In energy markets across the world, market prices for fossil fuels are often lower than the prices of energy generated from renewable sources, such as solar, wind, and biofuels. These market prices, however, don’t take into account the “true costs” of the energy being sold, because they ignore the external costs to society caused by pollution and its resulting burdens, including damages to public health and the environment. Accounting for these externalities can as much as double the cost of some fossil fuels and, in some cases, make them more expensive than renewables.
Because renewable forms of energy have far lower external costs than energy generated from fossil fuels, if one can implement policies that incorporate those costs into the price of electricity generated from all technologies, the playing field levels out and renewables can compete on a more fair and economically justified basis. The challenge, of course, is determining those “true costs.”
Estimating the true costs of electricity generation is both complex and controversial. This report, The True Cost of Electric Power, examines the various methods that have been used to measure such “true” costs and looks at how such estimates can be used in company decisionmaking and public policy to ensure that investments are directed at the electricity generation methods with the lowest true costs to investors and society
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