manner in which deposits or premiums are set and by the association of refunds with measurable performance. The risks associated with these uncertainties are largely shifted to the producers. Because of limited information, difficulties in the estimation of damages would remain, however; thus, periodic administrative reviews would be necessary to resolve the required level of deposits. Particularly with long-lived products, it could be hard for firms to establish the absence of potential damages. A less ambitious program that links deposits and refunds to the meeting of very specific and measurable criteria would seem more practical than the alternative in which the deposits are intended to fully cover estimated damages.
And, finally, the link between the pool of deposits and the actual liability for damages is also of concern. Costanza and Perrings ( 1990) envision the pool of deposits as a source of funds for the remediation of environmental damages or for compensation to injured parties. A key question, however, is whether the easy availability of a pool of deposits might encourage excessive liability judgments in the repair of environmental damages.
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Questia, a part of Gale, Cengage Learning. www.questia.com
Publication information: Book title: Using Economic Incentives to Regulate Toxic Substances. Contributors: Molly K. Macauley - Author, Michael D. Bowes - Author, Karen L. Palmer - Author. Publisher: Resources for the Future. Place of publication: Washington, DC. Publication year: 1992. Page number: 122.
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