Statistical value of life

In calculating externalities, a European Commission (EC) project uses the value of 2.6 Meuro (about 3 million US$) to monetise the loss of a life, for all the European energy chains considered (European Commission, 1995a-f). This value is based on a survey of three types of data:

• Willingness to accept a higher risk of death, as revealed by salary increases in risky jobs as compared with similar jobs with small risk.

• Contingency valuation studies, i.e. interviews aimed at getting statements of WTP for risks of death.

• Actual expenditures paid to reduce risk of loss of life (e.g. purchase of automobile air bags, anti-smoking medication, etc.).

Compensations paid by European governments to families of civil servants dying in connection with their job were also considered in the European Commission study. The scatter in data reviewed ranged from 0.3 to 16 Meuro per death. For use outside Western Europe, the study recommends to use the purchase parity translation of the statistical value of life (SVL) used in the European case studies (i.e. same purchasing power).

A feeling for the statistical value of life can be obtained by considering the salary lost by accidental death. If one assumes that the accidental death on average occurs at the middle of working life and then calculate the total salary that would have been earned during the remaining time to retirement, one would in Denmark get a little over 20 years multiplied by the average salary for the high seniority part of a work career, amounting to between 300 000 and 400 000 DKr per year, or around 8 MDKr (some 1.25 MUS$ or 1.1 Meuro). If this was paid to an individual, it should be corrected for interest earning by giving the corresponding present value of annual payments of about 60 keuro/y over 20 years. However, as a cost to society, it may be argued that no discounting should take place, because society does not set money aside for future salary payments.

Two other arguments might be considered. One is that in times of unemployment the social value of a person fit to work may be less than the potential salary. Accepting this kind of argument implies that the outcome of technology choices in a society would depend on the ability of that society to distribute the available amount of work fairly (the total amount of salaries involved is not fixed, because salaries are influenced by the level of unemployment). The other argument is that the members of a society have a value to that society above their ability to work. If this were not the case, a society would not provide health services that prolong people's lives beyond retirement age. A judgement on the merits of these arguments would lead to the conclusion that the SVL for society is more than the 1.1 Meuro estimated above, but not how much more. One could say that the European Commission study's value of 2.6 Meuro represents a fairly generous estimate of non-tangible values to society of its members, and that a lower value may be easier to defend. However, as stated above, the EC estimate has an entirely different basis, representing an individual SVL rather than one seen from the point of view of society. The conclusion may rather be that it is reassuring that two so different approaches do not lead to more different values.

One further consideration is that not all deaths associated with say Danish use of energy take place in Denmark. If coal is imported from Bolivia, coal mining deaths would occur there, and the question arises whether a smaller value of life should be used in that case, reflecting the lower salary earnings in Bolivia (and perhaps a smaller concern by society). This would easily be stamped as a colonial view, and the EC study effectively opted to use the same SVL no matter where in the world the death occurs (this is achieved by assuming that e.g. all coal comes from mines in Germany or the UK, whereas in reality Europe imports coal from many different parts of the world).

The global equity problem is one reason why the concept of SVL has been attacked. Another is the ethical problem of putting a value on a human life. The reply to the latter may be that SVL is just a poorly chosen name selected in the attempt to give the political decision-process a clear signal (read: in monetary units) regarding the importance of including consideration of accidental death in decisions on energy system choice and siting. This debate over the use of SVL was taken up by Grubb in connection with the greenhouse warming issue (Grubb, 1996), using arguments similar to those given above.

For the examples of externality and LCA results to be presented below, a monetised SVL value of 2.6 Meuro/death has been used. The discussion above suggests that if this SVL is on the high side, it is so by at most a factor of 2.

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Renewable Energy 101

Renewable Energy 101

Renewable energy is energy that is generated from sunlight, rain, tides, geothermal heat and wind. These sources are naturally and constantly replenished, which is why they are deemed as renewable. The usage of renewable energy sources is very important when considering the sustainability of the existing energy usage of the world. While there is currently an abundance of non-renewable energy sources, such as nuclear fuels, these energy sources are depleting. In addition to being a non-renewable supply, the non-renewable energy sources release emissions into the air, which has an adverse effect on the environment.

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