External Costs Associated with Electricity Generation in Lithuania: Impact of Ignalina NPP Closure

Sustainability and development have been founded on continuing growth in energy demand and distribution, and management of natural resources through proper allocation and efficiency. It is clear that the use of energy in all its forms and applications provides an enormous benefit to society. However, it is also associated with numerous environmental and social challenges, such as, e.g., the health effects of air pollution. These burdens are referred to as external costs, as they have not been included in the market price of energy. The purpose of externalities research is to quantify damages in order to allow rational decisions to be made that weigh the benefits of actions to reduce externalities against the costs of doing so. Ultimately, market failure could be reduced by internalization of the external costs during energy planning. The paper deals with the problems of external costs associated with electricity generation in Lithuania and evaluates the environmental impact related to increased atmospheric pollution when the first unit at Ignalina NPP will be closed in 2005. Simplified methodology for the evaluation of external costs based on Impact Pathway Approach developed by International Atomic Energy Agency was applied. Achieved results indicate that due to the increased atmospheric pollution the external costs associated with electricity generation in the case of the first unit closure at Ignalina NPP would amount to 130 million USD. (author)