Synthesizing Environmental Externality Costs – A Statistical and Multi-Attribute Analysis Approach

Due to the high degree of uncertainty and complexity of environmental effects, estimates of environmental damage costs tend to vary significantly from one study to another. It is often difficult for the policy maker or analyst to choose reasonable estimates of environmental externality adders in policy analysis. In this paper, we propose an approach to synthesizing estimates of environmental externality adders given in different sources using the Finite Mixture Distribution statistical technique and the Analytic Hierarchy Process multi-attribute analysis method. We present the results of the marginal social costs of C0 2 obtained using the proposed approach and the possible applications of these results in environmental studies.