The Polluter Pays Principle
Chapter Forty-Six
Syllabus topic 2, "Sustainable Development."
Pages 135 to 137 of 663
In one line
The person who causes pollution should bear its cost, and in India that has been read to include the whole cost of restoring the damaged environment, not merely of compensating the victims.
In exam wording: the polluter pays principle, stated in Principle 16 of the Rio Declaration 1992, is that national authorities should endeavour to promote the internalisation of environmental costs 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; in Indian law it has been given the stronger content of absolute liability for the cost both of compensating victims and of restoring the environment.
Why the law has this at all
Because pollution is an externality: a cost imposed on somebody who is not a party to the transaction. If the polluter does not bear it, three things follow. The polluter's product is under-priced, so too much of it is made. The victim bears a loss for which nobody answers. And there is no incentive to abate, because abatement costs money and pollution does not.
The principle originates as an economic policy recommendation of the Organisation for Economic Co-operation and Development in 1972, which is worth knowing: it entered international environmental law from economics, not from tort.
The international formulation, read carefully
Rio Principle 16 is unusually hedged and the hedges are examinable.
- "National authorities should endeavour to promote", not "shall ensure".
- "The internalisation of environmental costs", which is the economic idea, not a liability rule.
- "The approach that the polluter should, in principle, bear the cost". Two qualifications in six words.
- "With due regard to the public interest and without distorting international trade and investment." A further limit.
That is a policy recommendation with four softeners. It is not a rule that anybody can sue on. And that is precisely why the Indian development matters so much.
The Indian form
Facts. Indian Council for Enviro-Legal Action v. Union of India, AIR 1996 SC 1446. Chemical plants at Bichhri village in Udaipur district produced H acid for export, a substance whose manufacture had been banned in western countries. Between two thousand four hundred and two thousand five hundred tonnes of highly toxic iron-based and gypsum-based sludge were dumped in the open and untreated waste water was allowed to run off. The toxic substances percolated into the aquifer, the well water turned dark and dirty, and the soil became unfit for cultivation.
Held. The Court applied the rule of absolute liability laid down in the Oleum Gas Leak case, expressly refusing to apply the rule in Rylands v. Fletcher because it is not suited to Indian conditions. Once an activity carried on is hazardous or inherently dangerous, the person carrying it on is liable to make good all the loss caused to any other person by the activity, and that includes the cost of removing the sludge and restoring the soil and the aquifer. That, the Court held, is what the polluter pays principle means, and it directed the Central Government to determine and recover the cost from the industries.
The Polluter Pays Principle
Why it matters here. It converts an economic policy recommendation into an enforceable liability for the whole cost of restoration, which is a great deal more than the international formulation says.
In Vellore Citizens' Welfare Forum v. Union of India, AIR 1996 SC 2715, the Court restated it: the polluter pays principle as interpreted by this Court means that the absolute liability for harm to the environment extends not only to compensate the victims of pollution but also to the cost of restoring the environmental degradation, and remediation of the damaged environment is part of the process of sustainable development.
The three things "pays" can mean
| Meaning | Who decides the amount | Example |
|---|---|---|
| Bear the cost of prevention | The regulator, by setting a standard | Effluent treatment plant required as a condition of consent |
| Bear a charge on the pollution | The legislature, by a tax or a cess | A charge per tonne of emission |
| Bear the cost of the damage after it occurs | A court | Bichhri; the 2018 valuation of the Costa Rican wetland |
Most students think only of the third. The principle covers all three, and the first is by far the most common in practice.
Worked example
A tannery discharges chromium-bearing effluent for fifteen years and is then closed.
- Compensation to victims. Those with proved loss, damaged land or ruined wells, are compensated.
- Restoration. The chromium in the soil and the aquifer must be removed. That cost is far greater than the compensation, and under Bichhri the tannery bears it.
- Who does the work. The Government determines and recovers the cost; the polluter is not left to remediate at its own pace.
- If it is insolvent. The principle produces nothing, and the loss falls on the public. This is the standing weakness, and it is why financial assurance requirements, bonds and insurance, matter.
What it does NOT mean
It does not mean a right to pollute on payment. Paying does not licence the discharge. It is a liability, not a fee.
It does not mean the State pays. The point of the principle is precisely that the State does not.
It is not a rule of international law binding on States. Rio Principle 16 is a recommendation, hedged four ways. Its binding force in India comes from the Supreme Court's reception of it as an essential feature of sustainable development in Vellore, and from section 20 of the National Green Tribunal Act 2010, which requires the Tribunal to apply it.
The Polluter Pays Principle
Distinctions
| Polluter pays, international | Polluter pays, Indian | |
|---|---|---|
| Source | Rio Principle 16 | Bichhri, Vellore, section 20 of the 2010 Act |
| Nature | Economic policy recommendation | Enforceable liability |
| Content | Internalise costs | Compensate victims and restore the environment |
| Fault | Not addressed | Irrelevant: liability is absolute |
| Enforced by | Nobody directly | The Supreme Court, the High Courts and the National Green Tribunal |
Quick revision
- Rio Principle 16, with its four softeners; originally an OECD policy recommendation of 1972.
- Indian Council for Enviro-Legal Action v. Union of India, AIR 1996 SC 1446: absolute liability includes the cost of restoration.
- Vellore: compensation of victims plus the cost of restoring the degradation.
- Three meanings of "pays": prevention cost, a charge, and damage after the event.
- The principle fails against an insolvent polluter, which is why financial assurance matters.
- Section 20 of the National Green Tribunal Act 2010 makes it statutory in India.
Test yourself
1. Give the four qualifications inside Rio Principle 16. "Should endeavour to promote" rather than shall ensure; "internalisation of costs" rather than liability; "should, in principle, bear"; and "with due regard to the public interest and without distorting international trade and investment".
2. What did Bichhri add to the principle? That absolute liability extends to the cost of removing the pollutant and restoring the soil and the aquifer, and that the Government may determine and recover that cost from the polluter.
3. Why is the principle weakest exactly where it is needed most? Because it produces nothing against an insolvent or absent polluter, which is the common case in the worst incidents.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.