This project was a key contributor in expanding and synthesising a database on the costs of environmental burdens within the EU, measured in monetary terms. EXIOPOL evaluated, analysed, and assessed damages from the emissions of pollutants into air and water. The project therefore updated and detailed external costs by type of emission, industry sector, and country, as well as for a range of themes, namely: health, agriculture, biodiversity, forestry and wastes. Each theme corresponds to a different Policy Brief.
This set of Policy Briefs details externalities by sector. It is complemented by two Policy Case studies, which focus on agriculture and energy under different scenarios in 2020.
- What are the external costs in each member state of energy production from biomass to meet the requirement of a 20% share of renewables in all primary energy use in the EU by 2020? These costs emerge from the application of nitrogen and phosphate fertilisers, which generate harmful emissions in the form of NH3, N2O, PM10 and PM2.5. These damage costs concern human health, eutrophication, acidification and biodiversity loss.
- What are the external cost implications of a 20% reduction in the number of cattle and an equivalent increase in pig and poultry consumption to meet the same amount of protein consumed by the EU's population? The switch is motivated by the desire to reduce methane emissions, which are harmful greenhouse gases.
The analysis of the biomass from energy production was carried out using the TIMES model. It analyses the changes in land use and crops throughout the EU, which are needed to meet the biomass requirements. It reveals that environmental costs are a little over Euro 2 billion for the entire EU- 27 area. These externality costs are dominated by NH3 emissions, which account for 88 to 94% of total costs. The countries with the highest costs are Germany, Poland, the United Kingdom, France, and Italy. At the same time small benefits emerge in Belgium and the Netherlands due to the decrease in the surface area allocated to oil crops and biomass. Regarding the changes in diet, a reduction of cattle and dairy products obviously leads to a reduction in methane emissions. However, NH3 and PM emissions, as well as N and P input, increase considerably. The study finds that the damages caused by non-climatic effects are higher than climatic damages avoided. A reduction of cattle, and an increase in pork and poultry would lead to benefits of about Euro 120 million, due to the reductions in GHG emissions. At the same time, damages due to non-GHG emissions amount to about Euro 3,200 million.
- What are the external benefits of the EU's 20-20-20 strategy, which targets a 20% share of renewables in gross energy consumption as well as a 10% share of biofuels? The benefits of this strategy have been separately estimated for electricity generation, heat generation, and the use of biofuels in transport.
Regarding energy, the study finds that the 20-20-20 strategy can occasionally have negative impacts on ecosystems. This mainly occurs in the transport sector with the production of biofuels. Overall, such effects are small compared to the benefits. In the case of electricity generation, net benefits are estimated to be around Euro 6.7 billion in 2020, with the largest share represented by human health, followed by reductions in climate change. In the case of heat generation, benefits amount to Euro 1.2 billion, climate change benefits being the largest, followed by gains in human health. Finally, in the case of transport, gross benefits amount to around Euro 7 billion. However, there are also damages from the application of nutrients to increase cultivation of energy crops, which amount to Euro 3.6 billion. Thus net benefits from the additional use of biofuels are estimated to be Euro 3.4 billion, with the highest share coming from climate change.
EXIOPOL has constructed a detailed, transparent, harmonised, global Multi-Regional Environmentally Extended Input-Output Table with externalities, called EXIOBASE, with the following characteristics:
- Covering 43 countries (95% of the global economy) and the Rest of World (combining the remaining 150+ countries)
- Full trade matrices with insights on which product from which country is exported to which industry sector in another country
- Distinguishing 129 industry sectors and products
- Covering 30 emitted substances and 80 resources by industry
- Extensions aggregated to compile indicators such as Global Warming Potential, Acidification, Total material requirement, and external costs. The latter were calculated by assessing the external costs of a kg per gas emission of a specific substance by a specific industry in a specific country, considering population density, rural or urban location, and stack height related to the emission.
The top-down approach developed in EXIOPOL considered the following questions, which were answered with the help of the EXIOBASE database:
- What are the external costs of global economic production?
- What are the impacts embodied in European imports?
- What are the dynamic impacts of policy interventions in the following areas: buildings, mobility, and food?
External costs and Impacts of European consumption and impacts embodied in European imports
The external costs generated by our current economic system are significant. Considering that the global GDP was Euro 34.1 Trillion in 2000, the estimated external costs amounted to Euro 2.35 Trillion. The externality assessment in our study is far from complete, neglecting, for instance the value of ecosystem services and biodiversity. The impacts included (looking at emissions related ones alone) create an amount of damage costs equivalent to 7% of the global GDP. Respiratory health effects (Euro 1,5 Trillon) and energy-related climate impacts (Euro 0.6 Trillion) form the dominant contributions to these external costs.
Considering the impacts of European consumption as well as the impacts embodied in European imports and exports, Europe is generally a net importer of natural resources and pollution.
- This is particularly true for land and water. The land use embodied in trade is higher than the land use in Europe itself ( more than half of the land use for the final demand in Europe is imported).
- There are also significant material imports embodied in trade.
- The flows that are embodied in imports and exports are relatively close for energy and greenhouse gases.
- External costs are the only factor for which Europe is a net exporter. This is mainly because external costs ( for instance, the value of a life) in the EXIOPOL approach are related to a country's wealth. This implies that external costs related to the same impact are valued lower outside Europe rather than inside Europe.
Dynamic impacts of policy
EXIOBASE has also been used in a dynamic form. Scenarios were imposed on the Environmentally Extended Input-Output database in combination with the World Trade Model. The aim was to analyse implications of certain policy actions. The main findings include:
- Implementation of the Directive 2002/91/EC on the energy performance of buildings can reduce GHG emissions by 150 Mtons in 2050.
- Scrappage premiums for old cars in combination with tax incentives stimulate car sales with low CO2 emissions, which greatly reduce the CO2 emissions of cars themselves. Impacts on employment and value added are limited in most scenarios.
- Diet changes towards a Mediterranean diet with lower meat consumption reduces impacts in land use, water use, and to a lesser extent GHG emissions. When diet change is combined with the reduction of food losses, higher reductions in impacts occur (22% less water use, 18% less land use, and 2.2% less GHG emissions). In the various scenarios agricultural employment will diminish by 2-3%.