Question

In the context of green engineering, what is the difference between internal and external costs? Which type is easier to estimate and quantify, and why?

2.29 from Engineering Economic Analysis - Jerome P. Lavelle - 13th edition.

Answer 1

Green engineering refers to the practice of applying financially and technologically best feasible products to design and produce products in a way that pollution created at source is also minimized.

Internal costs refer to monetary costs of producing goods and products and external costs refer to externality costs of production i.e. cost of pollution to the society.

Internal costs are easier to estimate and quantify as they are already captured in monetary terms as opposed to external costs which need to be assigned a monetary value which differs from project to project.