Making the Polluter Pay; J. Adler

Rarely are particular polluters forced to pay for actual damage caused. For example, when Congress enacted Superfund, the fed eral program to clean up hazardous waste, "polluter pays" was used to justify generic taxes on producers of materials (chemicals and oil) that ended up in waste dumps. Even if companies had acted responsibly-even if none of their materials or products ended up .at waste sites-and they had caused no damage, they had to pay the tax if they happened to produce certain materials. Su perfund is a policy under which polluters and nonpolluters alike are forced to pay exorbitant sums. The polluter pays principle is valid, but it needs to be better understood and, ulti mately, to be reinstated under institutional Mr. Adler is Associate Director ofEnvironmental Studies at the Competitive Enterprise Institute in Washington, D.C. arrangements that make it effective and fair.

To begin with, one must recognize that emissions per se are not pollution. Pollution is the imposition of a harmful waste product or emission onto the person or property of another without that person's consent; it is a "trespass" under the principles of com mon law. If the trespass is so minor that it creates no impact or inconvenience for the property owner, it will normally be toler ated. Otherwise, it will likely result in legal action of some kind. The generation of a waste, in and of itself, does not necessarily harm other people or their property. Not every emission, waste, discharge, or industrial byproduct is pollu tion. Thus there is no reason for government policy to discourage waste per se. Yet environmental regulators are eager to adopt "pollution prevention," "waste reduc tion," and "toxics-use reduction" schemes. Such programs completely miss the point. They tend to move away from any true concern for limiting pollution, and from holding polluters accountable for the dam ages that they cause.

Current environmental policy rarely fo cuses on harm. Indeed, sometimes it doesn't even focus on pollution at all! Much of the time the emphasis is on compliance with byzantine rules and requirements. Fines are levied not when the property of another is contaminated, but when a permit is improp erly filed, or a waste-transport manifest is not completed in line with the demands of regulatory officials. The Environmental Protection Agency itself has observed that under current law "a regulated hazardous 167 168 THE FREEMAN • MARCH 1995 waste handler must do hundreds of things correctly to fully comply with the regula tions, yet doing only one thing wrong makes the handler a violator."2 Environmental rules are now so complex that only 30 percent of corporate counsels believe that full compliance with environmental laws is actually possible, according to a survey conducted by the National Law Journal. 3 The Exxon Valdez Case Even when harm occurs as a result of pollution, the "polluter pays" principle is routinely violated. Consider the case of the Exxon Valdez. In 1989, an oil tanker ran aground because its captain was drunk, and over 300,000 barrels of crude poured into the water of Prince William Sound, causing significant, though not permanent, environ mental disruption. Few people are aware that the crime for which Exxon was pun ished was killing migratory birds without a permit. Extensive shorelines were covered in oil, and the government prosecuted Exxon for not having permission to go hunting!

Exxon was subject to civil suits from those, such as local fishermen, who claimed damage from the spill. However, much of the money that Exxon was forced to pay did not go to alleged victims of the spill. Exxon paid $125 million in fines to the federal government and the state of Alaska. In addition, Exxon was forced to pay $900 million into a fund to be doled out by government officials for environmental projects, habitat protection, and scientific research, among other things.4 In May 1994, $38.7 million of this money was used to create a new state park. s Exxon was under tremendous political pressure to restore the "public" shoreline so it engaged in a costly, and extensive, cleanup operation. Much of the cleanup was unnecessary-nature has its own methods of cleaning up spills of natural substances like oil-and in some cases the extensive beach cleaning actually caused harm. So, not only was Exxon prosecuted on generic offenses against "public" goods rather than for specific harms to specific parties, but the politicization of the spill resulted in a thoughtless policy response. Had a similar spill occurred in a more private setting-if, for example, a tanker truck had overturned, spillingonto private properties-the owners of the affected properties would have had clear, direct recourse. Additionally, they would have had a tangible incentive to ensure that any cleanup or remediation was a proper way to address the problem at hand.

There was no means for affected citizens to hold Exxon directly responsible for much of the actual damage caused to the Alaskan shoreline. The Alaskan coast had no private owners, stewards, or protectors who could seek redress or ensure that cleanup dollars were well spent, as they could if that oil had spilled into someone's backyard. The only direct payments made by Exxon to those actually harmed were to .fishermen and Alaska natives who claimed damages from a temporary decline in the salmon and seal harvest. 6 If we truly want polluters to pay, there need to be private property owners that can defend .threatened or harmed resources. Ownership of ecological resources can serve as a deterrent against. causing harm against others, in the same manner that private property provides such incentives in other areas. Private ownership also pro vides tangible incentives for better steward ship.7 Polluters such as Exxon should be held responsible, not for violating a bureaucratic proscription about the hunting of birds or for having harmed some' 'public" resource, but because they harmed someone else's person or property, and they have no right to do that. Moreover, any restitution should be paid to those harmed, not simply to a government agency that proclaims it will spend the money in the public interest.

Making Polluters Pay A fishing club in England, the Pride of Derby Angling Club, demonstrates how property rights can prevent stream polluThe Foundation for Economic Education Irvington-on-Hudson, New York 10533 Tel. (914) 591-7230 Fax (914) 591-8910 March 1995 MINIMUM WAGES F ew economic laws, if any, are more malicious and malignant than mini mum wage laws. They prohibit workers from accepting employment unless they are paid at least the mini mum. They order employers to use only workers who qualify for the minimum and reject all others. The laws erect a hurdle over which all American workers are forced to jump. The employment hurdle actually is higher than the stated minimum, be it $4.25 or $5.15 an hour. It is higher by the costs of mandated fringe benefits which employers are forced to pay. There are Social Security contributions, unemploy ment and workmen's compensation, and paid holidays. The $4.25 minimum wage is at least a $6 an hour minimum cost. In some industries with high work men's compensation levies, such as heavy industries and construction, the minimum cost may be $7 per hour or more. If local governments levy payroll taxes, they raise the hurdle by the same amount. Similarly, the costs of health insurance which many employers carry raise the height of the hurdle.