ECO 245

Environmental Economics (online)

Fall 2012

Assignment [X] By [Your Names] [Date] Nature has been giving us humans a lot. But humans, in return, have given nothing but damage to nature. Our environment has constantly been deteriorating. This damage has costs, which are both environmental and economical. It is high time steps should be taken to either prevent it from damaging further or take those to task who are responsible for the damage. Various intergovernmental organizations have been taking up the cause. Two ideas have been promoted to take care of these ideas. Polluter pays principle Precautionary principle

Polluter pays principle is strongly supported by Organization for Economic Co-operation and Development (OECD) and the European Community (EC) countries and ensures that those responsible for damaging the environment pay for it. Also,It has been recognized as a part of the international environmental law and is known to pave the way for sustainable development by keeping a check on those who wreak the nature. It supports policies that help reduce greenhouse gas emissions when enacted. In U.S. some environmental taxes have polluter pays as the underlying principle. These include Gas Guzzler Tax, a "polluter pays" fine called Corporate Average Fuel Economy (CAFE). Apart from this the Superfund law in US makes it mandatory for those who pollute to pay for clean-up of any material that is harmful for the environment. In U.S. the Polluter pays principle has not been very successful. It is mainly because of the nature of some industries like sewage, which are subsidized by the government and thus do 1

ECO 245

Environmental Economics (online)

Fall 2012

not have enough resources to meet the environmental norms and keep the risks in check. Precautionary principle emerged from Rio Conference, or "Earth Summit" in 1992. As the name suggests, is based on a preventive approach. It allows the policy makers to take decisions on a discretionary basis in cases where extensive scientific knowledge is lacking. If an action can be potential threat to the environment, the policy makers can avoid it from happening. However, if it can be scientifically proven that the particular action will not cause any damage to the environment, they can challenge the decision. This principle has been received well in the European Union and they have made it mandatory requirement. Precaution exercised could be strong or weak. Generally, it should be appropriate according to the risk that is anticipated from a particular action. Application of the precautionary principle is called the precautionary approach. Though largely they have the same definition, there are some subtle differences. First is that application can vary across regions as every state has its own way of following the principle. Second is that the precautionary approach also takes into account the cost-effectiveness, both in terms of social and economic costs, of implementation. Various countries have adapted the precautionary principle. For example, US passed a Precautionary Principle Purchasing ordinance in 2005, to check the environmental costs of its purchases. Japan also tried using precautionary principle in 1997 for testing each variety of agricultural products. Taking steps to safeguard our environment has become the need of the hour. We have been exploiting nature to extract every possible resource and the largest possible quantities. This is causing a great imbalance and giving rise to the turmoil in terms of natural disasters like floods and draughts. The two ideas that were discussed are just a part of the broader effort to contain the damage and take corrective actions. It cannot be pinned to one authority or country to take up the onus. Ultimately, it is the collective effort that counts.