20
2 Technology, Risk, Precaution, and Sustainability
production of a good are not included, the price of this good will be too low from
an economic perspective. The resulting decisions of market participants then lead to
misallocation of resources and ultimately to a loss in the overall economy.
The objective of a more “environmentally conscious” economy is to ensure that
external costs, and therefore also related (potential) damage, are fully taken into
account when pricing raw materials and products. This is one of the main goals of
the Swiss Sustainable Development Guidelines (Steinemann et al., 2019).
To consider these external costs within the economy, they need to first be
identified, quantified, and recorded in monetary terms (monetization) in accordance
with the current state of science and technology as well as with political protection
goals. In the case of reversible environmental damage, monetization of it can, for
example, be achieved through compensation costs. For irreversible damage, other
approaches have to be used such as an empirically determined willingness to pay
for avoiding damage. The total external costs of using a good are calculated from
the monetized environmental (or human health) costs and are based on the fraction
that an individual polluter is responsible for.
The billing of external costs should follow the polluter pays principle. This is
done through a political process where the calculated external costs are charged
to the polluting company or entity according to the fraction that this entity is
responsible for. These costs then appear in their cost calculations. This can be
achieved with the help of market-oriented instruments such as:
• Tradable emission certificates: These certificates are marketable permissions,
e.g., for certain pollutant amounts. Requirements for a meaningful certificate are
(i) high geographical distribution of emissions and (ii) no resulting local toxicity.
For example, they can be applied to atmospheric pollutants such as CO 2 , NO x ,
SO 2 , or volatile organic compounds (VOCs).
• Taxes: Taxes could be placed on raw materials, energy, products, waste, and
emissions according to their input or output quantities. As an example, in 2017,
Sweden introduced a tax on various types of electronic equipment depending on
the amount of brominated flame retardants present in the devices (Andersson,
2017). The resulting revenues can either be earmarked directly for the avoidance
and compensation of human health and environmental damage or be reimbursed
for responsible behaviors (bonus-malus system).
The funds raised through such instruments are not always necessarily used to
prevent or compensate for damages. There are approaches for creating a tax system
in which the increased taxation of health and environmental burdens is accompanied
by a simultaneous reduction of income taxes or value-added taxes so that overall
government revenues are not increased.
In an economic structure that includes health and environmental costs, the
concept of health and environmental protection should not be seen as a costly
fulfillment of legal requirements. Rather, it should be recognized as providing
the possibility to optimize economic benefits through the efficient use of scarce
resources and the protection of the public. Producers and consumers receive
2 Technology, Risk, Precaution, and Sustainability
production of a good are not included, the price of this good will be too low from
an economic perspective. The resulting decisions of market participants then lead to
misallocation of resources and ultimately to a loss in the overall economy.
The objective of a more “environmentally conscious” economy is to ensure that
external costs, and therefore also related (potential) damage, are fully taken into
account when pricing raw materials and products. This is one of the main goals of
the Swiss Sustainable Development Guidelines (Steinemann et al., 2019).
To consider these external costs within the economy, they need to first be
identified, quantified, and recorded in monetary terms (monetization) in accordance
with the current state of science and technology as well as with political protection
goals. In the case of reversible environmental damage, monetization of it can, for
example, be achieved through compensation costs. For irreversible damage, other
approaches have to be used such as an empirically determined willingness to pay
for avoiding damage. The total external costs of using a good are calculated from
the monetized environmental (or human health) costs and are based on the fraction
that an individual polluter is responsible for.
The billing of external costs should follow the polluter pays principle. This is
done through a political process where the calculated external costs are charged
to the polluting company or entity according to the fraction that this entity is
responsible for. These costs then appear in their cost calculations. This can be
achieved with the help of market-oriented instruments such as:
• Tradable emission certificates: These certificates are marketable permissions,
e.g., for certain pollutant amounts. Requirements for a meaningful certificate are
(i) high geographical distribution of emissions and (ii) no resulting local toxicity.
For example, they can be applied to atmospheric pollutants such as CO 2 , NO x ,
SO 2 , or volatile organic compounds (VOCs).
• Taxes: Taxes could be placed on raw materials, energy, products, waste, and
emissions according to their input or output quantities. As an example, in 2017,
Sweden introduced a tax on various types of electronic equipment depending on
the amount of brominated flame retardants present in the devices (Andersson,
2017). The resulting revenues can either be earmarked directly for the avoidance
and compensation of human health and environmental damage or be reimbursed
for responsible behaviors (bonus-malus system).
The funds raised through such instruments are not always necessarily used to
prevent or compensate for damages. There are approaches for creating a tax system
in which the increased taxation of health and environmental burdens is accompanied
by a simultaneous reduction of income taxes or value-added taxes so that overall
government revenues are not increased.
In an economic structure that includes health and environmental costs, the
concept of health and environmental protection should not be seen as a costly
fulfillment of legal requirements. Rather, it should be recognized as providing
the possibility to optimize economic benefits through the efficient use of scarce
resources and the protection of the public. Producers and consumers receive