What is an externality?

An externality is a positive or negative outcome of a given economic activity that affects a third party that is not directly related to that activity. Erosion and chemical runoff caused by building roads, which causes water pollution further downstream, is an example of a negative externality. By comparison, an increase in high-earning taxpayers, resulting from a university being built in a low-income area with limited higher education opportunities, is an example of a positive externality.

Examples of externalities that we use when customizing SAVi:

Environment:Higher/lower water and air pollution, more/less greenhouse gas emissions, degradation or rehabilitation of land and habitats, deforestation or reforestation, biodiversity loss/ gains.

Social: Loss of traditional jobs, generation of new jobs, increase/ decrease of wages, impacts on human health and health costs, effects on urbanization trends and rural livelihoods, changes in size of public space, social conflicts, contribution to education and skills building.

Economic: Contribution to economic development (indicators: GDP, green GDP), effects on land and real estate prices, revenue losses/ gains in affected sectors, new trade opportunities, commercialization and acceleration of technological innovation.