Environmental Compensation, and the Economics of Enforcement

In one line

Environmental compensation is a sum fixed by a formula and imposed by a Board without a court, and it has become the commonest environmental sanction in India without ever having been enacted by Parliament.

Where the power comes from

Not from a section of any Act in terms. No environmental statute uses the words environmental compensation and provides for its levy in general.

From the rules. Rule 18 of the Plastic Waste Management Rules 2016, inserted in 2022: environmental compensation is to be levied on the polluter pays principle on persons not complying with the Rules, as per guidelines notified by the Central Pollution Control Board. Rule 22 of the E-Waste (Management) Rules 2022, which provides for guidelines laid down by the Central Board with the Ministry's approval and levies compensation on a producer for non-fulfilment of targets and for the transaction or use of a false certificate, on unregistered entities and on anyone who aids or abets a violation. Rules 13 and 14 of the Battery Waste Management Rules 2022. And rule 23(2) of the Hazardous and Other Wastes Rules 2016, which makes the occupier and the operator liable to pay financial penalties levied by the State Board with the prior approval of the Central Board.

And from directions. Section 5 of the Environment (Protection) Act 1986 permits the Central Government to issue directions to any person, officer or authority, including for closure, prohibition or regulation of an industry and for stoppage of electricity, water or any other service. Section 33A of the Water Act 1974 and section 31A of the Air Act 1981 give the Boards a like power. A direction to deposit a sum computed on a formula is how the levy was first imposed.

And from the Tribunal. Section 15 of the National Green Tribunal Act 2010 empowers relief, compensation and restitution of the environment, and section 20 obliges the Tribunal to apply the polluter pays principle. Section 24 sends compensation ordered on the ground of damage to the environment into the Environmental Relief Fund.

The intellectual source is the Bichhri litigation.

Facts. In Indian Council for Enviro-Legal Action v. Union of India, AIR 1996 SC 1446, chemical industries at Bichhri in Rajasthan produced highly toxic effluent and sludge which percolated into the earth and destroyed the wells and soil of the surrounding villages. Held. The units were absolutely liable on the rule in the Oleum gas leak case; the polluter pays principle required them to bear the cost of restoring the degraded environment as well as of compensating the victims; and the Central Government was directed to determine the amount required for remedial measures and, if the units did not pay, to recover it from them in accordance with law; recovery as arrears of land revenue was ordered only in the judgment of 2011. Why it matters here. It is the case that made the cost of restoration a legal liability rather than a policy aspiration, and every environmental compensation formula is an attempt to compute what it declared.