Pollution Pocketbook #1: Who pays for pollution?

Pollution Pocketbook #1: Who pays for pollution?

Pollution pocketbook is a short blog series regarding how our laws and policies incorporate the polluter pays principle.

Featured image

Imperial Refinery, Calgary, AB, Canada. Dept. of Mines and Technical Surveys / Library and Archives Canada / PA-015634

The polluter pays principle (PPP) is aimed at ensuring that those who pollute pay to remedy the environmental harm they cause and that costs to the environment are internalized (to incent us to pollute less).  In applying the principle we generally focus on the party who is the most proximate cause of the pollution: however, our laws don’t make every polluter pay for all pollution.

Who pays? Scale matters

In the context of who pays we see that scale matters. We don’t pay for the pollution from driving our cars (at least not directly).  If we did perhaps we would see more compact cars or cyclists on our streets.  (Driving a car is also a great example of the complexity of calculating how much we pollute, from the resources that go into the car itself, to the fuel, to the infrastructure that must be built and maintained: the sources of payment track an extensive chain of pollution).

On the other hand we do pay utility bills which incorporate costs associated with waste water treatment.  Even then scale matters, as larger urban areas typically treat wastewater more thoroughly then smaller urban areas (taking advantage of the greater number of polluters to meet higher standards).  At different scales the economic feasibility of payment typically differs.

We could require everyone to pay for their specific pollution levels but such an approach would likely be too cumbersome to track and administer. Rather our laws and polices focus on pollution that is likely to create significant harm to people or property.  The greater the risk and gravity of harm that your activity may or does have the greater likelihood PPP will be applied.

Who Pays? Sector matters

Some sectors may pollute but seem to be able to evade application of the PPP.  We know that land conversion and application of fertilizers for agricultural purpose can result in significant pollution.   Some pollution mitigation measures may apply to the agricultural sector, such as the need to create nutrient management plans, but typically the regulations fall well short of a comprehensive polluter pays system.

The exclusion of some sectors from being subject to the PPP may be due to practical, political and economic factors (or combination thereof).  Sectors which result in significant non-point source pollution may avoid application of the PPP due to the difficulty in quantifying the pollution itself and discerning the level of impairment on the environment.  Political, cultural and economic rationale may also be relied upon to justify exceptions to oayment.

(For a general review of the polluter pays principle and agriculture see Margaret Rosso Grossman, “Agriculture and the Polluter Pays Principle”, vol. 11.3 Electronic Journal of Comparative Law (December 2007))

Who Pays? Policy matters

The policy context of the PPP also matters.  Cap and trade policies can be viewed as a form of polluter pays but typically include the “grandfathering” in of polluting activities which predated the policy.  A baseline of pollution credits is often provided to these historic polluters free of charge.  This in turn raises equity concerns as an uneven pollution playing field is created.  An initial auction of credits has been suggested as a better representation of the PPP.

Who should pay? Who could pay?

I have previously proposed (on the heels of the Supreme Court of Canada’s AbitibiBowater decision) that we should expand the net of who is considered to be a “polluter” to those facilitating the polluting activities, possibly all the way to financiers and other creditors.  Such an approach might change our view of pollution and better incorporate environmental considerations from project conception to decommissioning (and bring us a step closer to full cost accounting).    Is such a move radical? (Start the debate in the comment section).

Which polluters pay under our current laws varies widely across jurisdictions and levels of pollution.   Alberta often focuses on those polluters who directly impact land, soil and groundwater. Other impacts on water and air typically involve a level of pollution payment in terms of environmental monitoring and investment in pollution abatement technology.  There remains a large amount of pollution that continues free of charge.

The scale, sector and policy context adds to the complexity of deciding who should pay.  In each case application of the PPP will likely result in economic arguments of why a polluter should not pay.  The complexity and efficiency of specific polluter pays mechanisms (the “how” or “when” we pay) is also central to who pays.

In future blogs we will consider some of the key issues with how the principle is applied in the Alberta and Canadian context and determine whether the right polluters are paying, at the right time, in the right amount.

Polluter pays (in brief)

The PPP is one of the most cited or adopted principles in laws around the world; by way of just a few examples it finds support in Canadian and Alberta law, US federal laws regarding superfund sites and clean water, as well as the Treaty on the Function of the European Union (article 191(2)). 

Governments rely on a host of mechanisms to implement the PPP including:

  • Effluent standards (with related costs of abatement systems and technology)
  • Administrative orders (with related costs or fines)
  • Financial security for remediation and reclamation
  • Pollution taxes
  • Cap and trade or pollution offset systems
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