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The hidden costs of electricity: externalities of power generation in Australia

1 Mar 2009


The key finding of this review is that a greater focus on externalities, preferably quantified in monetary terms, will help Australia to gain maximum social and environmental benefit from the portfolio of electricity generating technologies it will use for meeting emission reduction targets.

This Academy study addresses the external social and environmental costs – the externalities – that accompany all electricity generating technologies. As reviewed here, these are costs not accounted for in the market price of electricity arising from impacts on, for example, climate, human health, crops, structures and biodiversity. Until identified, and then if possible quantified in monetary terms, they remain hidden, playing a limited role in technology selection.

The main rationale for this study is that the Australian Government, like others in the industrialised world, has adopted climate change policies such as the Carbon Pollution Reduction Scheme (CPRS) for constraining carbon dioxide (CO2) and other emissions. Reduction targets call for a new portfolio of low-emission electricity generating technologies. The Academy believes that to meet these targets the focus must be on technology. Its recent study Energy Technology for Climate Change: Accelerating the Technology Response looked at technical, commercial and investment issues for various technology scenarios. Around $250 billion will be needed to bring the new technologies into production by 2050.

There will also be heavy development costs. While the power generation technologies of the future will inevitably have lower external impacts relating to CO2 emissions, there will be other externalities. With adequate understanding of those externalities, policy and investment decisions relating to electricity generation can take into account all social costs and benefits. That is the ultimate purpose of this kind of review.

Related identifier: ISBN 978-1-921388-05-7

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