Weighing environmental externalities: Let's do it right

Journal Article · Fri May 01 04:00:00 EDT 1992 · Electricity Journal; (United States)

DOI:https://doi.org/10.1016/1040-6190(92)90082-I· OSTI ID:7246343

Joskow, P L ^[1]

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1. Massachusetts Inst. of Tech., Cambridge (United States)

Should we as a society adopt policies to internalize external environmental costs Of course we should. But we should do it correctly. State public utility commissions (PUCs) that are using numerical externality adders' reflecting global and regional environmental impacts in the resource planning and selection process are doing it wrong. The use of these adders is likely to lead to higher electricity prices without a commensurate improvement in environmental impacts in the resource planning and selection process are doing it wrong. The use of these adders is likely to lead to higher electricity prices without a commensurate improvement in environmental quality. Alternative approaches for dealing with environmental damages or externalities exist that can lead utilities to take account of the environmental costs associated with the generation of electricity more effectively and at lower cost. This article discusses what an externality is and why the use of environmental adders by PUCs in the resource selection process, while well intentioned, is a bad idea. The author discusses how the most egregious errors associated with the use of adders can be corrected if PUCs insist on using them. Finally, he outlines an alternative approach that state PUCs can pursue which will better serve the electricity customers they are supposed to protect and promote a cleaner environment at the lowest reasonable cost. The author emphasizes that this is not a debate about whether or not environmental costs should be factored into the investment and operating decisions of firms that produce pollution. Rather, it is about how it should be done and whether state PUCs are in a particularly good position to do it well, given their expertise, legal authorities, other responsibilities and scarce resources.

• OSTI ID: 7246343
• Journal Information: Electricity Journal; (United States), Journal Name: Electricity Journal; (United States) Vol. 5:4; ISSN ELEJE; ISSN 1040-6190
• Country of Publication: United States
• Language: English

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