Section Two
POLLUTION PREVENTION/WASTE
MINIMIZATION
4    ESTIMATING UNCERTAIN BENEFITS AND COSTS OF
POLLUTION PREVENTION
James D. Englehardt, Assistant Professor
Department of Civil and Architectural Engineering
University of Miami
Coral Gables, Florida 33134-0630
INTRODUCTION
Although explicit recognition of risk may raise fears of financial and legal implications within
management, it is now recognized that good business practice includes identification of risk in
corporate decision making.1 If environmental, health, and safety risks are recognized, the Securities
and Exchange Commission (SEC) and Financial Accounting Standards Board (FASB) may require
liabilities to be disclosed, and financial reserves or insurance policies to be established. However, the
analysis can increase profitability, by aiding selection of production processes having reduced environmental and health liabilities, often large compared to other costs, and by reducing waste disposal
costs. Simply performing the risk analysis is often enough to suggest ways of reducing risks and
associated costs, once recognized. And, finally, self-insurance requirements, or the value of environmental and health insurance, can be estimated with such methods, which may be of interest, for
example, to chemical manufacturers. No one expects risk-free technology, but employees and customers value honest management policies that minimize risks while protecting product quality and
economic health.
Difficulty in estimating environmental risks, health risks, marketing risks, and the risk of production stoppages (due to contamination introduced with recycled raw materials, for example) can be due
either to inherent variability, or to a lack of information.2 In planning, it is often necessary to estimate
both types of uncertainty. When the value of the project justifies an in-depth, site-specific analysis of
risk, detailed models may be used. However, it is unlikely that a large amount of data or information
on most risks will be available within the time and budget available for selecting many pollution
prevention processes.
In this paper, a Bayesian method of estimating typical risks associated with industrial hazardous
waste and processes of minimizing wastes, when little data or specific information are available, is
outlined. The risk estimates can be obtained in monetary terms, for example, for use in a benefit-cost
analysis to select efficient waste minimization approaches. An example analysis of the economic risk
associated with transportation of solvents to and from a commercial recycler is given. Such risk
estimates can then be included in the analysis of overall project economics.3
THE MODEL
Risk can be defined as the probability of loss. Losses associated with the use and generation of
hazardous materials are primarily health, environmental, safety, and economic risks, and may be
measured in dollars, lives, quantity of material, or other units.
In reality, probabilities, and therefore risks, depend not only on inherent uncertainties, but on the
information available for risk estimation. For example, the probability that a prize is behind door one
of three is 1/3, until door three is found not to hide the prize, when the probability becomes one-half.
Unfortunately, traditionally derived probability distributions do not reflect information content.
That is, the shape of a traditionally derived probability distribution that has been revised with
48th Purdue Industrial Waste Conference Proceedings, 1993 Lewis Publishers, Chelsea, Michigan 48118. Printed in
U.S.A.
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