Comparative Analysis of Monetary Estimates of External Environmental Costs Associated with Combustion of Fossil Fuels

Public utility commissions in a number of states have begun to explicitly treat costs of environmental externalities in the resource planning and acquisition process (Cohen et al. 1990). This paper compares ten different estimates and regulatory determinations of external environmental costs associated with fossil fuel combustion, using consistent assumptions about combustion efficiency, emissions factors, and resource costs. This consistent comparison is useful because it makes explicit the effects of various assumptions. This paper uses the results of the comparison to illustrate pitfalls in calculation of external environmental costs, and to derive lessons for design of policies to incorporate these externalities into resource planning. 38 refs., 2 figs., 10 tabs.