Is Restoration the Economically Efficient Remedy for Environmental Harm?

Francesca Leucci (Bologna University)

Abstract

The aim of this paper is to challenge the current view of restoration as an adequate remedy for environmental liability. Although the primary goal of restoration from an economic perspective should be to prevent accidents and, thus, minimize social costs, existing inaccuracies, information gaps and private interests of parties in environmental litigation may hinder its potential of inducing ex-ante optimal deterrence. On the other hand, even if restoration is conducted under perfectly efficient and sustainable conditions, a full internalization of the whole cost to the environment is highly unlikely to occur. For example, liable parties should be obliged to pay interim losses until recovery in order to achieve deterrence. However, a lack of clear guidelines to judges is likely to raise uncertainty and the inability of polluters to take ex-ante optimal care. Seemingly, current remedies for environmental harm would not be able to achieve either deterrence or victim compensation. Alternative remedies based on a smart mix of monetary and non-monetary sanctions would be therefore needed to enhance the efficiency of liability laws.

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