We live and work in a world driven by a fossil fueled economy. Our cars and other dominant forms of transport run primarily on gasoline derived from oil. Our homes and work places stay heated and cooled using electricity generated by utilities heavily dependent on coal. Many air pollution issues such as climate change, acid rain and smog are directly related to our energy choices. Solutions to air quality issues range from calls for greater energy efficiency to increased reliance on renewable energy sources to more stringent pollution control regulations. Often the primary argument against these 'pollution solutions' begins with a logic of cost. Opponents to these policy options might suggest that renewable energy sources may be a good idea, but they cost more to produce a KWH of electricity than their fossil fuel counterparts. In recent years, environmentalists with a keen sense of economics have confronted the cost argument head on. They've adopted many economic models to show that the price of a gallon of gas or a KWH of electricity is not always as transparent as the cost listed on the billboard at the gas station or on your utility bill. The concept of 'environmental externalities' can be used to offer a different perspective on the costs of a fossil fueled economy. In economics, the term externalities refers to activities of individuals (or firms) that affect other non-involved individuals. The most publicized issue of externalities today is probably the issue of second hand smoke. Smokers, so the logic goes, harm not only themselves, but others who breath their smoke second hand, when they smoke inside poorly ventilated buildings. This would be considered a negative externality. Externalities can also be categorized as positive. For example, individuals who sweep the sidewalks in front of their homes or stores provide positive benefits (externalities) to all other individuals who use those sidewalks. Negative externalities take...
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