Financial Responsibility for Environmental Obligations: Are Bonding and Assurance Rules Fulfilling Their Promise?

James W. Boyd ()

Discussion Papers from Resources For the Future

Abstract: Financal assurance rules, also known as financial responsibility or bonding requirements, foster cost internalization by requiring potential polluters to demonstrate the financial resources necessary to compensate for environmental damage that may arise in the future. Accordingly, assurance is an important complement to liability rules, restoration obligations, and other regulatory compliance requirements. The paper reviews the need for assurance, given the prevalence of abandoned environmental obligations, and assesses the implementation of assurance rules in the United States. From the standpoint of both legal effectiveness and economic efficiency, assurance rules can be improved. On the whole, however, cost recovery, deterrence, and enforcement are significantly improved by the presence of existing assurance regulations.

Keywords: financial assurance; financial responsibility; bonding; environmental insurance (search for similar items in EconPapers)
JEL-codes: K13 K32 Q38 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-env and nep-ias
Date: 2001-08-01
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