Page 121 - Materials Chemistry, Second Edition

L1644_C03.fm Page 96 Tuesday, October 21, 2003 3:11 PM

Lowest Low High visibility

{
{
visibility visibility {
Costs to Producer's Producer's
society indirect direct High
costs costs { visibility
Purchase
price to
customer
Extraction
Pollution Low
as well as Production { visibility
resource Distribution After-sale
misuse costs of
and Use ownership
depletion
Maintenance
Disposal
External Internal
Production Costs
environmental costs
Total Costs
FIGURE 3.9 Types of production and environmental costs and their visibility.

and other measures not directly necessary to manufacturing the product. The first
part of the environmental costs, the internal environmental costs or abatements costs,
belongs to the producer’s indirect costs in the first half of the life-cycle. They are
internal costs from an environmental point of view because the polluter pays them.
Moreover, in each phase of the product life-cycle, costs to society are generated in
the form of pollution as well as misuse and depletion of resources. These costs are
the second part of environmental costs — the external environmental costs or
externalities — and have very little visibility.
Thus, two types of environmental costs can be distinguished:

• Internal environmental costs or abatement costs are those a company pays
to reduce its environmental loads to, at least, under the legal threshold,
e.g., the installation and maintenance of gas filters.
• External environmental costs or externalities are emissions and other
environmental loads caused to society, e.g., increase of asthma cases; to
obtain them the monetization of environmental damage estimates is nec-
essary.

The conversion of environmental damages in external costs is called monetiza-
tion. With the external environmental costs or externalities at one’s disposal, it is
possible to internalize these costs and calculate the total cost of a product. Theoret-
ically, this is the price a product needs to be consistent with the market. In a figurative
sense, it could be considered the amount that must be paid to maintain the planet
in equilibrium, apart from the amount paid to the producer. More practically, it
means that, with the monetization, environmental damages can be introduced into

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