Application of an environmental valuation approach that incorporates externality costs in sustainability decision-making of the metallurgical sector - Synopsis

Consideration of the economic, environmental, and social impacts associated with the life-cycle of a technology is of increasing importance for decision-making in industry. It has been suggested that economic assessment of technology deployment projects requires the translation of associated environmental effects into monetary values. This paper introduces an approach for identifying and evaluating environmental damage in monetary terms. The approach groups the environmental impacts associated with a technology life-cycle system into four main criteria: air, water, land, and mined abiotic resources. The valuation of the impacts on the resources consists of an economic cost benefit analysis (CBA) procedure that comprises four steps: the compiling of an impact inventory, a monetary valuation of the inventory, discounting, and a risk/uncertainty analysis. The monetary valuation step for impacts on air resources is primarily based on published externality costs for Europe and the United States, which are adopted and converted to reflect the South African context. Local opportunity costs are utilized for the other resource criteria. The damage costs are transformed into South African Rand at 2005 prices. The paper demonstrates how the approach may be applied in the assessment of projects in the metallurgical industry. Shortcomings in the approach are identified. For example, not all of the aspects that are considered necessary to assess environmental performances comprehensively can be valued in monetary terms. Also, certain values, specifically those pertaining to opportunity costs, need to be determined on a case-by-case basis. Furthermore, the uncertainties associated with the indicators obtained may strongly influence the usability of the results of an environmental performance assessment, e.g. future damage costs will change with fluctuations in the markets. It is concluded that although such an approach has merit in increasing the understanding of the potential financial implications of a technology?s environmental performance, further research is required to improve the approach described if it is to be used further in the South African metallurgical industry. Damage cost estimates that are specific to South Africa need to be developed to reduce uncertainty, and the combination of both quantitative and qualitative approaches is recommended for comprehensive sustain-ability decision-making.