The Application of the External Costs Concept on Innovative Industrial Technologies

Summary The purpose of this paper is to illustrate the growing application of economic techniques in environmental decision making, drawing on analysis carried out for the EC DG Research Ecosit study. A comparison is made of the production and use of loosefills manufactured from expanded polystyrene (derived from fossil fuels) and vegetable starch (a renewable resource derived from corn). This comparison is based on the ExternE methodology, again developed with funding from DG Research of the European Commission. This methodology has been used previously to advise in the development of legislation on air quality, energy policy, waste policy, etc. Results suggest that improved environmental performance of MaterBi is more than enough to offset the difference in price between the two products. Results are of course subject to some level of uncertainty and this will be addressed more deeply in further work, though we believe that the overall conclusion drawn will prove to be robust. Final results from the Ecosit study will be available after November 2002, and will cover a variety of additional case studies to those presented here