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Analyzing the Polluter Pays Principle Through Law and Economics Essay

“The ‘polluter pays principle’ states that whoever is responsible for damage to the environment should bear the costs associated with it. ” The Polluter Pays Principle (PPP) is one of the internationally recognized principles that in? uence the shaping of environmental policy at both the national and international level. As one of the environmental principles that have developed ‘from political slogans to legal rules,’ it is also increasingly re? ected in national and international law. It is seen and analyzed both as a principle of environmental economics and as a principle of environmental law.

In environmental economics, it is discussed as an ef? ciency principle of internalization of environmental costs. As a legal principle, it is usually treated as a principle for the allocation of the cost of pollution prevention, and for liability and compensation for environmental damage. In general, it is regarded as an important and ‘right’ principle in the perspective of environmental protection. It is often mentioned together with other major environmental principles such as the precautionary principle, the principle of prevention and the principle of integration.

In general, it is regarded as an important and ‘right’ principle in the perspective of environmental protection. It is often mentioned together with other major environmental principles such as the precautionary principle, the principle of prevention and the principle of integration. The “polluter pays principle” (PPP or principle) requires the polluter to bear the expense of preventing, controlling, and cleaning up pollution. Its main goals are cost allocation and cost internalization.

In 1972, the Organisation for Economic Co-operation and Development (OECD) articulated the principle explicitly and in 1989 indicated that it should be applied to agriculture. Though the principle originated as an economic principle, since 1990 it has been recognized internationally as a legal principle. The PPP now plays an important role in national and international environmental policy. The European Community (EC) adopted the principle in the 1987 Single European Act, and it has appeared in international agreements, including the Rio Declaration of 1992.

The principle is an explicit part of legislation in some nations; in others, it is an implicit subtext for both environmental regulation and liability for pollution. Historical Evolution Of Polluter Pays Principle The polluter pays principle, like the other great towering principles that today influence international environmental law, such as: (1) the sustainable development principle; (2) the prevention principle; (3) the precautionary principle; and (4) the proximity principle, started as a political declaration without legal force.

The polluter pays principle has been included in documents with legal status. For instance, many modern constitutions in the European Union explicitly provide for a right to a clean environment and thus environmental policy principles also constitute environmental law. The right to a clean environment implies a duty of the state to protect its citizens, but it is questionable whether these principles or social rights can yet be considered subjective rights, meaning that they can be enforced by citizens in a court.

However, some see the right to a clean environment as a human or natural right existing independently of politically decided treaties. Finally, the polluter pays principles is now seen in specific pieces of legislation becoming more (or some might say ‘less’) than a grand constitutional statement of an intractable human right. OECD – the birth of the polluter pays principle Some explanation of the sometimes arbitrary course of the principle of polluter pays can be found in its historical development.

The principle first appeared in a legal context in a document prepared by the international Organization for Economic Cooperation and Development (“OECD”) and included the following recommendation: “The principle to be used for allocating costs of pollution prevention and control measures to encourage rational use of scarce environmental resources and to avoid distortions in international trade and investment is the so-called ‘Polluter Pays principle’.

This principle means that the polluter should bear the expenses of carrying out the above mentioned measures decided by public authorities to ensure that the environment is in an acceptable state. In other words, the cost of these measures should be reflected in the costs of goods and services which cause pollution in production and/or consumption. Such measures should not be accompanied by subsidies that would create significant distortions in international trade and investment”.

In 2001, the OECD Joint Working Party on Agriculture and Environment, after years of gestation and development by other organisations, stated that a new and expanded form of the polluter pays principle should provide that: “… the polluter should be held responsible for environmental damage caused and bear the expenses of carrying out pollution prevention measures or paying for damaging the state of the environment where the consumptive or productive activities causing the environmental damage are not covered by property rights. United Nations – the Rio Declaration This proclamation was proved, at least on paper, if not yet by jus cogens, in 1992 when the United Nations Conference on the Environment and Development delegates agreed on the Rio Declaration on Environment and Development (the “Rio Declaration”), which has been described as an “instrument of international jurisprudence [that] articulates policies and prescriptions directed at the achievement of worldwide sustainable development”.

It is of note that Principle 16 of the Rio Declaration provides that: “[n]ational authorities should endeavour to promote the internalization of environmental costs and the use of economic instruments, taking into account the approach that the polluter should, in principle, bear the cost of pollution, with due regard to the public interest and without distorting international trade and investment”. The principle’s appearance in such a seminal statement of the undamental principles of international environmental law demonstrates its significance in environmental liability regimes around the world. United States The principle has to some extent informed United States’ legislation, but its influence should not be overstated and commentators note that: “The United States, in contrast to the European nations, does not officially recognize the [polluter pays principle] as a distinct principle or policy mandate, but does, by natural political and economic inclination, closely follow its precepts in practice”.

Certain provisions of the United States’ Clean Air Act 1970 (the “CAA”) and Clean Water Act 1977 (the “CWA”) require polluters to satisfy environmental standards at their own expense; and the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”) assigns liability for costs associated with cleaning-up sites contaminated by hazardous wastes. CERCLA is a notable milestone in the development of the polluter pays principle in the United States and commentators have noted that: “the polluter pays principle is one of the central objectives or goals of CERCLA”.

Flaws in the Polluter Pays Principle Few people could disagree with what seems at first glance to be such a straightforward proposition. Indeed, properly construed, this is not only a sound principle for dealing with those who pollute but is an extension of one of the most basic principles of fairness and justice: people should be held responsible for their actions. Those who cause damage or harm to other people should “pay” for that damage. This appeal to our sense of justice is why the “polluter pays principle” (PPP) has come to resonate so strongly with both policy makers and the public.

As a general rule, sound economic analysis of pollution and environmental problems must also be based on the principle of responsibility. Forcing polluters to bear the costs of their activities is good economics too; it not only advances fairness and justice, but also enhances economic efficiency. In other words, with appropriate policies based on a PPP, we should not have to give up the economic efficiency of a free market system based on private property in order to obtain environmental protection, nor vice versa.

But as with most such general principles, the devil is in the details. In this case, the details relate to three basic questions that any application of the PPP must answer. First, how do we define pollution and therefore a polluter? Second, how much should the polluter pay, once he is identified? Third, to whom should the payment be made? The answers to these questions are at the heart of whether any application of the PPP will be either just or economically efficient.

A correctly construed polluter pays principle would penalize those who injure other people by harming their persons, or by degrading their property. Too often, however, the PPP is misdefined and misused to suppress private economic activity that benefits the parties directly involved and does no specific damage to other people, but which offends those who oppose human impact on the environment and prefer to leave resources undeveloped. The objective is to restrain the resource use at the expense of the property owners and consumers without cost to those who wish to see the resources remain idle.

Under such a misapplication of the PPP, very often “a polluter” is not someone who is harming others, but is someone who is simply using his own property and resources in a way that is not approved of by government officials or environmentalists. In such cases there is no harm to be measured and no real victims to compensate. Consequently, the amount to be paid is not determined by the extent of any actual damage done. Rather, it is set at a level that curbs the politically disfavored activity to the degree desired by its opponents.

And finally, the payment (whether there are real victims or not) typically goes to the government in the form of a tax. In other words, in most cases, the PPP is used as cover to promote a political or ideological agenda rather than to ensure that real polluters pay compensation to real victims of their activities. Constitutional and Legislative Measures Stockholm Declaration of 1972 was perhaps the first major attempt to conserve and protect the human environment at the international level. As a consequence of this Declaration, the States were required to adopt legislative measures to protect and improve the environment.

Accordingly, Indian Parliament inserted two Articles, i. e. ,, 48A and 51A in the Constitution of India in 1976, Article 48A of the Constitution rightly directs that the State shall endeavour to protect and improve the environment and safeguard forests and wildlife of the country. Similarly, clause (g) of Article 51A imposes a duty on every citizen of India, to protect and improve the natural environment including forests, lakes, river, and wildlife and to have compassion for living creatures.

The cumulative effect of Articles 48A and 51A (g) seems to be that the ‘State’ as well as the ‘citizens’ both are now under constitutional obligation to conserve, perceive, protect and improve the environment. Every generation owes a duty to all succeeding generations to develop and conserve the natural resources of the nation in the best possible way. The phrase ‘protect and improve’ appearing in both the Articles 48A and 51A (g) seems to contemplate an affirmative government action to improve the quality of environment and not just to preserve the environment in its degraded form.

Apart from the constitutional mandate to protect and improve the environment, there are a plenty of legislations on the subject but more relevant enactments for our purpose are the Water (Prevention and Control of Pollution) Act, 1974; the Water (Prevention and Control of Pollution) Cess Act, 1977; the Air (Prevention and Control of Pollution) Act, 1981; the Environment (Protection) Act, 1986; Public Liability Insurance Act, 1991; the National Environment Tribunal Act, 1995 and the National Environment Appellate Authority Act, 1997; the Wildlife (Protection) Act, 1972; the Forest (Conservation) Act, 1980.

The Water Act provides for the prevention and control of water pollution and the maintaining or resorting of the wholesomeness of water. The Act prohibits any poisonous, noxious or polluting matter from entering into any stream or well. The Act provides for the formation of Central Pollution Control Board and the State Pollution Control Board. The new industries are required to obtain prior approval of such Boards before discharging any trade effluent, sewages into water bodies.

No person, without the previous consent of the Boards shall bring into use new or altered outlet for the discharge of sewage or trade effluent into a stream or well or sewer or on land. The consent of the Boards shall also be required for continuing an existing discharge of sewage or trade effluent into a stream or well or sewer or land. In the Ganga Water Pollution case, the owners of some tanneries near Kanpur were discharging their effluents from their factories in Ganga without setting up primary treatment plants.

The Supreme Court held that the financial capacity of the tanneries should be considered as irrelevant while requiring them to establish primary treatment plants. The Court directed to stop the running of these tanneries and also not to let out trade effluents from the tanneries either directly or indirectly into the river Ganga without subjecting the trade effluents to a permanent process by setting up primary treatment plants as approved by the State Pollution Control Board.

The Water (Prevention and Control of Pollution) Cess Act, 1977 aims to provide levy and collection of a cess on water consumed by persons carrying certain industries and local authorities to augment the resources of the Central Board and the State Boards constituted for the prevention and control of water pollution. The object is to realise money from those whose activities lead to pollution and who must bear the expenses of the maintaining and running of such Boards.

The industries may obtain a rebate as to the extent of 25% if they set up treatment plant of sewage or trade effluent. The Air Act has been designed to prevent, control and abatement of air pollution. The major sources of air pollution are industries, automobiles, domestic fires, etc. The air pollution adversely affects heart and lung and reacts with hemoglobin in the blood. According to Roggar Mustress, the American Scientist, air pollution causes mental tension which leads to increase in crimes in the society.

The Air Act defines an air pollutant as any ‘solid, liquid or gaseous substance including noise present in the atmosphere in such concentration as may be or tend to be injurious to human beings or other living creatures or plants or property or environment. ‘ The Act provides that no person shall without the previous consent of the State Board establish or operate any industrial plant in an air-pollution control area. The Central Pollution Control Board and the State Pollution Control Board constituted under the Water Act shall also perform the power and functions under the Air Act.

The main function of the Boards under the Air Act is to improve the quality of air and to prevent, control and abate air pollution in the country. The permission granted by the Board may be conditional one wherein stipulations are made in respect of raising of stack height and to provide various control equipments and monitoring equipments. It is expressly provided that persons carrying on industry shall not allow emission of air pollutant in excess of standards laid down by the Board. In Delhi, the public transport system including buses and taxies are operating on a single fuel CNG mode on the directions given by the Supreme Court.

Initially, there was a lot of resistance from bus and taxi operators. But now they themselves realise that the use of CNG is not only environment friendly but also economical. Noise has been taken as air pollutant within the meaning of Air Act. Sound becomes noise when it causes annoyance or irritates. There are many sources of noise pollution like factories, vehicles, reckless use of loudspeakers in marriages, religious ceremonies, religious places, etc. Use of crackers on festivals, winning of teams in the games, and other such occasions causes not only noise pollution but also air pollution.

The Air Act prevents and controls both these pollutions. The Environment (Protection) Act, 1986 was enacted to provide for the protection and improvement of the quality of environment and preventing, controlling and abating environmental pollution. The Act came into existence as a direct consequence of the Bhopal Gas Tragedy. The term ‘environment’ has been defined to include water, air and land, and the inter-relationship which exists among and between water, air and land and human beings, other living creatures, plants, micro-organism and property.


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