The Limitations of Legal Institutions For Addressing Environmental Risks

Abstract

This article assesses the major systems of environmental liability in the United States—the toxic tort system and Superfund. The discussion of each of these areas first lays out the scientific background of the environmental problems and the applicable regulatory regime. It then analyzes the efficacy of these regimes for addressing environmental problems and suggests alternative institutional designs for better promoting the goals of equitable and cost-effective compensation of disease victims and efficient deterrence and remediation of environmental degradation.

Long Tail Risks and Endogenous Liabilities: Regulating Looting

“…This is looting at its clearest: the operations existed in these forms solely because of the availability of limited liability. lt resulted in an estimated 10,000 orphaned waste sites and clean-up costs in excess of US$140 billion to date (see Menell (1991) The role of sunk capital is similar to but distinct from the role of fixed capital in determining the incentives of firms for looting. Capital is sunk when there is a cost applied to the liquidation of any part of the capital stock.…”

Long-term Liability and the Choice of Liquidation

“…can be very large. For example, recent estimates suggest that the total transactions costs of the U.S. Comprehensive Environmental Response Compensation and Liability Act (CERCLA, also known as the Superfund) could exceed U.S.$44 billion, out of a total cost of US$100 billion (see Menell (1991)). Secondly, attribution of liability requires that the court be able to identify the responsible party.…”

“…This is looting at its clearest: the operations existed in these forms solely because of the availability of limited liabilit.y. It resulted in an estimated 10,000 orphaned waste sites and clean-up costs in excess of US$100 billion to date (see Menell (1991)). …”

“…In the U.S. alone, the thrifts crisis has been estimated to have generated social losses of U.S.$140 billion, and the clean-up programme for "orphaned" waste sites U.S.$100 billion (see Akerlof and Romer (1993) and Menell (1991)). Nor are the problems confined to the U.S. -the phenomenon of waste site abandonment is something that has occurred across a large number of different jurisdictions.…”

Gestion de l'environnement dans les pays en développement

“…S'il lui faut recourir à son système juridique, un pays doit disposer d'institutions juridiques fonctionnant parfaitement, et notamment de droits de propriété clairement définis et de contrats applicables. Même dans ce cas, la solution juridique peut se révéler inefficace, soit parce qu'elle rejette de nombreux cas légitimes, en ayant instauré des moyens de preuve stricts, soit parce qu'elle fait peser sur un seul la charge des compensations, alors que la responsabilité de la pollution est partagée avec d'autres (Menell, 1991).…”