Global climate policy and the polluter pays principle: A different perspective

Abstract

Since developed countries have contributed most of the greenhouse gas emissions currently responsible for climate change, should they pay all or most of the costs for needed climate change policies? The original polluter pays principle contends that firms and in turn countries should be charged for the full costs to society of their current pollution. This policy promotes both efficiency and common perceptions of equity. The historic polluter pays principle—a modification of the original polluter pays principle used to argue that developed countries should pay most of the costs for climate policies—contends that the costs of remediating past pollution should be allocated according to their past pollution. For various reasons, however, the historic polluter pays principle does not promote efficiency nor even equity. So those who advocate that the developed countries shoulder the lion’s share of climate policy costs need to use other arguments. Moreover, regardless of how the costs are allocated, the original producer pays principle should be implemented so that current producers pay the full costs to society of their greenhouse gas emissions wherever they are located. These findings are of interest to the mineral and energy sectors since global climate policies will substantially affect these sectors. Moreover, one can extend the findings to remediation policies for all past pollution, including for example the cleaning up of old historic mining sites.