The Polluter Pays Principle (PPP) is an environmental policy principle which requires that the costs of pollution be borne by those who cause it. In its original emergence the Polluter Pays Principle aims at determining how the costs of pollution prevention and control must be allocated: the polluter must pay.
Its immediate goal is that of internalizing the environmental externalities of economic activities, so that the prices of goods and services fully reflect the costs of production. Bugge (1996) has identified four versions of the PPP: economically, it promotes efficiency; legally, it promotes justice; it promotes harmonization of international environmental policies; it defines how to allocate costs within a State.
In March of this year over 600 economists signed a statement (PDF) arguing that “the free allocation of carbon credits to emitting industries under a cap-and-trade program would undermine the program’s long-term success.” Europe’s experience offers a similar lesson.
Unfortunately, after using the logic behind the principle to his political advantage during the campaign, President Obama is now wavering on his promise to fight for it to be incorporated into law.
