Analyzing The Polluter Pays Principle

ANALYZING THE POLLUTER PAYS PRINCIPLE THROUGH LAW AND ECONOMICS
BORIS N. MAMLYUK* I. INTRODUCTION ................................................................................. 44 II. AN IN-DEPTH LOOK AT THE POLLUTER PAYS PRINCIPLE ................ 46 A. What Is the Polluter Pays Principle?......................................... 46 B. Background and History of the Polluter Pays Principle .......... 47 C. Theory and Variations of the Polluter Pays Principle............... 48 D. The Polluter Pays Principle in Crisis ........................................ 51 III. THE PRINCIPLES OF COASE AND CALABRESI IN ADDRESSING POLLUTION ....................................................................................... 53 A. The Coasian Reciprocity Principle ............................................ 53 1. Applicability of the Coase Theorem to Polluter Pays Principle .............................................................................. 53 2. Problems with Application of Coase Theorem to Pollution Cases .................................................................... 54 B. Calabresi-Melamed Cheapest Cost Avoider Principle .............. 55 IV. CRITICAL LAW AND ECONOMICS APPROACH TO THE POLLUTER PAYS PRINCIPLE ............................................................. 57 A. What Is Efficiency? What Are Our Values? And What Are Externalities? ...................................................................... 57 B. Full Internalization Is Neither Required Nor Possible .............. 61 C. Ambiguity; Practical Unworkability .......................................... 62 V. DEVELOPMENT OF A FORWARD-LOOKING ENVIRONMENTAL ECONOMIC THEORY ......................................................................... 67 A. The Concept of Environmental Harm and Costs: Beyond Anthropocentrism....................................................................... 68
Visiting Scholar, Cornell Law School (2007-2009); Ph.D. Candidate in Law, Economics & Institutions, CLEI Center, University of Torino, Italy; J.D., University of California, Hastings College of the Law. The author presented an earlier version of this article at the 2007 Meeting of the Canadian Law and Economics Association. The author thanks Kate Litvak, Bernard Black, Ugo Mattei, Michele Graziadei, Golnoosh Hakimdavar, John D. Haskell and the Faculty of Law Review at the University of Torino for their incisive and helpful comments. The author can be reached at bmamlyuk@gmail.com.
Electronic copy available at: http://ssrn.com/abstract=1679245
44
SOUTHEASTERN ENVIRONMENTAL LAW JOURNAL
[VOL. 18.1
B. The Problem With Static, Single-Generation Economic Models........................................................................................ 72 C. Beyond Efficiency and Towards Multilevel Governance ........... 73 D. The Strategy of Homo Ecologicus ............................................. 76 E. A Right to Biosphere Quality in Law? ....................................... 81 VI. CONCLUSION .................................................................................... 84
I.
INTRODUCTION
In the preface to The Law and Economics of the Environment, Richard Posner remarked that we have entered a second generation of economic analysis of environmental law in which fundamental economic issues . . . are no longer the focus.1 Rather, the analysis has shifted to the practical issues of environmental law.2 This second generation is typified by the work of the now-famous Stern Review.3 This essay seeks to challenge the dominant wisdom of the second generation scholarship, upon which fundamental economic issues have been settled.
THE LAW AND ECONOMICS OF THE ENVIRONMENT, xv (Anthony Heyes ed., 2001) [hereafter Heyes]. 2 Id.; see also Karel Vasak, A 30-Year Struggle: The Sustained Efforts to Give Force of Law to the Universal Declaration of Human Rights, UNESCO COURIER, Nov. 1977, at 29-32. Both Posner and Vasak employ a generational approach: Posner to economic analysis and Vasak to human rights analysis. A generational approach implies a maturation and absorption of lessons learned by previous generations. This assumption bears out neither in international environmental law nor in the law of human rights. This criticism of generational analysis is not intended to disparage the work of international legal historians who employ a complex analysis in their efforts to follow legal development over a span of many decades while returning to more troublesome areas in legal development for further analysis. 3 See NICHOLAS STERN, THE ECONOMICS OF CLIMATE CHANGE: THE STERN REVIEW (2007), pre-publication edition available at http://www.hm-treasury.gov.uk/stern_review_report.htm [hereafter THE STERN REVIEW]. The Stern Review is named after Sir Nicholas Stern, Head of the Government Economic Service and adviser to the British Government on the economics of climate change and development. The Review is a 700-page survey of climate change challenges that is particularly sensitive to CO2 emissions. The Review contains detailed policy recommendations for reducing greenhouse gas emissions and has arguably initiated a third generation of environmental law and economics analysis that focuses on issues of intergenerational equity.
Electronic copy available at: http://ssrn.com/abstract=1679245
2010]
ANALYZING THE POLLUTER PAYS PRINCIPLE
45
Todays mainstream scholarship rests on unarticulated anthropocentric value judgments, which render the resulting economic analysis not only ethically bankrupt but also irrelevant in practice.4 Consequently, the currently dominant liability allocation models are inefficient for evaluating methods of pollution abatement.5 Therefore, revising liability attribution by neutrally weighing the interests of both humans and the environment is particularly relevant to critiquing the dominant liability attribution theory, which underpins the polluter pays principle.6 Revising the dominant liability model so as to evaluate choices based on the interests of both humans and the environment will introduce a commonly overlooked key variable: the environments own legal right to protection as a legal entity.7 This essay is divided into several parts. Part II outlines the basic concept of the polluter pays principle and its economic rationale. Part II then critiques the important conceptual and practical weaknesses of the polluter pays principle. Part III analyzes Ronald Coases and Guido Calabresis systems for dealing with pollution and nuisance problems. Part IV analyzes the workability of the Coase and Calabresi models and discusses whether those paradigms may be reconciled with the polluter pays principle. Finally, Part V suggests an alternative environmental regulation scheme based on economic considerations that are radically different from current mainstream economic models.
Christian Becker, The Human Actor in Ecological Economics: Philosophical Approach and Research Perspectives, 60 ECOLOGICAL ECON. 17, 17-23 (2006). 5 Id. (Environment here is a heuristic concept, denoting the global sphere and all conceivable species and biological and mineral groups (animate and inanimate) as stakeholders). 6 See Organization for Economic Cooperation, Council Recommendation on the Implementation of the Polluter-Pays Principle (Jan. 1975), 14 I.L.M. 234, 239 [hereinafter OECD, Polluter-Pays Principle]. 7 Susan Emmenegger & Axel Tschentscher, Taking Natures Rights Seriously: The Long Way to Biocentrism in Environmental Law, 6 GEO. INTL ENVTL. L. REV. 545, 572-76 (1994).
46
[VOL. 18.1
II. AN IN-DEPTH LOOK AT THE POLLUTER PAYS PRINCIPLE A. What Is the Polluter Pays Principle? The polluter pays principle is a broad concept with different meanings depending on the specific context.8 In domestic law, the polluter pays principle states that polluting entities are legally and financially responsible for the harmful consequences of their pollution.9 In contrast, in international law, the Organization for Economic Cooperation and Development (OECD) prescribes a quasi-regulatory regime of environmental taxation for the application of the polluter pays principle.10 According to the OECD, companies are taxed according to the level of pollution they produce.11 In theoretical terms, the polluter pays principle is a model for allocating and abating environmental harm and requires the responsible individual, firm, or nation to bear the cost of pollution.12 Absent this mechanism, the costs of environmental damage fall on the general
Eric Larson, Why Environmental Liability Regimes in the United States, the European Community, and Japan Have Grown Synonymous with the Polluter Pays Principle, 38 VAND. J. TRANSNATL L. 541, 545-50 (2005) (discussing how the polluter pays principle has been implemented in such places as the United States, the European Community and in Japan.). 9 See Stefanie Sommers, The Brownfield Problem: Liability For Lenders, Owners, and Developers in Canada and the United States, 19 COLO. J. INTL ENVTL. L. & POLY 259, 26667, 277-91 (2008) (comparing the application of the polluter pays principle in the United States and Canada. Sommers also discusses brownfield liability in Canada and the problems of enforcing Canadas Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)). 10 OECD, Polluter-Pays Principle, supra note 6, at 234-35. 11 Id. Polluter pays schemes have been discussed at the top levels of nearly every major international organization from the UN to the EU to regional bodies, NGOs and multinational corporations. For instance, the World Banks Investment Framework for Clean Energy and Development has set forth guidelines for responsible development and sustainable investment. World Bank, An Investment Framework for Clean Energy and Development: A Progress Report (Sept. 1, 2006) at 3, available at http://siteresources.worldbank.org/SOUTHASIAEXT/Resources/2235461171488994713/3455847-1189621792 121/AnInvestmentFrameworkforCleanEnergyandDevelopment.pdf. For analytical ease, this essay considers both meanings of the polluter pays principle. 12 See Rio Declaration on Environment and Development, 16, U.N. Doc.A/CONF.151/26 (Aug. 12, 1992); see also SUMUDU A. ATAPATTU, EMERGING PRINCIPLES OF INTERNATIONAL ENVIRONMENTAL LAW 470 (Transnational Publishers 2006).
2010]
47
community, either through taxation to fund governmental cleanup or by reduced environmental quality. In the legal sense, the polluter pays principle embodies the general equitable notion that polluting entities should bear the costs of their pollution.13 Therefore, the polluter pays principle has entered mainstream economics and environmental economics in this amorphous form.14 Not surprisingly, there is heated debate regarding the scope of the broad principle and the wisdom of its economic justifications.15 B. Background and History of the Polluter Pays Principle The polluter pays principle dates back to the early 1970s.16 Although the OECD adopted it in 1972, it was not extensively debated in broader international circles until the early 1990s, culminating with its inclusion in the Rio Declaration.17 Prior to the polluter pays principle, there was no perceived need to internalize the costs of environmental harm because natural resources were considered free goods; pollution emissions were thought to have negligible negative effects, and the environment was not valued at all.18 No legal or economic bases developed to allocate the costs of cleanup because the oceans and atmosphere were seen as inexhaustible sponges for humanitys waste.19 Little or no thought went into the need to protect the environment until people started economically valuing the environment. Once people started quantifying environmental value, they
13 14
OECD, Polluter-Pays Principle, supra note 6, at 234-35. See PETER G. G. DAVIES, EUROPEAN UNION ENVIRONMENTAL LAW: AN INTRODUCTION TO KEY SELECTED ISSUES 52-55 (Ashgate Publg, Ltd. 2004); ALAN GRIFFITHS & STUART WALL, APPLIED ECONOMICS 117 (11th ed., 2007) ([T]he move towards environmental taxes is in line with the polluter pays principle); LSZL ZSOLNAI, RESPONSIBLE DECISION MAKING 171-72 (Transaction Publishers 2008) (discussing the polluter pays principle in EU law as appearing in environmental acquis communautaire). 15 SHIFTS IN COMPENSATION FOR ENVIRONMENTAL DAMAGE 65-68 (Michael Faure & Albert Verheij eds., 2007) (discussing the vagueness of the polluter pays principle especially as it is applied to measuring the actual amount of pollution). 16 See OECD, Polluter-Pays Principle, supra note 6, at 234. 17 Rio Declaration, supra note 12, at 16. 18 ATAPATTU, supra note 12, at 438. 19 Id. at 438-39.
48
[VOL. 18.1
realized the need to efficiently exploit environmental resources.20 However, the values that people were trying to optimize in the environmental context went undefined, leaving lots of ambiguities in the process of internalizing costs. The problem of externalities was recognized long before the 1970s, at least as early as Pigous 1932 work, The Economics of Welfare.21 The social costs of pollution22 and the need to internalize the costs and benefits of pollution were extensively debated throughout this time.23 Duncan Kennedys internalization solution for the problem of social costs is a variation of the polluter pays principle, although his nomenclature differs from traditional literature.24 Mainstream law and economics literature and the history of international conventional law state that the polluter pays principle sprang from the need to find an efficient solution to the seemingly straightforward problem of environmental harm between two entities of relatively equal bargaining strength.25 Conventional environmental economics concluded that the polluter pays principle was the only efficient model for dealing with pollution, whether in the context of liability for private harm or as a broader preventative measure.26 C. Theory and Variations of the Polluter Pays Principle The polluter pays principle deals with cost allocation, cost internalization, and legal liability.27 Scholars disagree as to whether the polluter pays principle addresses cost allocation in addition to deciding
Id. at 439. ARTHUR C. PIGOU, THE ECONOMICS OF WELFARE 183 (4th ed. 1932); see Duncan Kennedy, Cost-Benefit Analysis of Entitlement Problems: A Critique, 33 STANFORD L. REV. 387, 394 (1981). 22 Ronald H. Coase, The Problems of Social Cost, 3 J.L. & Econ. 1, 1-2 (1960). 23 ATAPATTU, supra note 12, at 438. 24 Id. 25 Id. at 438-39. 26 See Robert V. Percival, The Globalization of Environmental Law, 26 PACE ENVTL. L. REV. 451, 461-62 (2009). 27 See Jonathan Remy Nash, Too Much Market? The Conflict between Tradeable Pollution Allowances and the Polluter Pays Principle, 24 HARV. ENVTL. L. REV. 465, 472-78 (2000).
21
20
2010]
49
liability.28 Scholars also disagree on whether is possible to apply the polluter pays principle without resorting to liability.29 The polluter pays principle can be a general liability allocation model in which an actor is held liable for harm because a wrongdoer must compensate the aggrieved victims of the harm.30 Likewise, the polluter pays principle may be envisioned as an ex ante allocation of the costs of pollution prevention and control measures designed to encourage rational use of scarce environmental resources.31 The polluter pays principle also spreads the cost of environmental harm to intermediary users and end-consumers, thereby generating incentives for efficient resource use at all levels.32 The polluter pays principle rests on the theory of cost internalization.33 In many domestic situations, it is politically difficult
See ATAPATTU, supra note 12, at 441 (emphasizing the distinction between ex post facto compensation basis of liability models and ex ante cost allocation / preventive pollution control) (citing John C. Dernbach, Sustainable Development as a Framework for National Governance, 49 CASE W. RES. L. REV. 1 (1998)). 29 Id. 30 OECD, Polluter-Pays Principle, supra note 6, at 239; RESTATEMENT (SECOND) OF TORTS 901 (1979). 31 The concept of absolute scarcity of the environment has emerged as the dominant theory of scarcity supported by modern empirical research. Absolute scarcity stands in contrast to relative scarcity, which dominated mainstream economics for much of the 20th century. See LIONEL ROBBINS, AN ESSAY ON THE NATURE AND SIGNIFICANCE OF ECONOMIC SCIENCE 55 (2d ed., 1935) (assuming with relative scarcity that there is always a possibility of substitute goods or production factors). It is settled that modern environmental economics correctly rests on the assumption of absolute scarcity. The assumption of relative scarcity derives from Newtons second law of thermodynamics, which posits that matter can neither be created nor destroyed and modern studies in ecological entropy. For application of the second law of thermodynamics and entropy to ecology and economics, see Paul R. Erlich et al., Availability, Entropy, and the Laws of Thermodynamics, in VALUING THE EARTH: ECONOMICS, ECOLOGY, ETHICS 65, 67-69 (Herman E. Daly & Kenneth N. Townsend eds., 2nd ed. 1992); see also HERMAN E. DALY & JOSHUA FARLEY, ECOLOGICAL ECONOMICS: PRINCIPLES AND APPLICATIONS 1-14 (Island Press 2004). 32 The principle is related to the user-pays principle, pursuant to which governments have to find social prices and charge users for the cost of using natural resources, such as water, forests, minerals and land resources. Depending on whether the resources are renewable or non-renewable, costs would include, inter alia, the costs of extraction, environmental damage costs and depletion costs, including costs imposed on future generations, because the resource will not be available in the future. See ATAPATTU, supra note 15, at 482. 33 See Candice Stevens, Interpreting the Polluter Pays Principle in the Trade and Environment Context, 27 CORNELL INTL L.J. 577, 577-78 (1994).
28
50
[VOL. 18.1
for governments to allocate pollution costs between multiple actors or require polluters to implement precautionary abatement measures because the parties involved have varying views and values.34 These political obstacles are resolved by appealing to the presumptively efficient nature of the cost internalization accomplished by the polluter pays principle.35 According to the internalization theory, producers who pollute internalize the costs of cleaning up the contaminated resources, and in turn pass those costs to the consumers of the goods.36 This theory internalizes the externalities in market decisions because the producers who cause the harm pay the external social costs of environmental harm.37 Ultimately, consumers pay the real costs of the goods, and innocent third parties are not made to bear the costs of the pollution.38 There are other justifications for the polluter pays principle.39 For example, environmental taxes can be a form of cost allocation or hybrid cost-liability allocation.40 Industry-wide and polluter-specific taxes theoretically meet the goal of allocating liability according to the source of harm.41 There are myriad environmental tax regimes, but generally a tax regime allocates prospective liability for potential environmental harm, thus spreading the cost and risk of accidents over a wide period of time.42 Environmental taxes efficiently meet the needs of governments to raise additional revenues, reallocate resources and redistribute incomes.43 Additionally, environmental taxes manifest a governments desire to correct a negative externality (by regulating and reducing
Id. See id. at 578. 36 See id. at 585. 37 Id. 38 Id. 39 See id. at 578-81. 40 Id. 41 Id. 42 Andrew J. White, III, Decentralised Environmental Taxation in Indonesia: A Proposed Double Dividend for Revenue Allocation and Environmental Regulation, 19 J. ENVTL. L. 43, 44 (2007). 43 Id.
35
34
2010]
51
environmental pollution) through the use of economic instruments rather than solely a regulatory scheme.44 Similarly, [i]n the OECD context, the [p]olluter [p]ays [p]rinciple is a cost allocation or non-subsidization principle intended to guide governments in addressing domestic pollution.45 In the broader international context, [E]nvironmental taxes (and also government levies and other types of charges) are assessed against the use of natural resources or the consequent waste, resulting in more efficient resource use and decreased pollution. Additionally, environmental taxes raise money to pay for remediation of pollution and other environmental damagesas well as even unrelated government expenditures.46 Other variations of the polluter pays principle include the notion of [a]ssessing liability in proportion to the probability of each companys contribution to actual injury.47 Likewise, the polluter pays principle can be imagined as a regulatory scheme, which allocates regulatory fines or criminal sanctions in proportion to the respective entitys degree of culpability in a given case.48 Alternative implementation models include tradeable pollution permits, bright line pollution or penalty models, and pollution abatement subsidy schemes.49 D. The Polluter Pays Principle in Crisis The polluter pays principle emerged on the international legal scene as a seemingly viable mechanism for cost allocation with many variations, and it was rooted in sound economic theory.50 Although the
44 45
Id. Stevens, supra note 33, at 578. 46 White, supra note 43, at 44 (citations omitted). 47 Albert C. Lin, Beyond Tort: Compensating Victims of Environmental Toxic Injury, 78 S. CAL. L. REV. 1439, 1499 n.355 (2005). 48 Stevens, supra note 33, at 578-81. 49 ATAPATTU, supra note 12, at 458. 50 See generally Michael Ewing-Chow & Darryl Soh, Pain, Gain, Or Shame: The Evolution of Environmental Law and the Role of the Multinational Corporations, 16 IND. J. GLOBAL
52
[VOL. 18.1
scope of this principle and its effects are still debated, a majority of scholars accept its economic rationale.51 These scholars conclude everyone is better off as long as the polluter picks up the tab for remediation, except possibly the polluter.52 The solution is Pareto efficient,53 and the only remaining task is implementation of the polluter pays principle.54 Unfortunately, the situation is not that simple. Beneath the surface, the traditional polluter pays mechanism contains a principle that negates workability in the international context. The polluter pays principle makes sense in the domestic or local context, where environmental harm can be roughly quantified and an adverse party can recover remedies or prevent future pollution. But the polluter pays principle makes less sense in a complex global context.55 In a world of ever-diminishing resources and accelerating extinction,56 economic theories involving simplified cost-benefit analysis, calculation of marginal utilities, cost-internalization and static two-agent models simply do not work because they rely on simple and narrow anthropogenic value sets.
LEGAL STUD. 195, 215 (2009) (discussing variable versus baseline tax systems to encourage sustainable development). 51 Cf. Helen Endre-Stacy, Sustaining ESD in Australia, 69 CHI.-KENT. L. REV. 935, 958 (1994) (The post-materialists (or simple communications) present a vision that rests upon consensussomething that becomes ever more elusive in an increasingly pluralistic world. It seems romantic because of its lack of strategic and institutional specificity. Neither legal liberalism nor postmaterialism goes far enough, even when they engage in vigorous ecoreformism.). 52 Although it may be argued that the end result is Pareto optimal since the polluter is better off as well, having been benefited by the clean environment, which his cost internalization is supposed to achieve. RICHARD A. POSNER, ECONOMIC ANALYSIS OF LAW 12-13 (7th ed. 2007). 53 Id. 54 Endre-Stacy, supra note 51, at 935-36. 55 George P. Smith, Re-Validating the Doctrine of Anticipatory Nuisance, 29 VT. L. REV. 687, 717 (2005). 56 PAUL M. WOOD, BIODIVERSITY AND DEMOCRACY: RETHINKING SOCIETY AND NATURE ixx (2000).
2010]
53
III. THE PRINCIPLES OF COASE AND CALABRESI IN ADDRESSING POLLUTION Essentially, the polluter pays principle rests on faulty assumptions concerning basic notions of efficiency in the environmental context and omits environmental values and protection. The indeterminacy of economic solutions to environmental pollution problems will be examined through two similar analytical frameworks: (1) the Coasian reciprocity principle; and (2) Calabresis cheapest cost avoider principle. These frameworks represent fundamental economic principles, and also rest on faulty assumptions of efficiency similar to the polluter pays principle. A. The Coasian Reciprocity Principle Ronald Coase recognized that all solutions to nuisance and pollution problems have costs.57 Coase also noted that a proper delimitation of rights must take into account reciprocal losses to neighbors from all property uses.58 This Coasian reciprocity principle suggests a very general cost-benefit approach to environmental regulation.59 According to Coase, [t]he world must have [polluters] . . . even at the expense of some inconvenience to [neighbors, and the neighbors] may be required to accept some not unreasonable discomfort for the general good.60 Coase does not define his standards for reasonableness and general good with any measure of objectivity because they are, naturally, contextspecific standards. 1. Applicability of the Coase Theorem to Polluter Pays Principle Coasian analysis, through the Coase Theorem, seems to apply to the polluter pays principle.61 For instance, potential victims are
See Coase, supra note 22, at 2. Id. at 19-20 (quoting W. L. PROSSER, THE LAW OF TORTS 412 (2d ed. 1955)). 59 See id. at 27. 60 Id. at 19-20 (citing PROSSER, supra note 58, at 398-99, 412). 61 See id. at 15-20 (stating that if all parties have full information about their costs and benefits if there are zero transaction costs, and if property rights are fully assigned and understood, then parties will bargain to allocate efficient outcomes. The polluter pays principle allows a similar degree of bargaining between polluters and potential victims.).
58
57
54
[VOL. 18.1
empowered by the government to hold polluters liable for harm, which according to the Coase Theorem will cause the polluters to avoid polluting activities that are not worth the risk of the resulting penalty.62 Thus, producers can implement risk transfer strategies or adjust pricing to reflect economic realities based upon this allocation of legal rights.63 In accordance with the Coase Theorem, a market may develop as a sort of pollution permit exchange where individuals and firms are able to bargain over the buying or selling of clearly allocated rights to pollute,64 The victims will seek to recoup any transaction costs, including litigation fees and court costs, from the polluter.65 The polluter will internalize all of these costs and pass thems on to the consumer, allowing compensation for the full costs of production, including the negative externalities of the pollution.66 Similarly, in environmental tax regimes governments would anticipate the extra costs of enforcement and essentially warn would-be polluters of their liability for such enforcement costs.67 If all proceeds as planned, pollution permits are traded and pollution occurs, but those affected by it do not complain because they have contracted away their rights and have already been compensated for their discomfort. In this sense, the Coase Theorem applies to the polluter pays principle.68 2. Problems with Application of Coase Theorem to Pollution Cases The most obvious problem with integrating the polluter pays principle with Coasian analysis is that actors do not operate with perfect
See Coase, supra note 22, at 41-42. Cf. NICHOLAS A. ASHFORD & CHARLES C. CALDART, ENVIRONMENTAL LAW, POLICY AND ECONOMICS: RECLAIMING THE ENVIRONMENTAL AGENDA 174-75 ( 2008) (stating that the polluter pays principle is irreconcilable with Coasian analysis and mainstream neoclassical economics because the principle is concerned with equity, fairness and ethical principles, whereas Coasian analysis would allow allocation of liability on economic efficiency grounds). 63 See Coase, supra note 22, at 41-42. 64 Id. 65 See generally id. at 15-19 (discussing transaction costs the victim must also be able to recover from the polluter in order to achieve an efficient outcome). 66 Id.; see also Stevens, supra note 33, at 584-85. 67 See Coase, supra note 22, at 41-42. 68 See id. at 15-19.
62
2010]
55
information.69 Thus, market actors do not know the precise transaction costs. Polluters do not know the costs of their pollution or the resulting liability, and victims do not know the costs of the damage. Coasian analysis relies on ex ante bargaining, so this incomplete information poses a problem.70 The polluter pays principle seeks to solve the lack of information with approximations of damage that are as accurate as possible.71 However, both systems lack an accurate predictive potential. On a more basic level, information asymmetry represents the fundamental problem with both the polluter pays principle and the Coasian regime.72 The efficiency of the actors envisioned by Coase is property allocation efficiency, where the best use is that which results in maximum utility.73 Both models measure efficient allocation of liability in terms of benefit to human actors in a present tense or single-generation model.74 The value of a clean environment is ignored and the concepts of value are not environmentally conscious. The environment is not imagined as an actor in the equation, but is rather thought of merely as a commodity.75 A similar result follows from the application of the Calabresi/Melamed cheapest cost-avoider principle. B. Calabresi-Melamed Cheapest Cost Avoider Principle Under the Calabresi-Melamed approach, there are four basic allocations of pollution rights: (1) the entitlement of emitters to emit; (2) the entitlement of victims to be free of emissions; (3) the amount emitters must pay to compensate victims for the harm; or (4) the amount victims must pay for abatement.76
See id. at 15-20 (describing how both the Coase Theorem and the polluter pays principle require zero transaction costs). 70 Id. at 8-11. 71 See Lin, supra note 47, at 1499 n.355. 72 See Coase, supra note 22, at 15-20. 73 See id. at 42-44. 74 See id.; Stevens, supra note 33, at 577-78. 75 See, e.g. Coase, supra note 22, at 2-6 (discussing land as something actors use and not equal to an actor). 76 See Guido Calabresi & A. Douglas Melamed, Property Rules, Liability Rules and Inalienability: One View of the Cathedral, 85 HARV. L. REV. 1089, 1096-97 (1972); Jonathan
69
56
[VOL. 18.1
As with Coase, applying the Calabresi-Melamed model to environmental harm is problematic because it rests on a dual-agent model.77 By allocating the entitlement of pollution rights to either polluters or to victims, either party can unilaterally set the level of pollution.78 In an allocation model favoring polluters, there is no incentive for polluters to curb their pollution until the risk of enforcement of monetary sanctions outweighs the monetary benefit of polluting.79 Even under an allocation model favoring the victims, implementation problems arise due to the mutual inability to quantify the costs or benefits of the pollution.80 Environmental values are not considered in this model and neither the polluters nor the victims will contemplate social costs or externalities. In the local nuisance context, it is possible to imagine two agents negotiating and quantifying their respective rights.81 However, in global environmental harm cases where the victim is the environment itself, such bargaining cannot take place because of the usually complex nature of the actors and their actions.82 Thus, the pollution continues unabated with only ex post facto enforcement opportunity.83
B. Wiener, Something Borrowed For Something Blue: Legal Transplants and The Evolution of Global Environmental Law, 27 ECOLOGY L.Q. 1295, 1336 (2001). 77 See Weiner, supra note 76, at 1337. 78 Id. Courts have also independently reached Calabresian cost avoidance results. For an example, see Spur Industries, Inc. v. Del E. Webb Dev. Co., 494 P.2d 700 (Ariz. 1972). 79 See Weiner, supra note 71, at 1337. 80 See id. 81 See Coase, supra note 22, at 26-27. 82 See Calabresi & Melamed, supra note 76, at 1116-20; see also Smith, supra note 55, at 717 (noting, in addition to the lack of a bifurcated negotiation, [t]he dilemma . . . is how one quantifies an irreversible and permanent loss to the environment). 83 See Calabresi & Melamed, supra note 76, at 1116-20; see generally Ashutosh Bhagwat, Modes of Regulatory Enforcement and the Problem of Administrative Discretion, 50 HASTINGS L.J. 1275, 1330 (1999) (addressing the primary issues inhibiting ex post enforcement, including identifying polluters and the irreversible harm done to the environment).
2010]
57
IV. CRITICAL LAW AND ECONOMICS APPROACH TO THE POLLUTER PAYS PRINCIPLE Few economists think an unmodified Coase or Calabresi approach is appropriate in complex environmental harm cases, such as a multiplepolluter context or global warming.84 Yet the polluter pays principle and emerging cap-and-trade schemes are essentially modified Coase and Calabresi models, resting on the same assumptions regarding efficiency, values, and externalities.85 A. What Is Efficiency? What Are Our Values? And What Are Externalities? The mainstream law and economics approach to environmental issues has followed the Kaldor-Hicks definition of efficiency.86 An outcome is more efficient if those who are made better off could, in theory, compensate those who are made worse off, leading to a Pareto optimal outcome.87 Therefore, a more efficient outcome could leave
See Lin, supra note 47, at 1457 n.86; see also Daniel C. Esty, Environmental Protection in the Information Age, 79 N.Y.U. L. REV. 115, 136 (2005) (providing the questions that one must ask when performing a Coasean or Calabresian analysis to determine who holds relevant property rights in environmental decision-making). 85 See generally Thomas A. Rhoads & Jason F. Shogren, Coasean Bargaining in Collaborative Environmental Policy, in THE LAW AND ECONOMICS OF THE ENVIRONMENT 21 (Anthony Hayes ed., 2001) (noting that economic evaluations of current environmental negotiation processes and management planning initiatives rest on the insight and analytic foundation provided by the Coase Theorem). 86 See RICHARD A. POSNER, THE PROBLEMS OF JURISPRUDENCE 376-80 (1990); Gary Lawson, Efficiency and Individualism, 42 DUKE L.J. 53, 89 (1992) (stating [w]hen an economist says that . . . control of pollution or some other policy or state of the world . . . is efficient, nine times out of ten he means Kaldor-Hicks efficient) (quoting RICHARD A. POSNER, ECONOMIC ANALYSIS OF LAW 13 (3d ed. 1986)); Weiner, supra note 76, at 1331-32. 87 See Calabresi & Melamed, supra note 76, at 1093-94 (stating that economic efficiency requires an allocation of resources which could not be improved in the sense that a further change would not so improve the condition of those who gained by it that they could compensate those who lost from it and still be better off than before); see also Russell S. Jutlah, Economic Theory and the Environment, 12 VILL. ENVTL. L.J. 1, 15-19 (2001) (addressing the interrelation between Kaldor-Hicks principle and Pareto improvement).
84
58
[VOL. 18.1
some people worse off.88 But as long as there is the possibility of compensation, an efficient outcome may be reached.89 In the environmental context, welfare economics dictates that clearly allocating property rights and exchanging those rights on the open market may solve the problem of negative externalities.90 This model offers a nonpolitical, objective, determinate method for judicial efficiency analysis.91 Practically speaking, judges or policymakers merely need to perform an objective three-step analysis to determine an efficient outcome: (1) [a]sk how the allocation of resources would be different if there were no transaction costs; (2) [d]evise a change in the rule to get as close as possible to that outcome; and (3) [r]ecommend the change no matter what the distributive outcome.92 As a corollary, when a private property exchange does not produce efficient results, more clearly delineating or enforcing property rights can theoretically correct the exchange.93 From the critical legal studies point of view, the Kaldor-Hicks efficiency approach is a nonstarter for economic analysis of environmental costs.94 First, it is impossible to have property rights in certain objects or ideas, such as the vitality of the environment, biodiversity, cleanliness, or bio-equilibrium.95 Even if it is possible to propertize certain non-tangible aspects of the environment, there is the risk that enforcement of private property regimes may be unworkable:
Id. See Weiner, supra note 76, at 1331-33; see also Lawson, supra note 86, at 90 (The catch is that under Kaldor-Hicks efficiency, one can call the action efficient whether or not the losers are in fact compensated.). 90 See EDITH BROWN WEISS ET AL., INTERNATIONAL ENVIRONMENTAL LAW AND POLICY 8590 (2d ed. 2007) [hereinafter WEISS ET AL.] (citing ALLEN V. KEESE ET AL., ECONOMICS AND THE ENVIRONMENT: A MATERIALS BALANCE APPROACH 2-6 (1970)). 91 Duncan Kennedy, Law-and-Economics from the Perspective of Critical Legal Studies, in 2 THE NEW PALGRAVE DICTIONARY OF ECONOMICS AND THE LAW 465, 468 (Peter Newman ed., 1998) [hereinafter Kennedy, Critical Legal Studies]. 92 Id. at 469. 93 See WEISS ET AL., supra note 90, at 86. 94 See Kennedy, Critical Legal Studies, supra note 91, at 469-71. 95 Id. at 466 (Some things (not public goods) you cant have property in at all.).
89
88
2010]
59
Private property regimes do not guarantee effective or efficient environmental protection. The reason is not simply the absence of completely defined property rights in all resources but the costs of coordination and exclusion under private property regimes in some ecological, technological, and institutional circumstances. Sometimes . . . public/state or common property regimes are preferable. The most we can legitimately claim about private ownership of environmental goods, then, is that it has substantial but not unlimited utility for conservation. . . . The notion that a single, sociolegal institution private property is both necessary and sufficient to resolve all environmental problems is not just highly improbable but fantastic.96 The reality that aspects of the environment may not be tradeable goods fundamentally undermines Coasian analysis, which requires a clear allocation of tradeable property rights.97 Incidentally, this also undermines the dominant rationales for the polluter pays principle.98 Second, the very concept of efficiency may be indeterminate in the environmental context because it relies on a series of overtly political value judgments.99 In other words, there is no correct answer to the question of how to value[,] implicit in the very concept of efficiency.100 Value judgments are inherently political and imbued with personal preferences, likes, tastes, and customs.101 Values that inform case-bycase efficiency analysis may be legally protected property values, have no legal protection (i.e., interest in aesthetic enjoyment)102 or be illegal (value of running a bulldozer over an ancient Native American burial
DANIEL H. COLE, POLLUTION AND PROPERTY: COMPARING OWNERSHIP INSTITUTIONS FOR ENVIRONMENTAL PROTECTION 178 (2002) (emphasis added). 97 Coase, supra note 22, at 19-20. 98 See e.g. Nickie Vlavainaos, Creating Liability Regimes for the Clean-up of Environmental Damage: The Literature, 9 J. ENV. L. & PRAC. 145, 150-54 (1999) (surveying rationales for the polluter pays principle). 99 See Kennedy, Cost-Benefit Analysis, supra note 21, at 419. 100 See id. at 407. 101 See id. at 444. Cf. POSNER, supra note 52, at 10 (defining economic value in formulaic terms of how much someone is willing to pay for it or, if he has it already, how much money he demands for parting with it). 102 See Kennedy, Critical Legal Studies, supra note 91, at 467.
96
60
[VOL. 18.1
ground one happens to own as an exercise of property rights), just to name a few. Regardless of their legal status, values are important factors and motivate individual economic agents within a particular political or cultural context.103 Moreover, it is important to highlight the malleability of values and the ease with which values and value-neutral efficiency arguments are routinely manipulated to conceal preferred outcomes.104 Economics does not have anything to say about moral values generally in the environmental context, and it also lacks any special competence to do so.105 Lastly, the mainstream efficiency model does not address fundamental questions of externalities, the components of an external cost, and what is a cost of what.106 With Coases redefinition of externalities as cost[s] not reflected in [an] activitys price because transaction costs prevent those on whom the loss falls from making a contract with whoever might prevent it, the answers to the above
Cultural studies and third world approaches to international law have much to teach environmental law and economics in this respect. See generally RODA MUSHKAT, INTERNATIONAL ENVIRONMENTAL LAW AND ASIAN VALUES: LEGAL NORMS AND CULTURAL INFLUENCES 16-31 (2004) (examining extent to which Asian cultural relativism affects or influences the norms of international environmental law and the application of these norms in the region). 104 Kennedy, Critical Legal Studies, supra note 85, at 471 (noting that both liberal and conservative legal economists prefer to pursue their political projects with respect to the economy by manipulating the apparently value neutral, technocratic discourse of efficiency to support their preferred outcomes, rather than by arguing on more overtly distributive or justice oriented grounds, that is, on the ideological grounds that half-consciously motivate them); see also MICHAEL G. FAURE & GRAN SKOGH, THE ECONOMIC ANALYSIS OF ENVIRONMENTAL POLICY AND LAW: AN INTRODUCTION 143-44, 171-73, 181-82 (2003). 105 See Kennedy, Critical Legal Studies, supra note 85, at 471. The fact that economists choose pollution or nuisance cases to illustrate their theories of cost allocation should not cause lawyers to believe that economists devote particular attention to environmental issues; pollution or nuisance are often chosen for ease of reference to the readers, as opposed to demonstrating the economists particular expertise in resource allocation. David M. Driesen, What is Free Trade?: The Real Issue Lurking Behind the Trade and Environment Debate, 41 VA. J. INTL L. 279, 318 (2001) (noting that trade experts and economists are not experts on public health and the environment, and their judgments about the scientific justification for health or environmental measures . . . will command little respect outside of their community). 106 Kennedy, Cost-Benefit Analysis, supra note 21, at 395.
103
2010]
61
questions have become even more indeterminate.107 Coases definition led the way for recognition of novel, non-physical harms and costs, such as adverse psychological and emotional responses to environmental issues. Therefore, emotional health, unique aesthetic experiences, and ideological satisfaction are now valid costs of particular environmental decisions.108 The fact that these costs cannot be quantified should cause economists concern. B. Full Internalization Is Neither Required Nor Possible A major conceptual and practical problem with external environmental costs is that they are exceedingly difficult to define and calculate as costs of human activity.109 The mainstream theory does not adequately define causation, resulting in arbitrary allocation of social versus private costs depending on the underlying value assumptions.110 Before the economization of the environment, such costs were externalized because they were too insignificant or too difficult to calculate.111 Current attempts to internalize environmental costs fall into a similar bogthe costs are too expansive, presumably too expensive, and more fundamentally, nearly impossible to liquidate.112 In step with the above analysis, the polluter pays principle does not require abatement, internalization, or absorption of all external costs.113 For example, although the polluter pays principle requires that states ensure polluters and users of natural resources bear the full environmental and social costs of their activities, the OECD logically
Id. at 398 (citations omitted); see also Todd E. Pettys, The Mobility Paradox, 92 GEO L.J. 481, 497 (2004) (discussing classical definitions, in addition to those proffered by Coase, to externalities). 108 See Kennedy, Cost-Benefit Analysis, supra note 21, at 398-99; see also WEISS ET AL., supra note 90, at 66-67 (discussing principles of intergenerational equity). 109 See generally Adam Chase, The Efficiency Benefits of Green Taxes A Tribute to Senator John Heinz, 11 UCLA J. ENVTL. L. & POLY 1, 28 (1992) (providing an example of the difficulty in measuring the cost of externalities). 110 Kennedy, Cost-Benefit Analysis, supra note 21, at 396. 111 Id. 112 WEISS ET AL., supra note 84, at 93-95. 113 Id.
107
62
[VOL. 18.1
does not require all environmental costs to be internalized.114 As long as the environment is in an acceptable state, the full cost of pollution need not be internalized.115 As noted in an OECD Recommendation, the polluter pays principle is merely an efficiency principle for allocating costs and does not involve decreasing pollution to any normative level.116 In other words, the goal is for producers and consumers to adjust to the total social costs of production.117 This sentiment is consistent with welfare economics teaching that discharges should be curtailed beyond the point where the marginal private benefit exceeds the marginal social cost.118 In theory, the polluter may pass on all or some of the environmental costs to the consumers, or the polluter may absorb them.119 However, because there is no prescriptive or optimal level of pollution, total social costs of the harm cannot be known and therefore cannot be internalized.120 This issue leads to more ambiguity and makes it harder to incorporate the polluter pays principle into a workable theory. C. Ambiguity; Practical Unworkability The breadth and ambiguity of the polluter pays principle is both a strength and a weakness.121 In the words of some commentators, the fundamental problem with the broader use of the polluter pays principle is that it does not indicate who is a polluter and therefore cannot determine liability.122 Theoretically, this distinction makes sense
See DAVID HUNTER, ET AL., INTERNATIONAL ENVIRONMENTAL LAW AND POLICY 412-14 (2d ed. 2002). 115 See OECD, Guiding Principles Concerning International Economic Aspects of Environmental Policies, annex 3, 4 Doc. No. C (72)(128) (May 26, 1972), available at http://sedac.ciesin.org/entri/texts/oecd/OECD-4.01.html [hereinafter OECD, Guiding Principles]; see also Nash, supra note 27, at 467-69 (tracing the origins of the polluter pays principle in the legal context to the OECD recommendation). 116 OECD, Guiding Principles, supra note 115, at annex 3. 117 Id. at annex 2. 118 WEISS ET AL., supra note 90, at 93. 119 Id. at 218. 120 Id. 121 See Nash, supra note 27, at 472 n.21. 122 PATRICIA W. BIRNIE & ALAN E. BOYLE, INTERNATIONAL LAW & THE ENVIRONMENT 94 (2d ed. 2002) (citations omitted).
114
2010]
63
as end-users are logically complicit in the environmental harm caused by the production of a given commodity or service which they consume.123 The practical response to arguments blurring the line between polluter and end-users is that cost-internalization, as both a form of liability allocation and risk transfer, is required by the one-sided nature of pollution flow.124 Another economic consideration weighing against the polluter pays principle is its practical unworkability as a functioning liability or precautionary scheme.125 Is the polluter pays principle relevant when it cannot provide practical guidelines for domestic enforcement?126 And to what extent is the polluter pays principle relevant to international law if it cannot be implemented and enforced? Several factors illuminate the difficulty in developing a working liability or cost allocation framework using the polluter pays principle.127 First, a crucial practical problem of the polluter pays principle is that it is an ex post model.128 This trait carries significant drawbacks.129 In the ex post context, the future risk of loss is smaller than the present benefit of pollution because future occurrences are discounted to present values.130 Therefore polluters have an incentive to defer investment in
W. Bradley Wendel, The Banality of Evil and the First Amendment, 102 MICH. L. REV. 1404, 1420 (2004) (discussing how institutional mechanisms, such as markets, threaten to make everyone inevitably complicit). 124 See Margaret Rosso Grossman, Agriculture and the Polluter Pays Principle: An Introduction, 59 OKLA. L. REV. 1, 29-32 (2006) (discussing how the polluter pays principle passes costs onto consumers, despite policy efforts to keep the cost on polluters). 125 Stevens, supra note 33, at 589 (stating that the polluter pays principle as a cost allocation principle for domestic environments still requires interpretation with respect to the use of environmental subsidies in different economic sectors). 126 See id. at 585-86. Cf. Nash, supra note 27, at 471 (Domestic law has never codified the polluter pays principle. Nonetheless, the principle influenced the development of U.S. environmental law in the 1970s and 1980s). 127 See Stevens, supra note 33, at 588-89. 128 See Ashutosh Bhagwat, Modes of Regulatory Enforcement and the Problem of Administrative Discretion, 50 HASTINGS L.J. 1275, 1330-31 (1999) (exploring the pros and cons of ex post regulation systems). 129 See id. 130 See Evan Bogart Westerfield, When Less is More: A Significant Risk Threshold for CERCLA Liability, 60 U. CHI. L. REV. 697, 715 (1993) (analyzing the cost/benefit decisions firms make in the context of CERCLA liability when calculating precautionary costs).
123
64
[VOL. 18.1
pollution abatement measures because it is more expensive in the present.131 If the polluters present payoff is higher than potential future loss from accidents, there are fewer incentives to invest in preventative measures today.132 Additionally, due to the tremendous cost of most environmental accidents, agents have little incentive to exercise due care to prevent accidents if they are likely to be judgment-proof due to limited assets.133 In the most extreme cases, potential liability could dwarf available assets and companies would simply fold due to the inability to pay clean-up costs.134 As a result of judgment proofing or strategic subsidiarization, in which companies deliberately separate high-risk operations to avoid liability, potential liability can be effectively reduced to zero.135 Second, because liability is allocated after environmental harm is noticeable or rises to the level of a legally cognizable injury, a long period of time lapses and tracing fault becomes difficult.136 For example, it has proven very difficult to assign liability from massive deforestation due to acid rain, from multiple sources of air pollution and particulate matter (including hybrid pollution effects from the automotive industry,
See id. See Gideon Parchomovsky & Peter Siegelman, Selling Mayberry: Communities and Individuals in Law and Economics, 92 CAL. L. REV. 75, 92 (2004) (arguing that rational, selfinterested polluters will underinvest in abatement efforts); see also Richard A. Epstein, Two Fallacies in the Law of Joint Torts, 73 GEO L.J. 1377, 1386 (1985) (addressing the role that joint and several liability plays in disincentivizing polluters in light of private and social gain). 133 See The Case of the Disappearing Defendant: An Economic Analysis, 132 U. PA. L. REV. 145, 161-63 (1983) (describing the economic incentives for a party to practice or not practice due care). 134 See U.S. Government Accountability Office (Aug. 2005), Environmental Liabilities: EPA Should DO More to Ensure that Liable Parties Meet Their Cleanup Obligations (Pub. No. GAO-05-658), at 1, available at http://www. gao.gov/ new.items/d05658.pdf. 135 Heyes, supra note 1, at 4. 136 See John H. Davidson, The New Public Lands: Competing Models for Protecting Public Conservation Values on Privately Owned Lands, 39 ENVTL. L. REP. NEWS & ANALYSIS 10368, 10371 (2009) (addressing [t]he nature of the incremental polluter and discussing problems with wetland drainage and the tendency of societies to overlook pollution until it manifests into a disaster).
132
131
2010]
65
end-users, and coal fired power plants).137 Allocating liability to parties and determining an appropriate extent is almost impossible in such a complex scenario. Moreover, with respect to greenhouse gas production, it is impossible to relate the cost of the resulting harm to a specific polluter, further complicating the causation analysis.138 Third, substantial information costs for both victims of pollution and polluters exist.139 These costs show the difficulty of measuring levels of pollution and valuing damages.140 The ex post nature of the model allows some degree of certainty in valuation, but the model does not allow actors to negotiate the potential liability prior to the occurrence of the accident.141 The Calabresian theoretical exchange between victim and polluter also rests on the assumption of the polluters willingness to pay.142 However, the willingness to pay and willingness to sell do not always result in price equilibrium.143 Therefore, the ex post nature of the
See Andrew P. Morriss & Roger E. Meiners, Borders and the Environment, 39 ENVTL. L. 141, 153 (2009) (citing Robert F. Blomquist, The Beauty of Complexity, 39 HASTINGS L.J. 555, 562 (1988)). 138 See Bruce Pardy, Climate Change Charades: False Environmental Pretences of Statist Energy Governance, 26 WINDSOR REV. LEGAL & SOC. ISSUES 179, 196-97 (2009) (relating the difficulty of how to properly internalize costs for pollution when the pollution cannot be traced back to a specific source). 139 See Ruoying Chen, Information Mechanisms and The Future of Chinese Pollution Regulation, 7 CHI J. INTL L. 51, 58-59 (2006) (explaining the difficulties and costs involved in collecting, analyzing and sorting available information and creating a reliable source from which parties can make informed decisions); see also Isabel Rauch, Developing a German and an International Emissions Trading System Lessons from U.S. Experiences with the Acid Rain Program, 11 FORDHAM ENVTL. L. REV. 307, 319 (2000) (The process of determining pollution control requirements within a regulatory system requires substantial administrative costs, as regulators must collect and analyze information . . . for all kinds of polluters.). 140 Chen, supra note 139, at 59. 141 See David W. Case, Corporate Environmental Reporting as Informational Regulation: A Law and Economics Perspective, 76 U. COLO. L. REV. 379, 419-20 (2005) (discussing informational asymmetries that make negotiations between the parties difficult) (citing CLIFFORD S. RUSSELL, APPLYING ECONOMICS TO THE ENVIRONMENT 46, 99-100 (2001)). Enforcement costs can be conceptualized as information costs for ease of analysis. 142 Cf. Sidney A. Shapiro & Christopher H. Schroeder, Beyond Cost-Benefit Analysis: A Pragmatic Reorientation, 32 HARV. ENVTL. L. REV. 433, 455 (2008) (Analysts lack persuasive evidence that individuals treat safety and health risks similarly. If anything, individuals may be willing to pay more to avoid health risks, particularly cancer.) (citations omitted). 143 See id. at 456. According to Shapiro and Schroeder:
137
66
[VOL. 18.1
polluter pays principle substantially increases the cost of obtaining information for both actors and victims. Fourth, it is conceptually difficult to attribute liability to firms without knowing of the impact of their harmful conduct at the time it occurred.144 Even the most ardent environmentalists would agree it is unfair to hold actors liable for pollution caused when the harm of the given act was not recognized.145 The point is elaborated as follows: [M]ost pollution . . . does not occur because of deliberate actions by careless and unthinking individuals. Most pollution incidents arise because a number of circumstances that would not normally be foreseeable but which give rise to damage. In the interests of doing justice to defendants, the common law does not always seek to redress any damage caused by such accidents. Clearly, this is contrary to the general thrust of the polluter pays principle.146
Yet another problem arises from the use of willingness-to-pay (WTP) to monetize health and safety risks. Since WTP is a function of a person's wealth, a person's wealth will limit how much money she or he can pay to be safer. By comparison, if regulatory benefits were monetized according to willingness to sell (WTS), the value of regulatory benefits would undoubtedly be higher since the WTS is not bounded by a person's wealth. In economic theory, the two amounts should have the same value, but considerable experimental evidence indicates that people charge a higher price to be exposed to greater health or safety risks than they are willing to pay to reduce such risks. Id. (citations omitted). 144 See BENJAMIN J. RICHARDSON, SOCIALLY RESPONSIBLE INVESTMENT LAW: REGULATING THE UNSEEN POLLUTERS 354 (2008) (While the retroactive character of some environmental liability laws strengthens the objective of providing compensation, it hardly deters future unsustainable financing. Penalizing lenders for unforeseeable harm caused by past activities does little in itself to influence future lending practices, except to avoid taking possibly contaminated land as loan security.). 145 Indeed, this principle of non-retroactivity was one of the key issues addressed by the European Commission in a 2000 White Paper on environmental liability. Commission White Paper on Environmental Liability, at 16, COM (2000) 66 final (Feb. 9, 2000), available at http://ec.europa.eu/environment/legal/liability/pdf/el_full.pdf. 146 STUART BELL & DONALD MCGILLIVRAY, ENVIRONMENTAL LAW 279 (5th ed. 2000); see also David Howarth, Muddying the Waters: Tort Law and the Environment from an English Perspective, 41 WASHBURN L.J. 469, 490 (2002) (conceding that tort liability is mostly faultbased but [attempting] to show that doing justice to defendants is not necessarily a point of criticism of the law).
2010]
67
The fairness and equity considerations pose significant theoretical problems for any ex post liability allocation model.147 The challenges to implementing the polluter pays principle posed by concepts like limited liability are also significant.148 Furthermore, the practical problems highlight the nascent state of environmental regulations and the hurdles posed by established liability, tort, and property law doctrines.149 V. DEVELOPMENT OF A FORWARD-LOOKING ENVIRONMENTAL ECONOMIC THEORY As shown above, the polluter pays principle and the conceptual liability models proposed by Coase and Calabresi are not based on objective, economic models of efficiency. Instead, these models are based on implicit value judgments of the decision maker.150 There are multiple solutions to this theoretical problem, ranging from acknowledgement of the politicization of the economic process to more
See generally FRIEDRICH SOLTAU, FAIRNESS IN INTERNATIONAL CLIMATE CHANGE LAW POLICY 133-78 (2009) (addressing these fairness and equity considerations). Cf. Robert L. Rabin, Restating the Law: The Dilemmas of Products Liability, 30 U. MICH. J.L. REFORM 197, 212 (1997) (Presumably the California Supreme Court hybrid approach in [Carlin v. Superior Court, 920 P.2d 1347 (Cal. 1996), which held manufacturers liable only for ex ante risks, but also to a standard approximating perfect knowledge,] is an effort to avoid the criticism of an ex post liability standard on intuitive fairness grounds: How can one justly be held responsible for failing to warn of risks that are unknowable at the time of marketing?). 148 See RICHARDSON, supra note 144, at 356 (Limited liability interferes with the polluter pays principle to the extent that insolvent firms do not pay for the entire cost of their environmental impacts. . . . Imagine how much more seriously investors would pay attention to corporate sustainability performance if they were potentially liable for some of the environmental delinquencies of companies in their portfolio.). 149 See, e.g., CRITICAL ISSUES IN ENVIRONMENTAL TAXATION: INTERNATIONAL AND COMPARATIVE PERSPECTIVES: VOLUME IV 99-127 (Kurt Deketelaere et al. eds., 2007) (addressing the relationships between the polluter pays principle and environmental regulations through case studies); Brian J. Preston, Sustainable Development Law in the Courts: The Polluter Pays Principle, 16TH COMMONWEALTH LAW CONFERENCE (Apr. 7, 2009), available at http://www.lawlink.nsw.gov.au/lawlink/lec/ll_lec.nsf/vwFiles/ Paper_07Apr09_PrestonCJ_Polluterpays.pdf/$file/Paper_07Apr09_PrestonCJ_Polluterpays.pd f (discussing the polluter pays principle and its effectiveness for environmental regulations). 150 See supra notes 94-105 and accompanying text; see also Bailey Kuklin, The Gaps Between the Fingers of the Invisible Hand, 58 BROOK. L. REV. 835, 859-60 (1992) (In the end, the economic analysis becomes blurred by the required normative judgment that controls.) (citing Kennedy, Cost-Benefit Analysis, supra note 21, at 393-400).
AND
147
68
[VOL. 18.1
pragmatic proposals.151 One solution focuses on the radical paradigmatic reassessment of humans impact on the environment.152 A step in the right direction is the development of a new institutional and economic approach to legal analysis. This new approach explains the failure of internalization models and actually internalizes the costs by revealing the faulty assumptions about firms, consumers, and markets.153 Similarly, alternative economic theories must acknowledge the growing impact of non-state actors and corporate firms154 Thus, the new approach will begin the gradual process of disengaging from a belief in formal and positivistic legal solutions and thus trusting in the good intentions of international institutions.155 A. The Concept of Environmental Harm and Costs: Beyond Anthropocentrism To reconcile the polluter pays principle with the goal of environmental preservation, it is necessary to re-examine the current understanding of harm, environmental costs, and human costs and benefits relating to the environment.156
See Bradley C. Karkkainen, Toward a Smarter NEPA: Monitoring and Managing Governments Environmental Performance, 102 COLUM. L. REV. 903, 909-10 (2002) (describing the NEPAs Environmental Impact Statement and environmental assessment procedures through which agencies produce and make publicly available a detailed statement on the environmental impacts of the proposed action, its alternatives, and any mitigation measures that might be available). 152 Id. 153 See FAURE & SKOGH, supra note 104, at 143-44 (According to institutional economics the reason why the effects are not internalized in the economy is transaction costs, broadly defined, including limited information, problems of negotiation and bargaining, and of enforcement.). 154 See, e.g., DAVID KENNEDY, THE DARK SIDES OF VIRTUE: REASSESSING INTERNATIONAL HUMANITARIANISM 309-16 (2d prtg. 2004) (discussing the current state of international humanitarianism and the need for a more pragmatic approach to bad faith actors); Richard B. Stewart, Economic Incentives for Environmental Protection: Opportunities and Obstacles, in ENVIRONMENTAL LAW, THE ECONOMY, AND SUSTAINABLE DEVELOPMENT: THE UNITED STATES, THE EUROPEAN UNION AND THE INTERNATIONAL COMMUNITY 171-87 (Richard L. Revesz et al. eds., 2000) (analyzing the development of economic incentive systems). 155 See supra note 154 and accompanying text. 156 See Carmen E. Sessions, Medical Monitoring Awards under CERCLA: Statutory Interpretation Versus Fundamental Fairness, 8 S.C. ENVTL. L.J. 81, 102 (1999) (citing Colin
151
2010]
69
Basically, the question is whether we can speak in a meaningful way of harm to the environment itself, absent anthropocentric value judgments.157 Both Coase and Calabresi speak of allocation ultimately based on moral judgments,158 and the critical legal tradition arrives at the same point. Yet, how can we make moral judgments if our moral priorities are focused on the near-term happiness of homo economicus rather than on long-term global sustainability?159 As Professor Lin explains: The human impact on the natural world is ever-expanding, reducing the amount of relatively undisturbed habitat and pushing more species toward extinction. There are often instrumental reasons for protecting species or habitats, a point the [Endangered Species Act] recognizes in declaring threatened and endangered species to be of esthetic, ecological, educational, historical, recreational, and scientific value to the Nation and its people. An animal may be a keystone species vital to the functioning of a particular ecosystem on which humans depend, obscure plants may be potential sources of a cure for cancer, and the Amazon may function as a carbon sink to mitigate the effects of fossil fuel use on global climate. These rationales for protecting endangered species or habitats all measure harm with respect to human interests. Even aesthetic interests, though less tangible than the interests just mentioned,
Crawford, Strategies for Environmental Justice: Rethinking CERCLA Medical Monitoring Lawsuits, 74 B.U. L. REV. 267, 304 (1994)). 157 Albert C. Lin, The Unifying Role of Harm in Environmental Law, 2006 WIS. L. REV. 897, 977 (2006). 158 See GUIDO CALABRESI, THE COSTS OF ACCIDENTS: A LEGAL AND ECONOMIC ANALYSIS 25-26 (1970) (An economically optimal system of reducing accident costs . . . might be totally or partially unacceptable because it strikes us as unfair, and no amount of discussion of the efficiency of the system would do much to save it. Justice must ultimately have its due. (emphasis added)). 159 See Becker, supra note 4, at 18; see also Benjamin J. Richardson, Putting Ethics into Environmental Law: Fiduciary Duties for Ethical Investment, 46 OSGOODE HALL L.J. 243, 259 (2008) (discussing the fundamental qualities of human nature in relation to socially responsible investment).
70
[VOL. 18.1
are human-centered and instrumental, and harm to those interests is measured in terms of human impacts.160 Likewise, in his analysis of property rights systems, Daniel Coles review of the environmental law literature and the current methodological approach is telling: If there are examples of common property regimes, as conventionally defined, that have been designed to preserve noncommodity, environmental resources, they simply do not appear in the literature. There is no reason to presume that a common property regime instituted to govern a fishery, for example, will preserve related, noncommodity amenities. While fish stocks are sustained, other marine resources may be degraded or even intentionally destroyed because they have no commodity or exchange value to the users. . . . The criterion of success is the long-term sustainable harvest of the commodity resource for the users, not the general preservation of environmental amenities. Thus, a common property regime may avert one tragedy of open access while ignoring, or exacerbating, another. 161 The users in this context are, of course, human beings.162 More to the point, they are humans currently in existencethe present generation for whom environmental rules are written and in whose favor economic theories accrue.163 Thus far, however, there has been little movement to overcome a human-based environmental harm model and imagine environmental
Lin, supra note 157, at 977-79 (citations omitted) (emphasis added). COLE, supra note 96, at 128-29 (emphasis added). 162 See Becker, supra note 4, at 18 ([Under the] homo economicus approach . . . [n]ature turns out as an object of human self-interest, a bundle of goods serving the purpose of satisfying human preferences.). 163 See id. ([T]he well-being of future generations . . . is not, however, a systematically inherent attribute of the concept of homo economicus.).
161
160
2010]
71
injury as distinct from human actors.164 Following the release of the Stern Review in 2007, many economists have deepened their analysis by reworking assumptions and models concerning weather forecasts, intergenerational equity, and predictive functions. However, they have not solved the deeper ethical problems.165 As Erin Englebrecht notes: [Current l]egal environmental injury determinations are tainted . . . by three fallacies of contemporary jurisprudence: (1) teleological confusion - as such determinations are rooted in an anthropocentric perspective and are further dictated by the economic and technological concerns of industry; (2) epistemological arrogance - as they over-confidently rely on objective and rational formulations for determining the earths sustainability thresholds; and (3) ontological error - as they emphasize private property entitlements and individual liberty over the greater interests of the community.166 Fortunately, the environmental law movement has started a positive reassignment of values from polluter-focused views to views centered on environmental stewardship, cleanliness, and preservation.167 However,
Compare Lin, supra note 157, at 983 (noting the lack of social consensus concerning a broader view of harmone that understands welfare interests to include moral interests in the existence of species or ecosystems and predicting that struggles will continue over theories of non-human-based environmental harm) with RESTATEMENT (SECOND) OF TORTS 7(2) (1965) (defining harm as the existence of loss or detriment in fact of any kind to a person resulting from any cause) (emphasis added). 165 See John E. Roemer, The Ethics of Distribution in a Warming Planet, COWLES FOUNDATION FOR RESOURCES IN ECONOMICS AT YALE UNIVERSITY 2 (2000), available at http://cowles.econ.yale.edu/P/cd/d16b/d1693.pdf (questioning the ethical problems of determining [h]ow . . . rights to produce [carbon emissions] be allocated over the present and future generations of man and how the rights to emit carbon should be allocated across nations today); Becker, supra note 4, at 20 (We do not only understand ourselves as mere biological beings but also as moral beings able to take responsibility for our actions. And we are not only interested in our mere survival, but also in a good life and human excellence.). 166 Erin Englebrecht, Three Fallacies of the Contemporary Legal Concept of Environmental Injury: An Appeal to Enhance One-Eyed Reason with a Normative Consciousness, 18 TUL. ENVTL. L.J. 1, 1 (2004); see Roemer, supra note 165, at 26-37 (discussing the teleological confusion fallacy); see id at 37-47 (discussing the epistemological arrogance fallacy); see also id. at 47-58 (discussing the ontological error fallacy). 167 For an early enunciation of the movement, see Weyerhaeuser Co. v. Costle, 590 F.2d 1011, 1043 (D.C. Cir. 1978) (applying U.S. Clean Water Act and stating: Hitherto, the right of the
164
72
[VOL. 18.1
the current disciplinary divide has obfuscated efforts to bring this conversation to the forefront of the international environmental law and economics fields. B. The Problem With Static, Single-Generation Economic Models Aside from moving towards more holistic, anti-anthropocentric models of environmental harm, a new economic model must incorporate dynamic theories of time, different from than the current static, singlegeneration assumptions.168 In the environmental law context, the Calabresian, Coasian, and polluter pays principles cannot answer the question of future impacts on the environment by focusing on problems of property rights allocation in the present.169 This inability is partly due to challenges in converting intergenerational equity into a workable economic theory170 and the difficulty in quantifying or valuing benefits gained from a clean environment or biosphere quality. The Stern Review makes an improvement towards acknowledging future generations and discounting to present value these future likely interests in a clean environment.171 But there are arguments that the Reviews model of
polluter was pre-eminent, unless the damage caused by the pollution could be proven. Henceforth, the right of the public to a clean environment would be pre-eminent.). 168 See Becker, supra note 4, at 18 (In mainstream economic theory, the human actor usually appears as homo economicus: a selfish, rational, utility maximizer. Modern economic models refer to human beings as self-related beings characterized by a specific rationality and by a concentration on their own self-interests. . . . The construct of homo economicus implies specific and limited perspectives on the relation of the human being with future generations or the relation of the human being with nature. . . . In fact, there is a potential conflict between the unfolding of the self-interest of homo economicus and sustainability; since it is hardly possible to imagine a sustainable development which does not require any restriction on todays generation and its self-interests.); Roemer, supra note 165, at 910 (There is no justification . . . of prejudicing the desires of the first generation. . . . The subjective views of the first generation, with regard either to impatience or altruism, should not determine our intergenerational ethics. To give the first generation such power completely violates fairness, which requires that we give all generations equal consideration.). 169 Id. 170 See WEISS ET AL., supra note 90, at 66 (discussing problems of modeling intergenerational equity); see also Wolfgang Buchholz, Intergenerational Equity, in ECOLOGICAL ECONOMICS 19-22 (Tomasz Zylicz ed., 1997). 171 See Roemer, supra note 165, at 5.
2010]
73
intergenerational justice lacks an ethical basis for its economic discounting model.172 A preliminary review of the economics literature following the Stern Review confirms the lack of a variable representing a static biosphere quality quotient, separate from human factors, within the economic models. Even John Roemers suggested intergenerational model values biosphere quality as a factor in human quality of life.173 But the literature does indicate promising proposals to award carbon emission permits to individual citizens, which will move toward equalizing the quota across regions and related innovative proposals.174 C. Beyond Efficiency and Towards Multilevel Governance How do we introduce complex models of intergenerational equity and ecological health as values distinct from our interests as homo economicus?175 How can progressive environmental lawyers, economists, and the broader environmental movement advance a programmatic agenda of equilibrium ecology based on a concept of
See id. ([The discounted-utilitarian] social welfare function which is employed by almost all the economists working in the area of climate change . . . places less value on the utility of generations, the farther distant they are from the present.). According to Roemer, intergenerational justice requires a more realistic assumption, or what he calls the sustainabilitarian approach, which seeks to maximize present consumption subject to the constraint that future generations enjoy a quality of life at least as good as that enjoyed by the current generation. See id. at 35. Intergenerational maximin, or sustainability of welfare, is arguably a more attractive ethic than utilitarianism. Id. at 41. 173 See id. at 26. ([I]ncluding biospheric quality in the welfare of individuals models the value that species variety and other biological and environmental goods have for humans, intrinsically, quite apart from the medicines that they may generate (although health is also related to biospheric quality).). 174 See id. at 26, 3940. 175 Homo ecologicus is set in contraposition to homo economicus, or the hypothetical rational, utilitymaximizing, economics-based human such as long popularized by Richard Posner and others. See Becker, supra note 4, at 20-21 (discussing the ethics of homo ecologicus); EndreStacy, supra note 51, at 957 (explaining that an agenda based on equilibrium ecology offers a deconstruction of industrialized society, but as yet offers no reconstructed vision within ecological limits that adequately answers charges of utopianism and vagueness); Luis Kutner, The Control and Prevention of Transnational Pollution: A Case for World Habeas Ecologicus, 9 LAW. AM. 257, 279-80 (1977) (proposing the creation of [a]n International Tribunal and international and national Commissions having the ability to invoke a writ of [World Habeas Ecologicus] seeking enforcement of international environmental regulations).
172
74
[VOL. 18.1
humans as homo ecologicus176 without inviting valid criticisms of idealism? The tension among the polluter pays principle, conventional law, economics efficiency models modifing the Coase and Calabresi models, and any sustainalitarian model can be resolved only by reexamining assumptions regarding the value of the environment.177 As shown above, the current anthropocentric efficiency model contributes to an environmental use and pollution regime depleting commons and harms the environment, all in the name of cost-benefit analysis conducted by human actors.178 A new conceptual economic and legal model must be based on a more complex view of economics that is different from a human-agent, dual-actor static game.179 Evolving towards this new model requires a fundamental paradigm shift. Incidentally, Guido Calabresi and Philip Bobbitt suggested the groundwork for such a shift decades ago in their book, Tragic Choices.180 Calabresi and Bobbitt argue that society is committed to an idealistic view of a value of life, and this view cannot be reconciled with the practical need to make decisions allocating limited resources.181 Rather than allowing resource allocation decisions to undercut a belief in fundamental values, policymakers should adopt strategies to avoid the
Becker, supra note 4, at 20. See Englebrecht, supra note 166, at 35-37 (The tension between present perceptions of technological and economic feasibility and what is a desirable state of the environment mirrors the tension between the civil and didactic functions of law. . . . [T]ransforming the didactic use of the law, or morality of aspiration, away from an anthropocentric perspective insists that our laws acknowledge that the earth is a purposeful creation, and that its purpose extends beyond the scope of human existence, interests, and our civil laws. . . . [P]olicymakers must acknowledge that the value of environmental quality may not be ascertainable or adequately reflected in a cost benefit analysis.). 178 See Judith I. McGreary, A Scientific Approach to Protecting Biodiversity, 14 J. NAT. RESOURCES & ENVTL. L. 85, 88 (1998-1999); Boris N. Mamlyuk, Abstract: The Law and Economics of The Polluter Pays Principle 12, available at www.canlecon.org/ submissions/docs/Mamlyuk%20abstract.doc. 179 See Adam Babich, Too Much Science in Environmental Law, 28 COLUM. J. ENVTL. L. 119, 160-61 (2003); Mamlyuk, supra note 178, at 10. 180 See GUIDO CALABRESI & PHILIP BOBBITT, TRAGIC CHOICES 149-99 (1978). 181 See id.
177
176
2010]
75
conflict.182 In the end, per the rules of tragedy, we sow the seeds of our own destruction. In environmental law and economics, numerous models have been proposed to stave off destruction and extinction, ranging from selfregulation183 to game theoretic models184 to new sustainable development models focusing on local methods. Each of these models is progressive, important, and relevant. Yet none have had a real impact on policymakers, especially regarding climate change policy.185 One reason for the failure of incorporating these new models in the progressive environmental movement is the failure to engage with the dominant economic discourse.186 Another reason is the failure to strategically use the unlikely advantage of incomplete information for the good, which is brought about by the current reality of this information gap with respect to climate change.187 A new economic approach must move away from efficient allocation of property rights between human actors and enter a new advanced model of efficiency in terms of preservation, conservation, and future utilization of resources. This approach must be multi-generational and the environment must have a right to its own cleanliness, separate from the rights of humans. This approach can be called the biosphere quality model.188 This new form of environmental cost-benefit analysis must
See Babich, supra note 179, at 160-61 (discussing politically accountable decisions as a means of allocating limited resources) (citing CALABRESI & BOBBITT, supra note 180, at 3435). 183 See Joel F. Handler, Dependent People, the State, and the Modern/Postmodern Search for the Dialogic Community, 35 UCLA L. REV. 999, 1047 (1988). 184 See Endre-Stacy, supra note 51, at 937 n.5 (discussing game theory models like Prisoners Dilemma and existential Satre-like no-exit situation). 185 See Lyuba Zarsky, Stuck in the Mud? Nation-States, Globalization, and Environment (1997), available at http://www.nautilus.org/archives/papers/enviro/zarsky_mud.html. 186 See Douglas A. Kysar & James Salzman, Harnessing the Power of Information for the Next Generation of Environmental Law: Foreword: Making Sense of Information for Environmental Protection, 86 TEX. L. REV. 1347, 1356 (2008) (discussing the uncertainty of how we can use climate-change models and statistics to approach a cost benefit optimization plan). 187 Id. 188 See Jennifer L. Eastman, Urban Biosphere Reserves: Integrating Conservation, Community, and Sustainability, 27 WM. & MARY ENVTL. L. & POLY REV. 707, 718-19 (2003).
182
76
[VOL. 18.1
move away from efficiency analysis based on monetized costs and benefits between two equally positioned stakeholders and begin to address future generations and nontangible aspects of biosphere quality as economic values.189 Even under existing property rights regimes, the new economic model may accomplish the above goals by providing incentives for polluters to reduce pollution and not merely bargain for rights to pollute at current or increased levels based on a cost-benefit analysis.190 This goal of decreasing pollution may be accomplished by reducing barriers to entry for environmentally-conscious technologies.191 Equally promising are new models of multilevel governance, involving self-regulation and corporate responsibility.192 Unfortunately, an analysis of each of these policy alternatives is beyond the scope of this essay. However, this essay will now explore the concept of homo ecologicus and the strategic choices that it opens below. D. The Strategy of Homo Ecologicus Homo ecologicus is a term that defines the human relationship with nature, as opposed to human relations to other humans or of humans to themselves.193 Several scholars claim that it is an ontology born of postmodernism,194 though its roots may run deeper in human philosophy.195 Christian Becker traces the study of the relationship
See id. at 711-14; Mamlyuk, supra note 178, at 12. See Ian Ayres & J.M. Balkin, Essay: Legal Entitlements as Auctions: Property Rules, Liability Rules, and Beyond, 106 YALE L.J. 703, 717 (1996); Mamlyuk, supra note 178, at 12. 191 One such example is Californias Solar Power Initiative, effective January 1, 2007, which provided consumers and power companies with substantial incentives to invest in solar energy. See CAL. PUB. UTIL. CODE 2851 (West 2007). 192 See generally MULTILEVEL GOVERNANCE OF GLOBAL ENVIRONMENTAL CHANGE: PERSPECTIVES FROM SCIENCE, SOCIOLOGY AND THE LAW 147-99 (Gerd Winter ed., 2006) (examining the proper role of industrial self-regulation, improved coordination between international environmental organizations, and basic principles for sustainable use of resources). 193 Becker, supra note 4, at 17-23. 194 See H.Y. Jung, Marxism and Deep Ecology in Postmodernity: From Homo Oeconomicus to Homo Ecologicus, in KARL MARXS SOCIAL AND POLITICAL THOUGHT 57-58 (Bob Jessop & Russell Wheatley eds., 1999). 195 Harmony between humans and nature is a core concept in ancient human religions and belief systems. Taoism, for example, often holds harmony with nature to be a key value. See
190
189
2010]
77
between humans and nature from romantic natural philosophy, including the work of the German romantic Novalis and English poet William Wordsworth, to recent discussions on virtue ethics.196 Becker recognizes the right of the environment rooted within the concept of homo ecologicus as an inherent condition of human excellence and the good life, rather than a limitation on human development.197 The corresponding lack of nature, a clean environment, and open spaces necessarily retards our understanding of, and relation to, not only others but to ourselves.198 Our practical experience with nature confirms, or should confirm, the meaning of our existence.199 Homo ecologicus is a social creature in the global sense of society, in contrast to homo economicus, whose core values are individualism and self-interest. Or if there is a social dimension, homo economicus is limited to family groups, fealty to firm, and nation.200 Interestingly, homo ecologicus also turns out to be far more rational than homo economicus.201 Homo ecologicus asserts that the biosphere quality model
Eric Sean Nelson, Responding with Dao: Early Daoist Ethics and the Environment, 59 PHIL. E.& W. 294, 296-97 (2009). The Taoist nature-mysticism of China would later influence Japanese religious experience, including Zen Buddhism. See William Th. de Bary, Buddhism and the Chinese Tradition, 12 DIOGENES 102, 105-08 (1964). Additionally in Japan the Shinto tradition is rooted in a unique local nature mysticism. See Hideo Kishimoto, Some Cultural Traits and Religions of Japan, 9 PHIL. E. & W. 34, 34 (1959). Rumis pantheism and nature worship rest on the same philosophy. See Stanford Encyclopedia of Philosophy, Pantheism (June 4, 1996), http://plato.stanford.edu/entries/pantheism/#Ath. In Western thought, the nature mysticism of St. Francis of Assisi, the founder of the Franciscan order, is well known. See R. James Long, Aquinas and Franciscan Nature Mysticism, LOGOS, Spring 2005, at 57-58, available at http://muse.jhu.edu /journals/ logos/v008/8.2long.html. Tolstoys asceticism and Henry David Thoreaus transcendentalism also derive from a profound desire to establish humanitys balance with nature. See Clarence A. Manning, Thoreau and Tolstoy, 16 NEW ENG. Q. 234, 240 (1943). 196 See Becker, supra note 4, at 17-23. 197 Id. 198 Id. Work in cognitive psychology and the interconnection between ecology, social groups and their experience, and ultimately social and economic relations and law continues to deepen our understanding of social processes and systems. A review of this important stream of scholarship is outside of the scope of this article, but must be included in any systematic approach to environmental economics. 199 See id. 200 Id. 201 Id. Rationality is a highly complex and contentious issue in environmental economics. For the time being, it is sufficient to view this model as more rational because it provides
78
[VOL. 18.1
does not merely provide the most efficient model of resource allocation but also maximizes the overall quality of life and reduces the global risk of extinction.202 To homo ecologicus, the biosphere quality model is an organic extension of humans historical compatibility with nature and present equilibrium in certain undeveloped, as well as some industrial societies. But more importantly, the biosphere quality model is a longlasting [future] compatibility of nature with an evolved economic system of commodity production and exchange.203 The biosphere quality model has several important policy implications.204 By recognizing the right of the planet to have a standard for a minimum clean environment and establishing a measurable quotient for that standard, the model gives subsequent scholars a measuring point for future harm caused.205 As an example, the biosphere quality model would set the global pollution levels of 2010, or anticipated pollution levels in 2015 or 2020, as a baseline pollution allowance or an absolute quantity of existing pollutants, including carbon dioxide, and water contaminants, to name a few variables. This model represents the Earth at the point where the amount of pollution is acceptable and should not be exceeded. Consequently, individual pollution permits will be prorated and calculated such that, in sum, the allowable pollution does not exceed the agreed-upon total pollution level. With these absolute values in
maximum current quality of life, and the highest probability for future enjoyment of similar quality of life in relation to nature, but also because it realizes natures quality of life. 202 Becker, supra note 4, at 20. 203 Id. 204 The biosphere quality model is theoretically similar to the zero-infinity dilemma under which if too many species are lost incrementally this may result in an accelerated breakdown of the ecosystem. See WOOD, supra note 56, at 67-69. But this model differs in that biosphere quality assumes a systemic collapse regardless of species extinction; biosphere quality is a much simpler linear model of fixed quantities of resources and accelerating use, resulting in peak scarcity and eventual collapse. It can be compared to the peak-oil theorem, or any closed system analysis. See Press Release, Cambridge Energy Research Associates, Peak Oil Theory World Running Out of Oil Soon Is Faulty; Could Distort Policy & Energy Debate (Nov. 14, 2006), available at http://www.cera.com/aspx/cda/public1 /news/pressReleases/pressReleaseDetails.aspx?CID=8444. To illustrate, we can imagine the earth as a closed glass jar with finite quantity of water, organic compounds, oxygen and bioorganisms. Sealed, the glass jar will sustain lifemold, bacteria, and other microorganismsuntil these organisms use up all available water and oxygen and suffocate in their own waste. Our planet is identical to this hypothetical glass jar. 205 Becker, supra note 4, at 20.
2010]
79
place, lawyers and economists can analyze in absolute terms the extent to which individuals, firms, or nations have exceeded their allowed quotas. This model thus enables the application of the polluter pays principle to collect the costs of the environmental harm. Without this baseline absolute level of allowable pollution, the polluter pays principle remains as toothless in theory as it is in practice. Absent an absolute ceiling for allowable pollution, ecologically sustainable development becomes a slippery slope,206 or worse still, an exponentially accelerating race to the bottom as firms and nations try to capture maximum development before the implementation of stricter international standards. For this reason, ecologically sustainable development, the dominant environmental regulation framework since the late 1970s premised upon reconciling economic needs of the present with economic needs of future generations, has done little to reduce actual global consumption or pollution levels.207 The idea that economic growth must be reconciled with environmental interests is meaningless without a bright-line definition of such interests, resulting in reformulating and redefining target environmental quality levels based on changing levels of economic development.208 To use a more abstract
See Endre-Stacy, supra note 51, at 935 (discussing the slippery concept of ecologically sustainable development as the dominant resource use paradigm and suggesting strategic ways to avoid charges of idealism). 207 See id. at 936. 208 To illustrate, in 1980 the International Union for Conservation of Nature and Natural Resources issued a World Conservation Strategy which, say, identified a target allowable pollution level of X. U.N. International Union for Conservation of Nature and Natural Resources, World Conservation Strategy (1980), available at http://data.iucn.org/ dbtwwpd/exec/dbtwpub.dll?AC=GET_RECORD&XC=/dbtwwpd/exec/dbtwpub.dll&BU=http %3A%2F%2Fdata.iucn.org%2Fdbtwwpd%2Fcommande%2Findex_newsite.htm&TN=iucn& SN=AUTO17749&SE=1795&RN=9&MR=20&TR=0&TX=1000&ES=0&CS=1&XP=&RF= WebRes&EF=&DF=WebAff&RL=0&EL=0&DL=0&NP=254&ID=&MF=&MQ=&TI=0&D T=&ST=0&IR=869&NR=0&NB=0&SV=0&BG=&FG=&QS=&OEX=ISO88591&OEH=ISO 88591. Between 1980 and 1987, when the World Commission on Environment and Development issued the Brundtland Report on Our Common Future, pollution levels increased to X + 1. U.N. GAOR, Report of the World Commission on Environment and Development: Our Common Future, Annex to document A/42/427 (1987). In 1992, the Earth Summit takes as its baseline pollution levels in 1992, which are higher than those in 1987 [X + 1], resulting in a baseline real starting pollution quantity of (X + 1) + 1. See William K. Reilly, The Road from Rio: The Success of the Earth Summit Depends on How Well We Follow Through on its Principles and Programs, EPA JOURNAL (1992), available at http://www.epa.gov/ history/topics/summit/01.htm. The same is true in 2000 ((X + 1) + 1) + 1) and ad infinitum.
206
80
[VOL. 18.1
formulation, without ideals that become standards, [environmental] law is flabby and cannot assist in approaches to resource use that are more sustainable.209 The proposed biosphere quality model also allows economists and policymakers to overcome the free rider problem, which currently causes substantial opposition to international environmental regulation.210 In the environmental context, the free rider problem is co-opted by critics to mean that developed nations stand to gain an unfair advantage from imposing unreasonable carbon and other pollution restrictions on developing nations.211 Because developing states will sacrifice economic growth in the name of environmental protection and developed states will not be disadvantaged relative to developing states, developed nations are free riders of any environmental regulation that seeks to limit, in absolute terms, pollution quantities.212 The argument does have superficial draw. However, the critique quickly folds as the statist interpretation of rights to development is removed and the discussion returns to an individual rights interpretation.
The permutations in absolute terms result in ever-increasing levels of pollution. At present, this increase is exponential. Ecologically sustainable development (ESD) strives to contain the increase in pollution to a linear rate of growth. See Rosalyn McKeowen, Education for Sustainable Development Toolkit, at 17 (2002), available at http://www.esdtoolkit.org/ esd_toolkit_v2.pdf. While ESD is an acceptable growth model for the near term in theory, it lacks any real content until we define the quantity X as an absolute value of pollution at a given date and agree to limit future levels of pollution in reference to X. The current shifting baseline is directly attributable to the failure to set this starting quantity. 209 Endre-Stacy, supra note 51, at 937. 210 See HORST SIEBERT, ECONOMICS OF THE ENVIRONMENT: THEORY AND POLICY 163-66 (7th ed., 2008). This formulation of the free rider problem states that developed nations stand to gain unfairly from imposing unreasonable carbon and other pollution restrictions on developing nations. Because developing states will sacrifice economic growth in the name of environmental protection, developed states will not be disadvantaged, relative to the developing states. However, this critique quickly folds when we remove the statist interpretation of rights to development and instead return to individual rights. 211 See Jonathon Baert Weiner, Global Environmental Regulation: Instrument Choice In Legal Context, 108 YALE L.J. 677, 720 (1999) (describing the problem of developed nations receiving environmental benefit from restricting developing nations economic growth as ecoimperialism from the developing nations perspective). 212 See Andrew Green, You Cant Pay Them Enough: Subsidies, Environmental Law, and Societal Norms, 30 HARV. ENVTL. L. REV. 407, 422-23 (2006).
2010]
81
E. A Right to Biosphere Quality in Law? Computing power and advances in systems analysis are predicted to allow analysts to create complete global weather modeling within ten years.213 These advances, coupled with vastly improved data collection, demographic modeling, satellite imagery, and statistical methods will allow scholars to finally locate and isolate specific polluters, attribute quantifiable volumes of gases or other pollutants to them, and measure the impact of this pollution on the overall health of the biosphere.214 Once this technology advances, the present information asymmetry and information cost problems will disappear.215 The technological advances will also allow analysts to model individuals actual pollution volumes as opposed to using only statistics.216 What does this advance mean for regulation of individuals, firms and states? Are current projected changes to environmental legislation adapted for this future reality? Unfortunately, the answer is no. There is no general right to environmental quality under international law.217 At the domestic level, states are beginning to concretely implement the polluter pays principle against polluting firms.218 And further, regional and bilateral treaties exist to protect habitats and biodiversity zones. Current and proposed regulatory techniques are increasingly protecting greater swaths of habitat, ecosystems, and
Erik P. DeBenedictis, Reversible Logic for Supercomputing, in PROCEEDINGS OF THE 2ND CONFERENCE ON COMPUTING FRONTIERS 391, 394-95 (2005) ([A] future computer required for [full] climate simulations will need a sustained performance of 1 Zettaflops.) (on file with author). Dr. Erik P. DeBenedictis is a principal researcher at Sandia National Laboratories, two major United States Department of Energy research and development national laboratories; see also Yen-Kuang Chen, et al., High-Performance Physical Simulations on Next-Generation Architecture with Many Cores, 11 INTEL TECH. J. 250, 25153, available at http://www.intel.com/ technology/itj/ 2007/v11i3/8-simulations/1-abstract.htm (describing how the advent of multi-core architectures promises to soon make processors with trillions of FLOPS available). 214 See supra note 213 and accompanying text. 215 Id. 216 Id. 217 See PHILLIPE SANDS, PRINCIPLES OF INTERNATIONAL ENVIRONMENTAL LAW 501 (2d ed. 2003) (The international legal order does not lend itself to an approach which allows the totality of the earths resources to be managed and used in a manner which is sustainable over the long term.). 218 See id.
213
82
[VOL. 18.1
endangered species.219 However, as suggested above, there is an interesting upside to the current lack of information, which progressive environmental advocates will exploit in anticipation of an increasing computing capacity and the eventual launch of total global weather systems monitoring.220 Currently, there is observed broad political and social momentum for environmental regulation in principle.221 Individuals, states, and firms all generally agree that environmental harm is a serious potential threat.222 Likewise, as evidenced by the Rio Declaration, most stakeholders and decision-makers would agree on the basic premise that if it were possible to measure environmental harm, firms should theoretically have to pay for this harm.223 This general agreement should be galvanized towards a concrete political end.224 To create a workable legal doctrine for liability allocation based on absolute values, environmental lawyers need to push for the following: Agreement between firms, modeled on the Rio Declaration, declaring that all firms believe, in principle that they should pay for the actual costs of their pollution, provided that causation, and costs are adequately quantifiable;
This is evidenced by the progress made in the conservation field, with a large number of new national parks being established around the world, and the evolution of eco-tourism to sustain these efforts especially in highly sensitive and fragile ecosystems. The Great Baikal trail in Russia (in partnership with the Lake Tahoe trail) is one such effort to establish a sustainable economic base for enjoyment and protection against human encroachment of delicate microclimate ecosystems. See Great Baikal Trail Association, Great Baikal Trail, http://www.greatbaikal trail.org/index_en.html (last visited Feb. 5, 2010). 220 See supra note 187 and accompanying text. 221 See, e.g. Robert W. Hahn & Robert N. Stavins, Incentive-Based Environmental Regulation: A New Era from an Old Idea? 18 ECOLOGY L.Q. 1, 32 (1991) (noting that politicians and the public throughout the world are concerned with environmental issues and that there is a growing demand for environmental quality). 222 See, e.g. Dominic A. Gentile, International Trade and the Environment: What is the Role of the WTO? 20 FORDHAM ENVTL L. REV. 197, 197 (2009) (noting the growing international community view that the state of the environment is a global concern.); Robert V. Percival, The Globalization of Environmental Law, 26 PACE ENVTL. L. REV. 451, 452 (2009) (stating that global awareness of environmental issues is surging). 223 See Rio Declaration, supra note 12, at 16. 224 Id.
219
2010]
83
Local, informal polluter pays agreements between individuals and small groups, in which local, bottom-up enforcement creates a working implementation of the rule; Further global acceptance of polluter pays principle as a universal principle, including studies into indigenous ecological equilibrium lessons.225 What would these declarations of principles accomplish in real terms? In the near term, the effect will likely be negligible. Firms will continue to expand their operations to new markets and continue to pollute, while having their firm practices signed off by their Chief Green Officers (CGOs).226 In the near term, these agreements will not create a legal right to biosphere quality.227 But the value of such agreements will become evident, however, as soon as systems analysis allows for the precise tracing of the cause and volume of a given firms pollution activities.228 These inter-corporate agreements will carry little evidentiary or binding force in the next decade, but they will manifest the will of current leaders to become liable for their levels of pollution.229 In a sense, these agreements become evidentiary admissions. Their import on actual practice and procedure of future environmental regulation is speculative at this point, but their symbolic significance, both now and in the future, should not be understated. As explained above, the polluter pays principle can acquire real force at the international level. Further codification and international conventions should be encouraged.230 Within ten years, advances in
See G. Nasieku Taraiya, The Legal Perspectives of the Maasai Culture, Customs and Traditions, 21 ARIZ. J. INTL & COMP. L. 183, 206 (2004) (discussing the benefits that can be obtained from studying indigenous ecological knowledge); Sandi B. Zellmer, Indian Lands as Critical Habitat for Indian Nations and Endangered Species: Tribal Survival and Sovereignty Come First, 43 SAN DIEGO L. REV. 381, 424 (1998) (discussing the environmental benefit to be gained from indigenous ecological knowledge). 226 John Davies, The Rise of the Chief Green Officer, CLIMATEBIZ (June 10, 2007), http://www.climatebiz. com/news/2007/06/10/rise-chief-green-officer. 227 See WEISS, ET AL., supra note 90, at 238-39. 228 See supra notes 213-216 and accompanying text. 229 See Rio Declaration, supra note 12, at 16. 230 Id. (intending to guide sustainable development around the goal).
225
84
[VOL. 18.1
computing capacity and systems analysis will allow analysts to isolate causes of pollution and to quantify, with small margins of error, actual ecological harm by given actors.231 When this advance in technology occurs, states and firms are likely to advocate environmental liability models that will seek to avoid liability or to shift externalities to other users.232 Until advances in systems analysis become widespread and there is near universal agreement on the general contours of an international environmental liability scheme, environmental advocates must push for broader acceptance of the polluter pays principle across all levels, including internationally, regionally, between multinational corporations, at international financial institutions, among and between NGOs, domestically, and on local group levels. The universal recognition of polluter pays principle in international law, both through the formation of state practice and opinio juris, will be greatly aided by this multipronged proactive approach. VI. CONCLUSION As Posner writes, discussing environmental values in economic terms does not inevitably mean to disparage and depreciate those values.233 This statement is very true. In many ways, the Stern Review represents the future generation of law and economics scholarship.234 It may well be the first major modern case were economic analysis determines the nature of future laws written to regulate the exact economic activities contributing to global warming.235 Nevertheless, it is also true that existing economic terms do not encompass or relate to important environmental values like biodiversity or sustainability.236 For
See supra notes 213-216 and accompanying text. Id. 233 See Heyes, supra note 1, at xv. 234 See STERN REVIEW, supra note 3 (analyzing the challenges of climate change as an example of Posners second generation of economic analysis of environmental law). 235 See id. 236 See Geoffrey Heal, Markets & Sustainability, in ENVIRONMENTAL LAW, THE ECONOMY, AND SUSTAINABLE DEVELOPMENT: THE UNITED STATES, THE EUROPEAN UNION AND THE INTERNATIONAL COMMUNITY 410-27 (Richard L. Revesz et al. eds., 2000) (proposing that because we are not conscious of the importance of natural ecosystems and the future value of environmental conservation, economic institutions cannot lead us to make sustainable choices).
232
231
2010]
85
a science built on the notion of equilibrium between producers and consumers, remarkably few economic articles are written regarding an ecological equilibrium.237 The very position of environmental economics as a fringe discipline238 and somehow outside of the core of economics proper is symptomatic of the disciplines priorities.239 Hence, when the environmental law debate is carried out in mainstream economic terms, progress is often trapped in dueling sets of vocabularies, methodologies, and of course, values.240 On the one hand, serious economists are performing rigorous economic analyses and influencing policy decisions. On the other hand, specialists in the softer sciences, like ethicists and ecologists, write on the role of nature in the good life. Lawyers straddle these two extremes, developing pragmatic proposals and analyzing likely pitfalls, practical opportunities, and challenges.241 Among social scientists, it is almost clich to speak of the observed human tendency to ignore challenges until they manifest into crises or catastrophes or to write on the human tendency to reduce complex phenomena to more easily quantifiable and manageable bits.242 In the context of environmental economics, the development and current implementation of the polluter pays principle is a clear illustration of this cognitive trait.243 The reduction of complex phenomenahuman contribution to environmental harmto economic terms has, in practice, run into an analytical brick wall when faced with issues like causation and valuation.244 To surmount this wall, economists simply ignore or
See DALY, supra note 31, at 349. This is mindful of the encouraging progress being made on establishing major interdisciplinary research centers like Columbia Universitys Earth Institute, and similar centers, and the significant interdisciplinary work done by leaders in the field. See Becker, supra note 4, at 18. 239 Id. 240 See supra Part IV. 241 See Sir Richard Jennings, Forward to PHILIPPE SANDS, PRINCIPLES OF INTERNATIONAL ENVIRONMENTAL LAW xii-xiv (Philippe Sands ed., Cambridge Univ. Press 2003) (1995) (stating the difficulties associated with creating a legal framework to deal with the problems facing environmental law). 242 See Lisa V. Bardwell, Problem-Framing: A Perspecive on Environmental ProblemSolving, 15 ENVTL. MGMT. 603, 603 (1991) (showing how organization of a problem can lead to a effective cognitive problem solving). 243 See supra Part II.C. 244 See supra Part IV.C.
238
237
86
[VOL. 18.1
overlook unquantifiable variables.245 Basic assumptions regarding the goals of economic liability models, or the values that they reflect, are likewise ignored or taken as settled.246 The solution, of course, is not a rejection of the economic analysis of environmental issues but the development of a more comprehensive and multifaceted theoretical approach to environmental law and economics.247 Attempts to develop such an approach date back to the first generation of environmental law.248 However, the fact that policymakers largely ignored these issues does not mean they absorbed the lessons of the first generation.249 Indeed, the theoretical problems debated in the first generation are ever more pressing today.250 With the acceleration of global warming and pollution rates, and the glaring impracticability of conventional models for controlling these environmental concerns, it is more necessary than ever to return to and reassess, rather than take for granted, the underlying assumptions of our economic theories.251 Therefore, rather than embarking on third or subsequent generation of economic analysis, we need to continuously reassess the assumptions of the first generation, particularly the value judgments that underlie why our current economic and legal models fail to adequately abate our environmental dangers.252
See id. See id. 247 To combat the charge of utopianism and vagueness, analysts must present effective political examples and detailed, programmatic visions of how they see an ecologically based, harmonious society. Urbanization and ecological harmony are reconcilable, though not in the mainstream ecologically sustainable development form. See CALABRESI & BOBBITT, supra note 180, at 34-41. 248 See Heyes, supra note 1, at xv. 249 Id. 250 See generally Jerry L. Anderson, The Environmental Revolution at Twenty-Five, 26 RUTGERS L.J. 395, 397 (1995) (stating that the efforts of the first generation of environmental law were not enough and that a harder stance on environmental protection is needed). 251 See Becker, supra note 4, at 19. 252 See Kennedy, Cost-Benefit Analysis, supra note 21, at 429.
246
245

Analyzing The Polluter Pays Principle

Загружено:

Сведения о документе

Исходное описание:

Оригинальное название

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

Analyzing The Polluter Pays Principle

Загружено:

Авторское право:

Доступные форматы

ANALYZING THE POLLUTER PAYS PRINCIPLE THROUGH LAW AND ECONOMICS

Electronic copy available at: http://ssrn.com/abstract=1679245

SOUTHEASTERN ENVIRONMENTAL LAW JOURNAL

Electronic copy available at: http://ssrn.com/abstract=1679245