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Externalities of Different Types of Electricity Generation Technologies


The most noted project on determining the external cost of energy is the ExternE (Externalities of Energy) project, which attempted to develop a consistent methodology to assess the externalities of electricity generation technologies. Work and methodologies on the ExternE project are continuously updated. For comprehensive details on ExternE, refer to

Prior to the ExternE project, studies were conducted in the late 1980s and beginning of the 1990s that gave an early insight into the importance of externalities for energy policy as a decision-making tool. An overview of the key aspects of these early studies is presented in Appendix I.

The ExternE methodology is a bottom-up approach, which first characterises the stages of the fuel cycle of the electricity generation technology in question. Subsequently, the fuel chain burdens are identified. Burdens refer to anything that is, or could be, capable of causing an impact of whatever type. After having identified the burdens, an identification of the potential impacts is achieved, independent of their number, type or size. Every impact is then reported. This process just described for the fuel cycle is known as the 'accounting framework'. For the final analysis, the most significant impacts are selected and only their effects are calculated.

Afterwards, the 'impact pathway' approach developed by ExternE proceeds to establish the effects and spatial distribution of the burdens to see their final impact on health and the environment. Then, the 'economic valuation' assigns the respective costs of the damages induced by each given activity.

The methodology summarised above was implemented in the computer model EcoSense (also within the ExternE project). EcoSense is based on the impact pathway approach and is therefore widely used to assess environmental impacts and the resulting external costs of electricity generation technologies. Moreover, EcoSense provides the relevant data and models required for an integrated impact assessment related to airborne pollutants.


Figure 4.2: Impacts Pathway Approach.

Figure 4.2 Impacts pathway approach. Source: European Commission (1994).

Source: European Commission (1994)


The modelling approach of EcoSense is briefly summarised in 'Methodology for the calculation of external costs of different electricity generation technologies based on the EcoSense Model' below, where the different steps for the determination of empirical results of external costs of electricity generation in the EU27 Member States are presented. It is important to note that the EcoSense model not only includes the external costs caused by conventional electricity generation in its own country but also models the pathway of emissions from conventional power plants to the different receptors (humans, animals, plants, crops, materials and so on) all over Europe ( in other words including those located thousands of kilometres outside an EU Member State). The aspect that emissions from one country pass to other countries, and, especially for climate change, to the whole world is essential to derive robust results. The objective of the EcoSense model, however, is to model cross-border effects in Europe only, and not on a global scale.

Because air pollutants can damage a number of different receptors (humans, animals, plants and so on), the task of analysing the impacts of any given emission is complex. Moreover, the final values of external effects and external costs vary between different countries and regions, since specific peculiarities from every country have an influence on the results due to a different range of technologies, fuels and pollution abatement options as well as locations.

In general, the fossil-fuel cycle of electricity generation demonstrates the highest values on external effects and external cost (coal, lignite, peat, oil and gas), of which gas is the least damaging. In the ExternE studies, nuclear and renewable energy show the lowest externalities or damages.


In almost all studies to date, the fossil-fuel cycles of electricity generation are associated with higher external costs than nuclear and renewable energies. An exception are the studies undertaken by Hohmeyer (1988) and Ottinger et al. (1990), which also show significant external costs of nuclear energy:

  • For the fossil-fuel cycles, earlier studies derived the impacts of emissions from regional and national statistics as a base for the economic valuation of the damage (top-down approach). In contrast, the more recent studies made use of the damage function approach, in which emissions of a pollutant are site-specifically quantified and their dispersion in the environment modelled to quantify the impact through dose-response functions. Finally, a monetary value is assigned to the impact (bottom-up approach). The emissions, concentrations and impacts of earlier studies are greater than those for recent studies leading also to diverse results. For instance, atmospheric sulphur oxides (SOx), nitrogen oxides (NOx), total suspended particles (TSP), and carbon dioxide (CO2) are greater in earlier studies, thereby, results for associated health effects are larger.
  • In the case of nuclear power, the assessment of severe accidents is the major focus of the analyses. Factors contributing to result variation are risk perception, resource depletion, and public spending on research and development. Hohmeyer (1998) and Ottinger et al. (1990), in contrast to the other studies, used data from the Chernobyl accident as the basis for their external cost analysis from severe reactor accidents. Generally, all studies conclude that the issue of the public's perception of the risks of nuclear power remains unresolved. In conclusion, the weakest points of externality studies of electricity generation so far has been that in almost all studies it is assumed that (i) in the nuclear cycle waste and other hazardous impacts are well managed and (ii) the problem of accidents (e.g. severe core meltdown accidents with containment rupture) and its disastrous effects for society are not addressed accordingly and/or are completely neglected.
  • For renewable energies the external costs are usually lowest among all energy generation technologies. However, the use of hydro power can have significant external effects as it can impact high-value ecosystems and adjacent populations. External effects from wind energy, such as noise creation and visual impacts, can also be significant in certain areas (for a detailed discussion on that, see earlier chapters of this volume and 'Methodology for the calculation of external costs of different electricity generation technologies based on the EcoSense Model'

The most important emissions concerning electricity generation are CO2, SO2, NOx and also PM10 (particulate matter up to 10 micrometers in size). Emissions generally depend on the type of fuel used:

  • CO2 emissions are related to carbon content. There is no realistic opportunity of reducing such carbon dioxide emissions by using filters or scrubbers, although techniques such as burning fossil-fuel with pure oxygen and capturing and storing the exhaust gas may reduce the carbon content of emissions. Carbon (dioxide) capture is the only possibility.
  • For SO2, the quantity of emissions per kWh electricity generated depends on the sulphur content of the input fuel. Furthermore, SO2 emissions can be reduced by filtering the exhaust gases and converting SO2 to gypsum or elementary sulphur. In general, the sulphur content of lignite is rather high, fuel oil and hard coal have a medium sulphur content and natural gas is nearly sulphur-free.
  • In contrast, NOx emissions are practically unrelated to input fuel. As NOx gases are formed from the nitrogen in air during combustion, their formation depends mainly upon the combustion temperature. Thus, NOx emissions can be reduced by choosing a favourable (low) combustion temperature or by denitrifying the exhaust gases (by wet scrubbing).

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