Suppose you want to put a dollar value on the external costs of carbon emissions from a power plant. What information or data would you obtain to measure the external [not social] cost?

Environmental economics is a subfield of economics that deals with the financial implications of environmental policies and the costs of environmental damage. At its heart, it considers how economic activities affect the natural environment and how they can be managed sustainably to prevent negative externalities, such as pollution and resource depletion.

When evaluating the external costs of carbon emissions from a power plant, environmental economics would advise on how to financially quantify the negative impacts. These impacts, such as health problems from poor air quality and loss of ecosystem services, impose costs on society that are not reflected in the market price of the electricity the plant generates. Environmental economists use tools like cost-benefit analysis to weigh the trade-offs of environmental decisions and assist policymakers in crafting regulations that internalize these external costs, promoting greater environmental stewardship and resource conservation.

The valuation of these costs involves detailed analyses of affected entities including human health, ecosystems, and economic activities. For instance, environmental economists might calculate the additional healthcare expenses attributed to respiratory illnesses from air pollution, measure the loss of biodiversity in monetary terms, or assess the economic impacts of crop failures due to climate change.

Carbon footprint analysis measures the total greenhouse gas emissions caused directly and indirectly by an individual, organization, event or product. It is a powerful tool for understanding the environmental impact of a power plant's operations and enables us to pinpoint key areas where interventions can be most effective in reducing carbon emissions. When undertaking a carbon footprint analysis, factors such as the type of fuel used, energy efficiency, and energy source (fossil fuels versus renewables) are critically assessed.

The analysis begins by collecting comprehensive data on all activities that generate carbon emissions. This information helps in mapping out the 'carbon profile' of the power plant and identifying the 'hotspots' of high emissions. The results of such an analysis can guide efforts to mitigate emissions by suggesting cleaner technologies or energy sources. It also informs strategies for carbon offsetting, such as reforestation or support for renewable energy projects, providing a blueprint for achieving carbon neutrality.

In terms of external costs, the carbon footprint analysis helps to frame them in the context of global emissions targets and potential fines or carbon taxes that might be incurred if the emissions are not curtailed. In addition, in a broader climate change policy context, it feeds into life-cycle assessments and benchmarking against industry standards for the purpose of environmental reporting and transparency to stakeholders.

Climate change impact assessment is a systematic process to identify and evaluate the effects of climate change on natural and human systems. This form of assessment is critical when looking to understand the full scope of external costs for carbon emissions from a power plant. It involves predicting and evaluating the changes in weather patterns, sea levels, and ecosystems that can be attributed to increased levels of carbon dioxide and other greenhouse gases in the atmosphere.

Experts carry out these assessments by analysing climate models, historical weather data, and projected emissions scenarios to anticipate future changes. They consider the vulnerability and resilience of different systems, such as how a rise in temperature could lead to more intense and frequent heatwaves, affecting human health and agriculture. The results of these assessments can be startling, showing not only immediate and direct impacts, such as the increased frequency of natural disasters, but also long-term and indirect ones like economic instability due to forced migration from affected areas.

Expressing these assessments in monetary terms involves valuing the costs of adapting to these impacts, like building flood defenses or transforming agricultural practices, as well as the potential costs of inaction. This comprehensive appraisal provides critical insight into the substantial investment needed to mitigate climate change and adapt to its effects. It also underpins the argument for introducing mechanisms such as emissions trading schemes or carbon pricing to incentivize reductions in greenhouse gas emissions.