Final answer:
Environmental costs form part of the legal liabilities that include higher litigation and insurance costs due to negative environmental impacts.
Step-by-step explanation:
Environmental costs do include higher litigation and insurance costs due to increased legal liabilities faced by firms as a result of environmental impacts. These additional costs are part of the social costs incurred by firms and third parties outside the production process. Environmental costs are a subset of legal liabilities that firms may face as part of the consequences of their operations, especially when their activities have negative impacts on the environment, leading to externalities such as pollution.
Furthermore, the costs associated with complying with environmental laws, referred to as regulatory expenses, are also considered when calculating the overall expense of environmental impacts. The U.S. firms may pay significant amounts to comply with these regulations, and while these costs represent a financial consequence, they can lead to overall benefits for the society by reducing ecological damage and promoting sustainable practices. It is also important to note that the cost of environmental regulations is only a small percentage of the overall costs that a large industrial plant faces.