The importance of external costs for the competitiveness of renewable energies

Low environmental damage is one of the main justifications for solar energy, especially now that supply security has slipped from public consciousness. In recent years, there has been much progress in the analysis of environmental damages, in particular thanks to the ExternE (external costs of energy) Project of the European Commission. This note presents a brief summary and comparison of external costs for the major energy technologies. Even though the uncertainties are large, the results provide substantial evidence that the classical air pollutants (particles, NO <SUB align="right"><SMALL>x</SMALL></SUB> and SO <SUB align="right"><SMALL>x</SMALL></SUB> ) from fossil fuels impose a heavy toll, in addition to the cost of global warming. The external costs are especially large for coal; even for "best available technology", they may be comparable to the price of electricity. For natural gas, the external costs are about a third to a half of coal. The external costs of nuclear energy are small (at most a few percent) compared to the price of electricity, and so are the external costs of most renewable energy systems. Therefore, if the external costs of all energy sources were internalised by government regulations, most renewable energies would become much more competitive.