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The paper provided detail analysis and calculations of external costs in cement industry of the Republic of Serbia and neighboring countries for period of 2010-2016. Internalization of externalities represents huge challenge for every policy makers in environmental area that have obligation to calculate the impact of economy on the environment. In fact, many parts of economy have far greater impact on environment than it can be expected and that is one of the reasons for including external costs in total costs of companies. Cement industry is among industries that emit pollutant particles in the air and cause serious environmental problems to local communities. The principal idea of paper is to evaluate external costs of cement production plants in Republic of Serbia, Bulgaria, Hungary and Romania, so in the end rightful solutions can be provided in order to neutralize or minimize environmental impact of cement factories. For this kind of analysis, EcoSense LE (Light Edition) software is used.  Analysis of external costs in cement industry will help in expansion of knowledge about internalizing environmental externalities in analyzed countries, where lack of similar studies does not help in solving the problem of environmental externalities in these countries. Key words: environmental externalities, the Republic of Serbia, cement industry, sustainable development, internalization of externalities, external costs .

INTERNALIZING ENVIRONMENTAL EXTERNALITIES IN CEMENT INDUSTRY: CASE STUDY FOR THE REPUBLIC OF SERBIA AND SELECTED NEIGHBORING COUNTRIES