The Full Costs of Thermal Power Production in Eastern Canada

The report applies a full cost accounting (FCA) approach to quantify the externalities of thermal power production in Eastern Canada, focusing on air pollution (SOx, NOx, VOC) and greenhouse gas (GHG) emissions. It finds that coal-fired power generates the highest externalities, with central estimates of $0.0394/kWh, which exceeds its marginal production cost of approximately $0.026/kWh. The study argues that internalizing these costs would shift investment toward natural gas, demand-side management, and renewable energy, and warns that Canada's Kyoto compliance strategy may forego domestic health co-benefits by favoring international emission credits over domestic reductions.

• Coal-fired power generation in Eastern Canada has the highest aggregate externalities among thermal fuels, with a central estimate of $0.0394/kWh. This value is approximately 50 per cent higher than the marginal cost of production for coal, which is estimated at ~$0.026/kWh.
• Public health externalities for coal-fired power are estimated at $0.0171/kWh, representing about 65 per cent of its marginal production cost. In contrast, natural gas externalities are significantly lower at $0.0102/kWh, which is approximately 20 per cent of its marginal production cost.
• Sulphate aerosol (SO4) mortality risk is the dominant driver of air pollution externalities in the study, accounting for over 70 per cent of total damages. Combined with chronic bronchitis risk from SO4, these two pathways account for nearly 90 per cent of all analyzed air pollution damages.
• The study uses a marginal GHG damage estimate of $26/tonne CO2-eq (in 1996 Canadian dollars), based on a globally averaged valuation of impacts and a one per cent social discount rate. This is higher than the $10–$15/tonne CO2-eq range assumed by the Government of Canada for international market purchases.
• The report argues that Canada's strategy for Kyoto compliance may prioritize international emission reduction credits over domestic action, which would cause the country to lose the domestic air quality co-benefits associated with reducing emissions from coal-fired power.
• An illustrative analysis of the Nanticoke coal-fired power plant suggests that when externalities are included in the economic analysis, a combination of demand-side management (DSM) and renewable energy becomes the least-cost option compared to doing nothing or converting to natural gas.

APA

Venema, H. D., & Barg, S. (2003). The Full Costs of Thermal Power Production in Eastern Canada. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/energy_fca_canada.pdf

Chicago

Venema, Henry David, and Stephan Barg. The Full Costs of Thermal Power Production in Eastern Canada. International Institute for Sustainable Development, 2003. https://www.iisd.org/system/files/publications/energy_fca_canada.pdf.

Wikipedia

{{cite report |last1=Venema |first1=Henry David |last2=Barg |first2=Stephan |title=The Full Costs of Thermal Power Production in Eastern Canada |publisher=International Institute for Sustainable Development |date=July 2003 |url=https://www.iisd.org/system/files/publications/energy_fca_canada.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{venema2003full, author = {Venema, Henry David and Barg, Stephan}, title = {{The Full Costs of Thermal Power Production in Eastern Canada}}, institution = {International Institute for Sustainable Development}, year = {2003}, month = jul, url = {https://www.iisd.org/system/files/publications/energy_fca_canada.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }