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analysis (CBA) is mandatory for evaluation of various environmental policy mea-
sures. In Europe, use of CBA to justify new equipment regulation has also been
increasing. The consideration of health and environmental impacts within a CBA
requires quantification of health and environmental impacts as far as possible on the
endpoint level to facilitate a subsequent valuation.
If a company or public administration must choose between one technological
solution and another, money is a very important parameter. The cost benefit analysis
has been developed to support long-term decisions from a societal point of view, in
contrast to a company perspective. In particular, the field of application includes the
evaluation of regulatory measures with a huge influence on the environment and the
selection of general public environmental strategies. The CBA intends to convert
the cost and benefits of regulatory measures, public environmental strategies, etc.
to monetary units (Nas, 1996). The basic principle behind this purpose from eco-
nomic science is to arrange the disequilibria caused by imperfections of the market
in the economic optimum between public and private interests. Therefore, it is
necessary to quantify the effects of the analyzed plans on society economically.
Because these effects can be environmental damages, they refer to effects on the
environment. Methods for their monetization allow estimating external environmen-
tal costs or externalities. They are called external because they are not considered
in conventional accounting methods (Dasgupta and Pearce, 1972).
The CBA facilitates efficient management of resources for the whole society.
When the results indicate that, as a consequence of the project, negative effects to
third parts such as atmospheric pollution or generation of dangerous wastes domi-
nate, the public administration intervene. Some of the interventions the government
can undertake to neutralize the negative effects are to establish emission thresholds
or taxes related to activities that provoke the damages. The CBA methodology
consists of four phases (Nas, 1996):

• Identification of the relevant costs and benefits
• Assignment of monetary values to the costs and benefits
• Comparison of the costs and benefits in the form of monetary units
generated along the lifetime of the project
• Final decision about the viability of the project and, if appropriate, adop-
tion of necessary interventions by the public administration

Figure 3.9 gives an overview of all the costs generated in the life-cycle of a
product and its visibility. The total costs are divided into two main types: pro-
duction and environmental. The costs with a lot of visibility are the direct ones
of the producer included in the selling price to the client and generated in the
phases from extraction to distribution. These are the conventional costs for raw
materials, energy and salaries. The costs in the second half of the life-cycle until
the disposal are less visible; these are the costs related to ownership after buying
the product.
The indirect costs of the producer do not have much visibility; they consist of
pollution abatement costs, actions to reduce the accident risk at the working place

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