Abstract
The paper deals with environmental externalities. The main focus of the paper is twofold: firstly, to discuss definition of the externality including distinction between the externality on one side, and the physical impact and pecuniary effect on the other side; secondly, to introduce the ExternE method as one possible method for the externality quantification.
The definition of externality is determined from the view of the economic theory as well as the ExternE project series. After the externality definition and classification, two possible approaches of the externality estimation are briefly presented (top-down and bottom-up approach).
The ExternE method is then introduced and described as the one of the most appropriate, politically and scientifically accepted methods for the externality estimation at the European level. The estimation of external cost induced from energy sector is introduced for the Czech Republic.