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Enforcement of environmental liability in the case of uncertain causality and asymmetric information

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  • Bartsch, Elga

Abstract

In providing precautionary incentives and allocating environmental risk, liability for environmental damages faces two difficulties: randomness of damages incurred and nonobservability of precautionary measures. Hence, a major obstacle in enforcing legal claims is the difficulty of proving causation. In order to alleviate the proof of causation, the German Umwelthaftungsgesetz introduces a refutable causality presumption. When imperfect information is taken into account, this conditional reversal of the burden of proof cannot ensure optimal precaution. Using a principalagent model, optimality conditions for a modified strict liability rule is derived. A specific rule for the optimal allocation of environmental damages under probabilistic causation and asymmetric information is obtained using a linear model.

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  • Bartsch, Elga, 1996. "Enforcement of environmental liability in the case of uncertain causality and asymmetric information," Kiel Working Papers 755, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkwp:755
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    1. Heister, Johannes, 1997. "Ökologie und Marktwirtschaft: Eckpunkte einer zukunftsorientierten Umweltpolitik," Kiel Discussion Papers 291, Kiel Institute for the World Economy (IfW Kiel).

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    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General

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