IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/412.html
   My bibliography  Save this paper

The Implication of Incorporating Environmental Costs in Utility Rate Setting

Author

Listed:
  • Mariam, Yohannes

Abstract

Electric and natural gas are the two major sources of energy for residents of Washington State. Several states have adopted a policy whereby utility companies decide on the choice of mixes of resources by incorporating cost effectiveness, conservation and externalities. Externalities could include the direct and indirect environmental and human health cost of using resources such as electricity and gas that are not captured by market prices. Washington State possesses diverse resources that are susceptible to wastes and emissions originating from the consumption of energy. The impact of these wastes could be spatial, short-lived or cumulative. By most accounts the overall impact of pollution on ecosystems could be far-reaching and greater than the quantifiable and monetized impacts of environmental externalities. The need to account for environmental externality becomes even stronger in situations where inter-generational equity is used as a criterion for planning long term resource requirement. Utility companies in Washington State are not required to explicitly incorporate or account for externality in the development and implementation of Integrated Resource Plan (IRP). IRPs are used by utility companies to facilitate the identification of the least-cost mixes of resources in the delivery of energy to their customers over a long planning horizon. In addition, there are no cases in which utility companies were ordered to incorporate costs of environmental externality in setting rates. The present study is intended to show the implication of explicitly incorporating externality in rate setting on i) changes in the prices of energy or utility rates, and ii) its contribution toward reducing emissions of selected pollutants. The study will explore situations under which externality estimates from other studies could be utilized to develop energy policies. Furthermore, the study will discuss ways in which increases in costs of using energy as a result of accounting for externality may be shared or accounted.

Suggested Citation

  • Mariam, Yohannes, 2002. "The Implication of Incorporating Environmental Costs in Utility Rate Setting," MPRA Paper 412, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:412
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/412/1/MPRA_paper_412.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Burtraw, Dallas & Krupnick, Alan J., 1996. "The second-best use of social cost estimates," Resource and Energy Economics, Elsevier, vol. 18(4), pages 467-489, December.
    2. World Bank, 1992. "World Development Report 1992," World Bank Publications - Books, The World Bank Group, number 5975.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Paunić, Alida, 2016. "Brazil, Preservation of Forest and Biodiversity," MPRA Paper 71462, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Muhammad Rafiq & Mir Kalan Shah, 2010. "The Value of Reduced Risk of Injury and Deaths in Pakistan—Using Actual and Perceived Risk Estimates," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 49(4), pages 823-837.
    2. Dodo J. Thampapillai, 2007. "The Scarcity Of Environmental Capital And Economic Growth: A Comparative Study Of Australia And The United States," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 52(02), pages 251-263.
    3. Coxhead, Ian A. & Jayasuriya, Sisira, 2003. "Trade, Liberalization, Resource Degradation and Industrial Pollution in Developing Countries: An Integrated Analysis," Staff Papers 12691, University of Wisconsin-Madison, Department of Agricultural and Applied Economics.
    4. Cecile Jackson, 1998. "Gender, irrigation, and environment: Arguing for agency," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 15(4), pages 313-324, December.
    5. Stefan Ederer & Stefan Weingärtner, 2014. "Structural Disparities in Carbon Dioxide Consumption and Trade in the World Economy. WWWforEurope Policy Paper No. 16," WIFO Studies, WIFO, number 47498.
    6. Boon Lee & William Shepherd, 2000. "Output and Productivity Comparisons of the Transport and Communication Sectors of South Korea and Australia, 1990 to 1998," School of Economics and Finance Discussion Papers and Working Papers Series 081, School of Economics and Finance, Queensland University of Technology.
    7. Kwong-Leung Tang, 1998. "East Asian Newly Industrializing Countries: Economic Growth and Quality of Life," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 43(1), pages 69-96, February.
    8. Soumyananda Dinda, 2018. "Production technology and carbon emission: long-run relation with short-run dynamics," Journal of Applied Economics, Taylor & Francis Journals, vol. 21(1), pages 106-121, January.
    9. Masao Tsujimoto, 2023. "Public Utilities Corporate Growth and Environmental Conservation: Evidence from Japan," International Journal of Energy Economics and Policy, Econjournals, vol. 13(4), pages 404-422, July.
    10. Vocke, Gary, 1994. "Global Review of Resource and Environmental Policies: Water Resource Development and Management," Foreign Agricultural Economic Report (FAER) 148003, United States Department of Agriculture, Economic Research Service.
    11. Peter J. G. Pearson & Roger Fouquet, 1996. "Energy Efficiency, Economic Efficiency and Future CO2 Emissions from the Developing World," The Energy Journal, , vol. 17(4), pages 135-160, October.
    12. Luiz Fernando Ohara Kamogawa & Ricardo Shirota, 2011. "Economic growth, energyconsumption and emissions: an extension of Ramsey-Cass-Koopmans modelunder EKC hypothesis," Anais do XXXVII Encontro Nacional de Economia [Proceedings of the 37th Brazilian Economics Meeting] 187, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    13. Hertel, Thomas W. & Maros Ivanic & Paul Preckel & John Cranfield, 2004. "The Earnings Effects of Multilateral Trade Liberalization: Implications for Poverty in Developing Countries," GTAP Working Papers 1208, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    14. Dana Schüler & Julian Weisbrod, 2010. "Ethnic fractionalisation, migration and growth," Empirical Economics, Springer, vol. 39(2), pages 457-486, October.
    15. Justin Doran & Geraldine Ryan, 2016. "The Importance of the Diverse Drivers and Types of Environmental Innovation for Firm Performance," Business Strategy and the Environment, Wiley Blackwell, vol. 25(2), pages 102-119, February.
    16. Eleftherios Filippiadis & Anastasia Litina, 2022. "A dynamic analysis of the income–pollution relationship in a two-country setting," Economic Change and Restructuring, Springer, vol. 55(2), pages 775-801, May.
    17. Abrego, Lisandro & Perroni, Carlo, 1999. "Free-riding, carbon treaties, and trade wars: the role of domestic environmental policies," Journal of Development Economics, Elsevier, vol. 58(2), pages 463-483, April.
    18. Granda, Catalina & Pérez, Luis Guillermo & Munoz, Juan Carlos, 2008. "The Environmental Kuznets Curve for Water Quality: An Analysis of its Appropriateness Using Unit Root and Cointegration Tests," Revista Lecturas de Economía, Universidad de Antioquia, CIE, November.
    19. Bjørnar Karlsen Kivedal, 2023. "Long run non-linearity in CO2 emissions: the I(2) cointegration model and the environmental Kuznets curve," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 50(4), pages 899-931, November.
    20. Yu, Yan & Wen, Zongguo, 2010. "Evaluating China's urban environmental sustainability with Data Envelopment Analysis," Ecological Economics, Elsevier, vol. 69(9), pages 1748-1755, July.

    More about this item

    Keywords

    Electricity; natural gas; energy; cost effectiveness; conservation; externalities; environmental and human health; Integrated Resource Plan (IRP); long planning horizon; utility rates; emissions; pollutants;
    All these keywords.

    JEL classification:

    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:412. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.