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Internalization of the external costs of global environmental damage in an integrated assessment model

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  • Kosugi, Takanobu
  • Tokimatsu, Koji
  • Kurosawa, Atsushi
  • Itsubo, Norihiro
  • Yagita, Hiroshi
  • Sakagami, Masaji

Abstract

This study simulates the internalization of the external costs of major global environmental issues using an optimal economic growth model. We merged two existing models: an integrated assessment model (IAM) and a life-cycle impact assessment (LCIA) model. We sought to achieve simultaneously the following three objectives: (i) to incorporate environmental issues including global warming in the IAM; (ii) to assess environmental impacts with a bottom-up approach from the LCIA; and (iii) to internalize external costs obtained from the environmental impact study. The study also provides initial simulation results obtained from the merged model. Simulation results indicate that global warming will account for somewhere from 10% to 40% of all external costs in the 21st century. The remaining cost will come from land use and its changes. The internalization of the external cost will cause a decline in economic growth by approximately 5%, whereas forest preservation will increase by 40% and fossil-fuel consumption will be reduced by 15%. The estimated sustainability indicators imply that a necessary condition of sustainable development is satisfied for the entire world and for the developed countries during the 21st century, but is not satisfied until the latter half of this century for the developing counties.

Suggested Citation

  • Kosugi, Takanobu & Tokimatsu, Koji & Kurosawa, Atsushi & Itsubo, Norihiro & Yagita, Hiroshi & Sakagami, Masaji, 2009. "Internalization of the external costs of global environmental damage in an integrated assessment model," Energy Policy, Elsevier, vol. 37(7), pages 2664-2678, July.
  • Handle: RePEc:eee:enepol:v:37:y:2009:i:7:p:2664-2678
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    References listed on IDEAS

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    Cited by:

    1. Kosugi, Takanobu, 2016. "Endogenizing the probability of nuclear exit in an optimal power-generation mix model," Energy, Elsevier, vol. 100(C), pages 102-114.
    2. Fahlén, E. & Ahlgren, E.O., 2010. "Accounting for external costs in a study of a Swedish district-heating system - An assessment of environmental policies," Energy Policy, Elsevier, vol. 38(9), pages 4909-4920, September.
    3. Koji, Tokimatsu & Takanobu, Kosugi & Atsushi, Kurosawa & Norihiro, Itsubo & Masaji, Sakagami, 2009. "Measuring Weak Sustainability for the future: Calculating Genuine Saving with population change by an integrated assessment model," MPRA Paper 16728, University Library of Munich, Germany.
    4. Koji Tokimatsu & Rieko Yasuoka & Masahiro Nishio & Kazuhiro Ueta, 2014. "A study on forecasting paths of genuine savings and wealth without and with carbon dioxide constraints: development of shadow price functions," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 16(3), pages 723-745, June.
    5. Defrancesco, Edi & Gatto, Paola & Rosato, Paolo, 2014. "A ‘component-based’ approach to discounting for natural resource damage assessment," Ecological Economics, Elsevier, vol. 99(C), pages 1-9.
    6. Hainoun, A. & Almoustafa, A. & Seif Aldin, M., 2010. "Estimating the health damage costs of syrian electricity generation system using impact pathway approach," Energy, Elsevier, vol. 35(2), pages 628-638.
    7. Koji Tokimatsu & Rintaro Yamguchi & Masayuki Sato & Rieko Yasuoka & Masahiro Nishio & Kazuhiro Ueta, 2014. "Assessing future sustainability by forecast of Genuine Savings paths," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 16(4), pages 359-379, October.
    8. Koji Tokimatsu & Rintaro Yamaguchi & Masayuki Sato & Rieko Yasuoka & Masahiro Nishio & Kazuhiro Ueta, 2012. "Measuring sustainable development for the future with climate change mitigation; a case study of applying an integrated assessment model under IPCC SRES scenarios," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 14(6), pages 915-938, December.
    9. repec:eee:energy:v:126:y:2017:i:c:p:165-178 is not listed on IDEAS
    10. Koji Tokimatsu & Rintaro Yamaguchi & Masayuki Sato & Rieko Yasuoka & Masahiro Nishio & Kazuhiro Ueta, 2011. "Measuring future dynamics of genuine saving with changes of population and technology: application of an integrated assessment model," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 13(4), pages 703-725, August.
    11. Ding, Huiping & Zhao, Qilan & An, Zhirong & Xu, Jia & Liu, Qian, 2015. "Pricing strategy of environmental sustainable supply chain with internalizing externalities," International Journal of Production Economics, Elsevier, vol. 170(PB), pages 563-575.
    12. Tamás, Mészáros Mátyás & Bade Shrestha, S.O. & Zhou, Huizhong, 2010. "Feed-in tariff and tradable green certificate in oligopoly," Energy Policy, Elsevier, vol. 38(8), pages 4040-4047, August.

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