Polluter Pay Principle

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Citation: 18 Se. Envtl. L.J. 39 2009-2010
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ANALYZING THE POLLUTER PAYS PRINCIPLE THROUGH

LAW AND ECONOMICS
BORIS
I.
II.
MAMLYUK
40
...................................................
INTRODUCTION
AN IN-DEPTH LOOK AT THE POLLUTER PAYS PRINCIPLE....................41
A.
B.
C.
D.
III.
N.
.......... 41
What Is the Polluter Pays Principle? ...........
Backgroundand History of the PolluterPays Principle........... 43
Theory and Variations of the PolluterPays Principle................44
47
..
.................
The PolluterPays Principle in Crisis.....
THE PRINCIPLES OF COASE AND CALABRESI IN ADDRESSING

.......
...............................................
POLLUTION.
48
............ 48
...........
The CoasianReciprocity Principle
1. Applicability of the Coase Theorem to Polluter Pays
Principle........................................48
2. Problems with Application of Coase Theorem to
Pollution Cases...................................49
B. Calabresi-MelamedCheapest Cost Avoider Principle...............50
A.
IV. CRITICAL LAW AND ECONOMICS APPROACH TO THE POLLUTER

..................................................
PAYS PRINCIPLE
51
What Is Efficiency? What Are Our Values? And What Are

...................................... 52
Externalities?
B. Full InternalizationIs Neither Required Nor Possible...............55
56
C. Ambiguity; PracticalUnworkability......................
A.
V.
DEVELOPMENT OF A FORWARD-LOOKING ENVIRONMENTAL

..............................................
ECONOMIC THEORY
A.
The Concept of Environmental Harm and Costs: Beyond

.....................................
Anthropocentrism
61
62
Visiting Assistant Professor, Ohio Northern University, Pettit College of Law; 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.
SOUTHEASTERN ENVIRONMENTAL LAW JOURNAL
40
[VOL. 18.1
B.
The Problem With Static, Single-Generation Economic

.......... 65
.................................
Models .
C. Beyond Efficiency and Towards Multilevel Governance............66
......... 69
D. The Strategy of Homo Ecologicus...............
E. A Right to Biosphere Quality in Law?.....................73
77
..........................................
VI. CONCLUSION
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."' 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.
Today's mainstream scholarship rests on unarticulated anthropocentric
value judgments, which render the resulting economic analysis not only
THE LAW AND ECONOMICS OF THE ENVIRONMENT
xv
(Anthony Heyes ed.,
2001)
[hereinafter LAW AND ECONOMICS].

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-reviewreport.htm
[hereinafter THE STERN REVIEW]. The Stem 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 CO 2 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.
ANALYZING THE POLLUTER PAYS PRINCIPLE
2009]
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
7
environment's own legal right to protection as a legal entity.
This Essay is divided into several parts. Part H1 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 Coase's and Guido
Calabresi's 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.
H.
AN IN-DEPTH LOOK AT THE POLLUTER PAYS PRINCIPLE
A.
What Is the PolluterPays 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
Christian Becker, The Human Actor in Ecological Economics: PhilosophicalApproach 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, 14 I.L.M. 234, 239 (Jan. 1975) [hereinafter
OECD, Polluter-PaysPrinciple].
Susan Emmenegger & Axel Tschentscher, Taking Nature's Rights Seriously: The Long Way
to Biocentrism in Environmental Law, 6 GEO. INT'L ENVTL. L. REv. 545, 572-76 (1994).
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. TRANSNAT'L 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).
4
42
[VOL. 18.1
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.
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 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
See Stefanie Sommers, The Brownfield Problem: Liability For Lenders, Owners, and
Developers in Canadaand the United States, 19 COLO. J. INT'L ENVTL. L. & POL'Y 259, 26667, 277-91 (2008) (comparing the application of the polluter pays principle in the United
States and Canada, and discussing brownfield liability in Canada and the problems of
enforcing Canada's Comprehensive Environmental Response, Compensation, and LiabilityAct
(CERCLA)).
'0 OECD, Polluter-PaysPrinciple,supra note 6, at 234-35.
" 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, NGO's and multinational
corporations. For instance, the World Bank's Investment Framework for Clean Energy and
Development has set forth guidelines for 'responsible development' and 'sustainable'
investment. World Bank, An Investment Frameworkfor Clean Energy and Development: A
Progress Report (Sept. 1,. 2006) at 3, available at http://siteresources.worldbank.org/SOUTH
ASIAEXT/Resources/2235461171488994713/3455847118962179212 1/AninvestmentFramew
orkforCleanEnergyandDevelopment.pdf. For analytical ease, this Essay considers both
meanings of the polluter pays principle.
12See Rio Declaration on Environment and Development,
16, U.N. Doc.A/CONF.151/26
(Aug. 12, 1992); see also SUMUDU A. ATAPATrU, EMERGING PRINCIPLES OF INTERNATIONAL
ENVIRONMENTAL LAW 470 (2006).
13OECD, Polluter-PaysPrinciple, supranote 6, at 234-35.

14See PETER G. G. DAVIES, EUROPEAN UNION ENVIRONMENTAL LAW: AN INTRODUCTION TO
KEY SELECTED ISSUES 52-55 (Ashgate Publ'g, Ltd. 2004); ALAN GRIFFITHS & STUART
WALL, APPLIED ECONOMICs 117 (11th ed., 2007) ("[Tihe move towards environmental taxes
is in line with the 'polluter pays' principle"); LASZLO ZSOLNAi, RESPONSIBLE DECISION
MAKING 171-72 (Transaction Publishers 2008) (discussing the polluter pays principle in EU
law as appearing in environmentalacquis communautaire).
2009]
43
surprisingly, there is heated debate regarding the scope of the broad

principle and the wisdom of its economic justifications. 15
B. Backgroundand History of the PolluterPays 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.1
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
No legal or
negative effects, and the "environment was not valued at all.
economic bases developed to allocate the costs of cleanup because the
oceans and atmosphere were seen as inexhaustible sponges for humanity's
waste.1 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 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 Pi ou's 1932 work, The Economics of Welfare.21 The social
costs of pollution and the need to internalize the costs and benefits of
23
Duncan
pollution were extensively debated throughout this time.
Kennedy's internalization solution for the problem of social costs is a
variation of the polluter pays principle, although his nomenclature differs
15SHIFTS 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).
See OECD, Polluter-PaysPrinciple, supra note 6, at 234.
Rio Declaration, supra note 12, 16.
1 ATAPATTU, supra note 12, at 438.
'9 Id. at 438-39.
0Id. at 439.
21ARTHUR 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).
22Ronald H. Coase, The Problems of Social Cost, 3 J.L. & Econ. 1, 1-2 (1960).
2 ATAPATFU, supra note 12, at 438.
44
[VOt. 18.1
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 Variationsof 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 2 rays principle addresses cost allocation in addition to deciding
liability. 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. ' The polluter pays principle also spreads
4Id.
' 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).
2 See ATAPATFU, 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 Frameworkfor National
49 CASE W. RES. L. REV. 1 (1998)).
2Governance,
9
1d.
OECD, Polluter-PaysPrinciple,supra note 6, at 239; RESTATEMENT (SECOND) OF TORTS

901 (1979).
3 The concept of absolute scarcity of the environment has emerged as the dominant theory of
scarcity supported by modem 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 modem environmental economics correctly rests
on the assumption of absolute scarcity. The assumption of relative scarcity derives from
Newton's second law of thermodynamics, which posits that matter can neither be created nor
3
2009]
45
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 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. These political obstacles are resolved by
appealing to the presumptively efficient nature of the cost internalization
According to the
accomplished by the polluter pays principle. 35
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
Industry-wide and polluter-specific taxes
cost-liability allocation. 0
theoretically meet the goal of allocating liability according to the source of
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.
See Candice Stevens, Interpretingthe PolluterPays Principle in the Trade and Environment
Context, 27 CORNELL INT'L L.J. 577, 577-78 (1994).
34Id.
35See id. at 578.

3See id. at 585.
37 Id.
3
8Id.
3 See id. at 578-81.
40
Id.
46
[VOt. 18.1
harm. 4' here are myriad environmental tax regimes, but generally a tax
regime allocates prospective liability for potential environmental harm, thus
42
spreading the cost and risk of accidents over a wide period of time.
"Environmental taxes efficiently meet the needs of governments to raise
additional revenues, reallocate resources and redistribute incomes."43
Additionally, environmental taxes manifest a government's "desire to
correct a negative externality (by regulating and reducing environmental
pollution) through the use of economic instruments rather than solely a
regulatory scheme.""
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
damages-as well as even unrelated government expenditures.4
Other variations of the polluter pays principle include the notion of
"[a]ssessing liability in proportion to the probability of each company's
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 entity's degree of
culpability in a given case.4 8 Alternative implementation models include
tradeable pollution permits, bright line pollution or penalty models, and
49
pollution abatement subsidy schemes.
41 Id.
42Andrew J. White, III, Decentralised Environmental Taxation in Indonesia: A Proposed

Double Dividendfor Revenue Allocation and Environmental Regulation, 19 J. ENVTL. L. 43,
44 (2007).
43Id.
4 Id.
45Stevens, supra note 33, at 578.
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).
48Stevens, supra note 33, at 578-81.
49
ATAPATFU, supra note 12, at 458.
2009]
47
D. The PolluterPays 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 scope of this principle
and its effects are still debated, a majority of scholars accept its economic
rationale.5 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.
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 costbenefit 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.
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
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
consensus-something 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.").
52Although 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).
53Id
Endre-Stacy, supra note 51, at 935-36.

George P. Smith, Re-Validating the Doctrine of Anticipatory Nuisance, 29 VT. L. REV. 687,
717 (2005).
5 PAUL M. WOOD, BIODIVERSITY AND DEMOCRACY: RETHINKING SOCIETY AND NATURE ix-
x (2000).
48
[VOL. 18.1
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)
Calabresi's 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 CoasianReciprocity 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.
This Coasian reciprocity principle suggests a very general costbenefit 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 re uired to accept some not
unreasonable discomfort for the general good."' Coase does not define his
standards for reasonableness and general good with any measure of
objectivity because they are, naturally, context-specific 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. For instance, potential victims are 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
See Coase, supra note 22, at 2.
58 Id. at 19-20 (quoting W. L. PROSSER, THE LAW OF TORTS 412 (2d ed. 1955)).
9 See id. at 27.
6 Id. at 19-20 (citing PROSSER, supra note 58, at 398-99, 412).
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).
62 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
2009]
49
risk transfer strategies or adjust pricing to reflect economic realities based

In accordance with the Coase
upon this allocation of legal rights.
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.6 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 them on to
the consumer, allowing compensation for the full costs of production,
including the negative externalities of the pollution.
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
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
equity, fairness and ethical principles, whereas Coasian analysis would allow allocation of
liability on economic efficiency grounds).
See Coase,supra note 22, at 41-42.
6 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).
6 Id.; see also Stevens, supra note 33, at 584-85.
See Coase, supra note 22, at 41-42.
6
8See id. at 15-19.
See id. at 15-20 (describing how both the Coase Theorem and the polluter pays principle
require zero transaction costs).
o Id. at 8-11.
50
[VOt. 18.1
with approximations of damage that are as accurate as possible.7 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 costavoider principle.
B. Calabresi-MelamedCheapest 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.
As with Coase, applying the Calabresi-Melamed model to
environmental harm is problematic because it rests on a dual-agent model.
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
71See Lin, supra note 47, at 1499 n.355.

72See Coase, supra note 22, at 15-20.
7 See id. at 42-44.

74See id.; Stevens, supra note 33, at 577-78.
See, e.g. Coase, supra note 22, at 2-6 (discussing "land" as something actors use and not
equal to an actor).
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
B. Wiener, Something Borrowed ForSomething Blue: Legal Transplantsand The Evolution of
Global Environmental Law, 27 ECOLOGY L.Q. 1295, 1336 (2001).
7 See Weiner, supra note 76, at 1337.
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).
2009]
51
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.so
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
However, in global
negotiating and quantifying their respective rights.
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. Thus, the pollution continues unabated with only
83
ex post facto enforcement opportunity.
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 multipleYet the polluter pays principle and
polluter context or global warming.
emerging cap-and-trade schemes are essentially modified Coase and
Calabresi models, restin on the same assumptions regarding efficiency,
values, and externalities.
See Weiner, supra note 71, at 1337.

a See id.
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, "[tjhe dilemma ... is how one
c2uantifies an irreversible and permanent loss to the environment").
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).
8 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).
See generally Thomas A. Rhoads & Jason F. Shogren, Coasean Bargainingin 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").
52
A.
[VOL. 18.1
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 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.
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
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.
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).
88 Id.
8 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.").
9 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-Economicsfrom 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].
' Id. at 469.
2009]
53
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
94
approach is a nonstarter for economic analysis of environmental costs.
First, it is impossible to have property rights in certain objects or ideas, such
as the vitality of the environment, biodiversity, cleanliness, or bioequilibrium. 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:
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
coordinationand 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
98
the dominant rationales for the polluter pays principle.
Second, the very concept of efficiency may be indeterminate in the
environmental context because it relies on a series of overtly political value
In other words, there is no "correct answer to the question of
judgments.
See WEISS
ET AL., supra note 90, at 86.

See Kennedy, Critical Legal Studies, supra note 91, at 469-71.
95Id. at 466 ("Some things (not public goods) you can't have property in at all.").
96 DANIEL H. COLE, POLLUTION AND PROPERTY: COMPARING OWNERSHIP INSTITUTIONS FOR
ENVIRONMENTAL PROTECTION 178 (2002) (emphasis added).

9 Coase, supra note 22, at 19-20.
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
poiluter pays principle).
See Kennedy, Cost-BenefitAnalysis, supra note 21, at 419.
54
[VOL. 18.1
how to value[,J implicit in the very concept of efficiency."

Value
judgments are inherently political and imbued with personal preferences,
likes, tastes, and customs.' 0 1 Values that inform case-by-case efficiency
analysis may be legally protected property values, have no legal protection
(i.e., interest in aesthetic enjoyment) or be illegal (value of running a
bulldozer over an ancient Native American burial 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. 03
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.'
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.'os
Lastly, the mainstream efficiency model does not address
fundamental questions of externalities, the components of an external cost,
0 See id. at 407.

101See 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").
102See Kennedy, CriticalLegal Studies, supra note
91, at 467.
103Cultural 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).
I0 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 & GORAN SKOGH, THE ECONOMIC ANALYSIS OF ENVIRONMENTAL
POLICY AND LAW: AN INTRODUCTION 143-44, 171-73, 181-82 (2003).
105See Kennedy, CriticalLegal 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. INT'L 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).
2009]
55
With Coase's redefinition of externalities as

and "what is a cost of what."'
"cost[s] not reflected in [an] activity's 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 questions have become even
more indeterminate.107 Coase' S 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.' 08 The fact that these costs cannot be
quantified should cause economists concern.
B. Full InternalizationIs Neither RequiredNor Possible
A major conceptual and practical problem with external environmental
costs is that they are exceedingly difficult to define and calculate as costs of
The mainstream theory does not adequately define
human activity.'0
in
arbitrary allocation of "social" versus "private" costs
causation, resulting
Before the
underlying value assumptions. 0
on
the
depending
"economization" of the environment, such costs were externalized because
they were too insignificant or too difficult to calculate." Current attempts
to internalize environmental costs fall into a similar bog-the 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."l 3 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 does not require all
1o6Kennedy, Cost-Benefit Analysis, supra note 21, at 395.

07 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).
1" 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).
09 See generally Adam Chase, The Efficiency Benefits of "Green Taxes" A Tribute to Senator
John Heinz, II UCLA J. ENVTL. L. & POL'Y 1, 28 (1992) (providing an example of the
difficulty in measuring the cost of externalities).
n1oKennedy, Cost-Benefit Analysis, supra note 21, at 396.
'" Id.
112WEISS ET AL., supra note 84, at 93-95.
113Id.
56
[VOL. 18.1
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.'
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. 6 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.
In theory, the polluter may pass on all or some of the environmental
costs to. the consumers, or the polluter may absorb them.' 19 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.1 20
This issue leads to more ambiguity and makes it harder to incorporate the
polluter pays principle into a workable theory.
C. Ambiguity; PracticalUnworkability
The breadth and ambiguity of the polluter pays principle is both a

In the words of some commentators, the
strength and a weakness.'
use of the 'polluter pays' principle is
broader
the
"fundamental problem with
and therefore cannot determine
a
polluter
who
is
that it does not indicate
22
Theoretically, this distinction makes sense as end-users are
liability."
logically complicit in the environmental harm caused by the production of a
114
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 1 3, 4 Doc. No. C (72)(128) (May 26, 1972), available at
Guiding
OECD,
[hereinafter
http://sedac.ciesin.org/entri/texts/oecd/OECD-4.01.html
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).
117OECD, Guiding Principles, supra note 115, at Annex 13.
119
Id. at Annex T 2.
WEISS ET AL., supra note 90, at 93.
Id. at 218.
20Id.
121
See Nash, supra note 27, at 472 n.21.
'
PATRICIA W. BIRNIE & ALAN E. BOYLE, INTERNATIONAL LAW & THE ENVIRONMENT 94
(2d ed. 2002) (citations omitted).
2009]
57
given commodity or service which they consume.123 The practical response

to arguments blurring the line between polluter and end-users is that costinternalization, 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
Is the polluter pays principle relevant when it
precautionary scheme.'
cannot provide practical guidelines for domestic enforcement?1 26 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
128
is an ex post model.18 This trait carries significant drawbacks., 9 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. 30
Therefore polluters. have an incentive to defer investment in pollution
If the
abatement measures because it is more expensive in the present.
polluter's present payoff is higher than potential future loss from accidents,
1 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
Fasses costs onto consumers, despite policy efforts to keep the cost on polluters).
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").
12 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").
127See Stevens, supra note 33, at 588-89.
12s 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).
129See id.
13 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).
131See id.
58
[VOt. 18.1
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.' 33 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.'
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, 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
132 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
Fallaciesin 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
fain).
See The Case of the DisappearingDefendant: 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).
13 See U.S. GOVERNMENT ACCOUNTABILITY OFFICE, ENVIRONMENTAL LIABILITIES: EPA
SHOULD DO MORE TO ENSURE THAT LIABLE PARTIES MEET THEIR CLEANUP OBLIGATIONS I
(Pub. No. GAO-05-658) (Aug. 2005), available at http://www.gao.gov/new.items/
d05658.pdf.
35 Heyes, supra note 1, at 4.
36 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 "[tJhe 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).
1 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)).
2009]
59
impossible to relate the cost of the resulting harm to a specific polluter,

further complicating the causation analysis.' 38
Third, substantial information costs for both victims of pollution and
polluters exist.' 3 9 These costs show the difficulty of measuring levels of
pollution and valuing damages.'4 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.' 4'
The Calabresian theoretical exchange between victim and polluter also rests
However, the
on the assumption of the polluter's willingness to pay.
do
not
always
result
in price
willingness to pay and willingness to sell
43
equilibrium.1 Therefore, the ex post nature of the polluter pays principle
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. INT'L 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.").
40 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) (citing CLIFFORD S.
RUSSELL, APPLYING ECONOMICS TO THE ENVIRONMENT 46, 99-100 (2001)) (discussing
informational asymmetries that make negotiations between the parties difficult). 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).
143See id. at 456. According to Shapiro and Schroeder:
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).
60
[VOt. 18.1
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.'"
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.'"
The fairness and equity considerations pose significant theoretical
problems for any ex post liability allocation model.14 The challenges to
implementing the polluter pays principle posed by concepts like limited
14See 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/legalliability/pdf/el-full.pdf.
14 STUART BELL & DONALD McGILLIVRAY, ENVIRONMENTAL LAW 279 (5th ed. 2000); see
also David Howarth, Muddying the Waters: Tort Law and the Environmentfrom 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).
147See generally FRIEDRICH SOLTAU, FAIRNESS IN INTERNATIONAL CLIMATE CHANGE LAW
AND 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?").
2009]
61
Furthermore, the practical problems

liability are also significant.148
highlight the nascent state of environmental regulations and the hurdles
49
posed by established liability, tort, and property law doctrines.1
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
One solution
of the economic process to more pragmatic proposals.
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
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.").
ISSUES IN ENVIRONMENTAL TAXATION: INTERNATIONAL AND
COMPARATIVE PERSPECTIVES: VOLUME IV 99-127 (Kurt Deketelaere et al. eds., 2007)
149 See, e.g., CRITICAL
(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,
http://www.lawlink.nsw.gov.au/lawlink/lec/1l1lec.nsf/vwFiles/
at
available
2009),
Paper 07Apr09_PrestonCiPolluterpays.pdf/$file/Paper_-07AprO9_PrestonCJ-Polluterpays.pd
f (discussing the polluter pays principle and its effectiveness for environmental regulations).
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) (citing Kennedy,
Cost-Benefit Analysis, supra note 21, at 393400) ("In the end, the economic analysis becomes
blurred by the required normative judgment that controls.").
1 See Bradley C. Karkkainen, Toward a Smarter NEPA: Monitoring and Managing
Government's Environmental Performance, 102 COLUM. L. REV. 903, 909-10 (2002)
(describing the NEPA's 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").
52
1 Id.
62
[VOL. 18.1
revealing the faulty assumptions about firms, consumers, and markets.' 53

Similarly, alternative economic theories must acknowledge the growing
impact of non-state actors and corporate firms.' 54 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. 1s
A.
The Concept of EnvironmentalHarm 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
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,1s and the critical legal tradition arrives at the
same point. Yet, how can we make moral judgments if our moral priorities
15 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.").
15 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).
155See supra note 154 and accompanying text.
15 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
Crawford, Strategies for Environmental Justice: Rethinking CERCLA Medical Monitoring
lawsuits, 74 B.U. L. REv. 267, 304 (1994)).
Albert C. Lin, The Unifying Role of Harm in Environmental Law, 2006 WIS. L. REV. 897,
977 (2006).
1s 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)).
2009]1
63
are focused on the near-term happiness of homo economicus rather than on

long-term global sustainability?5 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 interestsjust mentioned, are
human-centered and instrumental, and harm to those interests is
measured in terms of human impacts.16
Likewise, in his analysis of property rights systems, Daniel Cole's
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
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).
1o Lin, supra note 157, at 977-79 (citations omitted) (emphasis added).
64
[VOL. 18.1
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 existence-the present generation for
whom environmental rules are written and in whose favor economic theories
accrue.1 63
Thus far, however, there has been little movement to overcome a
human-based environmental harm model and imagine environmental injury
as distinct from human actors.'" 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. 6 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)
161COLE, supra note 96, at 128-29 (emphasis added).
162See Becker, supra note 4, at 18 ("[Under the] homo economicus approach

... [niature turns
out as an object of human self-interest, a bundle of goods serving the purpose of satisfying
human preferences.").
163See id. ("[TJhe well-being of future generations . . . is not, however, a systematically
inherent attribute of the concept of homo economicus.").

64 Compare Lin, supra note 157, at 983 (noting the "lack of social consensus" concerning "a
broader view of harm-one 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).
16 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/dl6b/dl693.pdf (questioning the ethical problems of
determining "[hjow ... 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.").
2009]
65
"epistemological arrogance" - as they over-confidently rely on

objective and rational formulations for determining the earth's
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, 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-GenerationEconomic 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, single-generation
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
166Erin
Englebrecht, Three Fallaciesof the ContemporaryLegal 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).
167For 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
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.").
168See Becker, supra note 4, at 18 ("In mainstream economic theory, the human actor usually
appears as homo economicus: a selfish, rational, utility maximizer. Modem 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
today's generation and its self-interests."); Roemer, supra note 165, at 9-10 ("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.").
6
1 9 Id.
66
[VOL. 18.1
intergenerational equity into a workable economic theory' 7 0 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.' 7 1 But there are arguments
that the Review's model of intergenerational justice lacks an ethical basis for
its economic discounting model. 2
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 Roemer's suggested intergenerational model values biosphere quality.
as a factor in human quality of life.'73 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?'75 How can progressive environmental lawyers, economists,
170See WEISS ET AL., supra note 90, at 66 (discussing problems of

modeling intergenerational
equity); see also Wolfgang Buchholz, IntergenerationalEquity, in ECOLOGICAL ECONOMICS

19-22 (Tomasz Zylicz ed., 1997).
171See Roemer, supra note 165,
at 5.
172See 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.
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).").
174See id. at 26, 39-40.
17 Homo ecologicus is set in contraposition to homo economicus, or the hypothetical
rational,
utility-maximizing, 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
2009]
67
and the broader environmental movement advance a programmatic agenda

of equilibrium ecology based on a concept of humans as homo ecologicusl76
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.17 7 As shown above, the
current anthropocentric efficiency model contributes to an environmental
use and pollution regime depleting commons and harms the environment, all
A new
in the name of cost-benefit analysis conducted by human actors.
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.1
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.'80
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,
Rather than allowing
make decisions allocating limited resources. 81
resource allocation decisions to undercut a belief in fundamental values,
ecological limits that adequately answers charges of utopianism and vagueness"); Luis Kutner,
The Control and Prevention of TransnationalPollution: A Casefor World Habeas Ecologicus,
9 LAW. AM. 257, 279-80 (1977) (proposing the creation of "[aln International Tribunal and
international and national Commissions" having the ability to "invoke a writ of [World Habeas
Ecologicus]" seeking enforcement of international environmental regulations).
176Becker, supra note 4, at 20.
17 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 . . . . [Tlransforming 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 . . . . [Pjolicymakers must
acknowledge that the value of environmental quality may not be ascertainable or adequately
reflected in a cost benefit analysis.").
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 PolluterPays Principle12 (on file with author).
1 See Adam Babich, Too Much Science in EnvironmentalLaw, 28 COLUM. J. ENVTL. L. 119,
160-61 (2003); Mamlyuk, supra note 178, at 10.
8 See GuIDOCALABRESI & PHILIP BOBBITT, TRAGIC CHOICES 149-99 (1978).
is) See id.
68
[VOL. 18.1
policymakers should adopt strategies to avoid the 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 selfregulation" to game theoretic models'8 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.s 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.' 8
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.
This new form
of environmental cost-benefit analysis must move away from efficiency
analysis based on monetized costs and benefits between two equally
182 See Babich, supra note 179, at 160-61 ("discussing politically accountable decisions as a
means of allocating limited resources") (citing CALABRESI & BOBBIrr, supra note 180, at 3435).
18 See Joel F. Handler, Dependent People, the State, and the Modern/Postmodern Search for
the Dialogic Community, 35 UCLA L. REv. 999, 1047 (1988).
18 See Endre-Stacy, supra note 51, at 937 n.5 (discussing game theory models like Prisoners'
Dilemma and existential Satre-like 'no-exit' situation).
1
See Lyuba Zarsky, Stuck in the Mud? Nation-States, Globalization, and Environment
(1997), availableat http://www.nautilus.org/archives/papers/enviro/zarsky-mud.html.
1 See Douglas A. Kysar & James Salzman, Harnessingthe Power of Informationfor 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).
Id.
1ss
See Jennifer L. Eastman, Urban Biosphere Reserves: Integrating Conservation,
Community, and Sustainability, 27 WM. & MARY ENVTL. L. & POL'Y REV. 707, 718-19
(2003).
2009]
positioned stakeholders and begin to address future generations

nontangible aspects of biosphere quality as economic values.
69
and
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
This goal of decreasing
increased levels based on a cost-benefit analysis.'
pollution may be accomplished by reducing barriers to entry for
Equally promising are new
environmentally-conscious technologies.191
models of multilevel governance, involving self-regulation and corporate
responsibility.' 92 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 oposed to human relations to other humans or of humans to
Several scholars claim that it is an ontology born of
themselves.
95
postmodernism,194 though its roots may run deeper in human philosophy.1
189See 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, 1061YALE L.J. 703, 717 (1996); Mamlyuk, supra note 178, at 12.
191One such example is California's 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).
192See generally MULTILEVEL GOVERNANCE OF GLOBAL ENVIRONMENTAL CHANGE:
PERSPECriVES 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).
193Becker, supra note 4, at 17-23.
194See H.Y. Jung, Marxism and Deep Ecology in Postmodernity: From Homo Oeconomicus to
Homo Ecologicus, in KARL MARX'S SOCIAL AND POLITICAL THOUGHT 57-58 (Bob Jessop &
Russell Wheatley eds., 1999).
195Harmony 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
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). Rumi's pantheism and nature
70
[VOL. 18.1
Christian Becker traces the study of the relationship 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.' 97 .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.1 98 Our practical experience with
nature confirms, or should confirm, the meaning of our existence.' 99
Homo ecologicus is a social creature in the global sense of. society, in
contrast to homo economicus, whose core values are individualism and selfinterest. Or if there is a social dimension, homo economicus is limited to
family groups, fealty to firm, and nation. 20 Interestingly, homo ecologicus
also turns out to be far more rational than homo economicus.201 Homo
ecologicus asserts that the biosphere quality model does not merely provide
the most efficient model of resource allocation but also maximizes the
202
To homo
overall quality of life and reduces the global risk of extinction.
ecologicus, the biosphere quality model is an organic extension of humans'
historical compatibility with nature and present equilibrium in certain
worship rest on the same philosophy. See Pantheism in STANFORD ENCYCLOPEDIA OF

PHILOSOPHY, (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 ljournals/ logos/vO08/8.2long.html. Tolstoy's
asceticism and Henry David Thoreau's transcendentalism also derive from a profound desire
to establish humanity's balance with nature. See Clarence A. Manning, Thoreau and Tolstoy,
16 NEw ENG. Q. 234, 240 (1943).
1 See Becker, supra note 4, at 17-23.
' Id.
198Id. 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
agproach to environmental economics.
See id.
2 Id.
2' 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
maximum current quality of life, and the highest probability for future enjoyment of similar
uality of life in relation to nature, but also because it realizes nature's quality of life.
Becker, supra note 4, at 20.
2009]
71
undeveloped, as well as some industrial societies. But more importantly, the

biosphere quality model is a "long-lasting [future] compatibility" of nature
with an evolved economic system of commodity production and
exchange.203
The biosphere quality model has several important policy
By recognizing the right of the planet to have a standard for
implications.
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
Consequently,
pollution is acceptable and should not be exceeded.
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 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
203 id.
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/publicl/news/pressReleases/press
ReleaseDetails.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 life-mold, bacteria, and other microorganisms-until these organisms use up
all available water and oxygen and suffocate in their own waste. Our planet is identical to this
hypothetical glass jar.
205Becker, supra note
4, at 20.
2
72
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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 formulation, "without ideals that become standards,
206 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).
207See 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
available at http://data.iucn.org/
Resources, World Conservation Strategy (1980),
dbtwwpdlexec/dbtwpub.dll?AC=GETRECORD&XC=/dbtwwpdexec/dbtwpub.dll&BU=http
%3A%2F%2Fdata.iucn.org%2Fdbtwwpd%2Fcommande%2Findex_newsite.htm&TN=iucn&
SN=AUTOl 7749&SE-1795&RN=9&MR=20&TR=O&TX=1000&ES=0&CS=1 &XP=&RF=
WebRes&EF=&DF=WebAff&RL=0&EL=O&DL-O&NP=254&ID=&MF=&MQ=&TI=O&D
T=&ST=0&IR=869&NR=0&NB=0&SV=0&BG=&FG=&QS=&OEX=1S088591&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 J. (1992), available at http://www.epa.gov/history/topics/
summit/Ol.htm. The same is true in 2000 ((X + 1) + 1) + 1) and ad infinitum. 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 17 (2002), available at http://www.esdtoolkit.org/
esd toolkitv2.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.
2009]1
73
[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 current' causes
In the
substantial opposition to international environmental regulation.
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.2 12 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.
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

213
These advances, coupled with vastly improved data collection,
years.
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.
211See 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 fromi restricting developing nations economic growth as "ecoimperialism" from the developing nations' perspective).
212 See Andrew Green, You Can't Pay Them Enough: Subsidies, Environmental Law, and
Societal Norms, 30 HARv. ENvTL. L. REV. 407, 422-23 (2006).
213Erik 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-PerformancePhysical Simulations
on Next-Generation Architecture with Many Cores, 11 INTEL TECH. J. 250, 251-53, available
at http://www.intel.com/ technology/itj/ 2007/vI li3/8-simulations/1-abstract.htm (describing
74
[VOL. 18.1
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 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. 22 Individuals, states, and firms all
how the advent of multi-core architectures promises to soon make processors with trillions of
FLOPS available).
214See supra note 213 and accompanying
text.
215Id.
216Id.
217See 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 earth's resources to be managed and used in a manner which is sustainable over
the long term.").
218See
id.
219This 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).
2 See supra note 187 and accompanying text.
2
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
2009]
75.
222
generally agree that environmental harm is a serious potential threat.

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. 22 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;
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.22
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
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).
23 See Rio Declaration, supra note 12, 1 16.
224 Id.
225See G. Nasieku Taraiya, The Legal Perspectives of the Maasai Culture, Customs and
Traditions, 21 ARIZ. J. INT'L & COMP. L. 183, 206 (2004) (discussing the benefits that can be
obtained from studying indigenous ecological knowledge); Sandi B. Zellmer, Indian Lands as
Critical Habitatfor 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).
76
[VOt. 18.1
(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 firm's pollution activities.228 These intercorporate 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 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 opiniojuris, will be greatly aided
by this multipronged proactive approach.
2 John Davies, The Rise of the Chief Green Officer, CLIMATEBiZ (June 10, 2007),
http://www.climatebiz. com/news/2007/06/1 0/rise-chief-green-officer.
227See WEISS ET AL., supra note 90,
at 238-39.
maSee supra notes 213-216 and accompanying text.
2 See Rio Declaration, supra note 12,
16.
m Id. (intending to guide sustainable development around the goal).
231
232 See supra notes 213-216 and accompanying text.
Id.
2009]
77
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 a science built on the notion of equilibrium between
producers and consumers, remarkably few economic articles are written
regarding an ecological equilibrium. 23 The very position of environmental
economics as a fringe discipline238 and somehow outside of the core of
economics proper is symptomatic of the discipline's 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.
2 See LAW AND ECONOMICS, supra note 1, at xv.

2 See STERN REVIEW, supra note 3 (analyzing the challenges of climate change as an
example of Posner's second generation of economic analysis of environmental law).
235See id.
236See 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).
237
See DALY, supra note 31, at 349.
238 This is mindful of the encouraging progress being made on establishing major
interdisciplinary research centers like Columbia University's 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.
24o See supra Part V.
241See Sir Richard Jennings, Forward to PHILIPPE SANDS, PRINCIPLES OF INTERNATIONAL
ENVIRONMENTAL LAW xii-xiv (Philippe Sands ed., Cambridge Univ. Press 2003) (1995)
78
[VOL. 18.1
Among social scientists, it is almost clich6 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
The reduction of complex phenomena-human
cognitive trait.243
contribution to environmental harm-to 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 overlook
unquantifiable variables.245 Basic assumptions regarding the goals of
economic liability models,2 or the values that they reflect, are likewise
ignored or taken as settled. 4.
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 develo such an approach date back to the "first generation" of
However, the fact that policymakers largely ignored
environmental law.
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
(stating the difficulties associated with creating a legal framework to deal with the problems
facing environmental law).
242See Lisa V. Bardwell, Problem-Framing: A Perspective on Environmental ProblemSolving, 15 ENVTL. MGMT. 603, 603 (1991) (showing how organization of a problem can lead
to a effective cognitive problem solving).
243See supra Part II.C.
244See supra Part IV.C.
245See id.
246 See id.

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 & BOBBrr, supra
note 180, at 34-41.
24
8 See LAW AND EcONOMICS, supra note 1, at xv.

249Id
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).
2009]
79
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. 51 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
2 See
252See
Becker, supra note 4, at 19.

Kennedy, Cost-Benefit Analysis, supranote 21, at 429.

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ANALYZING THE POLLUTER PAYS PRINCIPLE THROUGH

THE PRINCIPLES OF COASE AND CALABRESI IN ADDRESSING

IV. CRITICAL LAW AND ECONOMICS APPROACH TO THE POLLUTER

What Is Efficiency? What Are Our Values? And What Are

DEVELOPMENT OF A FORWARD-LOOKING ENVIRONMENTAL

The Concept of Environmental Harm and Costs: Beyond

SOUTHEASTERN ENVIRONMENTAL LAW JOURNAL

The Problem With Static, Single-Generation Economic

In the preface to The Law and Economics of the Environment, Richard

THE LAW AND ECONOMICS OF THE ENVIRONMENT

(Anthony Heyes ed.,

[hereinafter LAW AND ECONOMICS].

ANALYZING THE POLLUTER PAYS PRINCIPLE

ethically bankrupt but also irrelevant in practice. 4 Consequently, the

AN IN-DEPTH LOOK AT THE POLLUTER PAYS PRINCIPLE

What Is the PolluterPays Principle?

The polluter pays principle is a broad concept with different meanings

Christian Becker, The Human Actor in Ecological Economics: PhilosophicalApproach and

SOUTHEASTERN ENVIRONMENTAL LAW JOURNAL

for the harmful consequences of their pollution.9 In contrast, in international

13OECD, Polluter-PaysPrinciple, supranote 6, at 234-35.

ANALYZING THE POLLUTER PAYS PRINCIPLE

surprisingly, there is heated debate regarding the scope of the broad

SOUTHEASTERN ENVIRONMENTAL LAW JOURNAL

from traditional literature.24 Mainstream law and economics literature and

The polluter pays principle deals with cost allocation, cost

OECD, Polluter-PaysPrinciple,supra note 6, at 239; RESTATEMENT (SECOND) OF TORTS

ANALYZING THE POLLUTER PAYS PRINCIPLE

the cost of environmental harm to intermediary users and end-consumers,

35See id. at 578.

SOUTHEASTERN ENVIRONMENTAL LAW JOURNAL

42Andrew J. White, III, Decentralised Environmental Taxation in Indonesia: A Proposed

ANALYZING THE POLLUTER PAYS PRINCIPLE

D. The PolluterPays Principle in Crisis

Endre-Stacy, supra note 51, at 935-36.

SOUTHEASTERN ENVIRONMENTAL LAW JOURNAL

III. THE PRINCIPLES OF COASE AND CALABRESI IN ADDRESSING POLLUTION

Essentially, the polluter pays principle rests on faulty assumptions

The CoasianReciprocity Principle

Ronald Coase recognized that all solutions to nuisance and pollution

See Coase, supra note 22, at 2.

ANALYZING THE POLLUTER PAYS PRINCIPLE

risk transfer strategies or adjust pricing to reflect economic realities based

Problems with Application of Coase Theorem to Pollution

SOUTHEASTERN ENVIRONMENTAL LAW JOURNAL

with approximations of damage that are as accurate as possible.7 However,

victims, either party can unilaterally set the level of pollution.78 In an

71See Lin, supra note 47, at 1499 n.355.

7 See id. at 42-44.

ANALYZING THE POLLUTER PAYS PRINCIPLE

outweighs the monetary benefit of polluting. 79 Even under an allocation

Few economists think an unmodified Coase or Calabresi approach is

See Weiner, supra note 71, at 1337.

SOUTHEASTERN ENVIRONMENTAL LAW JOURNAL

What Is Efficiency? What Are Our Values? And What Are

The mainstream law and economics approach to environmental issues

ANALYZING THE POLLUTER PAYS PRINCIPLE

exchange does not produce efficient results, more clearly delineating or

preferable. The most we can legitimately claim about private

single, sociolegal institution - private property - is both necessary

ET AL., supra note 90, at 86.