The polluter pays principle is the commonly accepted practice that those who produce pollution should bear the costs of managing it to prevent damage to human health or the
environment. For instance, a factory that produces a potentially poisonous substance as a by-product of its activities is usually held responsible for its safe disposal. The polluter pays principle is part of a set of broader principles to guide sustainable development worldwide (formally known as the 1992 Rio Declaration).

This principle underpins most of the regulation of pollution affecting land, water and air. Pollution is defined in UK law as contamination of the land, water or air by harmful or potentially harmful substances.

The polluters pays principle

The 'polluters pays' principle is the commonly accepted practice that those who produce pollution should bear the costs of managing it to prevent damage to human health or the environment. For instance, a factory that produces a potentially poisonous substance as a byproduct of its activities is usually held responsible for its safe disposal.

This principle underpins most of the regulation of pollution affecting land, water and air. Pollution is defined in UK law as contamination of the land, water or air by harmful or potentially harmful substances.

Part of a set of broader principles to guide sustainable development worldwide (formally known as the 1992 Rio Declaration), the polluter pays principle has also been applied more specifically to emissions of greenhouse gases which cause climate change. Greenhouse gas emissions are considered a form of pollution because they cause potential harm and damage through impacts on the climate. However, in this case, because society has been slow to recognise the link between greenhouse gases and climate change, and because the atmosphere is considered by some to be a 'global commons' (that everyone shares and has a right to use), emitters are generally not held responsible for controlling this form of pollution.

However, it is possible to implement the polluter pays principle through a so:
called carbon price. As we'll discuss in future questions in this series, this imposes a charge on the emission of greenhouse gases equivalent to the corresponding potential cost caused through future climate change. In this way, a financial incentive is created for a factory, for instance, to minimise its costs by reducing emissions.

Many economists argue a carbon price should be global and Uniform Across Countries And Sectors so that polluters do not simply move operations to so-called pollution havens – countries where a lack of environmental regulation allows them to continue to pollute without restrictions.

Greenhouse Gas Emissions

The polluters pays principle is the commonly accepted practice that those who produce pollution should bear the costs of managing it to prevent damage to human health or the environment. For instance, a factory that produces a potentially poisonous substance as a byproduct of its activities is usually held responsible for its safe disposal.
Applying the principle through a carbon tax or emissions trading system.

The polluter pays principle can be applied to greenhouse gas emitters through a so:

called carbon price. This imposes a charge on the emission of greenhouse gases equivalent to the corresponding potential cost caused through future climate change – thus forcing emitters to internalise the cost of pollution. In this way, a financial incentive is created for a factory, for instance, to minimise its pollution costs by reducing emissions.

The carbon price can make the polluter pay through two different policy instruments. The first is a straightforward price-based mechanism in the form of a carbon tax, where the price of pollution is determined by the rate of the tax for each tonne of greenhouse gas emitted. The second form is through a quota-based system, often referred to as a cap-and- trade, or emissions trading system. This sets a cap, or limit, on the maximum level of emissions for a given time period, and distributes permits or allowances for each unit of greenhouse gas among firms that produce emissions. Some firms find it easier or cheaper to reduce emissions than others, and can thus sell permits to firms whose cost for reducing emissions is much higher.

Therefore the trading takes place between high-cost and low-cost polluters, thereby determining the price of a polluting permit. The polluters have 'paid' through ensuring they have enough permits to cover the amount of emissions they have emitted for the given year Uniform carbon price effect Regardless of which type of instrument is used, many economists argue a carbon price should be global and uniform across countries and sectors so that polluters do not simply move operations to so-called pollution havens - countries where a lack of environmental regulation enables them to continue to pollute without restrictions.

The Report of the High-Level Commission on Carbon Prices (2017) estimated that the appropriate carbon price across the world will need to be US$40–80/tCO2e by 2020, and US$50–100/tCO2e by 2030, to be consistent with meeting the goals of the Paris Agreement. For jurisdictions that use a carbon tax, this would require directly setting the rate at the appropriate carbon price. However, this has often been politically difficult to impose. For jurisdictions that have an emissions trading system, a tighter cap can be imposed to restrict the supply of permits, and thus indirectly increase the carbon price to a level that is in line with the Paris Agreement.

In environmental law, the polluter pays principle is enacted to make the party responsible for producing pollution responsible for paying for the damage done to the natural environment. It is regarded as a regional custom because of the strong support it has received in most Organization for Economic Co-operation and Development (OECD) and European Union countries.

It is a fundamental principle in US environmental law. According to the French historian of the environment Jean-Baptiste Fressoz, financial compensation (not named polluter pays principle at that time) is already the regulation principle of pollution favoured by industrials in the nineteenth century.[1] He wrote that:
This principle, which is now offered as a new solution, actually accompanied the process of industrialization, and was intended by the manufacturers themselves.

The polluter pays principle underpins environmental policy such as an ECOTAX which, if enacted by government, deters and essentially reduces EMISSIONS. This principle is based on the fact that as much as pollution is
GREENHOUSE GAS unavoidable, the person or industry that is responsible for the pollution must pay some money for the rehabilitation of the polluted environment.