(A topical essay I wrote for an Energy Economics unit)
Cheap energy has been abundantly available for the last century. But is it really as cheap as it seems? Conventional energy trade carries external costs that neither the producer nor the consumer pays. Society at large must foot the bill for negative social and environmental by-products of energy production and consumption. This paper discusses the consequences of the failure to incorporate these externalities into the price of traded energy.
Externalities are defined as benefits or costs generated as an unintended by-product of an economic activity that do not accrue to the parties involved in the activity and where no compensation takes place[5]. In other words, any party (be it an individual, a group, a society or world-wide) external to an economic transaction may receive positive or negative impacts to which they had no intention or input in accruing.