The Law and Economics of the Environment

The Law and Economics of the Environment

Edited by Anthony Heyes

This outstanding book focuses on how economics can contribute to the design, implementation and appraisal of legal systems that create the ‘right’ incentives for environmental protection. The sixteen original and specially commissioned contributions – written by some of the leading names in their field – span many of the important areas of contemporary interest and employ case study material combined with theoretical, empirical and experimental research.

Chapter 5: Liability policy and toxic pollution releases

Anna Alberini and David Austin

Subjects: economics and finance, environmental economics, environment, environmental economics, environmental law, environmental sociology, law - academic, environmental law


Anna Alberini and David Austin INTRODUCTION This chapter examines whether imposing strict liability for the cost of cleaning up contaminated sites has increased the level of care taken by firms to avoid uncontrolled releases of pollutants into the environment and reduced the frequency and/or severity of such events. Proponents of environmental policies based on strict liability contend that, faced with the prospect of disbursements over clean-up or to compensate third parties, firms will avoid improper disposal of pollution into the environment. In practice, a number of US environmental statutes incorporate strict liability for polluters. Under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA, originally passed in 1980), parties that have contributed to badly contaminated sites may be forced to pay for clean-up. The full burden of environmental costs is placed on the responsible party (the polluter) and the Environmental Protection Agency (EPA) does not have to prove that the party failed to meet a standard of due care. Strict liability is often imposed on polluters by state ‘mini-Superfund’ laws, which address the numerous non-priority hazardous waste sites that do not qualify for the federal Superfund programme, and by the Offshore Continental Shelf Act (1974), which covers off-shore spills occurring during drilling operations. Legal liability is one way in which firms can be made to internalize the pollution damages associated with their production activities. It is an ex post type of intervention, giving firms flexibility in how they wish to reduce the likelihood of uncontrolled releases of pollutants, while relieving...

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