Regulating the environmental impacts of the electricity supply industry.

The electricity supply industry (ESI) in England and Wales does not operate efficiently, in terms of optimising the balance between benefits of electricity and costs associated with environmental impacts. The optimal situation would be one where such impacts are minimised per unit of electricity service used, notwithstanding cost considerations. However, the present regulatory regime fails to account sufficiently for environmental impacts. Indeed, it cannot do so at present, due to lack of objective, complete and sufficiently accurate information.The main methods currently advocated for valuing environmental impacts are based on the theory of neo-classical environmental economics. These aim to place monetary values on impacts, which can then, in theory, be used to internalise environmental externalities, by applying market mechanisms to correct for the market inefficiency. However, numerous objections have been raised and weaknesses identified, including, principally, the lack of a systematic approach and the inability of the technique to accurately value impacts which are not usually considered in monetary terms.Better regulation starts with better understanding of the issue(s) to be regulated. In this case, it requires appropriate data about values of environmental impacts. While environmental economics is not rejected outright, further improvements are required and, in any event, it must be supplemented by a systematic approach, which encompasses a means of valuing non-economic elements of value. The Environmental Analysis, Valuation and Application (EAVA) Framework proposed here has been designed and developed in order to address these requirements. It also satisfies the need for objectivity, rigour, transparency, versatility, practicality and a step-by-step, sequential procedure for dealing appropriately with environmental impacts.The EAVA Framework encompasses four separate methods which have been developed simultaneously to work together in order to address different areas of the problem. The output analysis method allows the production of a complete inventory of released incidental outputs (RIOs) which arise from the process being studied. The pathway analysis method provides a means of tracing these RIOs through the environment and generating objective data about the resulting environmental changes. The valuation method is where the only necessary subjectivity of valuation is concentrated by accommodating the views of those whose quality of life is damaged by the impacts. The unit of valuation is the "natural" unit of quality of life outcome state (QLOS), and quantification is achieved through use of the QLOS Index. The final method is the application method, where valuation data and information about unknowns or other "gaps" in knowledge or data are utilised in mechanisms to ensure decision making and operation of the process concerned correctly reflects the environmental impacts caused. It should be noted here that procedures exist throughout the EAVA Framework for identifying and quantifying "gaps". The overall result is the EAVA Framework - a single integrated process for regulating environmental impacts, from the point of origin, to the point of applying regulation.