This is commonly referred to as a ‘target consistent’ approach. In other words, it can be calibrated to achieve a certain emissions target by a specific date, such as net zero by 2050. Alternatively, the carbon price can be based on desired outcomes. This is called the Social Cost of Carbon (SCC), which many mainstream economists consider to be the best method for pricing carbon. This imposes a charge on the emission of greenhouse gases equivalent to the corresponding potential cost caused through future climate change, forcing emitters to take on, or internalise, the cost of pollution. The polluter pays principle can be applied to greenhouse gas emitters through a so-called ‘ carbon price’.

Applying the principle through a carbon tax or emissions trading system Society bears these costs as greenhouse gases are emitted into the atmosphere, which is described a ‘global commons’ as everyone shares and has the right to ‘use’ it. When the pollution cost from the release of greenhouse gases is not imposed on emitters, these costs are thus ‘externalised’ to society, representing what economists describe as a ‘ market failure’. But because society has been slow to recognise the link between how human activities have increased the rates of greenhouse gases emissions that can cause the climate to change, emitters are generally not held responsible for controlling this form of pollution. Greenhouse gas emissions are considered a form of pollution because they cause potential harm and damage through impacts on the climate, and also contribute to outdoor or ambient air pollution, which the World Health Organisation estimates is associated with 4.2 million deaths annually. Why should the principle be applied to greenhouse gas emissions?

Pollution is defined in UK law as contamination of the land, water or air by harmful or potentially harmful substances. The principle underpins most of the regulation of pollution affecting land, water and air. The polluter pays principle is part of a set of broader principles to guide sustainable development worldwide (formally known as the 1992 Rio Declaration ).

For instance, a factory that produces a potentially poisonous substance as a by-product of its activities is usually held responsible for its safe disposal. The ‘polluter pays’ principle is the commonly accepted practice that those who produce pollution should bear the costs of managing it to prevent damage to human health or the environment.

Economic principle definition