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Environment Forum

Latest Posts

Polluter Pays Principle

Posted by Andrew Bone Friday, 16th December 2016

Fundamental principles were laid down at the Rio Earth Summit in 1992. One of these is the Polluter Pays Principle (PPP). Sustainable development describes a transition from a post-industrial economy, characterised by impunity to certain costs which were traditionally externalised. The intangible or real costs to society and the environment are classic examples of externalised costs that the sustainable economy transition seeks to internalise.

The PPP establishes the principle that industries cannot act in a way which undermines the health of people or damages the environment. Or if they do, they should be attempting to find ways to stop doing it, by developing new technologies and eliminating waste. And if they still cannot prevent causing injury and damage, they should at least pay a financial price, so that they are incentivised to seek a better way to manage their business, and compensate their victims.

The end result will be that every actor in every industry views pollution control as intrinsic to maintaining competitiveness, and that socially and environmentally compatible practices are not viewed as they previously have been as an unnecessary extra cost, and to be lobbied against as a threat to profits.

Yes, this is a radical change from previous business practice, and no doubt still raises cynical eyebrows during board meetings. As a result, when governments regulate to ensure businesses are doing their best to adapt to the demands of the sustainability transition, there inevitably erupts a public stream of complaints about loss of competitiveness and threats to employment.

Both of these arguments, loss of competitiveness and threats to employment, can be shown to be unfounded, provided the playing field is level for all sectors of industry and internationally. Hence international treaties, such as the Paris Agreement, demand a reduction in the greenhouse gases which are pressure cooking our only planet.

International treaties and agreements attempt to establish standards globally, so that if one country applies sustainability principles, its industry does not suffer loss of competitiveness against countries that do not. Mandatory internalisation of costs will only work if non-cooperative countries cannot take advantage of it to gain a market edge. If countries do not agree to apply sustainability principles they should be excluded from markets, and suffer sanctions. One of these is the carbon tax. If a country, such as the USA, refuses to limit its pollution, their market advantage should be denied by restrictions on their ability to export their 'dirty products'. The level of punitive tariffs on their products would be high enough to ensure they find it cheaper simply to limit pollution rather than fight for competitiveness by geo-political means.

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