Neoclassical and institutional economics have developed different theories and methodologies for evaluating environmental and social impacts of electricity generation. The neoclassical approach valuates external costs, and the institutional approach uses social cost valuation and MCDM methods. This paper focuses on three dimensions: theoretical and methodological backgrounds; critical review of specific studies: methodologies, results, and limitations; and discussing their results and implications for environmental policy and further research. The two approaches lead to a common conclusion that fossil fuels and nuclear power show the highest environmental impact. Despite the common conclusion, the conclusion has limited implications for environmental policy because of the weakness of their methodologies. (c) 2006 Elsevier Ltd. All rights reserved.