Estimation of Dose-response relationship for CO2 Emissions. Comparison of Environmental cost of CO2 emissions using NPV and EIRR criterion.

1. Environmental assessment of switching to renewable energy sources SaadSarfraz

2. Definitions Renewable Energy Derived from sources that are naturally regenerative or are practically inexhaustible , such as biomass, heat (geothermal, solar, moving water (hydro, tidal and wave) , and wind energy. Municipal waste may also be considered a source of renewable thermal energy source. (Business Dictionary Online ) Wind Power Mechanical or electrical power generated by a windmill using the kinetic energy as the primary energy source. (Macmillan Dictionary of the Environment 2nd Edition, Michael Allaby) Market Externalities An economic concept covering those cost and benefit attributed to an economic activity that are not reflected in the price of the goods and services produced. (Macmillan Dictionary of the Environment 2nd Edition, Michael Allaby) Decision Analysis A philosophy, articulated by a set of logical axioms, and a methodology and collection of systematic procedures, based upon those axioms, for responsibly analyzing the complexities inherent in decision problems. (Decision Analysis an Overview, Operations Research, Vol. 30, No. 5)

3. Introduction Situation Analysis October 2008 load shedding crossed 7000MW Peak Demand14130MW Available capacity: 7112 MW (Ex-KESC system) Peak power demand 5% energy sales 7% Current and projected demand supply gap FY2010: Peak demand= 21838 MW FY2013: Peak demand= 26978 MW Least cost option for bridging the gap Policy Analysis vs. Decision Analysis and Market externalities Kyoto Protocol under UNFCCC Cost of non-compliance i.e. reducing Green House Emissions

4. Objective of this study Estimate cost of externalities from coal CO2 Emissions (Dose-response relationship) Incorporate cost of CO2 emissions into Economic analysis 1200MW of Power generation Compare NPVs and EIRRs of competing options coal fired thermal vs. wind farm technology over the useful life of the project.

6. Unanticipated demand increase

7. Economic Activity

8. Fossil fuel burning

9. Deforestation

11. Significance of the topic Policy makers Energy planning Socially accepted alternative Economic growth and development Health expenditure Business Managers Synergetic aspect of production Global competitiveness; export deadlines Reduced work days lost due to illness

12. Analysis(Theoretical framework) Dose-response relationship GDP/capita engaged constant 2000 US$=β0 +β1 Avg. Annual Earning (industrial)+β2 Capital/Labor Ratio+β3 CO2 emissions from solid fuel consumption(in Millions)+β4 days lost due to disputes + β5 Enrollment in professional vocational institutions+ε Avg. Annual Earning Days lost due to disputes NPV & EIRR Thermal vs. Wind Energy alternatives CO2 emissions from solid fuel GDP/Capita Engaged 2000 US$ Capital to Labor ratio Voc/professional enrollment

14. Net present values and EIRR

15. Conclusion Scope of project and limitations Targeted approach Data limitations Other health effects from SO2 NO2 PM10 etc. Cost effective vs. Benefit cost analysis Long term environmental sustainability Link to excel work sheets

16. References Anon (1998), Hazy Days Are Here Again, Borneo Bulletin (28 February). Anaman, K.A.and Ibrahim, N.(1999), Economic Analysis of Human Health Impact of the 1998 Haze related Air Pollution Episode in Brunei Darussalam, Proceedings, International Congress of Biometerology and International Conference on Urban Climatology, Sydney, 8–12 November, 6 pp. Babbie,E. ,The Practice of Social Research, Eight Edition (Wadsworth, New York 1998). Dixon,J.A.,, Economic Analysis of Environmental Impacts, Second Edition (Earthscan, London 1994) 210 pp. Field, B.C. , Environmental Economics: An Introduction (McGraw-Hill Inc., Sydney 1994) 482 pp. Hoek, G. et al. (1990), ‘Effects of Air Pollution Episodes on Pulmonary Function and Respiratory Symptoms’, Toxicology and Industrial Health 6, 189–197.

17. References Cropper, Maureen L., "Measuring the Benefits from Reduced Morbidity," American Economic Review 71 (May 1981), 235-240. Gerking, Shelby D., Linda R. Stanley, and William N. Weirick, "An Economic Analysis of Air Pollution and Health: The Case of St. Louis," Office of Policy and Resource Management, United States Environmental Protection Agency, July 1983. Grossman, Michael, "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy 80 (Mar. 1972), 223-255. Harrington, Winston, and Paul R. Portney, "Valuing the Ben-efits of Improved Human Health," mimeo, Resources for the Future, Washington, D.C., 1982. Hoek, G. et al. (1993), ‘Acute Effects of Ambient Ozone on Pulmonary Function of Children in the Netherlands’, American Review of Respiratory Disease 147, 111–117. Jansen, H. M. A., G. J. van der Meer, J. B. Opschoor and J. H. A. Stapel (1974), An Estimate of Damage Caused by Air Pollution in the Netherlands in 1970, Institute for Environmental Problems, Free University of Amsterdam (IvM-VU no. 8a), Amsterdam. Judge, G. J., R. Carter Hill, W. E. Griffiths, H. Lutkepohl and T. C. Lee (1988), Introduction to the Evidence from Daily Data’, Journal of Environmental Economics and Management 18, 1–18. Lave, L. B. and E. P. Seskin (1971), ‘Health and Air Pollution’, Swedish Journal of Economics 73, 6–95. Lave, L. B. and E. P. Seskin (1977), Air Pollution and Human Health, Baltimore. Lipfert, F. (1984), ‘Air Pollution and Mortality: Specification Searches Using SMSA-Based Data’, Journal of Environmental Economics and Management 11, 208–243. Ostro, B., D. Robert and L. G. Chestnut (1990b), ‘Transferring Air Pollution Health Effects Across European Borders’, Paper presented at Congress of European Association of Environmental and Resource Economists, Venice (Italy).

18. Appendix

19. Wind NPV EIRR Calculations

20. *Work sheets included in the accompanying CD

21. Thermal NPV EIRR Calculation

22. *Work sheets included in the accompanying CD

23. Wind farm sites and other information