EXIOPOL is a project funded by the European Commission under the 6th framework programme, priority 6.3 Global Change and Ecosystems. The consortium comprises a large number of partners and covers a variety of relevant research expertises in the field of environmental valuation and Environmentally Extended Input-Output assessment. Overall 38 universities and centres of research from Europe, China and India are involved. The project has taken off in March 2007 and will last up to October 2011.
The core of the project is to support cost-effectiveness and cost-benefit analysis of technologies, policies, and standard setting, at the micro, macro and meso level. This requires the coverage of a broad range of impacts and assessment of external costs. To see the Integrated Project in this context we present the toolbox that currently is in use or ideally should be used for such assessments, and indicate the main gaps in it. This then gives the rationale on which areas our project has to focus. For this purpose, we refer to the matrix presented below.
|Level||Example||Tools for direct cost assessment||Tools for impact assessment||Tools for benefit assessment||Gaps in toolbox filled in this project|
|Micro||Company level (e.g. technology choice), household level (e.g. consumption decisions)||Life cycle costing||Life cycle assessment, site specific tools like EIA or RA||External costs, local||
|Meso||Sector or product group level (e.g. sector standard, tax, or ban)||IO, in combination with scenario tools (e.g. CGE)||EE I-O, in combination with scenario tools (e.g. CGE)||External costs, sectoral average|
|Macro||Societal level (as per sector level)||IO, in combination with scenario tools (e.g. CGE)||EE I-O, in combination with scenario tools (e.g. CGE)||External costs, country average|
Note: EIA: Environmental Impact Analysis. LCA: Life Cycle Assessment. LCC: Life Cycle Costing. IOTs: Input-Output Tables. RA: Risk assessment
Cost-benefit analysis and cost-effectiveness analysis require insights in the following factors:
- Calculation of the (net) costs that implementation of a technology, standard or policy will imply.
- Implications of measures at meso- and macro level, but also the ‘ripple effect’ of measures taken at micro level, can only be assessed properly when making use of a framework that covers all relations in the economic system including environmental effects, which only can be provided by environmentally extended input-output tables (EE I-O tables). Such tables are currently simply non-existent for the EU25.
As also indicated in the call text, measures can be taken at a micro (e.g. company), meso (e.g. sector) and macro (e.g. country or multi-country) level. And conversely, measures taken at one of these levels can have contrary ‘ripple effects’ or spillovers at another level. The toolbox needs to be adequately filled for each level, but maybe even more importantly, must be able to create linkages between these levels.
The table shows that the main gaps in the toolbox cluster around two issues:
- The (market) costs and direct (market) benefits of proposed sustainability policies, technologies and standards usually can be calculated rather straightforwardly. This is not true, however, for the indirect, non-market costs or externalities. From previous research it is clear that there are still important gaps in the assessments of external costs, which need to be filled.
- Calculation of the reduction of environmental impacts related to this implementation. The quotient of impact reduction and net costs indicates the cost-effectiveness of the measure.
- Calculation of the (reduction of) external costs by reduction of impacts related to this measure. Such a reduction of external costs, and (net) investment that a measure requires, allow to assess the true societal costs and benefits.
It is particularly the integration and linkage of external cost data with the (EE) I-O tables that provides additional power to the toolbox. This link can be easiliy provided by expressing external costs in (time and place-independent) cost factors per kg emitted substance and/or unit of production, which is the data provided via EE I-O tables. This framework then also allows calculating spillovers between sectors: the I-O table will allow calculating how a change in activity level in one sector may induce changes in activity levels in other sectors, and hence related emissions, external costs, etc.
The objectives of EXIOPOL are to:
- Synthesise and develop further estimates
of the external costs of key environmental impacts for Europe;
up an environmentally extended (EE) Input-Output (I-O) framework
in which as many of these estimates as possible are included,
allowing the estimation of environmental impacts and external costs of different
economic sector activities, final consumption activities and resource
consumption for countries in the EU;
- Apply the results of the external cost estimates and EE I-O analysis for the analysis of policy questions of importance, as well as for the evaluation of the value and impact of past research on external costs on policy-making in the EU.