LIABILITY FOR CLIMATE CHANGE: THE BENEFITS, THE COSTS, AND THE TRANSACTION COSTS

As we learn that the danger of climate change is real and imminent, we need to develop social mechanisms to redistribute the uneven economic damages resulting from it, both nationally and internationally. The polluter-pays principle, which is widely applied in environmental policy, is an immediate way to do this. Liability for climate change has several advantages: it could generate knowledge about the size and probability of economic damages, and it would create institutions to minimize these costs, such as insurance. However, the liability model faces severe obstacles, in both national and international law, as many of the other speakers in this Symposium have pointed out. The duty of care and proof of causation are cornerstones of any system of liability. Both pose serious barriers to claims for compensation in this field. Depending on how these rules are implemented, claims for climate change-related damages could become crushingly expensive and cause high transaction costs, as the following example may show. I calculated the potential liability in a climate damage suit for six randomly selected coal power plants in Pennsylvania. To establish their potential liability in 2012, I added their emissions from 1992— the year when they “knew that their behaviour (or omission to regulate their economies) would contribute to future damage”—to 2006