Study on Renewable Energy Resources, Oman - authority for ...

Renewable Energy Resources in Oman
7.2 Environmental Taxes
7.2.1 External Costs
No electricity generation technology exists that is completely devoid of pollution
or negative environmental impacts. Energy supply has impacts on the environment,
e.g. from emissions of chemical pollutants into air, water and soil both at
construction and during operation. Many of these emissions cause accountable
damage, such as to human health, natural ecosystems and the built environment.
This is termed external effects and is not paid by owners of the energy system,
and not passed on to the consumers.
However there is true expenditure involved in these impacts, which has to be
paid by those affected. Such costs represent a cost to society that are not paid for
by the polluter that causes the emissions. If the polluter does pay adequately for
the damage caused, then this is referred to as 'internalisation of external cost'. As
long as the external costs are not internalised the market mechanism cannot secure
an optimal allocation of resources. The prices of goods with high associated
external costs, are less than if such costs were internalised, so there is overconsumption
of these goods, as compared to the optimal consumption for the welfare
of the society.
The fossil fuels that represent the largest specific costs are: coal, HFO, diesel oil,
and natural gas; of which gas has the lowest environmental costs. Electricity
generated from renewable energy has less specific external cost compared to
natural gas generation.
The external cost imposed on society differs from country to country, and they
must be specifically evaluated in a national context. The following external cost
estimates are from industrialised countries and China and provided by the World
Bank.
• Average abatement cost in the industrialised countries is 20 USD per
tonne CO 2
• Abatement cost of SO 2 emissions are estimated to 100 USD per tonne
• Abatement cost Particles emissions are estimated to 35 USD per tonne
• NOx emission abatement costs are 240 USD per tonne, but emission is
very plant specific and difficult to generalise
7.2.2 Environmental Tax
An environmental tax is a tax on electricity production that reflects the environmental
impact of the various fuels and technologies; it can be imposed on the
producers or the purchasers of the electricity. It will in any case have to be
brought forward to the end-users, who will pay the tax at the end of the day.
Based on emission factors for the various fuels a levy corresponding to the
abatement cost per unit of fuel is imposed.
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