This paper assesses the consequences of the internalisation of the environmental externalities of the Spanish power system. Based on results from the ExternE project, a model has been developed which is able to incorporate environmental externalities and thus allows for a socially efficient electricity system operation. Results show how when externalities are internalised, the electricity system operation may be altered significatively, even when only part of the externalities are taken into account. They also show that in some cases, the efficient allocation of resources seeked by this internalisation of externalities is prevented by the existence of political constrains, which may be justified on a social basis.
Keywords: Externalities, power systems, Spanish electricity sector
2nd Atlantic Workshop on Energy and Environmental Economics. A Toxa, Vigo (Spain). June 2006
Published: June 2006.