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responsibility on environmental protection the company fulfills and the lower correspondingly its environmental failure will be.
Figure 1 Sketch of relationship between environmental control cost and environmental failure cost
Seeing from current laws and regulations on pollution control, if the company actively fulfills its social responsibility and carries out environmental cost control, the State will show very low stimulation or no award,
and if it does not fulfill its responsibility and emits pollutants illegally, the government will impose at most a penalty of RMB100,000 yuan. This indicates that now in China the cost of breaking law is very low for a
company and correspondingly if a company carry out environmental cost control, it needs to purchase environmental control machine and make capital input. If normal investment of the machine is RMB3,000,000
and its economic durable time is three years, in that way the depreciation cost of the machine will be 1,000,000 yuan each year. Suppose the machine works normally after purchase, calculate running cost at RMB 3,000 yuan
per day, in that way the running cost each year will be more than 1,000,000 yuan. This shows that the environmental control cost of the company is RMB2,000,000 yuan per year, so that environmental control cost
departs from environmental failure cost is the root cause for the company not to do environmental control cost actively.
1.2 Divide as per functions environmental cost occurs
Seeing from environmental expense that occurs to the company, environmental cost includes environmental expense to make up environmental loss that already occurred and also environmental expense that is used to
prevent bad environmental result that might happen in future. It is found through investigation that currently companies rarely actively make up environmental loss that
already happen and environmental loss that already happen is hard to form matching relationship with the company and government also can not force the company to be responsible for the already occurred
environmental loss and recover it. Ask a company to do pollutant emission control for future environment, no matter from the government or
Environmental control cost Environmental failure cost
Pollutant emission quantity
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the company, corresponding driving force is lacked. First for the company, currently government has not requirement on company to carry out environment responsibility contract systems, therefore, as long as the
company can emit pollutants successfully, for government it is hard to call to account. Moreover, what is carried on governors is fixed-term appointment system, once the term of some governor is expired, pollution
responsibility formed within the term will be undertaken by the next government and next government finance, it is thus clear that no matter for the company or the governor, they both lack the driving force of being responsible
to monitor the future environment in this region.
1.3 Divide as per space scope of environmental cost
According to space scope of environmental cost, it can be divided into internal environmental cost and external environmental cost.
Internal environmental cost refers to the expense resulted by environmental factor and already made clear to be undertaken and paid by the company, for example, pollutant emission fees, environmental damage penalty,
environmental treatment and protection investment and increase of product environmental performance. One of the prominent features of internal environmental cost is that currency computation can be made, which will be
undertaken by the company. External environmental cost refers to those bad environmental results which are caused by company
economic activity but can not be clearly computed and still not be undertaken by the company for various reasons. For current Chinese law does not provide that the company has to undertake all the result of pollution caused
by the company, therefore, from company’s point of view, environmental cost is divided into external environmental cost and internal environmental cost.
Figure 2 Sketch of classification of environmental cost
Make up already occurred environmental loss
Environmental failure cost
Maintain currently environmental status
Internal environmental cost Environmental control cost
As per occurring functions of environmental cost
External environmental cost Prevent bad result that might
happen in future
As per space scope of environmental cost
Company’s environmental cost As per occurring time of
environmental cost
