Category Archives: Legal Issues

Will the real Polluter Pays Principle please stand up?

What is “the” Polluter Pays Principle? One version of the principle says that the polluter ought to pay in proportion to her pollution. A second – and very different – version says that the polluter ought to bear a burden in proportion to her pollution.

There is a large difference between these two versions because the person who pays a tax on emissions is not necessarily the person who is actually made worse off by such a tax.

Here’s an imaginary example: Assume that consumers in Europe pay a tax on gas. This might not burden them at all (even though they are the agents who ultimately hand over money to the tax collector) because gas stations might just lower gas prices in response to the introduction of the tax. However, the gas station owners might not lose any profit, neither. Rather, they might be able to pass on the burden (the “tax incidence”) to oil producing countries by lowering the market price for oil. In an oil producing country, this might have the effect that company X goes bankrupt, as a result of which employee Y loses his job and must move to another town, as a result of which his child Z loses his friends and suffers from a depression.

There are certainly contexts in which  “Polluter Pays Principle” is used in the first sense and there are definitely contexts in which it is used in the second sense. And it is equally certain that this leads to confusion in debates over environmental policy and environmental justice! What is much less certain is whether one version is more sensible and whether one version represents the core idea behind the Polluter Pays Principle better.