Externalities of Hazardous Materials

• Economic Costs. They mostly involve cleanup costs and, when the hazmat accident occurs in some inhabited areas, population relocation is often necessary for a short period. There is an inverse relationship between economic costs of a hazmat accident and its social and environmental costs. In developed countries where there are strict regulations, social and environmental costs are often minimal while economic costs (cleanup and relocation) are extensive. In many developing countries where environmental regulations are not enforced, economic costs are not supported, thus transferring the impacts over social and environmental costs, which are obviously more difficult to measure and evaluate.
• Social Costs. Direct medical costs related to hazmat accidents are possible to evaluate more directly since statistics are available. Like all environmental externalities, indirect consequences may be higher than the sum of direct consequences. This relationship is however less important for hazmat accidents because of their punctuality and scale.
• Environmental Costs. Since hazmats accidents are punctual events, their environmental costs may be assessed in a comprehensive manner. They provide specific case studies of the effects of pollutants over environmental systems.

Four billion tons of hazmat are shipped each year in the United States with around 500,000 shipments daily. Road accounts for 60% of shipments, while waterways, rail and air account for 35%, 5% and 1% respectively. Similar scales of shipments and modal distribution in several other developed countries can be expected. The United States DOT cataloged more than 30,000 hazardous substances transported regularly with 22 hazard classes such as corrosive, flammable, combustible, and radioactive.

Road, rail and air account respectively for 84.1%, 12.5% and 3.2% of hazmat releases. The number of hazmat accidents has stabilized, but their impacts in terms of injuries and fatalities, in absence of information on cleanup costs, have increased significantly. Pipelines are also an important source of hazmat releases.