Polluter Pays Principle

Polluter Pays Principle
Common but Differentiated

Responsibilities
Unit II
General Principles of Environmental Law and Justice
7/20/2020 Unit II: General Principles of Environmental Law and Justice 1

• Decisions by international courts or arbitrators, such as the International Court
of Justice or the International Tribunal for the Law of the Sea, also shape
international environmental law. The Trail Smelter Arbitration case of 1938 and
1941, one of the earliest international environmental law cases, involved a
dispute between the United States and Canada over air pollution from a
Canadian smelting factory. The pollution blew across the American-Canadian
border and destroyed crops in the State of Washington. After 15 years, an
international arbitration panel established the “polluter pays principle,” a key
foundation of international environmental law. The polluter pays principle
holds that if pollution from one nation causes harm in another nation, then the
polluter nation must pay to remedy the damage.
• https://www.encyclopedia.com/environment/energy-government-and-
defense-magazines/international-environmental-law

• The Polluter Pays Principle (PPP) (प्रदुशकले दाियत्व बहन गनुर्पनेर् िसद्धान्त) was
adopted by Organization for Economic Co-operation and Development
(OECD) in 1972 as an economic principle for allocating the costs of
pollution control.
• The Polluter-Pays Principle started out as an economic principle and
has recently become a legal one.
• Plato: “If anyone intentionally spoils the water of another…let him not
only pay for damages, but purify the stream or cistern which contains
the water” (The Dialogues of Plato: The Laws).

• Indian philosopher Kautiliya, who lived more or less at the same time
of Plato. This dates back to 300 BC, when Kautiliya in his Arthasastra
(Study of Economics) prescribed different levels of financial penalties
for causing harm to the environment. The fines depended on the
degree of harm caused. For example, he would prescribe “fines for
faeces in a holy place, in a place for water, in a temple and in royal
property”.
• Ram Shah in his 14th edict passed a dicta saying that whoever cuts
down tree/s near the mouth of water, will be penalized Rs. 5/-.

• The polluter pays principle requires either government intervention
or the presence of clearly defined property rights.
• E.g. If someone has access to a river, they can sue a chemical
producer if they create a cost of pollution. For other goods, it is
harder to define property rights. For example, the pollution from a
car affects everyone in society and also other countries. In this case
it is impractical to extend property rights to try and deal with the
problem. The pollution faced by individuals is relatively low. In this
case government regulation is the only effective method.

• To ensure that the polluter pays, government intervention will
involve:
❑ Estimation of the external cost of the pollution.
❑ Place a tax on good to make people pay the true social cost or they may
require the firm to pay to clean up the costs they create.
❑ To make sure a firm pays, money may need to be deposited as insurance
against the worst case environmental scenario.

A Helping Hand for the Invisible Hand: the “Polluter Pays” Principle:
• The “polluter pays” principle is an application of classical liberal economics,

and is much less controversial. The idea is that pollution enables a polluter
to dispose of wastes at little or no cost. These externalized costs are borne
by those who live downstream, and whose property, health and livelihood
are adversely affected. Although the costs to these persons may be
enormous, the polluter has no incentive to stop polluting. If costs are not
internalized, there is actually an incentive to engage in environmentally
destructive behaviour.

• The true aim of the principle henceforth be to institute a policy of
pollution abatement by encouraging polluters to reduce their
emissions instead of being content to pay charges.
• The “polluter pays” principle means that the costs of pollution and
waste should be paid by those who cause the pollution or create
waste. E.g. Erica Oil Spill case where European Court of Justice decided
the case with regard to primary polluter and secondary polluter.

• Under this principle, States should take those actions necessary to
ensure that polluters and users of natural resources bear the full
environmental and social cost of their activities.
• Incorporation in Rio declaration, suggests that it is now to be viewed

as an element of SD.

• National authorities should endeavour to promote the internalization

of environmental costs and the use of economic instruments, taking
into account the approach that the polluter should, in principle, bear
the cost of pollution, with due regard to the public interest and
without disturbing international trade and investment.
• Rio Declaration , principle 16

Integration of environmental protection and economic activities (how?)
• By ensuring that the full environmental and social costs (including

costs associated with pollution, resources degradation and
environmental harm) are reflected in the ultimate market price for a
good or service.
• Environmentally harm or unsustainable goods tend to cost more and
consumers will switch to less polluting substitutes. Resulting in a
more efficient and sustainable allocation of resources.

• संिबधानको दफा ३० को उपदफा २ मा: बातावरणइय प्रदुशण वा ह्रासबाट हुने
छ्यतीबापत पीिडत लाई प्रदुशकबाट कानून बमोिजम छ्यितपुतीर् पाउने हक हुनेछ।
• Criminal code 2074, part 5, section 113.
• Environment Protection Act 2076, section ञ
• अथार्त प्रदुशकले दाियत्व ब्यहोनुर् पनेर् िसद्धान्तको पिहलो पक्छ भनेको प्रदुशण गनेर्
ब्यक्ती वा उध्योगले बातावरण (सास्कृितक धरोहर वा मानब िनिमर् त संरचना
शाहीत ) वा मानब स्वास्थ्यमा पारेको प्रितकुल प्रभाबबाट बातावरण वा मानिबय
स्वास्थ्यलाई पूवर् िस्थती मा फकार्उन लाग्ने मुल्य वा लागत बेहुनुर् पदर्छ भन्ने हो।
• The Polluter Pays Principle is not a principle of equity; it is designed
not to punish polluters but to set appropriate signals in place in the
economic system so that environmental costs are incorporated in the
decision-making process and hence arrive at sustainable development
that is environment-friendly.
• Environmental pollution is a result of non-internalization of
environmental costs by polluters, which then becomes a public
concern.
• Developed to internalize environmental externalities.

• Polluter Pays is a method for internalizing externalities.
• Internalization requires that all the environmental costs be borne by the

producer/consumer instead of the community as a whole.
• Prices will reflect the full cost if regulatory standards require or if taxes on the
production or product correspond to the true cost of environmental damage.
• Externalities:
• Negative externalities
• Positive externalities

• A negative externality in simple terms, is anything that causes an
indirect cost to individuals. E.g. if the toxic gases that are released
from industries or mines, these gases cause harm to individuals within
the surrounding area and have to bear a cost (indirect cost) to get rid
of that harm.
• A positive externality is anything that causes an indirect benefit to
individuals. For example, planting trees makes individuals' property
look nicer and it also cleans the surrounding areas.

• एभरेस्ट पेपर िमल्स को मुद्दामा न्या द्वय चन्द्रप्रशाद पराजुली र बलराम केसी ले
"सावर्जिनक नदी प्रदुशण गनेर् अिधकार कसैलाई पिन हुँ दैन, यदी गिरन्छ भने त्यसको
िजम्मा प्रदुशणकतार्ले िलनुपछर् ।
• (Shatrughan Prasad Gupta and Others v. Everest Paper Mills Pvt. Co.
and Others, writ number 3480/2059)

• In general it is for the polluter to meet the costs of pollution control
and prevention measures, irrespective of whether these costs are
incurred as a result of imposition of some charge on pollution
emission or are debited through some other suitable economic
mechanism or are in response to some direct regulation leading to
some enforced reduction in pollution.
• As seen in the case of Erica oil spill.

• The Erika judgment recognizes the existence of ecological damage
"resulting from the harm done to the environment", giving in
particular the right to compensation to environmental protection.
• Ruling came after 7 yrs of investigation.
• The Court mentioned primary polluter, the ship owner and the
secondary polluter, the charter the Total SA (because of negligent
conduct they produced waste)

Problems
• Narrow definition of damage excludes environmental

losses that cannot be easily quantified in monetary
terms, e.g. wildlife or that which affects the quality of
environmental without causing actual physical damage.
Eg. Mega projects that destroy wildlife and their habitat.
• It doesn’t indicate who the polluter is and cannot as

such determine liability.

Problems
• It can be difficult to impose regulations or tax on firms from other
countries. For example, when we contribute to global warming,
the problem affects everyone around the world, but it can be
difficult to create international agreements to impose penalties
on those polluting.
• Pollution havens. These are countries which have weaker
environmental legislation and firms can escape taxes and
regulations on pollution by shifting production to those countries.
• Some costs are unexpected and occur after the event. e.g. in
building nuclear power plant.

Function
• Preventive function (ex ante) is based on the assumption that the
polluter will reduce pollution as soon as the cost which s/he has to
bear are higher than the benefits anticipated from continuing
pollution.
• Precautionary function is based that the potential polluter, s/he
has an incentive to reduce risks and invest in appropriate risk
management measures.
• Restorative function (ex post), which means that the polluter has to
bear the clean up costs for damage already occurred.

Cases of PPP
a. Erika Oil Spill Case
b. Indian Council for Enviro-Legal Action v. Union of India & Ors (Bichhri Village case)
interpreted PPP to mean that “absolute liability of harm to the environment extends not
only to compensate the victims of pollution, but also to the cost of restoring environmental
degradation. This principle forms an important part of sustainable development”
c. In Vellore Citizen's case, court held that “The precautionary principle and the polluter pays
principle have been accepted as part of the law of the land. Article 21 of the Constitution of
India guarantees protection of life and personal liberty.”
d. In M.C. Mehta V. Union of India, SC referred the case of Enviro-Legal Action and Vellore
Citizens case and ordered the Calcutta tanneries to relocate and pay compensation for the
loss of ecology/environment of the affected areas and the suffering of the residents.
e. In the Kamalnath's case, court by considering the PPP as the law of the land, ordered that,
"It is thus settled by this Court that one who pollutes the environment must pay to reverse
the damage caused by his acts.”

Cases of PPP
• In Everest paper mills case, justices Chandra Prasad Parajuli and Bala Ram KC
opined that the court may in future give directive orders to polluted industries
to invest in environment clean up in accordance to polluter pays principle and
private interest must yield to public interest. Further, said that polluting
industries must take the responsibilities of pollution. They extended by saying
that government has stipulated Nepali citizens to live in a clean environment.
• Shatrughan Prasad Gupta v. Everest Paper Mills, Writ number 3480, NKP
2061-46-8, Decision date 2061-04-12
• Prakash Mani Sharma v. PM and PMO, Writ number 3413, NKP 2061-46-8,
Decision date 2061-04-12.

Cases of PPP
• In Amlekhgunj hazardous waste case Chief Justice Kalyan Shrestha and
Justice Min Bahadur Rayamajhi, stated that it is exporting State’s
responsibility to dispose it in environmental sound management. In
analyzing the term responsibility they stated that in the process of
disposing hazardous waste government must be liable to compensate
if public health and ecosystem are compromised. It is of important
duty of the disposer to provide free basic health sytem for public and
to list out and assess the negative impact on agriculture field of locals
or to natural resources.
• This case has explicitly elaborated in terms of human health and
bringing environment to its former state.
Cases of PPP
• In this case the court gave mandamus order to the government to
establish compensation fund, to assess the negative impact on local
communities, effective free health facilities to locals.
• Theoretically this case highlighted that it is a duty of polluter to
dispose hazardous waste, bringing back environment to its former
stage and compensation and health check up of affected local
communities. The court explicitly mentioned that though disposing
hazardous waste is of producer, however, to compensate and health
check up is solely a responsibility of the government.
• Raju Chapagain v. HMG et. al., Writ number 2949, Decision date
2066-7-4, NKP 2066-51-10.
legislations
• Constitution of Nepal, 2072 (2015)
• Environment Protection Act, 2076 (2019)
• Solid Waste Management Act, 2068 (2011)
• Forest Act, 2076 (2019)
• Water Resources Act, 2049 (1992)
• Electricity Act, 2049 (1992)
• Motor Vehicles and Transport Management Act, 2049 (1993)
• Industrial Enterprises Act, 2073 (2016)
• Pesticide Act, 2048 (1991)
• Soil and Water Conservation Act, 2039 (1982)
• Tourism Act, 2034 (1978)
• National Parks and Wildlife Conservation Act, 2029 (1973) etc.

Reference
• बातावरण सरक्षण सम्बन्धी मुद्दाहरुको सँगालो, Pro Public.
• http://www.lse.ac.uk/GranthamInstitute/faqs/what-is-the-polluter-
pays-principle/

Common but Differentiated Responsibility
“All animals are equal, but some are more equal

than others.”
(George Orwell, Animal Farm)

• States shall co-operate in a spirit of global partnership to conserve,
protect and restore the health and integrity of the Earth’s
ecosystem. In view of the different contributions to global
environmental degradation, states have common but
differentiated responsibilities. The developed countries
acknowledge the responsibility that they bear in the international
pursuit of sustainable development in view of the pressures their
societies place on the global environment and of the technologies
and financial resources they command.
• Principle 7 of the Rio Declaration

Common but differentiated Responsibility
Similar statement is incorporated in UN Climate Change
Convention 1992:
• ….. Parties should act to protect the climate system on the basis of
equality and in accordance with their common but differentiated
responsibilities and respective capabilities.

What is CbDR
▪ Negotiations between developing and developed countries.

▪ Recognizes that the special needs of developing countries must be
taken into account in the development.
▪ Recognizes historical differences in the contribution of developed
and developing in global environmental problems.

What is CbDR?
• Differences in their technical capacity to tackle these problem.

• CbDR is about equitable principle and expresses fairness and equity in
the responsibility of developed and developing countries.

CbDR has two dimension
▪ First: Obligation to co-operate in developing the law (Common

Responsibility).
▪ Second: Normative value in defining responsibilities of developed

and developing countries in the implementation and interpretation
of international environmental obligations (Differentiated
Responsibility).
• Rio recognizes that states have “common but differentiated
responsibilities” (CbDR) for two distinct reasons:
1. because the developed industrialized nations have contributed more to

today’s environmental problems;
2. because they have vastly more technological and financial resources to
contribute to the solution.
• However, its application is limited as countries avoid true wealth
redistribution, which would require developed countries to provide
developing countries financial assistance, capacity building,
technology transfer, and trade advantages.
▪ Climate change convention has adopted CbDR.
▪ E.g. the Kyoto Protocol on Climate Change provides specific greenhouse-gas-
reduction requirements for developed countries only,
▪ It establishes different reporting requirements for developed (more
stringent), developing, and least developed countries (less stringent).

The principle has two fundamental elements
• Common Responsibility
• Differentiated Responsibility

Common Responsibility
❖ Common responsibility (Erga Omnes Responsibility)
• Shared obligations of two or more states towards the

protection of a particular environmental resources.
• Notion of the ‘common heritage of mankind’.

• Applied where the resources are shared, under the control of no state
or under the sovereign control of state, but subject to common legal
interest, e.g. biodiversity, outer space, moon etc.
• Protects environment and promotes sustainable development, but
due to different social, economic, and ecological situations, countries
shoulder or carry different responsibilities.

In summary
▪ Global partnership.
▪ Duty to cooperate and participate.
▪ Understanding of the environment as the common concern of
humankind.

Differentiated Responsibility
• Differentiated responsibility of states for the protection of
the environment.
• Differentiated environmental standard set (based on
economic, socio-cultural and ecological situations):
• Future economic development.
• Historical contributions to causing environmental problems.
• Special needs and circumstances.

• Aims to promote substantive equality between developing and

developed states.
• Different legal obligations.
• The different techniques available to apply it include ‘grace’ periods
in delaying implementation, and less stringent commitments. (E.g.
Montreal Protocol has given grace or extended periods to
developing countries to phase out from ozone depleting
substances (ODSs)).

• In recent interpretation of World Trade Organization (WTO) law, there
is movement towards an obligation to consider the particular
economic, social and environmental situation of developing countries
when adopting environmental measures.
• Important aspect of the principle is international assistance, including
financial aid and technology transfer (from developed to developing
nations and LDCs).
• [Also mentioned in the TRIPs Agreement]

• Developed Nations are expected to take the lead on environmental
problems, as they have superior ability to address them.
• Developed countries have to bear more responsibility as they have
both contributed to environmental problems and have greater
capacity to respond to environmental challenges.

• Objective of this principle is to recognize the inability of developing
countries to bear the costs of environmental protection.
• Therefore, developed countries should bear this cost of
environmental protection.
• This in turn can be done through technology transfer, fund transfer
etc.
• The UNFCCC and the Montreal Protocol have tried to ensure firm
commitments from developed countries to transfer environment
friendly technology to developing countries.

Legal Status
• It is not a principle with normative standard nor a customary
international law. But still significant, as the principle is important in
the enforcement of international environmental obligation.
• It is a Framework principle, so the outlines and forms are to be
identified as nations proceed with the negotiations.
• It is a Compromising principle that can bring states together.

Cases of CbDR
• WTO Shrimp Turtle case (India, Pakistan, Thailand and Malaysia v. USA).
• In early 1997, India, Malaysia, Pakistan and Thailand brought a joint complaint
against a ban imposed by the US on the importation of certain shrimp and
shrimp products. The protection of sea turtles was at the heart of the ban.
• The US Endangered Species Act of 1973 listed as endangered or threatened the
five species of sea turtles that occur in US waters, and prohibited their “take”
within the US, in its territorial sea and the high seas. (“Take” means
harassment, hunting, capture, killing or attempting to do any of these.)
• Under the act, the US required that US shrimp trawlers use “turtle excluder
devices” (TEDs) in their nets when fishing in areas where there is a significant
likelihood of encountering sea turtles.

Cases of CbDR
• The US lost the case, not because it sought to protect the
environment but because it discriminated between WTO members.
It provided countries in the Caribbean — technical and financial
assistance and longer transition periods for their fishermen to start
using turtle-excluder devices.
• It did not give the same advantages, however, to the four Asian
countries (India, Malaysia, Pakistan and Thailand) that filed the
complaint with the WTO.

Summary of CbDR
• CbDR principle provides for asymmetrical rights and obligations

regarding environmental standards, and aims to encourage broad
participation.
• It reflects the core elements of equity, placing more responsibility on
wealthier countries for causing specific global problems/issues/
concerns.
• It is importantly a conceptual framework for compromise and co-
operation effectively in meeting environmental challenges.

Polluter Pays Principle

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Polluter Pays Principle

Common but Differentiated

7/20/2020 Unit II: General Principles of Environmental Law and Justice 1

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• The “polluter pays” principle is an application of classical liberal economics,

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• Incorporation in Rio declaration, suggests that it is now to be viewed

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• National authorities should endeavour to promote the internalization

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• By ensuring that the full environmental and social costs (including

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• Internalization requires that all the environmental costs be borne by the

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• Narrow definition of damage excludes environmental

• It doesn’t indicate who the polluter is and cannot as

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“All animals are equal, but some are more equal

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▪ Negotiations between developing and developed countries.

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• Differences in their technical capacity to tackle these problem.

7/20/2020 Unit II: General Principles of Environmental Law and Justice 37

▪ First: Obligation to co-operate in developing the law (Common

▪ Second: Normative value in defining responsibilities of developed

1. because the developed industrialized nations have contributed more to

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• Shared obligations of two or more states towards the

• Notion of the ‘common heritage of mankind’.

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• Aims to promote substantive equality between developing and

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• CbDR principle provides for asymmetrical rights and obligations

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