How economics can help address the problem of data waste

Last updated: 24th February 2023

Matthew Bell, Director at Frontier Economics and former Chief Executive of the UK Committee on Climate Change, explains how economics can help tackle the environmental impact of data waste.

Every second, multiple copies of the same data are created and stored by businesses and consumers on clouds and servers across the world. This requires copious amounts of energy and natural resources, such as water, minerals and land. With global data volumes set to more than double over the next decade, data waste (the social and environmental cost of keeping duplicate, redundant or poor-quality data) is a growing problem that has received scant attention from policymakers and businesses.

US studies suggest that up to 22% of medical records are duplicated. In addition, by some estimates more than half of business data is dark data—information that is stored but cannot be retrieved or productively used. And despite recent improvements, data centre energy demands remain huge—between 220-320 terawatt hours globally in 2021 (International Energy Agency). One hyperscale data centre, a very large and densely packed data center serving multiple enterprises, can use as much energy as 50,000 homes.

With technology solutions alone unlikely to fully address the environmental impact of data waste, economic tools and incentives need to play a role in tackling the issue. Our research has identified three areas that could help:

1) Emerging methods for pricing data: choosing what to discard or keep can be tough, as anyone who has weeded out an old paper file will attest. With documents that have potentially valuable future uses, you might choose to pay to store them or even sell them to a third party for preservation. For internal firm data shadow pricing of digital data sources could be used, with internal charging mechanisms reflecting the cost of storage. Another approach, borrowed from the financial markets, is the use of options contracts, where a third party contracts the option to buy the data at a specified future date. Such contracts would also reveal the market-determined future ‘option value’ of that data.

Options pricing admittedly has limitations. It depends on the seller having ownership rights to the data. More problematically, markets can have short time horizons and may struggle to identify long-term future use cases. In these instances, alternative decision-making frameworks could be developed that value data according to factors such as its uniqueness, the likelihood it could be easily replicated in the future and the extent to which its use is limited to specific purposes. The public sector might also want to pay attention to private, public and third sector data where future social benefits could accrue to those other than the data owner.

2) Assessing the value of mechanisms for sharing data: better sharing of data can improve sustainability outcomes. It can eliminate the need for costly data replication and enable shared solutions to societal and business problems. Yet the majority of socially useful data is not shared, either for commercial reasons or because organizations lack the resources to extract and disseminate it.

Economics can contribute through more frequent and better frameworks for the valuation of shared data. One of our recent studies found that a 25% increase in data sharing could boost GDP of the world’s 20 largest economies by up to $118.3bn.

3) Use of nudges and incentives for data use: digital nudges have proved effective in online content moderation, with bots encouraging users to pause before posting potentially harmful comments. They could also help reduce data waste by highlighting the environmental cost of downloading a movie versus streaming it, or by reminding users to delete earlier versions of a file as they write a report. Regulators and policy makers could also incorporate related incentives in policy design, especially in socially beneficial areas such as scientific research and the environment.

Data waste remains a neglected but important component of sustainability performance. Armed with better economic tools and frameworks, businesses and policymakers can make a start on its reduction.

You can read more about our thinking on this subject by clicking here.

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