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Electricity constitutes a critical input in sustaining the world’s economic growth and development and the well-being of its inhabitants. There are, however, by-products of electricity production that have a negative and undesirable effect on the environment. Most of these are emissions introduced by the fossil fuel combustion, which accounts for more than 60 percent of the total electricity generated at the world wide level. The environmental impacts (or damages) caused by these emissions are labelled environmental "externalities" or "stranded costs”. An externality refers to the features of any product or service you purchase, that is not actually paid for when you buy something. Costs or benefits are not always covered in the purchase price. Herman Daly, formerly Senior Economist in the Environment Department of the World Bank, argued that the task of environmentally accurate – or true cost accounting, is to internalize or account for the externalities we know exist but have yet to find a means to adequately measure in the purchase price of resources, goods or services. While for nuclear energy most of the environmental externalities, like radioactive waste disposal and plant decommissioning, have been internalized ever since the electricity generating cost, but externalities for fossil fuels have not. In fact, there are by-products of the electricity generation from fossil fuels that have an undesirable effect on the environment with considerable costs being involved. The indirect cost of these emissions, carbon, sulphur and nitrous oxides, mercury and particulates, labelled “externalities”, are not, generally, taken into consideration. The carbon dioxide emissions penalize the fossil fuels because the damage to public health, for asthma, chronic bronchitis or emphysema and cause of air and water pollution, land disruption and Earth’s global warming, with elevated external costs. A wide range of site specific ecological and social factors can be key externalities for hydroelectric plants and renewable energy sources as well. Of course, for the renewable, these external costs are much lower like 7 to 10 US mills/kWh for solar energy, 5 for wind and 1 or 2 for hydro, as compared with 100 or more for coal. "Environmental resources, if not sustainably managed, may indeed limit economic growth....but everywhere mounting evidence suggests that bad environmental policies may carry real economic costs, measurable in terms of lost production, wasted investment, or reductions in the productivity of labour." This is not a new idea. (Costing The Earth, 1992, pp. 18-19). In addition, other external costs should be addressed too, like the energy needed for the construction of the PV components or the carbon dioxide emissions cost in the case of wind power plants, because of the stainless steel production. According to Mario Silvestri’s book “The Energy’s future” the energy required for building the PV components is greater than the energy produced in the life time of the system, such that not a single kWh might become available for external use. And Denmark, who is a world leader in wind farm construction, because of the steel production, has a pro capita carbon dioxide emissions, double as compared to the EU average value. A detailed study by the Italian research Centre, CESI (“The Energy’s external costs”) suggests for pulverized coal power plants an external cost between a minimum value of 2 and a maximum of 100 US mills/kWh, 10 for IGCC plants, 50 for oil and 25 for natural gas. For the gas however, we should consider the methane leakages during the extraction, transport and distribution phases and the carbon dioxide emissions in the drilling operation. There are two main areas where the market does not adequately account for the costs of energy use. These are the environmental degradation and government subsidies to various forms of energy. When some of the costs of energy use are placed on society rather than the individual consumer, it tends to result in increased energy use. The principle that polluters should pay for the damage they cause is becoming more widely accepted. Applying this principle to energy use would drastically affect the choices made by energy consumers. In addition, the type of energy we use has direct impacts on other economic factors such as local employment. In "capitalist" countries such as those in North America, Western Europe and the rest of the non-communist world, the price of goods is generally determined by the "free market". Traditional economic theory says that prices are determined by market forces such as supply and demand. This holds true for many of the commodities traded on open markets; but, because energy is so important to the economy of every country, governments have often intervened in energy markets. Many different methods have been used to influence the energy use and energy choices of consumers. These include: direct subsidies such as tax breaks, research and development funding to specific energy sectors and military spending. Fossil fuels have played an important role in fuelling the advancement of civilization in the past centuries, coal in the nineteenth and oil, the “black gold”, in the twentieth century. But their use raises some environmental issues as well. Coal mining has a direct impact on the environment, affecting land and causing subsidence, as well as producing mine waste that must be managed. Coal combustion produces several types of emissions that adversely affect the environment, particularly ground-level air quality. Concern for the environment has in the past and will in the future contribute to policies that affect the consumption of coal and other fossil fuels. The main emissions from coal combustion are carbon and sulphur dioxide, nitrogen oxide, particulates and mercury. Oil also, although its importance in transport, energy production and chemistry, has generated negative effects, like local conflicts and wars – the Gulf war in 1991 cost more than $30 billion on top of the regular yearly military expenses – for the control and possession of the Middle East oil wells and for numerous transport accidents with sea pollution. People die from air pollution and global warming every year. Acid rain damages car finishes, eats away at building facades and dissolves the lime rock under your feet. Overhead wires are vulnerable to storm damage and pose a visual intrusion. These are all negative externalities from electricity production. By choosing progressive legislative remedies that in some way include externalities you can better cover the costs of damaging land, air, and water, or health impairment caused by electricity production. Such damages may unintentionally undermine economic growth and should be taken into account because they drive up the actual costs of generating and distributing power. Several different studies are currently underway in an effort to determine the value of energy externalities. For example, the New York State Energy Research and Development Authority and the U.S. Department of Energy have come up with some values for the environmental costs of different types of electricity generation. These costs have been calculated in terms of US mills/kwh (see table below). If these amounts were added to a customer's electricity rates, as a government tax used to clean up the environment, the environmental costs of electricity would be internalized. The higher rates would probably result in a reduced demand for electricity, as customers would switch to more efficient electrical appliances. Renewable sources of energy would also be encouraged because of their lower external costs.