External costs : What do they mean for energy policy ?

Abstract The European Commission's ExternE Project has made major advances in the quantification of external costs of electricity. Although some impacts cannot be valued, important conclusions are possible. This paper outlines some provisional implications for energy policy. External costs are technology dependent and for some older power plants are large compared to electricity prices. Global warming and nuclear accidents have very uncertain external costs and pose threats to sustainability. Well located renewable energy sources have low external costs and provide sustainable energy options. Both economic and regulatory instruments may be used for internalizing environmental externalities — a mix will be most appropriate.