Student Essay

10900 Words Apr 27th, 2011 44 Pages
Energy Policy 31 (2003) 721–734

Electricity and externalities in South Africa
Randall Spalding-Fechera,*, David Khorommbi Matibeb b a Energy and Development Research Centre, University of Cape Town, Private Bag, Rondebosch 7700, South Africa Gauteng Department of Agricultural Conservation and Environment, PO Box 8769, Johannesburg 2000, South Africa

Abstract As the electricity supply sector in developing countries undergoes increasingly rapid restructuring, and technology and fuel choices widen, understanding the environmental implications of investment choices becomes ever more important. The objective of this paper is to expand previous analysis of the external costs of electric power generation in South Africa. We present a
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Externalities arise when an individual’s welfare is affected, and that impact is not compensated or otherwise represented in the market price (Baumol and Oates, 1988; Pearce and Turner, 1990).1 There is a substantial body of literature on energy externalities in industrialised countries such as the United States (e.g. ORNL & RFF, 1995; Rowe et al., 1994) and Europe (e.g. ETSU, 1995; Friedrich and Voss, 1993; Hohmeyer, 1988; Ottinger et al., 1991; Pearce et al., 1992). Few studies of this magnitude have been conducted in
*Corresponding author. Tel.: +27-21-650-3230; fax: +27-21-6502830. E-mail address: (R. Spalding-Fecher). 1 Strictly speaking, the second criterion is less important because, even if some payments are made, the impacts still exist and the payments are unlikely to exactly match the monetary value of those impacts (see Baumol and Oates, 1988, p. 18).

developing countries, however, and even the Carnevali and Suarez (1993) study in Argentina (which largely focused on avoided control costs and emissions) and the Van Horen (1996b) study of the South African power sector, consider only damages caused by electricity generation. Most international studies of externalities in the electricity sector have focused on the damages caused by air pollution and other negative environmental consequences. In developing countries, electricity also has a variety of positive impacts that may be externalities—particularly avoided

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