Polluters Pay Principle(PPP)

 Power Minister Piyush Goyal has reiterated India’s stand for the implementation of ‘Polluter Pays’ principle on international carbon emissions.
About Polluters Pay Principle(PPP)

• The first major reference to the PPP appeared 1972 in the OECD Guiding Principles Concerning International Economic Aspects of Environmental Policies
• The PPP as a guiding principle across countries became necessary because some countries faced complaints by national firms about rising costs and a loss of international competitiveness following a national implementation of the PPP within their borders.
• The ‘polluter pays’ principle basically works on the premise that those responsible for higher pollution—whether it is an individual factory or a country—should bear the costs of managing it to prevent damage to health or the environment.
• For instance, a factory that produces a potentially poisonous substance as a byproduct of its activities is usually held responsible for its safe disposal.

Analysis:

• Greenhouse gas emissions are considered a form of pollution because they cause potential harm and damage through impacts on the climate. However, in this case, because society has been slow to recognise the link between greenhouse gases and climate change, and because the atmosphere is considered by some to be a ‘global commons’ (that everyone shares and has a right to use), emitters are generally not held responsible for controlling this form of pollution.
• However, it is possible to implement the ‘polluter pays’ principle through a so-called carbon price. This imposes a charge on the emission of greenhouse gases equivalent to the corresponding potential cost caused through future climate change. In this way, a financial incentive is created for a factory, for instance, to minimise its costs by reducing emissions.
• India is putting out about 4% of greenhouse gases supporting 17% of the world’s population. But, some of the largest polluters in the world are not taking any responsibility in this regard. Therefore, the world will have to recognise the polluter pays principle.
• But there are some flaws in this system. Firstly, ambiguity still exists in determining 'who is a polluter'. In legal terminology, a 'polluter' is someone who directly or indirectly damages the environment or who creates conditions relating to such damage. Clearly, this definition is so broad as to be unsupportive in many situations.
• Second, a large number of poor households, informal sector firms, and subsistence farmers cannot bear any additional charges for energy or for waste disposal.
• Third, small and medium-size firms from the formal sector, which mainly serve the home market, find it difficult to pass on higher costs to the domestic end-users of their products.
• Fourth, exporters in developing countries usually cannot shift the burden of cost internalisation to foreign customers due to elastic demand.
• Lastly, many environmental problems in developing countries are caused by an overexploitation of common pool resources. Access to these common pool resources (in line with the PPP) could be limited in some cases through assigning private property rights, however, this solution could lead to severe distributional conflicts.

By: Vishal