Regulatory failure and the polluter pays principle: why regulatory impact assessment dominates the polluter pays principle

This paper shows possible inconsistencies in environmental law, in which regulatory impact assessment (RIA) and the polluter pays principle (PPP) coexist. While these norms can be compatible, we show that there are a number of realistic settings in which the PPP does not reach efficiency and systematically leads to regulatory failure. These systematic errors are due to the ex-ante restriction of possible actors, in combination with possible opportunistic behavior, market power issues, the existence of multiple optima and to the neglect of second-best problems in the PPP. We show that RIA, encompasses the polluter pays option and avoids these flaws.