GEF

Unit 7  |  The Economics of Sustainability 149 A more comprehensive example might be a steel production company. The price of the steel sold includes labor, equip- ment, and natural resources. However, iron ore mining and its transport to steel mills causes many forms of pollution, as does the heavy consumption of energy to convert iron ore to steel. Generally, the price of steel does not include the cost of envi- ronmental damage. Instead, the costs are passed on to society in the form of decreased health or increased climate change. The crucial point about environmental externalities is that because consumers are not directly aware of their cost, they do not consider it when making purchase decisions. Pollution caused by pesticide and fertilizer runoff from farms (top), and air pollution from fossil fuel combustion (bottom) are examples of economic externalities. ?  DID YOU KNOW The United Nations 2005 Millennium Ecosystem Assessment reported that of the twenty-five ecosys- tem services determined to be important for humans, fifteen were in a state of serious decline.