Case #1244.0

A Question of Values: The Case of Environmental Externalities in the Generation of Electrical Power

Publication Date: January 01, 1994
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Abstract:
This microeconomics case uses the deliberations of the Massachusetts Department of Public Utilities as a vehicle for raising the issue of how to quantify the value of an environmental externality--in this instance, power plant construction--and how to use that information in shaping regulatory policy. The case highlights two competing theories of pollution measurements. "Implied valuation" would measure the marginal cost of actually installing pollution control equipment; "damage valuation" would measure the demonstrated cost of actual damage to the environment. State DPU commissioners must decide which standard to adopt.

Learning Objective:
This case is a vehicle for raising the issue of how to quantify the value of an environmental externality--in this instance, power plant construction--and how to use that information in shaping regulatory policy.

Other Details

Case Author:
Esther Scott
Faculty Lead:
Adam Jaffee
Pages (incl. exhibits):
29
Setting:
United States
Language:
English