Incorporating environmental externalities into the capacity expansion planning: An Israeli case study

In this paper we use the WASP-IV model and develop methodology to estimate the impact of several environmental externality costs on the electricity sector development plan. For this purpose, 22 cases were generated which were later on reduced to only seven non-dominated cases by considering this problem as a dynamic multiple objective programming model.The major impact of internalizing the external cost is on fuel use. In the electricity generation system more natural gas and less coal has been used. A cost benefit analysis (CBA) of three scenarios has been performed focusing on taxing only one pollutant while looking at its overall implication. The benefit cost ratio was about 4.5 while the net benefit was about 200 million USD (depending on the scenario).Multi-objective analysis among the different scenarios was carried in a dynamic setting. Seven scenarios appear in the non-dominated set. Out of them five appears in every year and those should have a higher weight placed on them by policy makers. Out of those five, two are a single tax on one pollutant. Thus, policy makers might want to consider a mixture of taxes but for the sake of simplicity can also use a simple one tax on a given pollutant.

► Long term energy-environmental planning problems for the electricity sector. ► Environmental considerations in the capacity expansion plan. ► Modified version of WASP-IV as a multiple objective programming model. ► Multi-objective analysis of trade-offs between costs and pollutants reduction.