This project intends to derive a consistent and comprehensive picture of the full cost of energy, and to make this crucial knowledge available to all stakeholders.

A complete and consistent assessment of the full cost of energy sources, which includes the external cost plus the private cost, is of paramount importance for energy and environmental policy making. Energy policy making is concerned with both the supply side and the demand side of energy provision. On the energy supply side deciding on alternative investment options requires the knowledge of the full cost of each energy option under scrutiny. On the demand side, social welfare maximisation should lead to the formulation of energy policies that steer consumers' behaviour in a way that will result in the minimisation of costs imposed to society as a whole. Demand side policies can benefit significantly from the incorporation of full energy costs in the corresponding policy formulation process.

The geographical dimension is also important since environmental damage from energy production crosses natinal borders. Moreover the EU enlargement process associated to the liberalisation of energy markets have highlighted the importance of a systematic harmonisation process, in which cost formation mechanisms and price setting must become transparent and reflect the total, real costs of energy provision across the continent and beyond. In turn, this requires the adoption of a common set of methods and values. Hence a consistent set of energy costs allows a better understanding of the international dimensions of policy decisions in these areas. Naturally, differences in estimates exist between countries, sources of energy, and technology used in the generation of the energy. But the present state of knowledge is disparate and some gains can be made by clarifying when and where particular estimates can be applied.

Moreover, costs are dynamic. The private costs and the external costs are changing with time, as technologies develop, knowledge about impacts of energy use on the environment increases and individual preferences for certain environmental and other values change.

Perhaps, the least well and least systematically covered area of external cost is that related to energy security. Even within one country estimates of the energy security costs of different types of energy remain somewhat elusive. A common methodology has not been applied to derive estimates for a range of countries. Yet, this is a major area of policy debate and key decisions are being taken to increase energy security and reduce dependence on foreign sources. Therefore, without undertaking primary research in terms of data collection, the project devotes significant resources in applying existing models across a range of countries to arrive at a common set of estimates of the costs of energy insecurity, as defined by a common set of parameters.

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