The Economics of Liability for Climate Engineering Interventions

Technologies such as Climate Engineering (CE) require complex and therefore costly legal institutions governing its deployment, e.g. regulating compensation for possible damages (liability) that come along with its deployment. The complexities and costs of these institutions may well be prohibitively high and CE may never be deployed for these reasons alone. The economic analysis of liability for CE interventions is concerned with understanding the complexities and costs by determining the efficiency and distribution effects of different regimes of international tort law. Different liability regimes determine different rules regarding the circumstances under which compensation for damages has to flow from the injurer(s) to the victim(s) and regarding the determination of the type and volume of the compensation. The objective of our work is to determine the feasibility and total economic cost of an ex post regime that provides adequate incentives for injurer(s) and, possibly, victim(s) to behave ex ante in such a way as to minimize social costs of CE accident risk. We will carry out our research in three steps:

In order to tackle the issues mentioned above, a suitable economic model of accidental CE harm is needed. The standard basic model of cost minimization from accidental harm (Landes and Posner 1987) appears inadequate for modeling CE harm due to a number of deficiencies such as its incapability to deal with irreducible uncertainties or its inappropriateness for dynamic settings like the evolving climate system (due to the model’s being static). For adapting and applying the model by Landes and Posner to CE we work particularly closely with the philosophers and climate modelers of our project.

The second step consists of a comparative assessment of different liability regimes for CE interventions with regard to different liability standards (e.g. strict liability, negligence rules) and causality requirements (e.g. cause-in-fact, proximate cause). Causality standards are particularly important in the case of CE where reliable predictions on cause and effect are likely to be the exception. Related to the issue of causality are the questions of the liable party and the duration of liability. Close cooperation with legal scholars is indispensable for the success of this second step.

Finally, we embed this comparative assessment in the wider context of climate change policy which serves three purposes. The first is to understand the extent to which climate policy impacts on the performance of liability regimes. Higher atmospheric carbon stocks increase the inherent volatility of the climate system, possibly reducing the ability of liability regimes to allocate risk efficiently. The second purpose of the embedding lies in understanding the way that an international liability regime will interact with international agreements on mitigation efforts. Both mitigation and precautionary effort are costly for individual countries. The extent and direction of a spillover from a narrowly optimal liability regime for CE to international negotiations on mitigation is poorly understood. The third purpose is to examine the performance of liability regimes in the context of alternative policies on climate change. For example, it is unclear how a functioning liability regime would interact with a global carbon tax or a global emissions permit system. A key concern would be the degree of complementarity and substitutability between these closely related instruments.

Editor: Sekretariat
Latest Revision: 2014-03-14
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