A Societal Life Cycle Costing of Energy Production: The Implications of Environmental Externalities

Abstract

Alberta’s electricity market is deregulated; consequently, it does not recognize the benefits of renewables. This research applied a novel societal life cycle costing approach to estimate the economic values of environmental damages to society that result from coal and biomass fired electricity generation. Although coal fuel is cheaper to produce electricity, yet its societal life cycle costing (LCC) is significantly higher than bioenergy systems. Mainstreaming of environmental externalities creates market advantages for low carbon energy sources. Coal power plants cause Alberta to lose at least $117.8 billion per annum due to externalities. Ending electricity from coal with wood pellet can save 53.7 billion USD per year. The societal life cycle cost per year of coal power plants in Alberta represents 15.8% of the province’s GDP and 343.7% of the total expenditure on health. The transformative potential presented by carbon pricing toward a cleaner future is limited. Externalities for health and ecosystems should also be priced and included in the retail price of electricity.