By Ana Murphy  

According to some EPA guidelines due to the importance of accurate cost information in making the decisions sketched out above, the term
environmental cost has been introduced into the vocabulary of environmental managers. 
Today we are starting a series of posts related to the definition(s) and the measurements used to evaluate environmental costs. 

Environmental costs are often hard to define from a business stand point. In the past 10 years they are more likely to be qualified as a subset of the costs of operating a business. When substances are released into the air, water or land, the resulting pollution used to be considered a social cost, an externality. But some of the new regulations has resulted in internalization of some of these environmental externalities, through, for example, requirement of additional investment in equipment or training, or for fines and fees resulting from noncompliance. As environmental externalities become internalized, and investors start to pay attention to the environmental risks of their "investments" new costs emerge. 


These new costs must be captured by the traditional cost accounting system, so that product costs remain accurate enough to facilitate sound decision making by policy makers and business managers. For example, how should the cost of improved waste treatment (wastewater plants, incinerators, etc.) be reflected in the costs of the products responsible for waste generation? 

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