Energy from Waste: Generation Potential, Mitigation Opportunity and Option Value

Climate change and waste management represent two challenges for sustainable development. As known, global warming will affect welfare worldwide through many categories of impact. Landfilling, especially if uncontrolled, often a preferred option as apparently cheap, can deteriorate the environment, originate dangerous pollution sources and arise social tension through the well known NIMBY syndrome. To reduce antropogenic impact on climate change one main instrument is carbon efficiency improvement implying to increase the share of non-GHGs intensive energy sources in energy production and consumption processes. When referring to non fossil fuels, the main focus is usually on nuclear and Renewable Energy Sources (RES): wind, solar, hydro and biofuels. However, there are other important sources that may have a role to tackle climate change and limit other negative environmental problems while exploiting useful resources. This is the case of wastes. After the reduction in waste generation, the so-called integrated waste management may create important benefits from the social, the economic and the environmental viewpoints allowing to recovering either material or energy. The present research proposes a macroeconomic assessment of impacts of Waste to Energy (WtE) (i.e. waste incineration with energy recovery) and of controlled landfill biogas to electricity generation and their potential contribution to a CO2 emission reduction policy, within a computable general equilibrium framework. To our knowledge, this is the first time that this has been done. We focus our analysis on Italy as a signatory of the GHG reduction commitment of 20% proposed by the European Community to be achieved by 2020 and confirmed once again at the Copenhagen summit organised by UNFCCC in December 2009. However, the rest of the world is also represented with a detail of 21 geo-political countries/regions. To introduce WtE and landfill biogas for electricity generation, the GTAP 7 database and its production tree have been extended appropriately. It is shown that albeit in the near future WtE and landfill biogas will continue to represent a limited share of energy inputs in electricity sector (in Italy, around 2% for WtE and 0.6% for biogas in 2020) they could play a role in a mitigation policy context. The GDP cost of the European emission reduction target for the Italian economy can indeed be reduced by the 1% when the two energy generating options are available. In absolute terms this translates into an annuitized option value of 87-122 million €.