EU project reveals the price of producing electricity
The cost of producing electricity from coal or oil would double, and the cost of producing electricity from gas would increase by 30 per cent if external costs such as damage to the environment and to health were taken into account, an EU funded research study has discovered. This is the first study to put financial figures against damages resulting from different forms of electricity production for the entire EU. The ten year project, EXTERNE sees the results of 20 separate research projects funded by the Fourth Framework programme's Joule programme and involving researchers from all Member States as well as the USA. The study estimates that these external costs amount to between one and two per cent of the EU's GDP, and that is without including the cost of global warming. The costs must be covered by society at large, as they are not included in the bills which electricity consumers pay. Commenting on the results, Research Commissioner Philippe Busquin urged energy producers to come up with environmentally friendly options that will help to reduce external costs. Currently, the generation of electricity costs around 0.04 euro per kWh, with external costs higher in urban areas than in rural ones. Electricity is however only one example, as the EXTERNE methodology could be applied to other energy related sectors such as transport. Initial results show that the aggregated costs of road transport, which is the main source of damage, add another one to two per cent to the bill. The study also indicates that nuclear power involves relatively low external costs due to its low influence on global warming and its low probability of accidents in EU power plants. Wind and hydro energy offer the lowest external costs. The methodology used in the study is 'impact pathway methodology', which measures emissions, the dispersion of pollutants in the environment and the subsequent increase in ambient concentrations. The impact on issues such as crop yield or health is then evaluated. The study proposes two ways of minimising these costs: taxing damaging fuels and technologies or subsidising cleaner technologies. Building on the results of the EXTERNE project, the Commission has recently launched NEWEXT (new elements for the assessment of external costs from energy technologies), which will study additional elements relevant to external costs, such as monetary valuation of mortality risk, effects arising from the risk of damage to air, water and soil and the impact of major accidents in non-nuclear fuel chains.