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

See all articles by Don Fullerton

Don Fullerton

University of Illinois at Urbana-Champaign - Department of Finance; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute)

Seng-Su Tsang

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management

Date Written: August 1993

Abstract

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.

Suggested Citation

Fullerton, Don and Tsang, Seng-Su, Environmental Costs Paid by the Polluter or the Beneficiary? The Case of Cercla and Superfund (August 1993). NBER Working Paper No. w4418. Available at SSRN: https://ssrn.com/abstract=480232

Don Fullerton (Contact Author)

University of Illinois at Urbana-Champaign - Department of Finance ( email )

1206 South Sixth Street
Champaign, IL 61820
United States
(217) 244-3621 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Seng-Su Tsang

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management

Pittsburgh, PA 15213-3890
United States

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