Environmental law and economics in Europe and in the United States

Table of contet

  ABSTRACT:  3

1  INTRODUCTION  3

2  ENVIRONMENTAL LAW AND ECONOMICS ISSUES  4

3  LEGAL VERSUS ECONOMIC INSTRUMENTS  5

4  ALTERNATIVE METHODS TO THE CONTROL OF ENVIRONMENTAL RISK  7

5  CRIMINAL ENFORCEMENT OF ENVIRONMENTAL LAWS  8

6  Conclusion  10

  REFERENCES  11

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ABSTRACT:

The paper analyses the general structure of the law and economics theory applied to environmental issues. The general idea of the law and economics literature is provided focusing, in particular, on the comparison between legal and economic instruments to control environmental risk. The core of this paper is that the selection of a regulation framework and a legal framework to implement an environmental policy is a demanding task, which calls for structured analysis to model the interactions between governments, firms and regulators.

1 INTRODUCTION

Fundamental objective of this contribution is to talk about the law and economics with respect to environmental regulation. In turn to do that, an overview of the literature within the traditional economic analysis of law method is provided concentrating, in particular, on the comparison between legal and economic instruments to control environmental risk. Environmental law and economics deals with, among other topics, “legal” instruments such as liability rules and the traditional command and control mechanisms like environmental standards and targets and “economic” instruments (such as taxes and marketable pollution rights). Nevertheless, this terminological distinction can be deceptive in view of the fact that the legal instruments are also economic, in the sense that they offer an incentive to obey with certain policy goals. Likewise, the economic instruments are also legal in the sense that a system of taxes or marketable pollution rights needs a legal framework to be effective (Faure, 1998). The thought of applying economic concepts to increase a better understanding of law helps either in explaining how legal rules progress, or what might be the consequences of alternative rules. Largely, one of the most controversial philosophy of law and economics is the so called “efficiency criterion” which stresses that the primary objective of a legal system has to be efficiency and that rules have to be evaluated for their capability of supplying incentives for the maximization of the society’s aggregate benefits; in fact, the “wealth maximization” principle proposed by Posner is a mean of applying the efficiency test (Posner 1972, 1983, Landes and Posner, 1987). Notably there is a big gap in the law and economics movement between United States and Europe, both for methodological aspects and legal frameworks. So the structural differences between common law and civil law, it is not possible to give a general opinion concerning the superiority in efficiency of one system relative to the other. There are no grounds to assume that one system is better or worse suited for economic analysis than the other. Nowadays in the United States, law and economics has led to outstanding and innovative ways for analyzing legal rules in all areas of law, from

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contract law, tort and property law to commercial law, constitutional law, criminal law and environmental law. The most important characteristic is, however, that “the economic analysis of law is an inter-disciplinary subject, bringing together the tools of two great fields of study. Economics allows us to perceive the legal system in a new way, one that is extremely useful to lawyers and to anyone interested in issues of public policy.” (Cooter & Ulen, 1988) The present tendency is to subdivide law and economics in two branches of studies (Posner, 1983). The “old” law and economics is interested in studying the legislation regulating the market (i.e. the behavior of individuals and organizations in the market), and dates back to Adam Smith; the “new” law and economics is interested in studying the legislation regulating nonmarket behavior (e.g. criminal law and family law), whose objective is to apply “economics to core legal doctrines and subjects such as contract, property, tort and criminal law” (Duxbury, 1995). Hence, the motive why economics smoothly stretched out into law and has produced significant results can be recognized, mainly, to the combination of two factors; the first one is that economics and law have a high degree of commonality; the second one is that economics offers a solid analytical framework of human behavior that conventional legal studies do not have. 1 In this paper, I will talk about the both strands of literature, the economic and the legal. In the second part, the main issues arising in environmental law and economics literature are showed. In part 3 and 4, the legal and economic instruments and the different alternatives for controlling environmental risk are analyzed. In part 5 some characteristics of the criminal enforcement of environmental laws are presented.

2 ENVIRONMENTAL LAW AND ECONOMICS ISSUES

It could be difficult to define the boundaries of the environmental law and economics literature, since the legal literature, on the one hand, mainly deals with environmental laws and does not address the issue of controlling environmental risk from an economic perspective (i.e. pollution taxes, tradeable permits); the environmental economics literature, on the other hand, studies the effects of economic instruments to control environmental pollution but the legal instruments (i.e. nuisances, liability law) are not usually considered (Faure, 1998). The law and economics literature has paying attention mainly upon the role of legal institutions and common law rules in achieving efficiency and distributive goals (Landes and Posner, 1987), in particular in the area of environmental policy (Landes and Posner, 1984; Kornhauser and Revesz, 1994). With this approach, liability has been analyzed in terms 1 Hsiung Bingyuang, The Success of Law and Economics: A Methodological Interpretation, Working Paper, National Taiwan University, 2000.

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