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 8: Self-enforcement of environmental law

Robert Innes

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


Robert Innes When environmental laws are breached, violating firms can often engage in remediation activity that reduces the harm caused by their violation. Polluters can clean up contaminated sites and act quickly to end their discharges. A possible objective of law enforcement is what I shall call self-policing of behaviour, when violators voluntarily engage in these sorts of remediation activities. A further objective of law enforcement may be the self-reporting of environmental offences to government authorities, and firm investments in environmental self-auditing programmes that enable firms to discover their offences, report them and clean them up. In this chapter, I consider how government enforcement programmes can prompt firms to engage in these self-enforcement activities, and the economic merits of doing so. At the crux of this inquiry is the premise that law enforcement is costly, so that prompting firms to exercise due care in preventing harmful environmental accidents – and cleaning them up when they occur – cannot be accomplished with the free imposition of sanctions for inefficient conduct. Instead, the government must monitor potential violators with cost, and optimal regimes of monitoring and sanctions must account for both the societal benefits of the harm that is prevented and the government enforcement costs that are borne.1 As will be seen in what follows, such enforcement costs can provide a powerful economic motive for eliciting the self-initiated enforcement actions at issue in this chapter. I begin this inquiry in the next section by focusing on the scope for selfreporting of behaviour to improve...

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