Business & Policy Environmental Policy What Is the Polluter Pays Principle? Definition, Examples, and Pros and Cons By Katherine Gallagher Katherine Gallagher Writer Chapman University Katherine Gallagher is a writer and sustainability expert. She holds a B.A. in English Literature from Chapman University and a Sustainable Tourism certificate from the GSTC. Learn about our editorial process Published June 25, 2021 Share Twitter Pinterest Email narvikk / Getty Images Business & Policy Corporate Responsibility Environmental Policy Economics Food Issues The polluter pays principle is an international environmental law practice that assigns reparations to parties responsible for producing pollution. This can come in the form of cleaning up themselves under the guidelines of the EPA or contributing financially to reimburse the local and federal governments for cleanup efforts. For example, when an industrial factory produces a toxic substance as a byproduct of its production activity, the business that owns the factory is held responsible for the safe disposal of that substance. The Polluter Pays Principle and Environmental Law In 1974, the Organization for Economic Cooperation and Development first adopted the “polluter pays'' principle, upholding that those who produce pollution should bear the cost of managing it through reparations or cleanup efforts in order to prevent damage to the environment and to human health. The principle was reaffirmed in the United States Comprehensive Environmental Response, Compensation, and Liability Act (also known as CERCLA or “Superfund”) in 1980; this was largely in response to a number of environmental disasters that received media attention in the late 1970s, specifically toxic waste sites in the Love Canal on the eastern edge of Niagara Falls, New York, and Valley of the Drums near Louisville, Kentucky. The Superfund gives the EPA authority to seek out and identify the parties responsible for environmental pollution, and then force them to either perform cleanups themselves or reimburse the government for EPA-led cleanup work. The EPA is authorized to implement CERCLA in all 50 states and U.S. territories; identification, monitoring, and response actions and programs are coordinated through a state’s individual environmental protection or waste management agency. Pros and Cons The polluter pays principle is an increasingly valuable tool from a legal standpoint, as it both holds firms accountable for their actions and gives them financial incentives to minimize the generation of potentially toxic pollutants, provide treatments for the pollution generated internally as part of their business model, and invest in cleaner technologies. It also takes the burden off local taxpayers and communities affected by that pollution. Forcing polluters to bear the real costs of their own pollution sounds great in theory, but as with most facets of legal action in the United States, there are still some hurdles to jump through. For instance, it isn’t always easy to calculate the precise costs of environmental pollution. There is also the danger of a vicious cycle where the pollutive parties are basically buying the right to pollute. The money that businesses pay to clean up pollution comes out of the money they make in revenue from activities that create the pollution in the first place, meaning that they may be destroying more resources to make up for the financial losses that go toward polluter pay fees. One could argue that if responsible parties don’t want to take the time to invest in cleaner technologies, polluter pays could encourage continuously pollutive practices rather than deter them. Real World Applications The polluter pays principle is commonly accepted and has been applied to numerous cases of environmental law since its inception. Smith Lake and Mariano Lake, New Mexico In 2008, the EPA partnered with the Department of Energy, the Bureau of Indian Affairs, the Indian Health Service and the Nuclear Regulatory Committee in developing a five-year plan to address abandoned uranium mines in the Pacific Southwest. The polluter pays policy came into play in 2015, when the EPA identified the Homestake Mining Company of California for contamination and safety hazards at its four abandoned uranium mines in Mariano Lake and Smith Lake on the Navajo Nation (the largest Indigenous reservation in the United States). In the first cleanup phase, Homestake was required to conduct radiation surveys of the mine sites, mitigate and address surface area (such as open holes) that could endanger people or animals, post bilingual warning signs around mine sites, and set funds aside for future EPA cleanups. A.C. Lawrence, Maine For 20 years between 1955 and 1975, the A.C. Lawrence Leather Company disposed of tannery sludge in several lagoons in South Paris, Maine. When the tannery closed, the sludge lagoons were covered in gravel, only to be discovered years later in 2000 when local residents began complaining about a “green ooze” coming from the river adjacent to the site. EPA investigations found a 6,200 cubic-yard layer of contaminants containing chromium, lead, and volatile organic compounds (VOCs) present in the soil from two and a half feet below ground surface to 14 feet down below ground surface. The cleanup cost approximately $5 million. Since the tannery business had closed years ago, the EPA set out to discover who exactly was to blame for the widespread pollution, and through a series of “complex corporate transactions” named ConAgra Grocery Products Company as the successor to the A.C. Lawrence Leather Company. After a series of negotiations, the EPA settled a lawsuit against ConAgra in 2014, who was forced to pay $5.7 million to reimburse the cost of cleanup at the South Paris, Maine, sludge site. New Bedford Harbor, Massachusetts From the 1940s to the 1970s, Aerovox Corp. owned and operated an electrical capacitor manufacturing facility on the western shore of New Bedford Harbor, Massachusetts. During that time, the company discharged hazardous substances, including polychlorinated biphenyl (characterized by the EPA as a probable carcinogen in humans), into the harbor. In 2012, the EPA reached a settlement agreement with AVX Corp., whose corporate predecessor was Aerovox Corp., in the amount of $366.25 million plus interest to implement cleanup work over the following five to seven years.