LAW MANTRA

THINK BEYOND OTHERS

(National Monthly Journal, I.S.S.N 2321 6417)

Polluter Pays Principle: Pros and Cons of Indian Laws Relative to International Practices Abstract Any successful international negation for reducing emissions must be based on four principles: The Precautionary Principle, The Principle of Sustainable development, The Polluter-Pays Principle of Equity. The strength of contraction and convergence is that it satisfies all these principles. 1. Sir John Houghton The paper starts with the basic knowledge of the Polluter Pays Principle and proceeds with the Historical evolution of the principle. The paper also deals with how the International and national development of the principle. The adoption of the principle in the legislation and judiciary is also dealt in detail in the paper. The later section of the paper deals with the disadvantage of the principle and ends with the conclusion.

Introduction The polluter pays principle states that whoever is responsible for damage to the environment should bear the cost associated with it.1 The Polluter Pays Principle (PPP) is one of the internationally recognized principles that influence the shaping of environmental policy at both the national and international level. As one of the environmental principles that have developed from political slogans to legal rules, 2 it is also increasingly reflected in national and international law. 3 It is seen and analysed both as a principle of environmental economics and as a principle of environmental law. In environmental economics, it is discussed as an efficiency principle of internalization of environmental costs. As a legal principle, it is usually treated as a principle for the allocation of the cost of pollution prevention, and for liability and compensation for environmental damage. In general, it is regarded as an important and right principle in the perspective of environmental protection. It is often mentioned together with other major environmental principles such as the precautionary principle, the principle of prevention and the principle of integration.4 In general, it is regarded as an important and right principle in the perspective of environmental protection. It is often mentioned together with other major environmental principles such as the precautionary principle, the principle of prevention and the principle of integration. The polluter pays principle(PPP)meant that the producer of goods of other items should be responsible for the cost of preventing or dealing with any pollution that the process caused. This included environmental cost preventing or dealing with any pollution that the process caused. This included environmental cost as well as direct cost to the people or property; it also covered cost incurred in avoiding pollution and not just those related to remedying any damage. It would include full environment cost and not just those which are immediately tangible. The principle also did not mean that the polluter could pollute and pay for it. Its main goals are cost allocation and cost internalization. In 1972, the Organization for Economic Cooperation and Development (OECD) articulated the explicitly and in 1989 indicated that it should be applied to agriculture. Though the principle originated as an economic principle,
1

Taking Action, Chapter 2 pg 3. Published by the United Nations Environmental Programme[sic]. Found at www.rona.unep.org.action.02.htm. 2 Sadeleer 2000 at 23-32 3 Macrow 2004. 4 For a more thorough discussion, see Bugge 1996 at 53-90

since 1990 it has been recognized internationally as a legal principle.5The PPP now plays an important role in national and international environmental policy. The European community (EC) adopted the principle in the 1987 Single European Act,6 and it has appeared in international agreements, including the Rio Declaration of 1992.7 The principle is an explicit part of legislation in some nations; in others, it is an implicit subtext for both environmental regulation and liability for pollution. Historical Evolution Of Polluter Pays Principle The polluter pays principle, like the other great towering principle that today influence international environmental law, such as: (1) The sustainable development principle; (2)Theprevention principle; (3) The precautionary principle; and (4) The proximity principle, started as a political declaration without legal force. The polluter pays principle has been included in documents with legal status. For instance, many modern constitutions in the European Union explicitly provide for a right to a clean environment8 and thus environmental policy principles also constitute environmental law. The right to a clean environment implies a duty of the state to protect its citizens, but it is questionable whether these principles or social rights can yet be considered subjective rights, meaning that they can be enforced by citizens in a court. However, some see the right to a clean environment as a human or a natural right existing independently of politically decided treaties. Finally, the polluter pays principle is now seen in specific pieces of legislation becoming more (or some might say less) than a grand constitutional statement of an intractable human right.

OECD The birth of the polluter pays principle

Environment Directorate, OECD, The Polluter-Pays Principle: OECD Analyses and recommendations, at 9. Doc. OCDE/GD(92)81 (1992) [hereinafter OECD, PPP Analyses]. 6 Single European Act, 17 Feb, 1986, 1987 OJ (L 169)1. 7 United Nations Conference on Environmental and Development, Rio Declaration on Environment and Development, UNCED Doc. A/CONF.151/5/REV,1,31 ILM 874 (1992)[hereinafter Rio Declaration]. 8 Michael G. Faure, The Economic Analysis of Environment Policy and Law: An Introduction, Edward Elgar Publishing, 2003.

Some explanation of the sometimes arbitrary course of the principle of polluter pays can be found in its historical development. The principle first appeared in a legal context in a document prepared by the International Organisation of Economic Cooperation and Development (OECD)9 and included the following recommendation: The principle to be used for allocating costs of pollution prevention and control measures to encourage rational use of scarce environmental resources and to avoid distortion in international trade and investment is the so-called polluter pays principle. This principle means that the polluter should bear the expenses of carrying out the above mentioned measures decided by public authorities to ensure that the environment is in an acceptable state. In other words, the cost of these measures should be reflected in the cost of goods and services which cause pollution in production and/or consumption. Such measures should not be accompanied by subsidies that would create significant distortion in international trade and investment. In 2001, the OECD Joint Working Party on Agriculture and Environment, after years of gestation and development by other organisation, stated that a new and expended form of the polluter pays principle should provide that: ......the polluter should be held responsible for environmental damage caused and bear the expenses of carrying out pollution prevention measures or paying for damaging the state of the environment where the consumptive or productive activities causing the environment damage are not covered by property rights.10 United Nations-The Rio Declaration This proclamation was proved, at least on paper, if not yet by jus cogens, in 1992 when the United Nations Conference on the Environment and Development delegates agreed on The Rio Declaration on Environment and Development (The Rio Declaration)11, which has been described as an instrument of international jurisprudence [that] articulates policies and prescriptions directed at the achievement of worldwide sustainable development.12 It is of note that Principle 16 of Rio Declaration provides that: national authorities should Endeavour
9

Environment and Economics: Guiding Principle Concerning International Economics Aspects of Environmental Policies, Annex 1, OECD Doc. C(72)128, (May 26, 1972), available at 1972 WL 24710 10 WWW.eoearth.org/article/Polluter_pays_principle. 11 Rio Declaration on Environment and Development, United Nations Conference on Environment and Development, UN.Doc. A/CONF. 151/5/Rev.1 (1992), reprinted in 31 I.L.M. 874,878(1992). 12 John Batt and David C. Short, The Jurisprudence of the 1992 Rio Declaration on Environment and Development: A Law, Science, and Policy Explication of Certain Aspects of the United Nations Conference on Environment and Development, 8 J. NAT. RESOURCES 8: ENVTL. L. 229,230(1993)

to promote the internalization of environmental cost and the use of economic instruments, taking into account the approach that the polluter should, in principle, bear the cost of pollution, with due regard to the public interest and without distorting international trade and investment.13 The principles appearance in such a seminal statement of the fundamental principle of international environmental law demonstrates its significance in environmental liability regimes around the world. United States The principle has to some extent informed United States legislation, but its influence should not be overstated and commentators note that: The United States, in contrast to the European nations, does not officially recognize the [polluter pays principle] as a distinct principle or policy mandate, but does, by natural political and economic inclination, closely follow its precepts in practice. 14 Certain provision of the United States Clean Air Act 1970 (the CAA) and Clean Water Act 1977 (The CWA) require polluters to satisfy environmental standards at their own expense; and the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) assigns liability for costs associated with cleaning-up sites contaminated by hazardous wastes. CERCLA is a notable milestone in the development of the polluter pays principle in the United States and commentators have noted that: the polluter pays principle is one of the central objectives or goals of CERCLA. 15 Flaws in Polluter Pays Principle Few people could disagree with what seems at first glance to be such a straightforward proposition. Indeed, properly construed, this is not only a sound principle for dealing with those who pollute but is an extension of one of the most basic principles of fairness and justice: people should be held responsible for their actions. Those who cause damage or harm to other people should pay for that damage. This appeal to our sense of justice is why the polluter pays principle (PPP) has come to resonate so strongly with both policy makers and the public. As a general rule, sound economic analysis of pollution and environmental problems must also be based on the principle of responsibility. Forcing polluters to bear the costs of their activities is good economics too; it not only advances fairness and justice, but also enhances economic efficiency. In other words, with appropriate policies based on a PPP, we should not have to
13 14

Rio Declaration at 879. See Sanford E. Gaines, The Polluter-Pays-Principle: From Economic Equity to Environmental Ethos, 26 TEX, INTL LJ. 463,480 (1991) 15 J. Whitney Pesnell, The Contribution Bar in CERCLA Settlements and Its Effect on the Liability of Nonsettlors, 58 LA. L. REV. 167,190 (1997)

give up the economic efficiency of a free market system based on private property in order to obtain environmental protection, nor vice versa. But as with most such general principles, the devil is in the details. In this case, the details relate to three basic questions that any application of the PPP must answer. First, how do we define pollution and therefore a polluter? Second, how much should the polluter pays, once he is identified? Third, to whom should the payment be made? The answers to these questions are at the heart of whether any application of the PPP will be either just or economically efficient. A correctly construed polluter pays principle would penalize those who injure other people by harming their persons, or by degrading their property. Too often, however, the PPP is misdefined and misused to suppress private economic activity that benefits the parties directly involved and does no specific damage to other people, but which offends those who oppose human impact on the environment and prefer to leave resources undeveloped. The objective is to restrain the resources use at the expense of the property owners and consumers without cost to those who wish to see the resources remain idle. Under such a misapplication of the PPP, very often a polluter is not someone who is harming others, but is someone who is simply using his own property and resources in a way that is not approved ofby government officials or environmentalists. In such cases there is no harm to be measured and no real victim to compensate. Consequently, the amount to be paid is not determined by the extent of any actual damage done. Rather, it is set at a level that curbs the politically disfavoured activity to the degree desired by its opponents. And finally, the payment (whether there are real victims or not) typically goes to the government in the form of tax. In other words, in most cases, the PPP is used as cover to promote a political or ideological agenda rather than to ensure that real polluters pay compensation to real victims of their activities.

Constitutional and Legislative Measures Stockholm Declaration of 1972 was perhaps the first major attempt to conserve and protect the human environment at the international level. As a consequence of this Declaration, the States were required to adopt legislative measures to protect and improve the environment. Accordingly, Indian Parliament inserted two Articles, i.e... 48A and 51A in the constitution of India in 1976,16 Article 48A of the constitution rightly directs that the state shall endeavour to
16

Inserted by the Constitution (42nd Amendment) Act, 1976.

protect and improve the environment and safeguard forests and wildlife of the country. Similarly, clause (g) of Article 51A imposes a duty on every citizen of India, to protect and improve the natural environment including forests, lakes, river, and wildlife and to have compassion for living creatures. The cumulative effect of Article 48A and 51A (g) seems to be that the state as well as the citizens both are now under constitutional obligation to conserve, perceive, protect and improve the environment. Every generation owes a duty to all succeeding generations to develop and conserve the natural resources of the nation in the best possible way.17 The phrase Protect and improve appearing in both the Article 48A and 51A (g) seems to contemplate an affirmative government action to improve the quality of environment and not just to preserve the environment in its degraded form. Apart from the constitutional mandate to protect and improve the environment, there are a plenty of legislations18 on the subject but more relevant enactment for our purpose are the Water (Prevention and Control of Pollution) Act, 1974;the Water (Prevention and control of Pollution) Cess Act, 1977; the Air (Prevention and Control of Pollution) Act, 1981; the Environment (Protection) Act, 1986; Public Liability Insurance Act, 1991; the National Environment Tribunal Act, 1995 and the National Environment Appellate Authority Act, 1997; the Wildlife (Protection) Act, 1972; the Forest (Conservation) Act, 1980. The Water Act provides for the prevention and control of water pollution and the maintaining or resorting of the wholesomeness of water. The Act prohibits any poisonous, noxious or polluting matter from entering into any stream or well. The Act provides for the formation of Central Pollution Control Board and the State Pollution Control Board. The new industries are required to obtain prior approval of such Boards before discharging any trade effluent, sewages into water bodies. No person, without the previous consent of the Boards shall bring into use new or altered outlet for the discharge of sewage or tradeeffluent into a stream or well or sewer or on land. The consent of the Boards shall also be required for continuing an existing discharge of sewage or trade effluent into stream or well or sewer or land. In the Ganga Water Pollution case19, the owners of some tanneries near Kanpur were discharging their effluent from their factories in Ganga without setting up primary treatment plants. The Supreme Court held that the financial capacity of the tanneries should be considered as irrelevant while requiring them to establish primary treatment plants. The Court
17

State of Tamil Naduvs. Hind Store, AIR 1981 SC 711;see also Rural Litigation and Entitle Ji : at Kendra vs. State of U.P., Air 1987 SC 359. 18 E.g. Indian Forest Act, 1927; The Factories Act, 1948; The Atomic Energy Act, 1962; Insecticide 1968. 19 M.C.Mehta v. Union of India, AIR 1988 SC 1037. See also Bhavani River v. Sakthi Sugar Ltd. AIR 1998 SC 2059.

directed to stop the running of these tanneries and also not to let out trade effluents from the tanneries either directly or indirectly into the river Ganga without subjecting the trade effluents to a permanent process by setting up primary treatment plants as approved by the State Pollution Control Board. The Water (Prevention and Control of Pollution) Cess Act, 1977 aims to provide levy and collection of a cess on water consumed by persons carrying certain industries and local authorities to augment the resources of the Central Board and the State Boards constituted for the prevention and control of water pollution. The object is to realise money from those whose activities lead to pollution and who must bear the expenses of maintaining and running of such Boards. The industries may obtain a rebate as to the extent of 25%20 if they set up treatment plants of sewage of trade effluent. The Air Act has been designed to prevent, control and abatement of air pollution. The major sources of air pollution are industries, automobiles, domestic fires, etc. The air pollution adversely affects heart and lung and reacts with haemoglobin in the blood. According to RoggerMustress, the American Scientist, air pollution causes mental tension which leads to increase in crimes in the society. The Air Act defines an air pollutant as any solid, liquid or gaseous substance including noise present in the atmosphere in such concentration as may be or tend to be injurious to human beings or other living creatures or plants or property or environment. The Act provides that no person shall without the previous consent of the State Board establish or operate any industrial plant in an air-pollution control area. The Central Pollution Control Board and the State Pollution Board constituted under the Water Act shall also perform the power and function under Air Act. The main function of the Board under Air Act is o improve the quality of the air and to prevent, control and abate air pollution in the country. The permission granted by the board may be conditional one where the stipulations are made in respect of raising of stack height and to provide various control equipments and monitoring equipments. It is expressly provided that persons carrying on industry shall not allow emission of air pollution in excess of standards laid down by the Board. In Delhi, the public transport system including buses and taxies are operating on a single fuel CNG mode on the direction given by the Supreme Court.21 Initially, there was a lot of

20 21

Substituted for 70%, w.e.f. 26th January, 1992. M.C.Mehta v .Union of India, AIR 1998 SC 2963.

resistance from bus and taxi operators. But now they themselves realise that the use of CNG is not only environment friendly but also economical. Noise has been taken as air pollutant within the meaning of Air Act. Sound becomes noise when it causes annoyance or irritates. There are many sources of noise pollution like factories, vehicles, reckless use of loudspeakers in marriages, religious ceremonies, religious places, etc. Use of crackers on festivals, winning of team in the games, and other such occasions causes not noise pollution also air pollution. The Air Act prevents and controls both these pollutions. The Environment (Protection) Act, 1986 was enacted to provide for the protection and improvement of the quality of the environment and preventing, controlling and abating environmental pollution. The Act came into existence as a direct consequence of the Bhopal Gas Tragedy. The term environment has been defined to include water, air and land, and the inter-relationship which exists among and between water, air and land and human being, other living creatures, plants, micro-organism and property. The definition is wide enough to include within its purview all living creatures including plants and micro-organism and their relationship with water, air and land. The Act has given vast power to the central government to take measures with respect of planning and execution of a nation-wide programme for prevention, control, abatement of environmental pollution. It empowers the Government to lay down standards for the quality of environment, emission or discharge of environmental pollutants; to regulate industrial locations; to prescribe procedure for managing hazardous substances, to establish safeguards for preventing accidents; and to collect and disseminate information regarding environmental pollution. Any contravention of the provisions of the Act, Rules,Orders, or Directions made there under is punishable with imprisonment for a term which may extend to five years or with fine up-to one lakh rupees or with both. The Act is an umbrella legislation designed to provide a frame work for central government coordination of the activities of various central and state authorities establish under previous laws, such as the Water Act and the Air Act.22 The parliament passed the Public Liability Insurance Act, 1991 to provide for public liability insurance for the purpose of providing immediate relief to the persons affected by accident occurring while handling any hazardous substance and for matter connected therewith. The Act provide for mandatory public liability insurance for installation handling and hazardous substance to provide minimum relief to the victim (other than workers) through the mechanism

22

Supra note 2 , p.68.

of collectors decisions. Such insurance will be based on the principle of no fault liability as it is limited to only relief on a limited scale.23 The National Environment Tribunal Act, 1995 was enacted to provide for strict liability for the damages arising out of any accident occurring while handling any hazardous substance. The Act provide for establishment of a National Environment Tribunal for effective and expeditious disposal of cases arising from such accident. It imposes liability on the owner of an enterprise to pay compensation in case of death or injury to any person; or damage to any property or environment resulted from an accident. The accident must have occurred while handling any hazardous substance. A clamant may also make an application before the Tribunal for such relief as is provided in the Public Liability Insurance act, 1991. The National Environment Appellate Authority Act, 1997 has been enacted to provide for the establishment of a National Environment Appellate Authority to hear appeal with respect to restriction of areas in which any industries, operations or processes shall not be carried out or shall be carried out subject to certain safeguard under the Environment (Protection) Act, 1986. After the establishment of the authority, no civil court or other authority shall have jurisdiction to entertain an appeal on matters on which authority is so empowered under the Act. It is evident that this Act has been made with objective to provide speedy justice on environmental issues. The Wild Life (protection) Act, 1972 was enacted with a view to provide for the protection of wild animals, birds and plants. The Act prohibits hunting of animals and birds as specified in the schedules. The Act also prohibits picking, uprooting, damaging, destroying etc. Any specified plant from any forest. The Act provides for State Wildlife Advisory Board to advise the State Government in formulation of the policy for protection and conservation of the wildlife and specified plants; and in selection of areas to be declared as a sanctuaries, national parks, etc. The Act is administered by a Director of Wildlife Preservation with Assistant Director; and a Chief Wildlife Warden with other Warden and their staff.

The forest (Conservation) Act, 1986 was passed with a view to check deforestation of forests. The Act provides that no destruction of forests or use of forest land for non-forest purposes can be permitted without the previous approval of the central government. The conservation of forest includes not only preservations and protection of existing forests but also reforestation. Reforestation should go on to replace the vanishing forests. It is a continuous and integrated

23

See Public Liability Insurance Act, 1991, the schedule.

process.24 The Act is intended to save a laudable purpose and it must be enforced strictly for the benefit of the general public. It is evidently clear that there is no dearth of legislation on environment protection in India. But the enforcement of these legislations has been far from satisfactory. What is needed is the effective and efficient enforcement of the constitutional mandate and the other environmental legislations The Problem with Indian Environment Law and The Pollutor Pays Principle A problem that is very specific to India is that legal redressal through private law may not be an option for most of the poor, illiterate, uneducated and rural masses because often they are unaware of their rights and legal procedures.25 There is also certain disillusionment prevalent because courts in India are unable to provide relief and redressal to citizens due to legal delays, higher litigation costs, complicated legal procedures, and a general apathy towards smaller, less urgent, cases.26 While the Polluter Pays Principle using the absolute liability regime has designed a better incentive and cost internationalisation structure; it is not perfect and has its own set of drawbacks. The first problem faced by all liability regimes is that like the harms of degradation on the environment are externalised, so are the benefits of environmental litigations. Therefore, often the damage borne by individual is very small and the compensation he shall receive from the courts shall also be small, whereas the cost of environmental litigation is usually high. Thus there is the problem of rational disinterest as the expected compensation may not be enough to induce any individual victim to sue the injurer.27 This problem of rational disinterest is further exacerbated in the case of health problems, when the victims are injured. This problem is particularly heightened in India, where the common man already suffers much disillusionment towards the Indian judiciary and the criminal justice system. This problem has been partly mitigated by allowing class-action tort or PIL. It is however seen in practice that most legal systems have very little exposure to such litigation. 28

24 25

Anupama Minerals v. Union of India and Others, AIR 1986 AP. 225. Prasad P.M., Environmental Protection: The Role of Liability System in India, Economic and Political Weekly, 17th January , 2004, on page 257. 26 Ibid. 27 Ott Clause and Schafer Hans-Bernd, Special Problems in Civil Liability, The Economics Analysis of Civil Law, 2004, Edwar Elgar Publishing Ltd, UK; Ott Clause and Schafer Hans-Bernd,Widening the Scope of Environmental liability, Erling Ide and Roger van den Bergh, Eds, Law and Economics of the Environment 1996, (J and F), page 109-114. 28 Schafer Hans-Bernd, The Bundling of Similar Interests in Litigation. The Incentives for Class Action and Legal Actions Taken by Associations, European Journal of Law and Economics, 2000, page 183.

Second, the outcome of civil liability would be inefficient if the tortfeasor has the opportunity of settling with the a few potential litigants in return for continuing his polluting activity. This small portion of the victims could become a credible treat and appropriate due compensation out-of-court from the tortfeasor leaving the majority to their fate. Here only a part of the social cost is internalized by the tortfeasor by means of paying compensation to group A. This leaves the economy still in a sub-optimal equilibrium where the socially damaging activity is oversupplied.29 Thirdly, even in strict liability regimes where one does not need to prove fault; causation must be proved and attributed to the injurer. To begin with, there may be many given sources or causes for a particular pollutant and it may not be possible to impute the source to the injurer. And more often than not, environmental damage is cumulative and it is difficult to attribute the share of damage. The problem is exacerbated further in those cases where there is a latency period between the event of pollution and the time when the harm manifests itself on the victim. It is also difficult or impossible to determine harm in cases where the event increases the probability of a certain disease, but may not be the only manifest cause. 30 A fourth, more crucial problem often faced by courts is that the injury suffered by an individual due to the pollution must be protected by a legal right. In the case of environment, it becomes difficult to delineate clear property right especially when it concerns an injury like deforestation, as opposed to something more explicit such as chemical poisoning. The fifth problem is that in many cases where the damage is large with many victims suing for compensation, the injurer might be judgement proof. This implies that he may be insolvent or may not have the required solvency to pay for the full damage caused by his actions. 31 This problem may be mitigated by using insurance for environmental liability. Regarding the question of liability of the importers to pay the amount to be spent for destroying the goods in question the courts stressed that the liability could not be doubted on applicability of Precautionary Principle and Polluter Pays Principle. Finally, there is the problem of assessment of damages, which is often faced by courts. This partly follows from the inability to delineate property rights and partly from the problem of cumulative pollution over many years by many polluters. In many cases, the effects of certain
29

Raja, A.V and Rathinam, Francis, Economics Efficiency of Public Interest Litigations (PIL): Lessons from India Munich Personal RePEc Archive, MPRA Paper No. 3870, June 2005, Munich Germany, downloaded from MPRA at http://mpra.ub.uni-muenchen.de/3870/ on July 17, 2008. 30 OECD: Recommendation of the Council concerning the Application of the Polluter-Pays-Principle to Accidental Pollution C (89)88. , 1989, Paris, France. 31 Supra Note 68.

environmental harms are still unknown and therefore it becomes more difficult to estimate damages. Conclusion Its good that India that imbibed the Polluter Pays Principle (PPP) in their Law of land. And, it also had actually helped in imposing damages on the polluter but still the problem with this principle is that it hasnt been implemented properly. If we look at the exemplary damages granted to span motels does not serve the purpose of the exemplary damages. Ten lakhs rupees is nothing for the big corporation like span motels. For them atleast Tencrores rupees exemplary damages should be given. And again if we look at the penalty imposed in the Vellore Citizens Case, then it just shocks us that how ten thousand rupees can justify the pollution spreaded by the tanneries in the nearby areas. The author personally feels that this is not an effective way of fund raising. We should reconsider the criteria laid to decide the compensation amount. At least it should deter the polluters from spreading pollution. This principle needs a strict interpretation from our judiciary with immediate effect and we just cant afford any sort of delay in its proper implementation in developing country, like India.

By:- Nilesh Ranjan And Chhavi Bahal, 3rd year, B.A LL.B (Hons.), Faculty of Law, ICFAI University Dehradun