Environmental Engineering Reference
In-Depth Information
These topics were introduced in Chapter 4. All of these key components are discussed in the
following sections.
7.4 External Costs
7.4.1 Introduction
Although there is general agreement as to the broad defi nition of external costs as costs
attributable to an activity that are not borne by the party involved in that activity, there are
widespread variations in defi ning the boundaries. For example, some have proposed that a
substantial proportion of Western defence budgets should be regarded as an 'external cost'
of oil. In light of the Gulf Wars, this may not be unreasonable.
External costs can be diffi cult to quantify but they can be highly signifi cant. If the enormous
costs of the clean-up operation after the Chernobyl nuclear disaster had been taken into
account when the plant was constructed, it clearly would never have been built. External
costs are set to play an increasing role in shaping future energy policy. Cleaning up the busi-
ness of power supply is now a fundamental aim of many governments around the world.
They are now recognizing the substantial costs to society of pollution, costs to which the
electricity industry is a major contributor. The task facing energy policy makers is how best
to go about the job of reducing pollution in electricity generation when in most countries
external costs are not refl ected in the market price of the end product. If this was done real-
istically, fossil fuel technology and nuclear prices would rise, making renewable energy
sources more competitive.
Deregulation of the power markets can either aid or hamper the quest for proper recogni-
tion of external costs depending on the details. Crucial to the process is the willingness of
governments to mandate that all energy options should compete on an equal footing. This
spurs utilities to take the full costs of electricity supply into account. Such levelling of markets
will also force the hidden subsidies to conventional technologies into the open; this
unbun-
dling
is a primary aim of privatization, or deregulation. What is needed are fair and workable
procedures to achieve what is referred to as the
internalization
of external costs.
7.4.2 Types of External Cost
Before looking more closely at the procedures available, a brief analysis of the make-up of
external costs will help explain why they engender controversy. Table 7.4 gives a list of the
local and general external costs excluding global warming.
External costs associated with energy supply/use are complicated. For simplifi cation they
can be divided into three broad categories:
•
hidden costs borne by governments;
•
costs of the damage caused to health and the environment by emissions other than CO
2
;
•
the costs of global warming attributable to CO
2
emissions.
The fi rst category includes the cost of regulatory bodies and pollution inspectorates (generally
small) and the cost of energy industry subsidies and research and development programmes.
