Overview
The Polluter Pays Principle (PPP) is a simple idea at the core of EU environmental policy: those responsible for environmental damage should pay to cover the costs. The polluter should pay for the price of measures taken to prevent, control and remedy pollution and the costs imposed on society, such as those associated with impacts on health, loss of ecosystem services, or the economy.
The PPP is a tool to respond to market failure where the price of goods and services incurred by the polluter does not fully reflect these costs. Therefore, market prices are distorted and the polluter is not sufficiently incentivised to prevent pollution.
The PPP corrects the market mechanism by introducing the right price signals, which provides an incentive for pollution reduction and investments towards clean technology, and supports the just transition by shifting the burden of pollution from society onto polluters.
Do we apply the Polluter Pays Principle?
Recognising the partial implementation of the PPP, as identified by the European Court of Auditors 'Special Report 12/2021: The Polluter Pays Principle: Inconsistent application across EU environmental policies and actions', the Commission announced as part of its Zero Pollution Action Plan that it would undertake a fitness check (evaluation) of current implementation.
Information on the fitness check is available here.
The fitness check confirms that, when implemented, the PPP is effective in improving the efficiency of environmental policy. The PPP is highly relevant for achieving the EU's climate and environmental goals.
The current partial implementation leaves scope for further improvements on a case-by-case basis. One approach is to remove environmentally harmful subsidies, which send the wrong incentives to polluters and thus contradict the PPP's implementation.
To strengthen implementation, the PPP must be applied in a way that balances a just transition, economic competitiveness, and administrative efficiency. Furthermore, establishing clear rules at the EU level delivers distinct European added value by harmonising the single market and ensuring consistent application.
More information
You can read more about polluter pays instruments across the EU in the study “Green taxation and other economic instruments – Internalising environmental costs to make the polluter pay” by IEEP et al., along with its annexes.
The fitness check on the polluter pays principle is available here.
