Incorporating Environmental Costs Into Energy Planning
Authors: Catania P. 
Published: July 2010

The need for valuation of the costs of waste in terms of environmental degradation, not in terms of abatement or avoidance costs, is required. Additionally, the need to enforce these environmental costs into the industrial decision-making process at the formative stages of energy policies will result in a sound environmental policy. It is in the interest of industry to take a pro-active stance rather than oppose such measures. The international agenda must not only recognize the need for balanced, environmentally sound development and end use of all of our energy resources but must also incorporate equal weight with other factors and must be such that no one nation is competitively compromised.

Strengthening the level of international cooperation, coordination, and communication among all energy researchers in all areas of energy research and placing education at the forefront will result in a knowledge base wherein policy issues will translate into research issues and the results of research into policy solutions.

Environmental factors integrated in the earliest stages of formation of energy policies and research, rather than as an add-on at the end, will facilitate the timely development of energy systems and maintain and protect the quality of our natural environment. One of the complimentary results will be the harnessing of human resources which has been one of the greatest obstacles to modernization and the rational use of energy resources. The emerging nations who are experiencing economic growth rates double that of the developed nations place an urgency on the need to enhance and strengthen the international links among energy researchers and policy makers.

Introduction

Pollution threatens our natural capital, the productive value of land, air and water, therefore it threatens our very existence. The definition of natural capital by Costenza and Daly(1) is defined as a stock that yields a flow of valuable goods and services into the future. This is viewed as an environmental issue by the public at large but in actual fact it is a market failure, hence, it is an economic problem. This arises from the fact that whenever a commodity is undervalued there is a natural propensity to increase the demand until the price rises and restores equilibrium. Decisions will then be based on this new equilibrium position. On the other hand, if the commodity is continuously undervalued or is free it will result in an inefficient use of the resource. This is the basis to the problem of pollution.

Costs borne by society are in general invisible even though society continues to discard the wastes of economic activity into the environment. These externalities or third party effects, either positive or negative, are imposed on parties not directly involved in the production or use of the energy resource. This is one category of social costs and benefits which are usually not taken into consideration in an unregulated market or consumptive decision-making process. If air, land and water had always had a market price, their values would have been recognized in economic terms and pollution would be minimized.