The study "Energy costs, taxes and the impact of government interventions on investments in the energy sector", carried out on behalf of the European Commission, provides consistent sets of data on generation and system costs and the cost of externalities in the energy sector. The work covers the most important power generation technologies (from fossil fuels to renewable energies), heating and cooling technologies and electricity and gas transmission, distribution, electricity and gas storage. The full energy value chain is included, from primary production to energy transformation, transmission, distribution, storage and consumption of energy.

EnergyVille/VITO contributed to the work package on 'External Costs'. The full study can also be found on the European Commission's website.



Closed project

For the study EnergyVille/VITO provided a full range of disaggregated external costs data in the energy sector for power and heating for the different technologies and countries. To calculate the environmental externalities of energy the Life Cycle Assessment (LCA) was used to define the specific impacts and emissions. PEF method 2.0, EF-complient datasets and Ecoinvent datasets were used for calculating the environmental impacts, which were further quantified and monetised as presented in the figure below, obtaining thus the external costs per technologies and countries.

Study on energy costs, taxes and the impact of government interventions on investments

For electricity, fossil fuel technologies have the highest external costs of €68-€177/MWh for the EU27 average and these are even higher in the non-EU G20 countries (from €81-€305/MWh), reflecting weaker emissions abatement on fossil plants in these latter countries, especially China and India. Nuclear and renewable energy technologies have external costs of €3-17/MWh in the EU and G20 with wind and hydropower, reaching levels below €5/MWh. Domestic wood boilers have high associated external costs up to €170/MWh. The largest applicable policy measure (thus internalisation of the external costs), by far, is the EU-ETS (EU Emissions Trading System), this can be understood to offset 16%-19% of the total external costs for the fossil energy technologies in the EU27 (and UK). The average external cost of electricity in the EU27 is €68/MWh (or €59/MWh after internalisations such as EU-ETS are included, both with large differences between the MS) compared to €178/MWh for the G20 weighted average. Together with the external costs of heat this leads overall to an external cost (across all 43 countries) of almost €4 100 billion per year (or 6.6% of the total annual GDP of these 43 countries considered). China (€1 900 billion) and the US (€600 billion) are the biggest ‘polluters’.

More info about the study?

Mihaela Thuring


Mihaela Thuring

Project Manager bij EnergyVIlle/VITO