Assessment and exploitation of energy-related externalities in the industrial sector

The scope of this paper is to comparatively evaluate the effectiveness of alternative policy measures in reducing impacts from atmospheric pollution generated from industrial energy use. The evaluation procedure relies on the assessment of energy-related externalities by exploiting the methodology developed in the framework of the ExternE project. The analysis focuses on 2 industrial units located in the Greater Athens area and examines three types of abatement measures that can be used independently of the extent energy saving or end-of-pipe emission reduction measures are used: substitution of fuel oil with natural gas, relocation of the units several hundreds of kilometers far from Athens and increase of stack height in the same site. It results that the use of natural gas is by far the most effective among these measures, leading to a reduction of more than 90% of both local and regional damages. The relative effectiveness of the examined measures does not change if the significant uncertainties associated with the accounting procedure are taken into account, while inclusion of the external cost due to greenhouse gases emissions is further accentuating the advantages of natural gas. Moreover, it is shown that the quantifiable energy-related external costs of a single industrial product, may be very low compared to the corresponding private costs, but they sum up to significantly high damages to society if we take into account the total energy consumption in the industrial sector. (c) 2006 Elsevier Ltd. All rights reserved.