Administrative monetary penalties and Environmental Liability in EECCA
September 6, 2011

Background:

The EAP Task Force has done extensive work on helping environmental regulatory agencies in EECCA countries to modernise their systems of economic instruments for environmental protection, particularly pollution and product charges. Recognising the need to further strengthen financial incentives for good environmental behaviour, EECCA countries have requested assistance in reforming two crucial instruments of deterrence against environmental non-compliance and risks: administrative (non-criminal) monetary penalties and liability for environmental damage.

Liability for environmental damage is an important aspect of the Polluter Pays Principle, as it makes the polluter bear financial responsibility for its environmental impact, the threat of potential damage compensation becomes a powerful incentive to prevent regular and accidental pollution releases. The concept of environmental liability in EECCA countries usually applies to damage to water resources, land, and habitats and species and does not cover “traditional damage” (economic loss, personal injury and property damage). While environmental liability issues are gaining visibility in the European Union in the context of implementation of the EU Environmental Liability Directive (2004/35/EC), this system remains underdeveloped in EECCA, where it is still based on the Soviet concept of “compensation for damages” and is seldom put into practice. The existing state-approved methodologies for environmental damage assessment are speculative, inaccurate, and often too complex to present to courts that are supposed to adjudicate on these issues. This project will use the EU and other OECD countries’ approaches as benchmarks to help EECCA countries modernise their legislation and methodologies on environmental damage assessment, remediation and/or compensation.

Taking into account the high rating and topicality of the given thematic area EECCA RECs have developed the project proposal in order to address the issue of current environmental damage in the EECCA region. As the given topic is included in the Work Programme of the EAP Task Force for 2009-2010 only the EECCA RECs decided to start this work immediately in order to ensure meeting the demands of the EECCA participants of the EfE process and to lay the ground for future work of the EAP Task Force in the given area.

At the last meeting of the Regulatory Environmental Programme Implementation Network of EECCA (REPIN) held on 11-12 June 2009 in Chisinau, Moldova, REPIN members considered and discussed the given project proposal and broadly endorsed its implementation. They provided useful guidance for EECCA RECs on implementing this project.

Aim:

This project is conceived as a combination of two studies: (1) development of guidance on the assessment and application of administrative monetary penalties based on the analysis of international practices (performed by OECD EAP Task Force Secretariat); and the assistance in reforming the systems of liability for environmental damage in EECCA (performed by EECCA RECs jointly with OECD Secretariat).

Among the main objectives of the given project are: - a regional review of current liability practices to analyze the legal framework on environmental liability and mechanisms of its application in EECCA countries. As part of this work, examples of litigation cases related to environmental liability regimes will be collected and analyzed. The guidance on reforming the systems of liability for environmental damage in EECCA will be developed, as well as two case studies with EECCA country-specific legal analysis and recommendations performed.

The reform of the environmental liability system in EECCA would encourage industries to take preventive measures against environmental accidents, increase remediation of environmental damage by responsible parties, contribute to the establishment of a level playing field by internalizing environmental costs by polluters, and engage new actors such as banks and insurance companies in promoting sound environmental management.

The main objectives of the project include:

- to assist EECCA countries to streamline the design and implementation of current environmental liability;

- to analyze the degree of the development of a system of assessing environmental damage as an instrument of environmental policy in EECCA;

- to develop recommendations on improving the system of assessing environmental damage.

The main objective of the project consists of a number of specific tasks:

  1. To perform comparative analysis of the systems of national legislation related to assessment of environmental damage.
  2. To develop a short description of terminology/glossary of terms in the field of the assessment of environmental damage (for ensuring compatibility and comparability).
  3. To analyze existing methodologies of assessing environmental damage and to select them.
  4. To identify the scope of application of methodologies of assessing environmental damage.
  5. To perform comparative analysis of procedures and roles of different actors of the process.
  6. To perform assessment of applicability of economic instruments in comparison with other tools (practices of application, frequency of application, the scope, etc.).
  7. To implement comparative assessment of taxes and tariffs for environmental damage and their effectiveness (for actual restoration of the environment; target use of funds, etc.).
  8. To select a model case in the EECCA region for assessing environmental damage according to the best internationally recognized methodologies.   

Expected results:

  1. Facilitation of the reform of the liability system in EECCA countries in line with the existing best international practices;
  2. Transparency and better communication between the state and business on liability issues and strengthening of trust on both sides;
  3. Valid ground for application in legal cases;

Outputs:

The following outputs are envisaged:

  1. Reformed systems of liability for current environmental damage.
  2. A Regional review of current practices for current environmental damage assessment applied in the EECCA countries, with OECD Secretariat providing support to this work.
  3. A Report on international best practices in consultation and with participation of the OECD/EAP Task Force Secretariat;
  4. 1-2 case studies with EECCA country-specific legal analysis and recommendations;
  5. Comparative analysis of current environmental damage assessment on a model object in the EECCA region based on EECCA and EU existing approaches.
  6. Practical Guidelines for assessing current environmental liability to be adopted by a number of EECCA countries.