Navigation path

High level navigation

Page navigation

Additional tools

  • Print version
  • Decrease text
  • Increase text

Environmental Liability

A General Analysis of the Financial Assurance Issues of Environmental Liability

The financial assurance of environmental liability, in particular of liability for damage to natural resources or bio-diversity, is critical to the environmental effectiveness of this policy instrument and has important economic implications. The European Commission has therefore committed to explore the challenges associated with, and the feasibility of, financial assurance for liabilities arising under the future EC environmental liability law. This study does it by a) assessing the regime outlined in the White Paper (WP) with the tools of the economic model of liability and b) discussing the conditions likely to facilitate financial assurance in general, and insurability in particular. The study reviews briefly the Dutch and Flemish environmental liability regimes as well.

The study concludes that the regime outlined in the WP follows to a large extent the efficiency conditions required by the economic model of liability. The empirical conclusions on insurability focus on the clean-up or restoration costs of contaminated sites since this is the area where most experience exists in Member States. This experience suggests that non-retrospective liability for the clean-up of contaminated sites, as the one proposed in the White Paper, is financially assurable. Damage to bio-diversity will have to be predictable to be insurable.

It is argued that, in general, financial assurance will be facilitated by avoiding a shift of the risk of causal uncertainty to the potential injurer and joint and several and retrospective liability rules and by allowing a claims made coverage of the environmental risk. Caps are not viewed are necessary to increase insurability. The effect of possible insolvency of the injurer is also discussed. Where such a risk is significant, liability rules may not be effective unless they are combined with mandatory financial security. However, insurance is only one of the possible mechanisms to provide financial assurance and potentially responsible parties should be allowed to chose between acceptable equivalent mechanisms.

The following documents are available:

| Top