Sovacool and two co-authors asked the following questions published in early 2021:
1. "What is the range and scope of externalities associated with electricity supply, energy efficiency, and transport?"
2. "What research methods and techniques of valuation does the community use to monetize these externalities?"
3. "What policy implications arise in terms of better governing energy and mobility systems?"
To answer these questions, the authors conducted a comprehensive and global research synthesis of externalities for energy and mobility. They synthesized data from 139 studies with 704 distinct estimates to examine the hidden social and environmental costs. The mean external cost for electricity supply is 7.15¢/kWh. When correlating this with the actual amount of electricity generated per year, the amount is $11.644 trillion. This likely exceeds both the
reported revenues for electricity sales, oil and gas production as well as the levelized costs of energy.
The mean external cost for mobility is 17.8¢/km. Using differentiated estimations of the externalities associated with aviation, road travel for passengers and freight, rail, and coastal water/marine modes of travel, transport’s global externalities amount to another $13.018 trillion. When combined, this $24.662 trillion in externalities for energy and transport is equivalent to 28.7% of global Gross Domestic Product.
Energy efficiency or demand response by contrast has net positive externalities of approximately 7.8¢/kWh. When put into the context of global efficiency
and demand management efforts, this approaches an annual positive value of $312 billion. The fundamental policy question is whether we want global markets that manipulate the presence of externalities to their advantage, or a policy regime that attempts to internalize them.
The authors concluded that using the mean numbers from their meta-analysis and research synthesis, the external costs associated with the global energy system could be $11.644 trillion and the global externalities associated with transport could amount to another $13.018 trillion. If this extra $24.662 trillion
(or 28.7% of global GDP)[138] were included in the price of energy or mobility, it would become clear not only that we need to fundamentally change our systems and markets, but that it would actually be profitable to do so. If the maximum estimates of $169.43 trillion are taken into consideration, they surpass the entire annual GDP of the world (estimated at about $85.931 trillion in 2018).
And let us not forget exactly who it is paying these external costs. Under the present energy and mobility system, it is paid by those who can least afford it: islanders in Kiribati and Tuvalu faced with losing their homes under the sea; farmers in Africa struggling with drought and salinization; miners dying of lung cancer [BIAS ALERT: requires foundation, not just aspersions]; children struggling to breathe; communities forced to relocate because their soil and water is contaminated; taxpayers responsible for a stretched health care system that has to cope with the health impacts of polluted air and water; and government agencies (and taxpayers again) charged with cleaning up oil spills, mine tailings, fly ash spills, and nuclear meltdowns [ANOTHER BIAS ALERT: requires foundation, not just generalized aspersions].
However, the authors findings are not all negative. Energy efficiency and DR efforts induce positive externalities—avoided costs, emissions, and other impacts—as they are implemented, helping “undo” some of the negative damage. By our assessment, these programs have a mean collective net positive externality of 7.8 ¢/kWh. When put into the context of global demand efforts, this approaches an annual positive value of $312 billion, an amount greater than global investments in efficiency, a sign once again such efforts tend to more than pay for themselves.
The challenge is to convince policymakers, regulators, and planners to get electricity and transport markets to function as they should in theory—to accurately price the potential $20.37 trillion in mean external costs our energy and mobility industries, and patterns of consumption, shift surreptitiously to society. Although the services provided by energy and transport systems generate unprecedented opportunities for those who have access to them, the externalities that result from these same systems limit opportunities for many others, frequently to the extent of making it difficult to live a meaningful and healthy human life, and sometimes to the extent of making it impossible
to live.
In this view, progressive energy, climate, and mobility policy is an attempt to promote fairness by correcting a massive market failure as much as it is about promoting jobs or protecting the environment. A fundamental question is whether we want energy and transport policies (such as subsidies) that manipulate the presence of externalities to their advantage, or those that attempt to fully internalize them and hold producers (and consumers) accountable.
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