Throne Speech promises polluter-pay system

Elizabeth Brubaker

In recent years airlines have gotten tight about the amount of luggage you can bring on board without paying extra fees. Now the consumer apparel market has responded: A startup called Jaktogo is making “wearable” luggage that lets you sneak an extra 30 pounds of stuff onto a plane by wearing it on your body.                                                                                    – The Boston Globe, October 6, 2013

“Only fools pay for extra luggage,” admonishes the web site of the wearable luggage company described above. “Clever people have a Jaktogo!”

Indeed, clever people everywhere manage to get around regulations they don’t like. While their specific methods cannot always be anticipated, people’s self-interested determination to circumvent rules should surprise no one.

Environmental rules are no exception. Earlier this year, Reason Magazine reported that residents of Concord, Massachusetts, have evaded the town’s ban on sales of drinking water in single-serving plastic bottles. How? By driving to nearby towns to buy their water – adding automobile pollution to the environmental costs of bottled water.

The unintended consequences of many a well-meaning regulation point to the importance of an announcement tucked into last week’s Speech from the Throne. To protect local communities and the environment from oil spills and other risks, the government promised to enshrine the polluter-pay system into law.

Without seeing the fine print, it is difficult to assess this promise. But in principle, a polluter-pay system will do much to protect the environment. At its best, such a system turns conventional regulation on its head. Polluters are no different from the ordinary consumers described in the above news stories – they will be resourceful when devising ways to get around inconvenient regulations. But polluters who are legally required to pay for any damage they cause have fewer incentives to cut corners or take environmental risks. On the contrary, it is in their self-interest to operate cleanly and safely. A polluter-pay system, in short, creates financial incentives that work for – instead of against – the environment.

One way of ensuring that polluters can pay for the damage they cause is to require them to carry sufficient liability insurance. The Throne Speech addressed this issue in two places – first, when discussing companies that drill for oil offshore or operate pipelines, and later when discussing railway companies that ship oil. Higher insurance requirements are laudable, but it is important that they not come with caps on overall liability. Governments have conferred protection from full liability on too many polluting industries. The next step in achieving a full polluter-pay system should involve removing all liability limits.

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