Electricity generation and environmental externalities: Case studies, September 1995

Electricity constitutes a critical input in sustaining the Nation`s economic growth and development and the well-being of its inhabitants. However, there are byproducts of electricity production that have an undesirable effect on the environment. Most of these are emissions introduced by the combustion of fossil fuels, which accounts for nearly 70 percent of the total electricity generated in the United States. The environmental impacts (or damages) caused by these emissions are labeled environmental ``externalities.`` Included in the generic term ``externality`` are benefits or costs resulting as an unintended byproduct of an economic activity that accrue to someone other than the parties involved in the activity. This report provides an overview of the economic foundation of externalities, the Federal and State regulatory approaches, and case studies of the impacts of the externality policies adopted by three States