Wikis > Formulation Tools > External Costs (ExternE)
Primary Source: Rabl, A. (2006) External Costs SWOT Analysis in Report on the SWOT analysis of concepts, methods, and models potentially supporting LCA. Eds. Schepelmann, Ritthoff & Santman (Wuppertal Institute for Climate and Energy) & Jeswani and Azapagic (University of Manchester), pp 115-120

Level of analysis: Micro, meso, and macro.

Description of the matter of the assessment/what is the purpose of applying the tool?:  

MIPS means Material Intensity Per Service Unit. MIPS indicates the quantity of resources used for this product or service. MIPS is an input-oriented method on micro level for estimating the environmental impact of products or services. Calculations are used for accounting the life-cycle-wide material / resource demand for products and services as indicator for their environmental impacts.

Description of the methodology:

Combination of LCA with impact pathway analysis (IPA)

The principal steps of an IPA for pollutants are the following:

–          specification of the emissions (e.g. kg/s of particles emitted by stack);

–          calculation of increased pollutant concentrations in all affected regions (e.g. μg/m3 of particles, using models of atmospheric dispersion);

–          calculation of damages (e.g. number of cases of asthma due to these particles, using a dose-response function);

–          monetary valuation of this damage (e.g. multiplication by the cost of a case of asthma).

The resulting values are summed over all receptors, choosing the temporal and spatial boundaries of the analysis such as to ensure that essentially all the damage is taken into account.

Detailed Description

Here we can only give a very brief discussion of the key features of the methodology used for the analysis of impact pathways, i.e. of the chain emission – dispersion – impact – cost. For a more complete presentation we refer to the reports of the ExternE Project or to review papers [ExternE 1998, Rabl and Spadaro 2000,], in particular the most recent results [ExternE 2004] and a detailed documentation of the methodology [ExternE 2005].

Over the years, numerous dispersion models have been developed. Usually separate models are used for the local and the regional domains. In the local domain, up to about 50 km from the source, pollutant deposition and aerosol formation by chemical transformation are relatively insignificant and concentrations are influenced primarily by meteorological parameters, such as wind speed and wind direction. Beyond 50 km, one must account for removal of the pollutant from the air by chemical reactions and deposition, both dry and wet.

For atmospheric dispersion ExternE uses the Gaussian plume model ISC (Industrial Source Complex) [Brode and Wang 1992] at the local scale. Regional concentrations are calculated using the Lagrangian trajectory models of EMEP (European Monitoring and Evaluation Programme) [] and of the Windrose Trajectory Model (WTM); the latter is an adaptation of the Harwell Trajectory Model [Derwent and Nordop 1986]. ISC and WTM are implemented in the EcoSense software [Krewitt et al. 1995] used for the impact calculations of ExternE. EcoSense also contains databases for receptors.

The damage calculations distinguish the upstream emissions from those during the utilization phase, and they take the specific conditions of the emission source into account, in particular stack height, local meteorological conditions and the distribution of population, crops and buildings. This point is especially important for primary pollutants such as PM: the damage per kg of pollutant is much higher if the pollutant is emitted at street level in a large city rather than from a tall stack in a rural zone. For secondary pollutants (created by chemical transformation in the atmosphere) this variation with site is much weaker. For upstream emissions ExternE assumes typical industrial installations in Europe.

Impacts are quantified using dose-response functions, also known as exposure-effect, exposure-response or concentration-response functions (CRF) in the case of air pollutants. They relate the pollutant concentration to the resulting impact on a receptor (human health, crop, etc.). Impacts on human health include asthma attacks, hospital admissions, chronic bronchitis, restricted activity days, and mortality. ExternE calculates mortality impacts of air pollution as a reduction in life expectancy, expressed as Years Of Life Lost (YOLL), rather than a number of premature deaths. That is necessary to allow more meaningful comparisons with other causes of death, for instance accidents for which the YOLL per death are much higher than for air pollution (of course such comparisons are not perfect, since the affected individuals differ in age and health status).

For health impacts, the CRFs are derived from a survey of epidemiological studies. In view of the available epidemiological evidence, ExternE assumes that the CRFs are approximately linear, without threshold, for the air pollutants of greatest concern here, especially particulate matter (PM). Of course, epidemiology is very uncertain at low doses or concentrations and the linear model may not be correct; however, there is no clear evidence why other models would be better. Also, if there is a threshold below current concentrations it has no effect on the calculation of incremental damage costs (i.e. for changes relative to current conditions, which is what is reported in external cost studies).

For crops and building materials, the CRFs have non-linear shapes. For agricultural crops there is even the possibility of a small benefit (fertilizer effect) when the background concentrations of SO2 and NOx are sufficiently low. For crops, one calculates the losses or gains in yield, and for building materials, the increase in cleaning and repair costs due to air pollution. The unit costs for crops and building materials are based on market prices.

Monetization is a method for aggregating health impacts and environmental burdens with different physical units into a single damage indicator. To obtain the damage costs, one multiplies the number of impacts (e.g. cases of asthma attack) by the unit cost per impact (e.g. € per asthma attack). Since monetary values translate the impacts into the language of the economy, the ExternE results are directly usable for cost-benefit analysis.

For health impacts, the unit costs include the cost of treatment and wage and productivity losses, which are market based, as well as non-market costs that take into account an individual’s Willingness-to-Pay (WTP) to avoid the risk of pain and suffering. If the WTP for a non-market good has been determined correctly, it is like a price, consistent with prices paid for market goods. Economists have developed several techniques for valuing non-market goods. In recent years, contingent valuation has become the method of choice; it obtains WTP estimates by asking individuals how much they are willing to pay to achieve a benefit [Mitchell and Carson 1989]. The uncertainties in the estimates are large, but for most environmental non-market costs no better alternative is available.

The most important impact is mortality. Since ExternE evaluates mortality according to the reduction of life expectancy, one needs the value of a life year (VOLY). But by contrast to the numerous studies of so called “Value of Statistical Life” (VSL) (an unfortunate and often misunderstood name for what is really the “willingness to pay for avoiding the risk of an anonymous premature death”), there have been very few studies until now to determine VOLY. For the 1998 and 2000 reports ExternE had calculated VOLY by assuming that VSL is a discounted sum of annual VOLYs; choosing 3.4 million € for VSL (a weighted mean of European studies), this implied a VOLY of approximately 100,000 €/life year. The current choice for VOLY is 40,000 €/life year, based on contingent valuations (CV) by the ExternE team in nine countries of the EU.

The damage costs of global warming depend on controversial assumptions about VSL in poorer countries and intergenerational discounting and are very uncertain.

The damage costs quantified by ExternE cover global warming for the greenhouse gases (for energy only CO2, N2O and CH4 are significant), and human health, crop losses and damage to materials for the other pollutants. While these are the most important damage categories, it is difficult to be complete in this type of work. A category that has not yet been quantified is the reduction of visibility due to air pollution (generally deemed of less concern in the EU than the USA). The quantification of ecosystem impacts is still somewhat preliminary. Impacts due to resource depletion are considered already internalized by the market.


Scope of assessment (what is being assessed)

Almost all burdens whose impacts and costs can be quantified at the current state of scientific knowledge:

–          greenhouse gases,

–          the classical air pollutants (NOx, SO2, PM, VOC, CO),

–          toxic metals, organic carcinogens (e.g. dioxins),

–          noise.

Methodology (robustness, validity & reliability)

The methodology has been compared with analogous work in the USA [Abt 2000, EPA 2004] and found to be essentially the same. It has been presented in numerous peer-reviewed articles [e.g. Rabl & Spadaro 2000, Krewitt et al 1998, Krewitt et al 2001, and references in Methodology Update ExternE 2005].

The uncertainties of the results have also been quantified [Rabl and Spadaro 1999, Spadaro and Rabl 2008].

The ExternE results in monetary values that can be directly applied in cost-benefit analyses.

R& D procedure

Another strength is the international nature of the work, which allow for all member countries to study results and methodology during the progress of the project. This benefit from active participation is further increased by the long duration of the ExternE project. All in all, this favours the robustness and reliability of the results from the project.


Scope of assessment

A category that has not yet been quantified there is the reduction of visibility due to air pollution (generally deemed of less concern in the EU than the USA). The assessment of ecosystem impacts is still somewhat preliminary.


There are still numerous scientific uncertainties about the dose-response functions for many impacts, especially the detailed causal links between health impacts and specific components of PM, about chronic health impacts of O3, and about ecosystem impacts of pollution.

Opportunities for broadening and deepening LCA

ExternE can provide crucial input for policy-making, for example:

–          Guidance for environmental regulations (for example, determining the optimal level of the limit for the emission of a pollutant);

–          Finding the socially optimal level of a pollution tax;

–          Identifying technologies with the lowest social cost (for example, coal, natural gas or nuclear for the production of electricity);

–          Evaluating the benefits of improving the pollution abatement of an existing installation such as a waste incinerator;

–          Optimizing the dispatching of power plants;

–          “Green accounting”, i.e. including corrections for environmental damage in the traditional accounts of GNP.

For a review of applications of ExternE before 2000, see Holland [2001]. A very important example of a recent application is the cost-benefit analysis of the CAFÉ (Clean Air for Europe) program of the European Commission DG Environment [EC 2006].

Threats for broadening and deepening LCA

The main risk stems from possible confusion among potential users because there is a bewildering array of tools that have been offered for the analysis of questions of environmental policy.

But even potential users who understand the scope and purpose of ExternE may hesitate to consider its results because of several misconceptions:

–          The misconception that the differences between results in different publications of ExternE mean that the methodology is inappropriate. (In reality such variability is due in part due the site-dependence of impacts and in part due to progress of the environmental sciences).

–          The misconception that the uncertainties are so large as to render the results meaningless. (In reality they are better than the infinite uncertainty in the absence of such analysis. Furthermore, as shown by Rabl, Spadaro and van der Zwaan [2005], the uncertainties are sufficiently small to help avoid erroneous policy choices that would be very costly).

Literature/Internet links

Abt 2000. “The Particulate-Related Health Benefits of Reducing Power Plant Emissions.” October 2000. Prepared for EPA by Abt Associates Inc., 4800 Montgomery Lane, Bethesda, MD 20814-5341.

Brode RW & J Wang 1992. User’s Guide for the Industrial Source Complex (ISC2) Dispersion Model. Vols.1-3, EPA 450/4-92-008a, EPA 450/4-92-008b, and EPA 450/4-92-008c. US Environmental Protection Agency, Research Triangle Park, NC 27711.

Derwent, R.G. and K. Nodop. (1986). Long-range Transport and Deposition of Acidic Nitrogen Species in North-west Europe. Nature 324, 356-358.

EC 2006. The CAFE Programme (Clean Air for Europe). European Commission DG Environment.

EPA 2004. BenMAP Fact Sheet. USEPA, Technology Transfer Network,

ExternE 1998. ExternE: Externalities of Energy. Vol.7: Methodology 1998 Update (EUR 19083); Vol.8: Global Warming (EUR 18836); Vol.9: Fuel Cycles for Emerging and End-Use Technologies, Transport and Waste (EUR 18887); Vol.10: National Implementation (EUR 18528). Published by European Commission, Directorate- General XII, Science Research and Development. Office for Official Publications of the European Communities, L-2920 Luxembourg. Results are also available at

ExternE 2004. New results of ExternE, after the NewExt and ExternE-Pol projects.

ExternE 2005. ExternE – Externalities Of Energy: Methodology 2005 Update. Available at

Holland M. 2001. “Applications of the ExternE Methodology”. Pollution Atmosphérique, Special Issue Dec. 2001, 69-76.

Krewitt K, Trukenmüller A, Bachmann TM and Heck T. 2001. “Country-specific Damage Factors for Air Pollutants: A Step Towards Site Dependent Life Cycle Impact Assessment”. Int J LCA 6 (4) 199 – 210.

Krewitt W, Hurley F, Trukenmüller A and Friedrich R. 1998. Health Risks of Energy Systems. Risk Analysis 18 (4), 377–383.

Krewitt W., A. Trukenmueller, P. Mayerhofer et al. 1995. ECOSENSE – an integrated tool for environmental impact analysis. in: Space and Time in Environmental Information Systems. H. Kremers, and W. Pillmann, Eds. Umwelt-Informatik aktuell, Band 7. Metropolis-Verlag, Marburg.

Mitchell, R.C. & R.T. Carson 1989. Using Surveys to Value Public Goods: the Contingent Valuation Method. Resources for the Future. Washington, DC.

Rabl A, J. V. Spadaro & B. van der Zwaan 2005. “Uncertainty of Pollution Damage Cost Estimates: to What Extent does it Matter?”. Environmental Science & Technology, vol.39(2), 399-408 (2005).

Spadaro JV & A Rabl 1999. “Estimates of real damage from air pollution: site dependence and simple impact indices for LCA”. International J. of Life Cycle Assessment. Vol.4 (4), 229-243.

Spadaro JV and Rabl A 2008. “Estimating the Uncertainty of Damage Costs of Pollution: a Simple Transparent Method and Typical Results”. Environmental Impact Assessment Review, vol. 28 (2), 166–183.