Controlling stochastic pollution events through liability rules: some evidence from OCS leasing

Journal Article · · Rand J. Econ.; (United States)

OSTI ID:7038190

Opaluch, J J; Grigalunas, T A

Under the OCS (Outer Continental Shelfs) Lands Act, firms are strictly liable for damages from oil spills. To the extent that this liability rule causes firms to internalize environmental risks, incentives for damage avoidance behavior are provided. Using data from the 1979 Georges Bank lease sale, the authors use a robust estimation technique to test the hypothesis that potential environmental costs are reflected in bids for OCS leases. The results indicate a substantial response to environmental risks. Recognizing reduced rents, they estimate that total high bids have declined by 20% because of firms' perceptions of environmental risks. The results suggest that liability rules have considerable potential in controlling stochastic pollution events. 44 references, 2 tables.

• Research Organization: Univ. of Rhode Island, Kingston
• OSTI ID: 7038190
• Journal Information: Rand J. Econ.; (United States), Journal Name: Rand J. Econ.; (United States) Vol. 15:1; ISSN RJECE
• Country of Publication: United States
• Language: English

Related Subjects

02 PETROLEUM
020900* -- Petroleum-- Environmental Aspects
29 ENERGY PLANNING, POLICY, AND ECONOMY
290300 -- Energy Planning & Policy-- Environment
Health
& Safety
294002 -- Energy Planning & Policy-- Petroleum
CIVIL LIABILITY
CONTINENTAL MARGIN
CONTINENTAL SHELF
ECONOMIC ANALYSIS
ECONOMICS
ENVIRONMENTAL IMPACTS
LIABILITIES
OIL SPILLS
RISK ASSESSMENT