THE MARGINALITY OF REGULATING MARGINAL INVESTMENTS - WHY WE NEED A SYSTEMIC PERSPECTIVE ON ENVIRONMENTAL EXTERNALITY ADDERS

One way to acknowledge the externality of pollutant emissions is to apply adders to project benefit-cost ratios when making new capacity planning decisions. This New England case study suggests that targeting only the marginal investments is problematic and provides meagre results, by ignoring the continued operation of existing power plants, the dynamic of new supply technology development, the existing rules for dispatching power plants, the characteristics of other emissions reduction options, and institutional barriers. A superior approach is to take a systemic perspective on the emissions reduction challenge, and compare the multi-attribute performance of complete resource portfolios rather than options at the margin.