EU to Polluters: Clean Up or Pay Up

New EU rules on responsibility for cleaning up the environment came a step closer when Parliament and the Council reached agreement in conciliation last week on the environmental liability directive. EU governments will in future have to ensure either that environmental damage is prevented or that the mess is soon cleaned up again. And in a clear shift towards the "polluter pays" principle, the cost of cleaning up will be borne by the company or other operator that caused the damage. If this is not possible, the relevant authorities may, as a last resort, take the necessary measures themselves to repair the damage.

Rules on environmental liability will be standardized throughout the EU, so companies or other operators will face similar laws in every EU country on their responsibility to prevent environmental damage or to pay for it to be cleaned up. This will prevent firms with environmentally risky activities from "shopping around" or seeking out the weakest environmental legislation in the various EU Member States. This legislation is a response to a series of disasters in recent decades, including the Seveso chemicals factory accident in 1976, the fire at the Sandoz plant in Basle in 1986 and oil spills such as the Amoco Cadiz, the Erika and the Prestige.

One key question is how polluters will pay for damage. Companies could cover themselves against any such costs by taking out insurance or using other forms of financial guarantee. Following pressure from Parliament, when the Commission reviews the legislation in six years' time it will check whether such insurance and guarantees have actually become available at a reasonable cost throughout Europe.

If not, the Commission will, if appropriate, propose legislation setting up a standardized compulsory financial guarantee scheme. Oil pollution is a special problem. An international compensation fund set up in 2003 to pay for oil damage is financed by oil customers rather than shipowners. MEPs are concerned this will reduce shipowners' incentive to act responsibly and they successfully pushed for the Commission to look at ways of shifting more responsibility towards shipowners when it conducts another review after 10 years.

Parliament would have preferred not to allow operators to invoke two international conventions that limit liability for navigation accidents but MEPs did not insist on this point. However, it was agreed that the Commission will review this matter too. Last week's conciliation agreement, concluded via an exchange of letters, still has to be formally approved by Parliament and Council, and this is due to happen in March. The directive will enter into force this year and the national implementing legislation must be in place three years later.