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Improvements in energy efficiency of electrical equipment reduce the greenhouse gas (GHG) emissions and contribute to the protection of the environment. This paper proposes a simplified model that quantifies the environmental cost of transformer losses and incorporates it into the economic evaluation of distribution transformers for industrial and commercial users of transformers. This environmental cost is coming from the cost to buy GHG emission credits because of the GHG emissions associated with supplying transformer losses throughout the transformer lifetime. Application results indicate that the environmental cost of transformer losses can reach on average 35% of transformer purchasing price for high-loss transformers. That is why it is important to incorporate the environmental cost of transformer losses into the economic evaluation of distribution transformers.