DOI: 10.5176/2251-1997_AF-43
Authors: Buntarika Jaikrajang
Abstract:
External failure costs of a firm are a component of environmental costs and can include costs which are imposed as a consequence of breaching environmental regulations, that is, imposed penalties and charges. Thus the imposed penalties and charges represent a shifting of some of the societal environmental costs from society to the firm which causes environmental damage (costs). An examination of penalties and charges imposed on firms in Thailand over the period 2003-2007 shows that 157 companies were financially penalized and 882 companies were charged with costs. Such companies account for 0.17 percent of the total manufacturing companies. The majority of imposed external failure costs on firms come from imposed pollution charges (99.7 percent). Estimated external failure costs of firms as a proportion of the investment establishment, total revenue, and value added of the sector were 0.04, 0.02, and 0.09 percent, respectively. Using ANOVA analysis revealed that there was no significant difference of the external failure costs and sectoral industry. However, the independent sample t-test revealed a significant difference of total external failure costs between pollution and non-pollution intensive industry. The result suggests that agro-based industries were the main industries which internalized some external failure costs because of their process. Such sectors produce a large amount of agriculture wastes, and thus they may have imposed on them environmental penalties if they do not conform to regulatory requirements.
Keywords: environmental costs, external failure costs, manufacturing sector, Thailand
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