Marek Łukasz Michalski * Methodology for Assessing External Costs in the Energy Industry

Externalities and their costs are incurred when negative social and economic activities of some party have an impact on others and this impact is not offset by expenditures to liquidate it. For example, in the electric power industry, external costs are generated when electricity producers do not incur expenditures required to liquidate adverse effects of their actions that are borne by another party. When a producer bears these expenditures, they are transformed into direct costs and are thus no longer external costs. They constitute components of direct manufacturing costs in the same way as other production costs [10, p. 58]. External effects should be the subject of detailed studies taking into account the public nature of environmental goods and the consequent absence of prices for many elements of the natural environment. The dominance of short-term financial objectives in development strategies of many companies, leading to overexploitation of the natural environmental and production of negative goods in the form of reduced social benefits, expressed as a reduction of current or future social welfare, indicate the desirability of such research. Taking this into account, this article presents methodologies for assessing external costs in the energy industry.