The Law and Economics of the Environment
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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.
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Chapter 14: Insurability, environmental risks and the law

Henry van Egteren and R.Todd Smith

Extract

13. International harmonization of environmental law: theory with application to the European Union Henry van Egteren and R. Todd Smith1 INTRODUCTION The European Union has attempted, in recent years, to find the most effective manner in which to accommodate varying environmental traditions regarding liability for environmental damages. The two main traditions are negligence and strict liability.2 Strict liability implies that an injurer is liable for the damages associated with an accident, regardless of the level of care taken by the injurer. Under simple negligence, the determination of liability for damages is a function of the injurer’s level of care: if the injurer meets or exceeds the legal standard of care, as defined by the court, then the injurer’s liability for damages is zero. There are powerful distributional consequences associated with one type of tradition versus another. While negligence and strict liability both may be capable of inducing socially optimal levels of care, potential injurers would normally prefer negligence-based regulations since they can escape liability when they perform at a level of care at or above that which society deems ‘optimal’.3 Under strict liability, potential injurers are liable even when they accomplish what society deems optimal. In other words, a potential injurer is liable under more circumstances when strict liability is imposed than when negligence is imposed. While the European Union would like to respect the environmental traditions of its member states, its most important objectives are to secure the environmental future of the region as well as to maintain or...

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