Making the Polluters Pay


Environmentalists often call for a world with zero pollution.  The response from industry and professional economists is disbelief.  Who is right?  That depends upon how one defines pollution.  Assuming that pollution is properly defined, government should seek to reduce pollution as much as is possible—perhaps even to eliminate it altogether.  However, if pollution is improperly defined, “pollution control” can become a pretext for the federal government to regulate the minutiae of each and every industrial process and economic transaction.


Emissions per se are not pollution.  Pollution is the imposition of a harmful waste product or emission onto the person or property of another without that person’s consent; it is a “trespass” under the principles of common law.  If the trespass is so minor that it creates no impact or inconvenience for the property owner, it will normally be tolerated.  Otherwise, it will likely result in legal action of some kind.  Today’s pollution dilemma is often the result of what is essentially a universal “easement” granted by the state to polluters, even to producers of significant and damaging pollution.


Because the first duty of government should always be to protect people and their properties from external harm, pollution control is a legitimate function of government.1  Pollution, like vandalism or theft, deprives people of what is theirs.  The proper role for government in this area is to ensure that polluters pay for the damage they cause and are enjoined from causing harm in the future.  This approach is often referred to as the “polluter pays principle,” and was trumpeted by early environmentalists as a means to discourage environmental harms such as those that caused the Cuyahoga river to catch fire.  If companies paid a price for polluting, it was argued, they would be less likely to do it.2


However, this approach is rarely embodied in American environmental laws.  The rhetoric of “polluter pays” is often used, but rarely in connection to forcing particular polluters to pay for actual damage.  In the case of Superfund, for example, “polluter pays” was used to justify generic taxes on particular industries, irrespective of the relative contributions of specific corporations to actual environmental damage.


Current environmental policy too rarely focuses on harm and too often focuses on compliance with Byzantine rules and requirements.  Fines are levied not when the property of another is contaminated, but when a permit is improperly filed, or a waste-transport manifest is not completed in line with the demands of regulatory officials.  As the Environmental Protection Agency has observed, “a regulated hazardous waste handler must do hundreds of things correctly to fully comply with the regulations, yet doing only one thing wrong makes the handler a violator.”3


Environmental rules are now so complex that only 30 percent of corporate counsels believe that full compliance with environmental laws is actually possible, according to a survey conducted by the National Law Journal.4  This is astonishing evidence that many pollution-control efforts are misdirected.  The proper focus of government officials should be identifying and prosecuting those firms that tangibly threaten human health and environmental properties, instead of monitoring compliance with overly-complex and time-consuming permitting and paperwork requirements.


We are all familiar with the case of the Exxon Valdez.  An oil tanker ran aground because of an allegedly drunken captain, and over 300,000 barrels of crude oil poured into the water of Prince William Sound, causing significant (though not permanent) environmental disruption.  What few are aware of, however, is the crime for which Exxon was punished was killing migratory birds without a permit.  Extensive shorelines were covered in oil, and the government prosecuted Exxon for not having permission to go hunting!


Exxon was subject to civil suits from those, such as local fishermen, that claimed damage from the spill.  However, much of the money that Exxon was forced to pay did not go to alleged victims of the spill.  Exxon was required to pay $125 million in fines to the federal government and the state of Alaska.  In addition, Exxon was forced to pay $900 million into a fund to be doled out by government officials for environmental projects, habitat protection, and scientific research, among other things.5  Last May, $38.7 million of this money was used to create a new state park.6


Even the money spent on cleanup was misspent.  Exxon was under tremendous political pressure to restore the “public” shoreline.  Thus it engaged in an extensive and costly cleanup operation.  However, not only was much of the cleanup unnecessary—nature has its own methods of cleaning up spills of natural substances like oil—but in some cases the extensive beach cleaning actually caused harm.


Not only was Exxon prosecuted for generic offenses against “public” goods rather than for specific harms to specific parties, but the politicization of the spill resulted in a thoughtless policy response.  Had a similar spill occurred in a more private setting—say, a tanker truck overturned, spilling onto private properties—the owners of the affected properties would have clear, direct recourse.  Additionally, they would have a tangible incentive to ensure that any cleanup or remediation was a proper way to address the problem at hand.


Under current institutional arrangements, there was no means for affected citizens to hold Exxon directly responsible for much of the actual damage caused to the Alaskan shoreline.  The Alaskan coast had no private owners, stewards, or protectors that could seek redress as if that oil had spilled into someone’s backyard (or to ensure that cleanup dollars were well spent).  The only direct payments made by Exxon to those actually harmed were to fishermen and Alaskan natives who claimed damages from a temporary decline in the salmon and seal harvest.7


If we truly want polluters to pay for the actual damages they cause, there need to be private property owners that can defend threatened or harmed resources.  Ownership of ecological resources can serve as a deterrent against causing harm against others, in the same manner that private property provides such incentives in other areas.  It also provides tangible incentives for better stewardship.8


Polluters such as Exxon should be held responsible not because they violated a bureaucratic proscription about the hunting of birds or harmed some “public” resource, but because they harmed someone else’s person or property, and they have no right to do that.  Any restitution should be paid to those harmed, not simply to a government agency that proclaims it will spend the money in the public interest.


A fishing club, the Pride of Derby, demonstrates how property rights can prevent stream pollution.  In England, clubs own the right to fish along some rivers and thus are quick to respond to pollution threats.  In 1948, several fishing-club members joined to form the Angler’s Cooperative Association (ACA).  In the Pride of Derby case, upstream polluters argued that their interests outweighed those of the club.  Since the fishery was threatened, the club went to court and prevailed in protecting its riparian rights.  The ACA has helped fishing clubs pursue injunctions against upstream pollution ever since.  To date, the ACA has been involved in over 1,500 cases.9


This ability of private parties to restrain upstream polluters is rarely available in the United States.  Historically, some communities had sought traditional common law remedies for interstate water pollution, which helped ensure that polluters paid.  However, such actions have since been preempted by the federal Clean Water Act.10   As with many environmental laws, whether or not someone is being harmed by an industrial activity is less important than whether the law is being followed.  In some cases this leads to environmental overprotection, but it can lead to environmental underprotection as well.  In either case, polluters are not held responsible for the actual wrongs they have committed.


Under the Clean Water Act, municipal polluters are treated preferentially.  First, their cleanup goals are often less stringent than those of industrial polluters, and, second, they face far more lenient cleanup schedules.  To politicians, the source of the pollution is as significant as the pollution itself.  Politically-preferred polluters are treated more leniently than are pariah polluters.  Yet, to the rivers and fish, pollution is pollution.  If one believes that the polluter should pay, it should not matter who or what that polluter is.


This problem is compounded by the prevalence of citizen suit provisions in the Clean Water Act and other environmental laws.  Under these provisions, private interest groups can effectively determine the enforcement priorities of government agencies.  Due to the anti-business bias of many of the environmental organizations that engage in citizen suits, private industry is subject to more legal actions than either agricultural activities or governmental facilities, even though both are greater sources of water pollution.  Indeed, between 1984 and 1988, environmentalist citizen suits against private industry were more than six times as common than suits against governmental facilities.11  According to Michael Greve, “There are no environmental reasons why environmental groups would display such a pronounced preference for proceeding against corporate polluters.”12


There is something profoundly unjust about limiting the legal recourse of persons harmed by polluting activities, while at the same time encouraging the use of citizen suits by organizations with no stake in the resources they claim to be protecting.  Indeed, some environmental groups have found that citizen suits can be a lucrative source of revenue.13


Contentions to the contrary notwithstanding, today’s environmental measures have very little to do with preventing pollution—they are not focused on preventing tangible harms to actual people and their properties.  Both public and private enforcement have suffered from this tendency.  If we accept the general principle that the polluter should pay, then we recognize that broad, drift-net emission-control strategies are ill-conceived.  One size does not fit all.  Forcing hundreds of small businesses to file extensive environmental reports makes little sense if the actions of only a few are causing environmental problems.


Drift-net approaches achieve pollution reductions more through their scope than their efficiency.  As a result they tend to produce environmental improvements at the expense of innocent individuals who have not contributed to environmental harm.  Even when the impacts of water- or air-borne emissions are extremely difficult to control, environmental protection and simple justice are better served when pollution reduction efforts focus on the true sources of pollution and ensure that it is the polluters that pay for the damages caused.


Consider the case of air pollution.  It is well-established that a small fraction of automobiles are responsible for the vast preponderance of auto-related emissions.  Indeed, over half of the emissions are generated by only 10 percent of the cars on the road.14   This means that for every ten cars, the dirtiest one pollutes as much as the other nine.  Nonetheless, federal officials insist upon imposing significant costs on the owners of all cars, through “clean fuel” requirements, periodic emissions inspections, and the like, in order to meet federal air quality standards.  If additional emission reductions are necessary in some regions to protect human health (an arguable proposition), targeting the dirtiest portion of the automobile fleet will reduce pollution more efficiently—and more equitably as well.  The majority of car owners whose vehicles are in clean-running condition should not be forced to pay for the pollution caused by an irresponsible minority.  (Additionally, it is questionable whether the federal government should tell local communities what level of air emissions is acceptable; local officials are fully capable of making such decisions, and will be held accountable by local citizens.)


Some environmentalists and public officials suggest adopting the “polluter pays principle” through the imposition of emission taxes.  This idea is generally associated with the economist A.C. Pigou, who argued that pollution taxes would force offending industries to “internalize” the costs they were imposing on others.  There are two significant problems with this approach, however.


First, such taxes will be used to enrich government coffers, not to compensate those who are harmed by the pollution.  It is one thing for the state to adjudicate disputes and ensure that polluters make restitution to those whom they have harmed.  It is another thing for the state to identify polluting activities and use pollution taxes as a source of general revenue.  The former is in accord with common law principles of justice; the latter encourages the continued growth of the regulatory state.


The second problem is that the state is in no position to assess the actual costs imposed by pollution.  Pollution taxes enacted through the political process are likely to reflect political priorities, rather than environmental ones.  The federal gasoline tax, for example, is often defended as a “polluter pays” approach because oil exploration, refining, and use all have environmental impacts.  A tax on gasoline, however, is a poor proxy for taxing environmental impacts—the same gallon of gasoline will produce different levels of emissions in different vehicles.  Furthermore, special-interest pleading will ensure that certain types of fuels and fuel additives receive special exemptions from the tax.  Politically-derived taxes are always manipulated in this fashion and are no way to make the polluter pay.


A related problem is that pollution tax schemes almost inevitably rely upon some proxy for pollution in the assessment of the tax.  This is true, generally, for so-called “pollution prevention” programs that are promoted by the Environmental Protection Agency.  It is far easier to levy a tax on an easily measurable factor, such as use of a resource or aggregate emissions or waste generated, than it is to try and measure the impact upon people.


As already noted, not every emission, waste, discharge, or industrial by-product is pollution.  Yet in the fervor to enact “pollution prevention” policies, environmental regulators adopt “waste reduction” and “toxics-use reduction” schemes.  Such programs completely miss the point.  The generation of waste, in and of itself, entails no necessary harm on other people or their property.  Thus there is no reason for waste per se to be discouraged by government policy.  Insofar as pollution-prevention efforts metastasize into crusades for the elimination of waste, they move away from any true concern for limiting pollution and holding polluters accountable for the damages that they cause.


Making the polluter pay should not entail trying to eliminate the generation of wastes and other by-products of a modern, industrial society.  Nor does it mean regulating every emission, every industrial process, indeed every aspect of economic life.  Rather, it means focusing environmental-protection efforts on the greatest sources of harm and ensuring that polluters pay for the costs of the harms they inflict upon others.  This goal can be best accomplished through a decentralization of environmental policy and a greater reliance upon common law remedies.  Central government dictates are not up to the task.


Zero-pollution is a laudable goal, but pollution prevention must mean the effort to eliminate the forcible imposition of environmental harms on other people and their property, not the elimination of all wastes, all emissions, or all industrial activities that environmental groups find distasteful.  Properly defined, pollution control is coercion control.  This is the essence of true environmental protection, and it should be the essence of American environmental policy.

End Notes

1.  It is important to separate “external harm”—harm that is involuntarily imposed by an outside actor—and harms that are the result of voluntary assumption of risk, such as results from a rock-climbing accident or engaging in unhealthy behavior.

2.  See, for example, Sydney Howe, “Making the Polluters Pay,” Washington Post, January 30, 1977.

3.  US Environmental Protection Agency, The Nation’s Hazardous Waste Management Program at a Crossroads: The RCRA Implementation Study (Washington, DC: US EPA, 1990), p. 36.

4.  Marianne Lavelle, “Environmental Vise: Law, Compliance,” National Law Journal, August 30, 1993, p. S1.

5.  Jeff Berliner, “Exxon Pleads Guilty, Judge Accepts $1 Billion Settlement,” United Press International, October 8, 1991.

6.  “Oil Spill Money Creates New Alaska Park,” Associated Press, May 27, 1994.

7.  However, it should be noted that the jury awards to the fisherman were more likely the product of outrage over the spill than actual demonstrated damage; see Jeff Wheelwright, “Exxon Was Right, Alas,” New York Times, July 31, 1994.  This is another product of focusing on “public” harms rather than on harms inflicted on particular parties.

8.  This point is elaborated in Robert J. Smith, “Resolving the Tragedy of the Commons by Creating Private Property Rights in Wildlife,” Cato Journal (Fall 1981), pp. 439-468 [excerpt on pp. 101-110 of this volume].

9.  This history is recounted in Kent Jeffreys, Who Should Own the Ocean? (Washington, DC: Competitive Enterprise Institute, 1991), pp. 17-18.

10.  See Roger E. Meiners and Bruce Yandle, “Clean Water Legislation: Reauthorize or Repeal?” in Taking the Environmental Seriously, Meiners and Yandle, eds. (Lanham, Maryland: Rowman and Littlefield, 1993), pp. 88-94.

11.  Michael Greve, “Private Enforcement, Private Rewards,” in Environmental Politics: Public Costs, Private Rewards, M. Greve and F. Smith, eds. (New York: Praeger, 1992), p. 111.

12.  Ibid.

13.  Ibid. pp. 109-110.

14.  J.G. Calvert, et al., “Achieving Acceptable Air Quality: Some Reflections on Controlling Vehicle Emission,” Science, July 2, 1993, p. 40; and, Donald Stedman, et al., On-Road Remote Sensing of CO and HC Emissions in California, Final Report Contract No. A032-093 (Sacramento: California Air Resources Board, 1994), p. 13.