Weighing environmental externalities: How to do it right

Journal Article · Tue Sep 01 04:00:00 EDT 1992 · Electricity Journal; (United States)

DOI:https://doi.org/10.1016/1040-6190(92)90181-6· OSTI ID:6909445

Freeman, III, A M ^[1]; Burtraw, D; Harrington, W; Krupnick, A J ^[2]

---

1. Bowdoin College, Brunswick, ME (United States)
2. Resources for the Future, Washington, DC (United States)

In this paper, the authors focus on the procedure of incorporating monetary measures of external damages as address to private bids and ranking alternatives on the basis of their social costs. They assume that it will be possible to develop methods and models to calculate environmental damages for specific electricity supply options. They reject the use of marginal control cost as a proxy for marginal damages. The question they address here is whether the marginal damage from an increase in electricity supply is the correct adjustment or adder to private cost for least-cost utility planning. They show that arriving at the correct adder depends on both the form that the existing environmental regulations take - that is, whether pollution is controlled by taxation, tradable emissions permits, or direct regulation - and, in the case of an emissions tax, whether the degree of control of pollution is optimal, too strict, or not strict enough according to the criterion of economic efficiency. They make explicit the circumstances under which the correct adder will be equal to marginal damages, will be some other positive number, or zero, or even negative. If emissions reductions are achieved by direct regulation or command and control policies (CAC), then the correct adder is always just equal to marginal damages.

• OSTI ID: 6909445
• Journal Information: Electricity Journal; (United States), Journal Name: Electricity Journal; (United States) Vol. 5:7; ISSN ELEJE4; ISSN 1040-6190
• Country of Publication: United States
• Language: English

Related Subjects

20 FOSSIL-FUELED POWER PLANTS
200600* -- Fossil-Fueled Power Plants-- Economic
Industrial
& Business Aspects-- (1990-)
29 ENERGY PLANNING, POLICY, AND ECONOMY
290300 -- Energy Planning & Policy-- Environment
Health
& Safety
296000 -- Energy Planning & Policy-- Electric Power
CONTROL
COST
ECONOMIC IMPACT
ELECTRIC UTILITIES
ENVIRONMENTAL IMPACTS
INSTITUTIONAL FACTORS
MANAGEMENT
PERFORMANCE
PLANNING
POLLUTION CONTROL
POWER PLANTS
PUBLIC UTILITIES
RATE STRUCTURE
SOCIO-ECONOMIC FACTORS
TECHNOLOGY IMPACTS