns of future generations in these analyses. This may be
a critical problem when we are analyzing the use of a nonrenewable
resource (such as coal). Regardless of the benefits that resource may
have for future generations, they are ignored in the decision-making
process as structured by these analyses.
Summary
The above discussion briefly outlines some of the more important basic
problems encountered in attempting to quantify environmental impacts.
The next section of this paper deals with methods of measuring various
categories of impacts and with valuing them.
We have seen that each of the following elements of environmental impact
estimation processes leads to uncertainty regarding the final value
assigned to those impacts:
- Numerical values mask uncertainty
- Only a few data points are used to extrapolate trends
- Cause-and-effect is hard to demonstrate
- Epidemiological data is scarce or nonexistent
- Models for environmental pollutant diffusion and transport are
1imited
- Many dose-response uncertainties exist
- Inter-species extrapolation adds ambiguity
- Significant changes from the status quo (e.g. technological
advances, modifications of regulations, change in enforcement
patterns or effectiveness) can invalidate estimates
- Lack of market values eliminates benchmarks
- Uncertainties and biases in interviews hinder use of
"willingness-to-pay"
- Site-specific information is expensive
- Certain impacts are susceptible to double counting
- Equity is often not considered
- Discounting ignores concerns of future generations
It is therefore important that the following guidelines be considered in
developing and applying an impact costing methodology:
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1. Values should only be calculated for impact categories which can
be measured in absolute terms, (eg. a 10% increase in
particulate, or 500 acres of wetlands destroyed).
2. All assumptions and techniques should be clearly stated. Since
some subjectivity will inevitably be required, it is important
that decision-makers are made aware of exactly where this has
occurred.
3. Sensitivity analysis should be performed on all major
assumptions. This includes varying the population projections,
boundaries of impact area, values assigned to types of impacts,
and discount rates.
4. All values should be presented as a range, representing a high
and low estimate. This helps make users aware of the
uncertainties involved in impact estimating, and provides a
display of the effect environmental considerations can have on
cost-effectiveness.
5. Up-to-date site-specific information should be used whenever
possible. The validity of using national average data can, in
some circumstances, be almost nil.
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III. SPECIFIC QUANTIFICATION TECHNIQUES
When comparing the financial costs of various proposed energy projects,
we are able to break down and analyze all the individual aspects of the
project and then place a fairly reliable dollar estimate on them. We can
then sum the individual costs using an accepted discount rate, and derive
one value which represents the total financial cost of each respective
project. This value is then readily comparable to that derived for other
projects, or the base alternative.
Unfortunately, measuring individual environmental impacts and then
synthesizing them into a single value with enough reliability for
comparison purposes, is a much more elusive goal. The measurement of
environmental impacts is largely a very recent pursuit of researchers,
and no methodologies enjoy complete acceptance. In those cases where
several impacts can be measured, there is seldom enough comparability in
the units used to enable their addition to a single number that would be
a measure of overall impact. As a result, there has been increasing
pressure to translate these units into dollar terms, which can then be
summed. This transition is a very difficult process, and the results are
not usually very satisfactory.
The first portion of this chapter briefly outlines some of the
methodologies commonly used to measure environmental impacts. This is
followed by a discussion of techniques used to put a dollar value on
these impacts. This is not meant to be an exhaustive literature review,
but rather is designed to give the reader an idea of the methodologies in
general use, and their principal constraints.
Chapter IV describes an alternate method of obtaining at least a partial
value of impacts through an assessment of mitigation costs. Other
analytical techniques, such as matrixes and ranking/rating evaluation
methods, are discussed in Chapter V. All of these techniques deserve
critical review for possible use in BPA's cost effectiveness methodology.
Techniques for Measuring Impacts
Most pollution impact measuring efforts have been designed to determine
the health benefits of particular regulations. The results have been
used to help justify air pollution regulations from a cost/benefit
standpoint. A methodology used to measure the benefits of a nationwide
50% reduction in specific pollutant levels, however, is not particularly
appropriate for use in determining the costs of a 2 ton/day point source
emission of that pollutant. Some researchers have extrapolated national
data to local situations, but the assumptions of impact uniformity and
linearity of the pollutant level/impact relationships, lead to
questionable results. Tlje need for site-specific data is extremely
important, though it can be costly.
Health
An increase in health costs is generally believed to be the most
significant financial impact caused by air pollution. Work performed on
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this topic has formed the cornerstone of environmental impact
quantification efforts. It therefore will receive greater coverage in
this paper than that given to other impact categories.
A substantial amount of research on the health effects of air pollution
has been recently undertaken, but is far from complete; the results
cannot be considered conclusive. Sulfur dioxide in the air, especially
in combination with particulates, causes significant respiratory problems
in humans. Coal-fired electric power plants emit large amounts of these
pollutants, and disperse them over a wide area. Other pollutants, with
perhaps less understood impacts, are also present in thermal plant
emissions.
Research has concentrated on the derivation of mathematical relationships
between air pollution and health impacts. The goal has been the
development of dose-response functions, which can estimate illnesses and
premature deaths resulting from exposure to a particular pollution
level. Nonparametrics, cross tabulation, and regression analysis have
each been used to some degree to derive dose-response functions.
Regression analysis has received the most attention in the literature.
Regression has been used to correlate the morbidity and mortality rates
in different localities with their pollution levels. Other factors, such
as income levels, manufacturing employment, and climate, have been
entered into the equations to better isolate pollution related impacts.
The resulting formulas have been used to estimate costs of air pollution
increases and benefits of decreases on both national and site-specific
levels.
Lave and Seskin use this technique in Air Pollution and Human Health.
They gathered data from over 100 urban areas on sulfate and particulate
levels, as well as on death rates related to various diseases. They also
entered variables dealing with population density, age distribution,
racial characteristics, income levels, occupation mix, climate, and
housing. Using the variables on population density, age, race, income,
and two pollution measures, they were able to account for 83% of the
variation in death rates in the cities tested. Further refinement led to
an estimate of early deaths related to pollution. Lave and Seskin stated
that a 50% reduction in sulfates and particulates would lower death rates
by 4.7% - 6.3%. Further studies provided projections for declines in
cardiovascular and respiratory diseases, and cancer.
There are a number of difficulties in applying the data to a specific
project. When local data are absent, national relationships between
pollution levels and health are sometimes assumed to be uniform and
linear. For example, if national data show a 50% decrease in pollution
yields a 4.7% decrease in morbidity and mortality, then the same is
assumed true locally. And it is assumed that a 50% increase would
produce a 4.7% increase in those factors, or a 10% increase would create
a 0.9% rise in them. These assumptions may be invalid because of
variation in:
- local climate and topography,
- population density and demographic characteristics,
- interaction with other pollutants in the area, and
- the variation of pollutant levels over time.
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At best, extrapolation of national averages to local situations can
provide only very gross estimates of the health impacts of a particular
project.
To circumvent this problem, site-specific data can be used (sometimes in
conjunction with national average figures) to make presumably more
precise estimates of impacts. However, it would be difficult for BPA to
do this to any significant degree. The cost of obtaining a sufficient
amount of reliable information on the impacted population of each
proposed project could prove to be quite high.
Health impacts of waterborne pollutants from electric power plants can
also be a problem. NPDES permits and concurrent effluent monitoring help
to limit these impacts. However, runoff from coal and residue storage
can still be serious, and accurately estimating the magnitude of these
potential problems is very difficult.
In addition, there are health impacts and accidents associated
specifically with the mining and transport of coal, as well as with
coal-fired plant operations. The Bureau of Labor Statistics, other
Federal agencies, and private organizations, regularly update figures on
the number of deaths, accidents, and illness rates in surface and
underground mines. Some agencies also keep track of injuries and deaths
occurring in the shipment of coal and in plant operations. Various
researchers have used this information to derive estimates of the annual
deaths and illnesses expected to result from the construction and
operation of a 1000 Mw coal-fired power plant (for example, see Unpaid
Costs of Electrical Energy, by William Ramsay, and Energy and the
Environment: Cost-Benefit Analysis). Illnesses are generally listed as
man-days lost.
Similarly, in the case of nuclear plants, accidents and fatalities have
been documented on uranium mining, transport, and plant operations.
Again, researchers have calculated the average man-days lost due to
injuries, and the average number of deaths resulting from the
construction and operation of a nuclear power plant. The commensurate
data for most renewable resources-related power facilities does not exist
to the degree it does for coal and nuclear power.
In summary, given a reasonable amount of site-specific information,
estimates of pollution-related health impacts can be made for some
thermal power projects. Similarly, accidents from mining,
transportation, and plant operations can be estimated for certain types
of operations. The estimates would not be complete, but could certainly
be used for project comparison purposes.
Materials damage and soiling
Pollution causes soiling as well as actual physical damage to certain
materials and structures. Costs result from more frequent painting of
buildings, cleaning of clothes, and shortened life of metals and fibers.
Controlled experiments (exposing painted surfaces and various materials
to both polluted and unpolluted air, while limiting all other external
11
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factors) are virtually nonexistent. Laboratory studies show that certain
airborne pollutants (including particulates) increase material
deterioration rates. The usefulness of these findings is limited by
three factors. First, peak pollution levels were frequently more
important than average levels. Second, local conditions (climate,
exposure) were critical deterioration rate determinants. Third, a broad
range of possible pollutant combinations can affect an area; there is no
current way of lab-testing the myriad conceivable combinations.
Even if information on materials damage relationships were available we
would still be left with the task of estimating the quantity of various
materials in the area. For these reasons, very few attempts have been
made to estimate materials damage and soiling due to pollution in a
specific area. Rather, researchers have normally skipped this step and,
through a series of sweeping assumptions, have attempted to directly
estimate the dollar cost of the damages. A few of the methods will be
discussed in the costing section of this chapter.
Crop and natural vegetation loss
Air pollution damages crops and natural vegetation. Field studies have
observed air pollution effects on crops over time. However, these
studies are necessarily subjective. The investigators must appraise both
the cause and extent of damage. Drought, disease, pests, and
environmental factors occurring the previous year may all affect the
healthiness of a crop, and can often have the same impact as recent air
pollution. Economic factors resulting in new crops or planting locations
may make impact estimates even more complex. In any case, substantial
local crop-specific data for ambient conditions are needed to provide
meaningful estimates of potential losses from energy projects.
One methodology used to make estimates of local crop losses due to air
pollution, and which minimizes field work, was developed by SRI (An
Estimate of the Nonhealth Benefits of Meeting the Secondary National
Ambient Air Quality Standards). A county's ambient and potential
pollution levels are rated on a scale (based on sulfur dioxide amounts).
Damage indices (previously developed) are then applied to the total
acreage of each crop in the county, yielding an estimate of incremental
total crop damage. Several users of the technique have acknowledged that
it provides only a "best guess," and that no real accuracy should be
assumed in the results. As with most other air pollution-related
impacts, probably the best which can be obtained is some method which
would display the relative impacts of one alternative versus another.
Very little completed research is useful in determining natural
vegetation losses caused by air pollution. A few site-specific cases of
extreme degradation are exceptions. It is doubtful if the site-specific
studies would be useful in projecting the impacts of most energy-related
projects. Instead, analyzing the value (in commercial and/or social
terms) of potential habitat loss has been the more common approach. This
is described below in the fish and wildlife section.
Inundation of areas upstream of a hydroelectric facility destroys
vegetation, in some cases forests or cropland. Likewise, the
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construction of thermal plants and the transmission lines associated with
energy generation will normally result in vegetation loss. Compared to
other types of impacts, these losses can relatively easily be measured
using site plans, aerial photographs, and/or field surveys. The
categories of vegetation/agricultural land loss can be determined, and
their acreage estimated with reasonable accuracy.
Aesthetics/visibility
Visibility impairment caused by airborne pollutants from a thermal power
station can be measured to some degree. Certain site-specific
information (including topographic, meteorological factors, and ambient
air conditions), can be considered in concert with emission projections
for the proposed facility to estimate air quality degradation. There are
models currently used for this purpose, but they have not been created
for all areas in the Pacific Northwest. This is important, as a general
model cannot be applied to all areas with equal reliability. In
addition, with sufficient project-specific engineering and hydrologic
information, estimates of water turbidity and thermal pollution can be
made.
Not all aesthetic qualities can be measured. The visual impact of the
plant itself, as well as associated mines, transmission lines, and odor
problems, do not lend themselves to ready measurement. Depending on the
type and proposed location of the facility, these impacts can be very
significant.
Recreation/fish and wildlife
The methodologies used in measuring recreation benefits resulting from
water-related projects are somewhat more widely developed and tested than
those used for most other benefits. The Water Resources Council (WRC)
has specified methodologies that can be used for such estimations. While
these regulations are designed for large Federal projects, and would not
be enforced on most small-scale hydro facilities, the methodologies are
certainly worth considering.
Since most of these methodologies are geared to the calculation of a
dollar value of projected recreation uses, they will be discussed in the
costing portion of this chapter. Basically, they utilize survey
techniques, gravity models, and other methods to determine the potential
demand for the recreation opportunities to be created by the facility.
For example, we can estimate the annual recreational user-days by using
some of these methodologies.
Fish and wildlife impacts (gains or losses) overlap to some degree with
recreation measures. Since, in some cases, the methodology employed to
estimate recreation values can consider fish and wildlife as well, care
must be exercised to avoid double counting. As with recreation, many of
the methodologies used attempt to directly derive a dollar value.
However, field techniques for estimating the annual number of fish and
wildlife lost are also available. A better measure of fish and wildlife
impacts is the loss of habitat productivity. While substantial
13
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site-specific information is necessary, studies of terrestrial and
aquatic habitat carrying capacities can be used to derive estimates of
this loss. The Habitat Evaluation Procedure developed by the U.S. Fish
and Wildlife Service is one example. It can be used to convert habitat
values into standard Habitat Units. The total Habitat Unit gains or
losses for each project can then be compared, even if the projects
involve radically different habitat types. The major advantage of this
technique is its ability to eliminate biases toward game species (common
to most other techniques), and treat the ecosystem as a whole.
Techniques for Valuing Impacts
At this point it would be ideal if we could develop a simple, low-cost
methodology for placing a reliable dollar value on the projected
environmental impacts of a project. This value could then be added to
the financial costs of the project, and the total costs of all
alternatives directly compared for relative acceptability. However, no
such methodology exists. While it is not possible to derive a meaningful
value (one having reasonably tight confidence limits) on all impacts,
techniques are available for making gross estimates of many values. Some
impacts can be valued with a much higher degree of reliability than
others. Some of the more commonly employed techniques are discussed
below.
Health
Deriving dollar values to represent human life and health is quite
difficult, and inevitably controversial. Three methods have primarily
been used to estimate such values, including foregone earnings,
willingness-to-pay, and (what Lave and Seskin termed) implicit valuations
based on private and public decisions. None of these methods enjoys
overriding acceptance.
The foregone earnings approach assumes that a person's worth to society
is most accurately measured by the wages he receives. Therefore,
society's loss of an individual through his early death can be measured
by the wages he would have earned had he lived until retirement.
Likewise, loss through illness can be measured by lost wages and medical
costs. Of course, this method does not consider the will to live and
enjoy life, the value of pain and suffering, and the value of an
individual to family and friends. It is implicitly assumed that people
who are not working for wages (such as retirees and housewives) have no
value. Foregone earning studies normally reveal a median value of life
of approximately $250,000. Not surprisingly, this is significantly lower
than the value derived by using other methods.
The second method determines what people are willing to pay for better
health and a longer life expectancy. People are asked what they would
pay to reduce their chance of dying from a particular disease this year.
Widely divergent responses frequently result, with many people unable to
provide any information at all.
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A widely used approach today includes an analysis of the decisions which
individuals and public agencies have made pertaining to the risk of death
and injury. One method used has been to determine the risk of death or
injury associated with a variety of jobs, then compare it to the salary
paid for these jobs. The amount of money people are willing to accept
for an incremental increase in risk is then determined. Extrapolation
produces the value they are implicitly placing on their lives. This
procedure requires several gross assumptions. First, it assumes that
people accurately perceive the relative risk associated with their job.
Second, they have virtually complete freedom to change jobs on the basis
of that risk perception. Lastly, it assumes the value of an increment of
risk is linear at all points on the scale. Despite the questionability
of these assumptions, the resulting values have recently gained
significant acceptance. The value of life determined in different
studies using this methodology has varied from about $200,000 to
$5,500,000 in 1978 dollars.
In a 1980 paper ("The Value of Life: What Difference Does it Make?"),
Graham and Vaupel assessed 57 Federal policies and regulations to
determine their cost per life saved (perhaps the Federal Government has
some intrinsic value it places on human life). The cost per life saved,
however, varied from $0 to $169,200,000, with very little grouping around
any particular figure. Saving lives, however, is not the sole purpose of
most of the 57 regulations assessed in the study.
In light of the uncertainty and extreme ranges in values produced by the
above methodologies, it is not surprising that there is little agreement
on the value of life. The problem is most acute among decision-makers,
who occasionally have to publically defend the use of a value. The most
commonly used values of life in current research lie between $500,000 and
$1,000,000. It may not be possible to obtain agreement on the use of
such a narrow range for a particular project. The public may not even
approve of such values being used. (Only three of the 57 regulations
assessed by Graham and Vaupel had values falling into this range.)
Assigning values to illness is perhaps a less sensitive issue than
valuing a life, but has not proven to be much easier. Illness data is
far less complete, and is of significantly lower quality, than that on
deaths. As with the value of life, values assigned to illness can only
be assumed to be crude estimates.
Researchers have generally taken two approaches to valuing illness. Many
have attempted to determine the per case or per day medical costs
associated with contracting a particular disease. To account for lost
productivity a dollar value per day of work lost is generally added.
These figures are derived from doctor, hospital, and other medical care
costs, and average wage figures. This method is dependent upon having
reliable data on the relationship between air pollutants and the
aggravation of particular diseases. While regression analyses have been
employed to prove such a relationship exists, the results have been far
from conclusive. Most researchers are convinced of a significant
relationship, but no clear, irrefutable associations have yet been
shown. Therefore, this uncertainty must be added to the uncertainty in
costs associated with specific illnesses.
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The second approach begins by determining the overall relationship
between illness (not specific diseases) and pollution, generally using
regression techniques. Next, average figures for medical costs
associated with pollution-aggravated diseases and productivity loss are
calculated. The illness-related costs of air pollution are determined.
As an example, in 1979 Freeman (The Benefits of Air and Water Pollution
Control: A Review and Synthesis of Recent Estimates) determined that a
20% reduction in air pollution nationally could lower the annual number
of restricted activity days associated with acute illness by 29 million.
He valued a restricted day at between $85 and $105, including medical and
productivity costs, to derive a national savings estimate of $2.48 to
$3.06 billion.
Freeman went on to calculate the annual benefits of national air
pollution control to be somewhere between $4.6 billion and $51.2 billion
(1978 dollars). Table III-l shows a breakdown of these figures. The
order of magnitude range "of values attests to the uncertainty of current
estimates. This situation is further aggravated when we apply the above
described methodologies to local area calculations.
To further illustrate the problems with using different methodologies and
assumptions, the American Lung Association (The Health Costs of Air
Pollution) summarized three studies on the health costs of coal-fueled
power plants. One study concluded that a 600 megawatt (Mw) plant in New
York would add $38.3 million to the nation's health costs, while one in
West Virginia would add $12.9 million. A second study estimated that a
1000 Mw coal-fired plant created $20,000 in health costs, while the third
study concluded that all currently proposed coal-fired plants in Utah
would result in the annual addition of $5,700 in health costs. Even
though the same project was not used in each example, there is no
question that different assumptions can yield completely different
results.
Almost any case on the health costs of air pollution can be built or
destroyed simply by the methodology and assumptions employed. This is a
critical point when assessing the results of such studies. The relative
impacts of one project versus another may be somewhat reliably discerned
from the data (if common methodologies and assumptions are used), but
absolute values can only be educated guesses.
To summarize, substantial methodological, empirical, and philosophical
difficulties exist on this subject. Some of these problems may be
alleviated through more extensive studies on the relationships between
pollutant levels and mortality and morbidity. Analytic techniques for
calculating and projecting costs related to pollution should also become
increasingly sophisticated with time. However, philosophical dilemmas
(such as placing a value on human life and the virtual impossibility of
placing a value on matters like pain and suffering) will continue to
hinder the development of realistic dollar values that can be agreed upon
by analysts, decision makers, and the public.
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TABLE III-l
Air Pollution Control Benefits Being Enjoyed in 1973
(In Billions of 1978 Dollars
Category Realized Benefits
Most'Reasonable
1. Health
Range Point Estimate
A. Stationary Source
Mortality $2.8 - 27.8 $13.9
.29 - 11.5 2.9
Total
$3.1
- 39.3
$16.8
B. Mobile Source
$ 0
.4
.2
Total Health
$3.1
- 39.7
$17.0
2.
Soiling and Cleaning
$ .5
- 5.0
$ 2.0
3.
Vegetation
A. Stationary Source
0
0
B. Mobile Source
$ .2
- 2.4
$ .7
Total Vegetation
$ .2
- 2.4
$ -7
4.
Materials
A. Stationary Source
$ .4
- 1.1
$ .7
B. Mobile Source
.1
- .3
.2
Total
$ .5
- 1.4
$ .9
5.
Property Values
A. Stationary Source
$ .9
- 6.9
$ 2.3
B. Mobile
.2
- 2.0
.4
Total
$1.1
- 8.9
$ 2.7
GRAND TOTAL*
$4.6
- 51.2
$21.4
* Because of overlap, only 30 percent of property value benefits are added
to other categories.
Source: Freeman, A.M., III. "Benefits of Air and Water Pollution Control
A Review and Synthesis of Recent Estimates." Prepared for the Council on
Environmental Quality, December 1979.
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Materials damage and soiling
To evaluate the magnitude of pollution-related cleaning costs, the usual
procedure has been to compare cleaning costs in a city (or portion
thereof) having a particular pollution level with those in another city
or area having a different level. Multiple regression techniques are
often used to sort out various physical and socioeconomic factors which
can affect the results.
The research has generally been site-specific, concentrating on results
found in a handful of locations. Once a number or formula is generated
from these studies, other analysts have been quick to latch onto it and
apply it across the entire nation. Given the assumptions necessary in
this process, a wide range should be attached to the projected values.
As an example, one study (described by Freeman) compared cleaning
frequencies for households in Steubenvi1le, Ohio and Uniontown,
Pennsylvania, having average annual suspended particulate levels of 235
and 115 micrograms/cubic meter, respectively. Households in the more
polluted town were found to spend an average of $84 per capita (in 1966)
more in annual cleaning costs than these in the less polluted location.
This number, derived for specific pollution levels in cities with
individual physical and socioeconomic circumstances, has been widely
applied by other analysts (with minimal justification). The more
detailed multiple regression studies have generally estimated national
level savings in cleaning costs to be realized through attainment of
pollution standards. Most attempts at Standard Metropolitan Statistical
Area (SMSA) level estimates have merely been disaggregates of national
estimates.
Materials damage presents bigger problems of cost identification than
cleaning. Some studies have shown a relationship between pollutant
levels and physical damage. This still leaves the task of estimating the
quantities of materials at risk and their absolute exposure levels. By
employing some rather sweeping assumptions, a few local and national
level estimates of pollution damages have actually been derived. Freeman
lists annual material damages from air pollution nationally at between
$2.7 and $7.2 billion (1978 dollars). A separate study (described by
Ramsay in Unpaid Costs of Electrical Energy) concluded that a 1,000 Mw
coal-fired power plant causes annual property damage of between $700,000
and $7,000,000 (presumably 1976 dollars). However, site-specific factors
are critical in determining impacts for a particular plant. The cost of
obtaining this data for many potential projects would likely be very high.
Crop and natural vegetation loss
If the physical damage to crops and trees can be measured, it is also
possible to derive a dollar value for those losses. Normally, the market
value of the lost production of both crops and trees are used. For
crops, both revenue and production cost changes should actually be
considered; farmers may react to pollution by changing production
techniques and/or crops. Natural vegetation is much more difficult to
value since most species have no market values. The vegetation's role in
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supporting wildlife and providing aesthetic qualities is one method of
obtaining such values. The most common techniques are discussed under
"Recreation/fish and wildlife." Also, consideration must be given to
foregone land use opportunities at the power source material site
(forest, mine, stream, etc.), at the plant site itself, and along the
transmission corridors. For example, if it is reasonable to believe that
potential farmland will be destroyed by the project, this lost production
should be evaluated.
Aesthetics/visibility
Air pollution can impair visibility and cause odor problems, and thereby
create an amenity loss. This, in turn, may lower property values and
reduce business (notably in recreation areas). Property value studies
have been rather numerous. There are many factors, however, which affect
property values besides air pollution. These include socioeconomic
characteristics of the neighborhood, and proximity to schools and
shopping.
Not all air pollution related effects on property values can rightfully
be attributed to aesthetics. Some of the effect is presumably
attributable to perceived health impacts, which are valued separately.
In any case, many studies have correlated air pollution increases with
decreases in property values. These studies developed average dollar
reduction figures for a given increase in particulates, sulfates, and/or
oxidants, and normally relate to specific cities.
A second way to value aesthetic impacts is by asking people what they
would be willing to pay not to suffer a specific reduction in air
auality. This may be used with both residents and recreationists in the
case of potential visibility impairment from proposed power plants.
Survey and bidding games techniques can be-used to obtain these
estimates. The controls placed on the interviews, the elimination of
bias, and the standardization of results have all presented problems in
obtaining valid responses. Difficulties in accurately perceiving
potential degradation also affects the outcome of these studies.
Similar techniques can estimate the recreation-oriented business which is
(or will be) lost due to visibility impairment. This impairment might
include the sheer presence of an energy facility within a recreation area.
However, the generation of this type of information for a multitude of
projects in different locations can be very costly. It is possible to
use average figures to estimate relative, though not absolute, visibility
impairment costs. For instance, figures have been developed on the
specific cost/man-kilometer of impairment. The value is taken times the
average number of residents and visitors to have their visibility reduced
(on a daily or annual basis) by pollution from a specific facility. That
number is then taken times the average number of kilometers of visibility
reduction in the impacted area. Again, this method is probably only
useful for comparative purposes.
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Willingness-to-pay surveys are also frequently used to assess aesthetic
damage from water pollution. Personal interviews are conducted to
determine what residents and recreationists are willing to nay not to
have the water degraded by a certain amount. These interviews are
subject to bias, perception difficulties, and a recognized disparity
between what people state they would pay and what they actually pay,
given the opportunity. This methodology does not measure the value
placed on the impact by people who will never see it, but who nonetheless
place a value on it.
The impact of water pollution on the property values of nearby residents
are another measure of the impact's cost. Again, perception,
double-counting, and difficulties in subtracting out extraneous factors
represent drawbacks.
Treatment costs
Waterborne pollutants, especially suspended solids and substances which
affect odor and taste, must normally be removed if they enter a
production facility or municipal treatment plant. If such pollutants
from a proposed project are deemed significant, the added cost of
removing them at downstream facilities can be calculated by determining
the project-added pollutants per unit of water reaching the treatment
facilities, and the added cost of their removal. This would be
appropriate for only a very few projects.
Recreation/fish and wildlife
The Water Resources Council (WRC) has mandated the use of specific
methodologies in calculating recreation benefits of certain water
resources projects. These methodologies may have application to some
hydro projects in the Northwest. The WRC regulations require
site-specific data for each project. If no recreation use-estimating
models are available for the region, WRC requires that the Travel Cost
Method (TCM), Contingent Valuation Method (CVM), or Unit Day Value Method
(UDV) be used (unless another can be adequately justified). These
methodologies are very briefly described below.
1. TCM - Uses travel behavior of users and travel costs to develop
willingness-to-pay functions. Demand curve for recreation
sites developed based on cost and distance. Can determine
recreationists' wi11ingness-to-pay for new facility.
2. CVM - Survey of households made to determine willingness-to-pay
for various proposed recreation opportunities. Can be
site-specific, or used to develop regional model.
3. UDV - Uses expert opinion to determine wi11ingness-to-pay
values. Unit Day Values have been derived for specific
sites, and the nation, and are applied to estimated use
figures.
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WRC regulations are quite detailed on choosing and performing the
.appropriate methodology. Nonetheless, there are significant difficulties
^involved. For example, in time of rapidly rising travel costs, it is
'important to use very recent data on costs and recreation patterns.
^Likewise, projections of future costs and accompanying changes in
"recreation use, are critical in estimating the magnitude of future
! benefits. Another complicating factor is the determination of all
' potential intervening opportunities available to recreationists that will
effectively lower the recreation potential of a site. This is especially
important where site-specific data is limited, and a regional gravity
model (or similar procedure) is used to estimate demand.
Other techniques have been derived, including the application of
regression techniques to determine recreation potential for given areas.
Various modifications of willingness-to-pay formulations have also been
; developed. As with the WRC methodologies and gravity models, these
itechniques have inherent method and data limitations. Regardless,
^.calculations of recreation benefits have been frequently used as major
-justifications for water impoundment projects. It is doubtful, however,
;if many large hydro projects with significant recreation benefits will be
-proposed to BPA over the next several years.
/Values for fish and wildlife impacts (gains or losses) overlap to some
degree with recreation values. Since the methodology employed to
¦estimate recreation values can additionally consider fish and wildlife,
care must be exercised to avoid double counting. In fact, some of the
methodologies available to determine these impacts are similar to those
discussed for recreation.
:For example, the Modified Unit Day Value Method (MUDVM) measures the
'willingness-to-pay to obtain, or keep, a given level of wildlife
availability (from a recreation standpoint). The wi11ingness-to-pay
figures are developed from all costs directly incurred by the
ihunter/fisherman (including entry and use fees), and are taken times an
estimate of the total number of use-days to be gained or lost by a
^proposed action. Like most other methodologies summarized in this paper,
this technique can become extremely complex, depending on the need and
'resources of the user. Information on habitat suitability, sustainable
use, and projected use changes, can all come into play.
There are a number of other ways of obtaining the same information.
Questionnaires have been used to determine what people would be willing
to pay to have more hunting and fishing opportunities, or conversely,
what they would pay to keep a particular site in its present condition
for such activites. The value of fish and wildlife for aesthetic
purposes has been similarly calculated. For commercial fishing, the
current dockside value of fish can be determined, and an estimate made of
the increase or decrease in the fish population expected to result from a
particular project. The total value of fish gain or loss is then
estimated.
Can Dollar Values be Used to Measure Impacts?
Obviously, numerous techniques have been employed in the derivation of
dollar values for environmental impacts. The foregoing analysis by no
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means covers all of these methodologies, but includes those which are
most commonly used. The accompanying chart summarizes the general impact
categories and the most frequently used costing techniques.
It is obvious that there are many shortcomings in the techniques
currently used to measure and value environmental impacts. These
shortcomings include:
- controversy over the value of life and health,
- impossibility of quantifying pain and suffering,
- lack of scientific research associating degree of pollution with
magnitude of impacts,
- unknown effects of mixing pollutants from several sources,
- uncertainties associated with data extrapolation,
- requirements of certain impacts to use subjective
willingness-to-pay surveys,
- lack of commonality in results using different techniques to
estimate the same impact,
- difficulty of eliminating double counting,
- uncertainties of delineating impacted area and estimating exposed
population,
- problems with using discount rates,
- difficulty in convincing public of the logic used in cost
estimation, and
- uncertainty over future technological advances in pollution
control, mine safety, and other areas.
A large number of assumptions must therefore be made in costing
environmental impacts; so many, in fact, that the results have little
accuracy. Generally, when we are projecting the physical, social, or
economic impacts of certain actions, we can not be certain of their
accuracy. However, we normally feel that the projections provide at
minimum an "order of magnitude" value (accurate within a factor of 10)
that will be useful for planning purposes. This is not necessarily the
case with most of the environmental costing methodologies currently
available.
Varying just one or two assumptions, wnile still maintaining the same
degree of logic, can easily account for a two- or threefold (or more)
change in the estimates. Likewise, some assumptions are almost
completely subjective, and will vary tremendously from one researcher to
another. Different methodologies often force a completely unrelated set
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MOST FREQUENTLY USED COSTING TECHNIQUES
Impact
Foregone Willingness- Implicit Market Multiple Travel Foregone Prop.
Earnings to-Pay Valuations Value/Costs Regress. Costs/Fees Opps. Values
Illness/
Accidents
Death
X
X
X
X
Materials
Damage
Soi1ing
Crop Loss
Natural Veg.
Loss
Aesthetics
Recreation
X
X
X
Fish and
Wi ldlife
Treatment
Costs
-------
of largely unresearched assumptions to be made. As a result, by varying
assumptions and methodologies within what appear to be logical bounds,
one can easily derive cost estimates of a project which will vary by one,
two, even three orders of magnitude.
This must be kept in mind whenever making these cost estimates, or when
using them in a decision-making capacity. Researchers can always derive
a methodology which will provide very specific estimates (or ranges).
However, these figures should never be accepted on faith. To better
understand the limitations of the projections, the user or reviewer
should carefully assess the techniques and assumptions which were
employed.
Placing a dollar value on environmental impacts is not without some
merit. The methodologies briefly discussed in this paper, and the
hundreds of variations which have been derived by academia, private
organizations, and government agencies, do serve a purpose. Increasing
pressure is being placed on government agencies to determine the most
cost-effective course of action in given circumstances, and environmental
impacts are destined to be part of those considerations. While
environmental costing techniques still suffer from severe data
constraints, they do provide a means for obtaining estimates of sorts.
The use of these methodologies will help isolate areas in which
pollution/effect research is most critically needed, and will publicize
the need for such research.
Another use is in the determination of the relative impacts of
alternative projects. However, reasonably reliable results can probably
be obtained only when considering identical categories of impacts. For
instance, sulphur dioxide-related impacts of one project can perhaps be
estimated and compared to the sulphur dioxide impacts of another, but
those results cannot reliably be compared to the waterborne thermal
pollution of a separate alternative. In other words, the dollar values
themselves are not likely very reliable, but they can be used to display
relative degrees of impact where impact categories and pollutant types
are held constant. This can also be important in determining the levels
at which regulatory standards should be set. Even though the dollar
values may not be accurate, the relative change in the value of expected
impacts with each increment of protection can disclose the most
cost-effective level at which to establish a standard.
As should be evident, a principal complicating factor in environmental
cost estimates is the bilevel nature of the assumptions. Not only must a
series of assumptions and estimates be made to measure the impacts
(number of illnesses, extent of visibility degradation, number of fish
lost, etc.), but an entirely different set of equally variable
assumptions must then be made to value these impacts. With most other
project evaluation efforts (e.g., construction material and labor, and
social-economic impacts) we can use past experience and proven techniques
to obtain reasonable estimates of the physical magnitudes and costs
involved. Very little of the corresponding effort of measuring or
valuing environmental impacts can be based on experience or time-proven
techniques. Being forced to make gross assumptions on both levels, we
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greatly compound uncertainties, normally well beyond those associated
with other project cost components.
Some of this uncertainty can be diminished by quantifying impacts in
terms of physical magnitude only. Then, decision-makers would assume the
responsibility of weighing the diverse impacts of various alternatives.
The uncertainties associated with particular impacts can thus be more
easily considered. Remember, all dollar values are treated as having
equal validity when they are added together in a standard cost-benefit
procedure. The use of ranges can only temper this problem a little, as
decision-makers almost always tend to key on a "most likely" or average
value.
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IV. MITIGATION COSTS
So far we have addressed only the costs associated with environmental
impacts. The conclusion we draw from reviewing the major techniques
available today for valuing impacts is that none can be applied
successfully in all situations. Only estimable damages or improvements
to marketable goods offers a sound basis for cost development, although
various methods for valuing recreational opportunities have been in use
for some time.
In this chapter we examine the costs of impact mitigation. Although just
one component of total system environmental costs and benefits, per
section 3(4)(B) of the Act, these costs are among the least difficult to
quantify. Mitigation*, in its most general sense, refers to measures
implemented as part of a program or project which are designed to prevent
impacts, reduce them to socially acceptable levels, or compensate for
impacts if they cannot be avoided or reduced to acceptable levels.
Too often the costs of required mitigation measures are determined late
in the stages of project planning, after the cost-effectiveness
determination has been made. And in some very unfortunate instances,
proper mitigation was not a part of the project planning process,
resulting in the application of very costly measures after project
completion. Had these measures (e.g., proper siting and noise controls
for a combustion turbine; fish passages for several dams) been a part of
the original project, mitigation costs would have been significantly
lower. These costs must be developed early in the project planning
stages and incorporated into the system costs prior to any determination
of a project's cost-effectiveness.
Below is a summary of the types of mitigation that we feel, at a minimum,
must be considered for each type of resource. The list is by no means
exhaustive. Every project has its own quirks and particular problems
which require special attention. Many of these require special studies
and innovative solutions. However, it is essential that the costs of
such special studies, designs, and all other information gathering,
planning, and implementation costs are estimated and included in total
system costs to give a realistic view of "cost-effectiveness."
* The CEQ NEPA regulations (40 CFR 1508.20) define "mitigation" to
include:
(a) Avoiding the impact altogether by not taking a certain action or
parts of an action.
(b) Minimizing impacts by limiting the degree or magnitude of the
action and its implementation.
(c) Rectifying the impact by repairing, rehabilitating, or restoring
the affected environment.
(d) Reducing or eliminating the impact over time by preservation and
maintenance operations during the life of the action.
(e) Compensating for the impact by replacing or providing substitute
resources or environments.
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Weatherization Programs - Maintaining indoor air quality (source
identification and control, or air-to-air heat exchangers if necessary).
Hydroelectric Projects - fishery mitigation (ladders or other passage
facilities, hatcheries, spawning channels, dissolved gas supersaturation
control, temperature control, and adequate flows); wildlife habitat
mitigation and/or compensation; population relocation; work force housing
and services; archaeological preservation and/or salvage.
Biomass Projects - emission controls; waste water disposal and
monitoring; solid waste (ash) disposal; soil conservation measures (for
plantations or slash recovery).
Municipal Solid Waste - emission controls; waste water disposal and
monitoring; residual waste disposal.
Geothermal Power Generation - emission controls; effluent disposal and
monitoring; ground water monitoring; noise abatement; wildlife and
fishery protection; work force housing and services; archaeological
preservation and/or salvage; seismic monitoring.
Geothermal Low-Temperature Applications - effluent disposal and
monitoring; possibly groundwater monitoring.
Wind Power - low-frequency noise control.
Central Station Solar (thermal) - waste water disposal and monitoring;
wildlife habitat mitigation; archaeological preservation and/or salvage.
Central Station Solar (photovoltaic) - wildlife habitat mitigation;
archaeological preservation and/or salvage.
Cogeneration - emission controls; noise abatement (for combustion
turbine); waste water disposal and monitoring (for boiler).
Combustion Turbine - emission controls; noise abatement (particularly low
frequency).
Coal-Fired Thermal - emission controls and monitoring; waste water
disposal and monitoring (possibly groundwater); stored coal runoff
control; solid waste disposal (scrubber sludge and fly ash); wildlife
habitat mitigation; work force housing and services; archaeological
preservation and/or salvage.
Nuclear Power - emission controls and monitoring (radiation); spent fuel
processing, storage, and ultimate disposal; waste water disposal and
monitoring (e.g., thermal pollution); groundwater monitoring; emergency
contingency planning; work force housing and services; wildlife habitat
mitigation; archaeological preservation and/or salvage.
The above list relates to general types of mitigation costs incurred by
the more common energy resources and technologies available today. It
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does not include "end of cycle" costs, or decommissioning costs, which
can be quite substantial, particularly for nuclear plants. The Act
expressly states, however, that end of cycle costs shall be included in
total system costs. Thus we have not discussed them as a component of
environmental costs, although many might view them as such.
Developing reliable estimates for mitigation costs is often a stumbling
block in project planning of any type. Perhaps the major reason is
reluctance on the part of project sponsors to commit to any specific
mitigation measure or strategy early in the planning stages. Too often
mitigation measures are tacked on as conditions of approval of the
various permits required, or as a forced component of an agency's Record
of Decision. We hope this situation will not occur during implementation
of the Regional Act. The Act clearly mandates inclusion of quantifiable
environmental costs and benefits in total system costs, such that they
become a component of the cost-effectiveness determination. This means
that mitigation costs must be developed up front, prior to the
determination.
Although the experience with mitigation costs is less extensive than with
project construction costs, estimates are available. Emission controls,
surface and groundwater monitoring, habitat management, erosion control,
waste disposal, etc., do not rely on unproven technologies, although
clearly the state-of-the-art is advancing rapidly on nearly all of these
fronts. Estimates can be developed by qualified professionals, and will
improve with the quality of information available. Unlike health cost
studies (whose results are not directly transferrable to dissimilar
areas), many energy projects employ similar technologies in dissimilar
areas. Thus emission control costs may be comparable, as would waste
disposal, monitoring, and work force housing costs, etc. The major
advantage of estimating mitigation costs as opposed to estimating health
costs is that they rely on physically measurable quantities instead of
such intangibles as the value of pain and suffering, or life itself.
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V. ENVIRONMENTAL VALUES AND THE POWER PLANNING PROCESS
In this chapter we take a step beyond the auantification of environmental
costs and benefits to look briefly at how environmental values,
particularly those that cannot be quantified, can best be factored into
the decision process. Subsequent submissions to BPA and the Regional
Power Council will elaborate further on this. At this time, however, we
feel it is important to present a brief discussion of the importance of
giving due consideration to nonquantifiable values.
Alternative Evaluation Systems
As evidenced by this paper, we do not believe that all adverse and
beneficial impacts can be reduced to a common denominator and expressed
in dollars and cents. Where marketable goods or opportunities are
involved, such as fish or kayak trips, one can make some headway.
Mitigation costs that represent the value of preventing, reducing, or
compensating for impacts can also be tallied and expressed as a component
of system costs. But to rely solely on measurable environmental impacts
in the cost-effectiveness determination could seriously malign the true,
if immeasurable, value of preserving environmental quality.
There are other ways of evaluating projects from an environmental
perspective in addition to adding up quantifiable environmental costs and
benefits. Most of these methods rely on expert judgment to value impact
categories. Some methods applicable to the power planning process are
briefly summarized below. A more complete discussion and critique of
these methods can be found in Evaluation in Environmental Planning by
Donald M. McAllister.
Goals-Achievement Matrix
This evaluation method, conceived by Morris Hill, is based upon a series
of goals. Each goal is weighted; project impacts are scored according to
their ability to promote or detract from achieving each particular goal.
Value weights for each goal are set to reflect their relative importance
to the affected population. In addition, impacts are classified
according to the various community or user groups affected, which are
also assigned weights. The weights are multiplied by the impacts to
derive a total score of goals-achievement for each alternative.
Although this system can incorporate intangible values, it has two major
weaknesses. First, the goals established may not include certain impact
categories, particularly if new information on impacts appears after the
goal statements are established. Thus the system, if used, should remain
flexible enough to incorporate new goal statements. A second weakness
might stem from the difficulties of weighting various consumer groups.
No procedures for determining weights is included in the method. It
would be very difficult to arrive at a public consensus on such weights,
without charges of discrimination. The major advantage of
Goals-Achievement Matrix is the emphasis on popular goals and issues
which, in the power planning process, could incorporate economic,
reliability, operational, and environmental criteria.
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Energy Analysis
The concept behind this method is similar to cost-benefit analysis,
except energy is substituted for dollars. In this system, energy is
viewed as a more accurate measure of intrinsic value than money since
energy is the most fundamental limiting factor on all human action.
Using this method, the "cost" of land disturbance would be expressed as
reduced plant production (e.g., in kilocalories). The "cost" of
materials would be measured by the kilocalories of fuel required to
produce them. However, this system cannot distinguish between biomass
and beauty or endangered species and weeds. It is best applied to
analyzing alternative processes, such as steel refining, to determine the
most energy efficient alternative.
Land-Suitability Analysis
This approach, upon which a number of techniques are based, focuses on
the intrinsic ability of landscapes to accommodate a particular type of
development, e.g., an energy facility. By relying on expert judgment to
rank suitability, ratings are assigned to subclasses of each land
characteristic and aggregated for each alternative site. This produces a
grand index of land suitability for the particular type of facility. The
approach is used in a number of forms, but is basically limited in
application to evaluating alternative sites rather than alternative
projects.
Environmental Evaluation System
This method was developed for the Bureau of Reclamation (now Water and
Power Resources Service) by Battelle Laboratories in Ohio to assist in
evaluating water resource projects. It is designed to be comprehensive
from an environmental, but not economic perspective. It is systematic,
providing replicable answers, and relies on an interdisciplinary team of
experts. Impact categories are established for use in all applications,
and scientific procedures are used where possible to estimate impacts.
Environmental impacts are divided into four broad categories: ecology,
environmental pollution, aesthetics, and human interest. The four
categories are broken down into 78 parameters. Impacts related to the
"with project" and "without project" conditions are then quantified. In
the second step, impact measures are transformed by "value functions"
into a value from 0 to 1, where 1 indicates "very good quality." The
last step is to multiply each environmental quality score by the value
weight of the corresponding parameter ("parameter importance units").
The "value functions", developed by the interdisciplinary research team,
rely where possible on scientific information. However, they incorporate
a fair amount of value judgment, according to McAllister. Also, the
process is geared to water resource projects, so the "value functions"
may not be applicable to other types of projects. The "parameter
importance units" are developed using the Delphi approach. This system
employs independent, but iterative, judgments of relative values and is
commonly used in expert judgment situations where weighting values must
be assigned.
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The Environmental Evaluation System seems to offer promise as an
evaluation tool, althouoh clearly it would have to be adapted to
evaluating projects other than water resource developments. Also, while
cost-benefit analysis has difficulty with nonmonetary values, this system
does not consider economic costs and benefits. Developing reliable
"value functions" could be a lengthy and controversial process.
Judgmental Impact Matrix
This system was developed at Northwestern University to assist the Army
Corps of Engineers assess alternative wastewater management systems. It
is particularly useful for screening a large number of alternatives with
many diverse impacts. It employs expert judgment to estimate impacts and
to assign value weights.
Rather than look at each alternative's impact on a particular element of
the environment, the impact of each discernible aspect of an alternative
is determined on a relative scale for all relevant, weighted parameters.
The result is many bits of information that are aggregated by a specified
computational procedure. A panel of experts use a variant of the Delphi
procedure to determine the relevant environmental and societal elements
to estimate impact magnitudes and to assign value weights. Although
complex, the method is comprehensive. Results, however, are sometimes
difficult to explain due to the mathematics involved. The model also
assumes additivity and linearity of impacts.
These examples of evaluation techniques are presented simply to
demonstrate the issues to be faced in developing any methodology for
decision-making that attempts to be holistic while considering all
relevant details. Although the methods presented are just a few of the
many that have been developed by planners, government agencies, and
private institutions, they have three basic features in common. First,
they examine an array of alternatives systematically. Second, they
incorporate a system of weighted values. Third, they rely on an
interdisciplinary team of experts for determining impacts and valuing
them.
By examining alternatives collectively and systematically, all
alternatives should receive fair and equal treatment. By using weighted
values, the results reflect a view of the most important decision
criteria. And finally, by relying on an interdisciplinary team of
experts the results should be as scientifically accurate and unbiased as
possible.
The major weakness of all of these methods, however, is a failure to
involve the public in determining value weights or perceived impacts.
Although public involvement can complicate a decision process, citizens
can be most helpful in determining the importance and magnitude of those
impacts that are most difficult to scientifically quantify, such as
visual impacts, land use changes, or lifestyle impacts. A secondary
benefit of citizen input is greater public confidence in the decision.
These advantages should outweigh any problems of increased complexity.
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Structuring the Decision-Making Process
Any methodology has the greatest difficulty when, used to compare very
unlike alternatives. This problem cannot be eliminated entirely from a
decision process that must examine a wide variety of energy resources for
such a large region. However, the problem could be significantly scaled
down by properly structuring the decision.
The first step in the regional power planning process is a determination
of need. By using a detailed end-use forecast to determine the amount
and quality of energy required throughout the planning period by each
sector and subsector, the most effective distribution of conservation
measures and direct-application renewables (first priorities under the
Act), can be determined. Remaining deficits broken into energy and
capacity requirements, within certain timeframes, can provide categories
for distinguishing alternative renewable baselogd and capacity resources
whose availability and power factors best match the deficits. For
instance, the availability of wind power, which can be developed within a
relatively short time frame, coincides roughly Wiith winter peaks caused
by stormy weather. Geothermal power, however, is a baseload resource
available year-round that may take five years or more to develop. After
selecting all cost-effective renewables, the same procedure would apply
to cogeneration and high-efficiency technologies1, the third priority
under the Act. Finally, any remaining deficits,would involve an
examination of alternative thermal resources.
At each stage, the environmental evaluation process would be applied to
determine the most environmentally preferable alternatives within each
priority class. A screening process at each stage should gradually
eliminate alternatives not meeting certain minimum criteria (e.g., more
than avoided cost; impact endangered species or anadromous fish; unproven
technology). This would narrow the number of alternatives within each
priority and deficit category. Thus detailed information gathering and
subsequent application of an evaluation methodology would be applied to a
more manageable set of feasible alternatives that were similar in power
characteristics and availability, and had the same priority under the
Act. Such a process would tend to minimize the number of comparisons
between dissimilar technologies.
Conclusions
Accounting for environmental costs and benefits in the regional power
planning process can best be achieved through a combination of approaches.
First, environmental costs and benefits that are directly measurable, and
that can accurately be expressed in dollar values, should be calculated.
These include impacts to marketable goods and services and impact mitiga-
tion costs. Such costs constitute a legitimate component of total system
costs that can be computed with relative ease.
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Second, to account for those impacts that cannot be expressed in dollars,
the project evaluation process should be structured to minimize compari-
sons among unlike projects. This can be achieved by adhering to the
following principles:
- Similar alternatives should be examined collectively, in one proce-
dure, rather than judged independently of one another.
- Feasible alternatives should be grouped first by priority under the
Act and secondly by power characteristics and availability.
- An end-use analysis forecast should be used to facilitate matching
resource power characteristics with the nature of power deficits.
Third, an evaluation methodology should be applied to each group of
similar projects, i.e., those with the same priority under the Act,
similar power characteristics (e.g., energy, capacity, intermittent), and
similar availability (e.g., within five years, five to ten years, etc.).
The evaluation process should be applied successively to each priority
group to identify acceptable alternatives that best match the nature and
timing of remaining resource deficits over the planning period. The
methodology should have the following characteristics:
- An interdisciplinary team of recognized experts should determine
impacts and evaluate them.
- Citizen involvement should be used to help determine impacts and
assign value weights to different evaluation criteria.
Finally, the entire process should be fully documented and subject to
public scrutiny.
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