section_path: Cost
section_name: Cost
paragraph_text: Cost
  
  Pollution has a cost. Manufacturing activities that cause air pollution impose health and clean-up costs on the whole of society. A manufacturing activity that causes air pollution is an example of a negative externality in production. A negative externality in production occurs "when a firm's production reduces the well-being of others who are not compensated by the firm." For example, if a laundry firm exists near a polluting steel manufacturing firm, there will be increased costs for the laundry firm because of the dirt and smoke produced by the steel manufacturing firm. If external costs exist, such as those created by pollution, the manufacturer will choose to produce more of the product than would be produced if the manufacturer were required to pay all associated environmental costs. Because responsibility or consequence for self-directed action lies partly outside the self, an element of externalization is involved. If there are external benefits, such as in public safety, less of the good may be produced than would be the case if the producer were to receive payment for the external benefits to others. Goods and services that involve negative externalities in production, such as those that produce pollution, tend to be overproduced and underpriced since the externality is not being priced into the market.
  
  Pollution can also create costs for the firms producing the pollution. Sometimes firms choose, or are forced by regulation, to reduce the amount of pollution that they are producing. The associated costs of doing this are called abatement costs, or marginal abatement costs if measured by each additional unit. In 2005 pollution abatement capital expenditures and operating costs in the US amounted to nearly $27 billion.