It is Time to Account for the Environmental Costs of Energy Resources

Abstract

In recent years, the principles of economics have been increasingly applied to environmental planning in order to determine the value of environmental protection. The results of this economic valuation have been extremely controversial. The methods and data used are limited in many ways and fraught with uncertanties. Nevertheless, some regulators in the US have begun to use economic valuations in order to account for environmental costs in the energy planning process. The “starting point” estimates being used in the US indicate that environmental costs are quite significant relative to conventional economic costs. Air emissions alone can equal anywhere from 50% to 100% of the conventional costs of typical electricity resources. Accounting for these costs now in the electricity planning process can have a significant effect on the future environmental impacts of electricity production. This article summarises the methods and results of economic valuations of environmental impacts of electricity production. It also summarises some of the policies used in the US to account for these impacts, and describes how similar policies might offer benefits for energy and environmental planning in Europe.