A detailed description of the methodology for generating external costs can be found here:
ExternE Methodolody 2005 Update

Please find at the following address the new research headlines concerning external costs


Human activities like energy conversion, transport, industry, or agriculture cause substantial environmental and human health damages, which vary widely depending on where the activity takes place and on the type of the activity. The damages caused are for the most part not integrated into the pricing system. Borrowing a concept adopted from welfare economics, environmental policy calls these damage costs externalities or external costs. By societal welfare principles, policy should aim to ensure that prices reflect total costs of an activity, incorporating the cost of damages caused by employing taxes, subsidies, or other economic instruments. This internalisation of external costs is intended as a strategy to rebalance the social and environmental dimension with the purely economic one, accordingly leading to greater environmental sustainability. Doing so is a clear objective for the European Union, for example, as expressed in the Fifth and Sigth Framework Programme of the European Commission and in the Göteborg Protocol of 2001.

To support this internalisation, socio-environmental damages must first be estimated and monetized. Over the past 20 years, there has been much progress in the analysis of environmental damage costs, particularly through the "ExternE" (External costs of Energy) European Research Network. Since 1991, the ExternE project has involved more than 50 research teams in over 20 countries. The effects of energy conversion are physically, environmentally, and socially complex and difficult to estimate, and involve very large, sometimes ultimately unresolvable, uncertainties, unpredictabilites, and differences of opinion. Despite these difficulties, ExternE has become a well-recognised source for method and results of externalities estimation.

  Last update: 05 October 2010
  Joachim Roos