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Financial Responsibility for Environmental Obligations: Are Bonding and Assurance Rules Fulfilling Their Promise?

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  • Boyd, James

    ()
    (Resources for the Future)

Abstract

Financal assurance rules, also known as financial responsibility or bonding requirements, foster cost internalization by requiring potential polluters to demonstrate the financial resources necessary to compensate for environmental damage that may arise in the future. Accordingly, assurance is an important complement to liability rules, restoration obligations, and other regulatory compliance requirements. The paper reviews the need for assurance, given the prevalence of abandoned environmental obligations, and assesses the implementation of assurance rules in the United States. From the standpoint of both legal effectiveness and economic efficiency, assurance rules can be improved. On the whole, however, cost recovery, deterrence, and enforcement are significantly improved by the presence of existing assurance regulations.

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Bibliographic Info

Paper provided by Resources For the Future in its series Discussion Papers with number dp-01-42.

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Date of creation: 01 Aug 2001
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Handle: RePEc:rff:dpaper:dp-01-42

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Keywords: financial assurance; financial responsibility; bonding; environmental insurance;

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Cited by:
  1. Marcel Boyer & Donatella Porrini, 2010. "Optimal liability sharing and court errors: an exploratory analysis," Working Papers hal-00463913, HAL.
  2. Muehlenbachs, Lucija, 2012. "Testing for Avoidance of Environmental Obligations," Discussion Papers dp-12-12, Resources For the Future.
  3. Yolande Hiriart & David Martimort & Jérôme Pouyet, 2005. "The Regulator and the Judge: The Optimal Mix in TheControl of Environmental Risk," Working Papers hal-00243027, HAL.
  4. Hiriart, Yolande & Martimort, David, 2004. "The Benefits of Extended Liability," IDEI Working Papers 334, Institut d'Économie Industrielle (IDEI), Toulouse, revised Jun 2005.
  5. Alberto Cassone & Giovanni Ramello, 2011. "The simple economics of class action: private provision of club and public goods," European Journal of Law and Economics, Springer, vol. 32(2), pages 205-224, October.
  6. Marcel Boyer & Donatella Porrini, 2008. "The Efficient Liability Sharing Factor For Environmental Disasters: Lessons For Optimal Insurance Regulation," CIRANO Working Papers 2008s-03, CIRANO.
  7. Peck, Philip & Sinding, Knud, 2009. "Financial assurance and mine closure: Stakeholder expectations and effects on operating decisions," Resources Policy, Elsevier, vol. 34(4), pages 227-233, December.
  8. Productivity Commission, 2008. "Chemicals and Plastics Regulation," Research Reports, Productivity Commission, Government of Australia, number 27.

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