This exploratory paper attempts to restart a debate about the incorporation of environmental
externalities into the cost structure of the organisation. A number approaches are considered;
regulation together with all that would follow such as audit and policing; pollution permits, which
probably can only be used with a sinking lid application; and other charging mechanisms such as
making the private sector pay for public sector capital funding. The fourth alternative, the use of an
environmental equity account, has not been widely considered in the literature.
The paper proposes the use of an environmental equity account (after Boone and Rubenstein,
1997) with the express intent of generating a charge for environmental impact based on the cost of
control. That is, the cost of implementing state of the art technology compared to that currently in
use within the organisation, is used as a balance which may be either paid as a capital sum or
carried as a balance sheet entry upon which dividend payments would have to be made. It is
envisaged that both capital sums and dividend payments would go to an agency responsible for
environmental remediation activity.
