Organisation for Economic Cooperation and Development
The 1972 OECD Council recommendation on guiding principles for economic aspects of environmental policies stated:
The principle to be used for allocating costs of pollution prevention and control measures to encourage rational use of scarce environmental recourses and to avoid distortions in international trade and investment is the so-called 'Polluter-Pays Principle'.
This principle means that the polluter should bear the expenses of carrying out the above-mentioned measures decided by public authorities to ensure that the environment is in an acceptable state. In other words, the cost of these measures should be reflected in the cost of goods and services which cause pollution in production and/or consumption. Such measures should not be accompanied by subsidies that would create significant distortions in international trade and investment. (quoted in JWPTE 2002: 9)The PPP was never supposed to be a way for polluters to pay to be allowed to pollute; the OECD intended it as a way to get the polluter to both 'limit their pollution and bear the cost of measures taken to that end' (JWPTE 2002: 12).
OECD guidelines allowed exceptions to the PPP in the form of government subsidies for the research and development of new pollution control technologies and for pollution control infrastructure for regions or industries experiencing severe difficulties. The OECD Recommendation on the Polluter-Pays Principle (OECD 1974) also allowed that:
In exceptional circumstances, such as the rapid implementation of a compelling and especially stringent pollution control regime, socioeconomic problems may develop of such significance as to justify consideration of the granting of government assistance, if the environmental policy objectives of a Member country are to be realised within a prescribed and specific time.
In each case the subsidies had to be selectively applied, temporary, and 'not create significant distortions in international trade and development'.
The OECD noted that financial incentives (payments made to induce polluters to reduce their emissions) were not compatible with the PPP (JWPTE 2002: 17).Towards the end of the 1980s the PPP was extended to include accidental pollution, not just routine pollution. In 1989 the OECD (1989b) published a Recommendation on the Application of the Polluter-Pays Principle to Accidental Pollution. The recommendation covers both the cost of specific measures associated with particular hazardous installations and general costs associated with accidental pollution which would be covered by fees and taxes on hazardous installations, including 'reasonable measures' taken by government authorities to prevent, prepare for and deal with accidents. These measures include:
• improving the safety of hazardous installations and accident preparedness;
• developing emergency plans;
• protecting human health and the environment following an accident;
• cleaning up and minimising ecological damage following an accident.