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Retroactive Liability or the Public Purse?

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  • Boyd, James
  • Kunreuther, Howard

Abstract

The article addresses the question of whether responsibility for pollution created in the past should be retroactively applied to firms, or if the costs of cleaning up existing pollution should be financed by the public. We show that making firms liable for retrospective environmental costs can weaken the incentive to take precautions against future environmental costs. This follows since public financing of these costs can lead to greater prospective risk deterrence by allowing firms to more fully internalize the costs of future environmental risks. However, an analysis of existing public financing approaches highlights a set of dangers associated with their practical use. Copyright 1997 by Kluwer Academic Publishers

Suggested Citation

  • Boyd, James & Kunreuther, Howard, 1997. "Retroactive Liability or the Public Purse?," Journal of Regulatory Economics, Springer, vol. 11(1), pages 79-90, January.
    • Handle: RePEc:kap:regeco:v:11:y:1997:i:1:p:79-90
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    Citations

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    Cited by:

    1. Shuichi Ohori, 2006. "Optimal Environmental Tax and Level of Privatization in an International Duopoly," Journal of Regulatory Economics, Springer, vol. 29(2), pages 225-233, March.
    2. Haitao Yin & Alex Pfaff & Howard Kunreuther, 2011. "Can Environmental Insurance Succeed Where Other Strategies Fail? The Case of Underground Storage Tanks," Risk Analysis, John Wiley & Sons, vol. 31(1), pages 12-24, January.
    3. Benjamin L. Collier & Andrew F. Haughwout & Howard C. Kunreuther & Erwann O. Michel‐Kerjan, 2020. "Firms’ Management of Infrequent Shocks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(6), pages 1329-1359, September.
    4. Boyd, James, 1996. "Banking on "Green Money:" Are Environmental Financial Responsibility Rules Fulfilling Their Promise?," RFF Working Paper Series dp-96-26, Resources for the Future.
    5. Liu Deming, 2012. "Proposing the Bonding Requirements for Investment in Africa: A Tripartite Solution for the Environmental Protection," The Law and Development Review, De Gruyter, vol. 5(2), pages 128-154, December.
    6. Thomas P. Lyon & Haitao Yin & Allen Blackman & Kris Wernstedt, 2018. "Voluntary Cleanup Programs for Brownfield Sites: A Theoretical Analysis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 70(2), pages 297-322, June.
    7. Boyd, James, 1999. "Environmental Remediation Law and Economies in Transition," Discussion Papers 10721, Resources for the Future.
    8. Haitao Yin & Howard Kunreuther & Matthew W. White, 2011. "Risk-Based Pricing and Risk-Reducing Effort: Does the Private Insurance Market Reduce Environmental Accidents?," Journal of Law and Economics, University of Chicago Press, vol. 54(2), pages 325-363.
    9. Haitao Yin & Howard Kunreuther & Matthew White, 2009. "Risk-Based Pricing and Risk-Reducing Effort: Does the Private Insurance Market Reduce Environmental Accidents?," NBER Working Papers 15100, National Bureau of Economic Research, Inc.
    10. Heyes, Anthony & Doucet, Joseph, 1997. "2-Stage Enforcement and Regulatory Polarisation: a Simple Model with Application to the USEPA," Cahiers de recherche 9717, Université Laval - Département d'économique.

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