Why nations join the International Oil Pollution Compensation Funds: Risk, transaction costs and democracy

30 Pages Posted: 17 Jan 2022

See all articles by David Soto-Oñate

David Soto-Oñate

University of Vigo; Indiana University

Gustavo Torrens

Indiana university

Date Written: January 15, 2022

Abstract

Although the frequency of incidents has been decreasing over time, oil spills with major ecological and socioeconomic impacts still occur, leading to situations in which the cost of the damage was substantially higher than the limitation of liability imposed by the conventions of the so-called International Regime. This paper analyzes why nations would sign a convention that entitles the polluter to limit its liability. Among the reasons for the existence of the limitation of liability, the relevant literature remarks the social importance of the industry and understand limitation of liability as a way to protect or subsidize the oil and the shipping industry. However, we suggest that other factors would be involved in the decision to join or not the international conventions. We theorize and empirically test the role of risk, transaction costs and democracy in the willingness of nations to sign these conventions.

Keywords: Liability and compensation, social cost, oil pollution, environmental externalities

JEL Classification: Q5, D23, F55

Suggested Citation

Soto-Oñate, David and Torrens, Gustavo, Why nations join the International Oil Pollution Compensation Funds: Risk, transaction costs and democracy (January 15, 2022). Available at SSRN: https://ssrn.com/abstract=4009805 or http://dx.doi.org/10.2139/ssrn.4009805

David Soto-Oñate (Contact Author)

University of Vigo ( email )

Campus Lagoas-Marcosende
Vigo, Pontevedra 36310
Spain

HOME PAGE: http://davidsoto.webs.uvigo.es/Home.php

Indiana University ( email )

513 N. Park Avenue
Bloomington, IN 47408–3895
United States

Gustavo Torrens

Indiana university ( email )

Wylie Hall, 100 S Woodland Ave
Bloomington, IN 47405-7104
United States
8128568131 (Phone)
47405-7104 (Fax)

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