International Review of Environmental and Resource Economics > Vol 10 > Issue 1

Electricity Externalities, Siting, and the Energy Mix: A Survey

Heinz Welsch, Department of Economics, University of Oldenburg, Germany,
Suggested Citation
Heinz Welsch (2016), "Electricity Externalities, Siting, and the Energy Mix: A Survey", International Review of Environmental and Resource Economics: Vol. 10: No. 1, pp 57-94.

Publication Date: 23 Nov 2016
© 2016 H. Welsch
Environmental economics
JEL Codes: Q48Q42Q51Q53Q54
Electricity generationExternalitiesFossil fuelsNuclear powerRenewable energySitingElectricity mixProperty valueWillingness to paySubjective well-being.


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In this article:
1. Introduction 
2. The Nature of Electricity Externalities 
3. Measurement and Valuation of Electricity Externalities 
4. Fossil Fuel Power Generation 
5. Nuclear Power Generation and Waste Disposal 
6. Renewable Energies 
7. The Electricity Mix 
8. Discussion and Conclusion 


While early literature on electricity externalities was largely concerned with fossil fuel power generation and the associated emissions, nuclear accidents (Chernobyl, Fukushima) and the large-scale deployment of renewable energy facilities have spurred a wave of research on the externalities of nuclear power and renewable energies. The issue is important because many countries have started reconsidering their energy policies, and the externalities from electricity generation play a major role in the benefit–cost analysis of relevant options. This paper reviews the literature on electricity-related externalities. It starts by discussing their nature and the methods employed in valuing them. It finds that appraisals of electricity externalities are complicated because of heterogeneity of both the externalities themselves and the methods applied in measuring them. The paper reviews valuation studies of the externalities from fossil fuel, nuclear and renewable sources, and it discusses the relevance of their findings for the siting of plants and the electricity mix. It concludes by pointing out gaps in our knowledge about electricity externalities that deserve to be addressed in future research.