Identification of Options and Policy Instruments for the Internalisation of External Costs of Electricity Generation. Dissemination of External Costs of Electricity Supply Making Electricity External Costs Known to Policy-Makers Maxima

51 Pages Posted: 31 May 2005

See all articles by Anil Markandya

Anil Markandya

Basque Centre for Climate Change (BC3); University of Bath

Alberto Longo

Queen's University Belfast - Institute of Agri-food and Land-Use School of Biological Sciences

Date Written: May 2005

Abstract

In the present paper, after reviewing the results of the ExternE project and its follow-up stages in the estimation of the external costs of electricity production, we look at the policy instruments for the internalisation of such costs. Emphasis is given to subsidies, such as feed-in tariffs, competitive bidding processes and tradable green certificates to stimulate the use of renewables in the production of electricity. When policy-makers are asked to choose the instrument(s) to internalise the externalities in the electricity production, they have to find a solution that gives the best outcome in terms of efficiency, cost minimisation, impact on the job market, security of energy supply, equity of the instrument, technological innovation, certainty of the level of the internalisation, and feasibility. The choice of the instrument will require some trade-offs among these criteria. Conjoint choice analysis can help in investigating how stakeholders and policy makers trade off the criteria when choosing a policy for the internalisation of the externalities. In this paper we present the first results of a questionnaire that employs conjoint choice questions to find out how policy makers and stakeholders of the electricity market trade off some socio-economic aspects in the selection of the policy instruments for the internalisation of the externalities. The results of this first set of interviews will be useful for further research.

Keywords: Policy instruments, ExternE, External costs, Electricity, Conjoint choice analysis

JEL Classification: Q42, Q48, Q51

Suggested Citation

Markandya, Anil and Longo, Alberto, Identification of Options and Policy Instruments for the Internalisation of External Costs of Electricity Generation. Dissemination of External Costs of Electricity Supply Making Electricity External Costs Known to Policy-Makers Maxima (May 2005). Available at SSRN: https://ssrn.com/abstract=729704 or http://dx.doi.org/10.2139/ssrn.729704

Anil Markandya (Contact Author)

Basque Centre for Climate Change (BC3)

Gran Vía 35-2
Bilbao, Vizcaya 48009
Spain

University of Bath ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

Alberto Longo

Queen's University Belfast - Institute of Agri-food and Land-Use School of Biological Sciences ( email )

25 University Square
Belfast, BT7 1NN
Ireland

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