Environmental Costs Paid by the Polluter or the Beneficiary? The Case of Cercla and Superfund
42 Pages Posted: 6 Jan 2007 Last revised: 24 Apr 2014
Date Written: August 1993
The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) of 1980 follows the "polluter pays" principle by placing retroactive liability on responsible firms. Yet this cost is borne by current shareholders who did not benefit from past low-cost waste management. This paper introduces a "beneficiary pays" principle that burdens consumers who benefited from lower prices. An input-output model is developed to calculate the effects of alternative tax rules on output prices. We find: (1) that the increase in commodity prices contributed by current Superfund taxes is only a small fraction of the price increase that would have fully covered the cost of controlling hazardous waste; and (2) current Superfund taxes do not raise the prices of goods associated with the most pollution.
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