Polluter pays principle

Adopted in 1972 by the Organisation for Economic Cooperation and Development (OECD), and in 1986 by the EEC, the polluter pays principle (PPP) is an economic principle that aims to internalise hidden environmental costs (externalities) within the economy.

This principle stipulates that the costs of prevention, reduction of pollution, environmental remediation and restoration must be borne by the polluter who caused the damage.

Limits of the polluter pays principle

The polluter pays principle, however, has some limits:

• first of all, one must be able to evaluate the economic cost of environmental damage, which is far from obvious
• secondly, it is difficult to identify the responsible party, as shown in the past by the examples of the black tides, when the captain of an oil tanker, the owner and charterer passed the buck;
• finally, the environmental cost may surpass the polluter's ability to pay. In this case, other mechanisms, such as insurance or national solidarity, must replace the polluter.

Applications of the polluter pays principle

The polluter pays principle can be applied in several different forms, such as standards, fees and taxes (Pigouvian taxes), insurance, quota markets or even damages following legal action.