Monetisation of fossil resource depletion by assessing the surplus cost T.C. Ponsioen1, M.D.M. Vieira1, and M.J. Goedkoop1. E-mail contact: ponsioen@pre-sustainability.com 1 PR Consultants BV, Printerweg 18, NL-3821 AD Amersfoort, The Netherlands

1. Introduction Depletion of fossil resources has a large impact on our energy intensive lifestyles. In life

cycle impact assessment (LCIA), indicators for pollution-related impacts are relatively

well established. For resource depletion, however, there is still little agreement on the

impact pathway approach [1]. The different types of LCIA methods that have been

developed for fossil resource use, each describe different effects [2]. Some methods

describe the future consequences of resource extraction, based on the concept that

extracting easily found resources now means that in the future (lower value) resources

need to be extracted under more challenging conditions and with alternative

technologies. The additional efforts that are required can be described by higher energy

requirements or additional costs, which have an increased effect on the environment

and economy [3] [4].

We propose a method to assess future consequences of fossil resource extraction by

monetisation. The method is based on surplus cost, as first applied by the ReCiPe

method [4]. This study intends to improve the method by using new data and insights.

2. Materials and methods The environmental mechanism of the indicators in the method here proposed is

illustrated with the example of crude oil in Figure 1. The additional production costs,

including mining, processing and transport costs from the mine to the port, are caused

by depletion of fossil resources that are extracted using the lowest cost production

technique and/or geographical distribution. For example, when all conventional oil is

depleted, alternative techniques, such as enhanced oil recovery or deep water

extraction, will be applied. The marginal cost increase (MCI) is the cost of the additional

inputs needed to produce another unit of the resource. The MCI was calculated for

crude oil, natural gas and coal separately, based on data from the International Energy

Agency [5] [6] [7] (for example, see Figure 2).

As damage indicator, we propose the surplus cost (SC) from fossil resource depletion,

which is the total additional future cost to the global society due to the production of

one unit of fossil resource and is related to a certain future global production volume.

We used future production simulation results from the SRES scenario study by the IPCC

[8] and chose different scenarios for three different societal perspectives. We also

chose different fixed discount rates for those perspectives (individualist 0%, hierarchist

3% and egalitarian 15%).

4. Conclusions We developed a life cycle impact assessment method for fossil resource depletion,

in which the marginal cost increase is calculated as an intermediate parameter and

surplus cost is calculated for three perspectives individualist, hierarchist and

egalitarian as a damage indicator.

When expressing the characterisation factors per gigajoule, the impacts are highest

for crude oil and lowest for coal.

In absolute terms, the impacts at endpoint level are highest in the egalitarian and

lowest in the individualist perspective.

The MCI ratios between the different fossil resources are similar to the ratios of the

surplus cost in the individualist and hierarchist perspectives.

The depletion of other resources, such as minerals, can be modelled in a similar way

to calculate comparable characterisation factors.

References [1] EC-JRC-IES. 2011. International Reference Life Cycle Data System (ILCD) Handbook - Recommendations for Life Cycle Impact Assessment in the European context. First edition November 2011. European Commission-Joint Research Centre - Institute for Environment and Sustainability. Luxemburg. lct.jrc.ec.europa.eu/pdf-directory/Recommendation-of-methods-for-LCIA-def.pdf.

[2] Steen, BA. 2006. Abiotic Resource Depletion Different perceptions of the problem with mineral deposits. International Journal of Life Cycle Assessment 11 (1), 49-54.

[3] Goedkoop, M, Spriensma, R. 2001. The Eco-indicator 99: A damage oriented method for Life Cycle Impact Assessment Methodology Report. 3rd edition. Ministerie van Volkshuisvesting, Ruimtelijke Ordening en Milieubeheer.

[4] Goedkoop, M, De Schryver, A. 2009. Fossil Resource. Chapter 13 in: Goedkoop, M, Heijungs, R, Huijbregts, MAJ, De Schryver, A, Struijs, J, Van Zelm, R. 2009. ReCiPe 2008 A life cycle impact assessment method which comprises harmonised category indicators at the midpoint and the endpoint level. Report I: Characterisation factors, first edition.

[5] IEA. 2010. Resources to Reserves 2010. Oil, Gas and Coal Technologies for the Energy Markets of the Future. To be released Autumn 2010.

[6] IEA, 2009a. World Energy Outlook 2009. OECD/IEA, Paris, France.

[7] IEA, 2011a. Coal. Medium-term market report 2011. Market trends and projections to 2016. IEA, Paris, France.

[8] IPCC. 2000. Emission scenarios. A special report of the IPCC working group III.

Acknowledgement - The research was funded by the European Commission under the 7th framework program on environment; ENV.2009.3.3.2.1: LC-IMPACT - Improved Life Cycle Impact Assessment methods (LCIA) for better sustainability assessment of technologies, grant agreement number 243827.

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MENA conv. oil

Figure 2. Cost-cumulative production data for crude oil. Legend: EOR - enhanced oil recovery; conv. - conventional; MENA - the Middle East and North Africa region; source: [5]

Individualist Hierarchist Egalitarian

Crude oil 0,72 2,9 14,1

Natural gas 0,25 1,5 6,7

Coal 0,0043 0,033 3

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Figure 3. Average and standard deviation of the surplus cost in US$ per GJ fossil fuel for different perspectives using fossil fuel production

3. Results and discussion The characterisation factors derived show that the ratios between the indicators of the

different types of fossil resources (crude oil : natural gas : coal) are rather constant in

most cases, only in the egalitarian perspective the ratio deviates because only there

zero discounting is applied (individualist 100:39:0.7; hierarchist 100:54:1.1; egalitarian

100:47:21) (Figure 3). The MCI gives a similar ratio (100:48:1.0); so, in general, the MCI

gives a good indication of the impact indicator. However, there are large differences

between the surplus cost characterisation factors for each perspective in cost per

gigajoule (egalitarian > hierarchist > individualist). From Monte Carlo simulations, we

found that data uncertainty is rather low. However, the results are extremely sensitive

to the assumed discount rate.

Marginal cost increase of crude oil (US$/GJ)

Crude oil use

Future production of crude oil

Surplus cost (US$)

Production technique/

location

Crude oil demand

Population growth

Economic growth

Substitution

Technological development

Reduced availability at current cost

Figure 1: The environmental mechanism of the surplus cost indicator for crude oil