Environmental impairment liability as an instrument of environmental policy

This paper evaluates the role of liability that may arise in the context of an impairment of the environment. Environmental Impairment Liability (or EIL for short) is analyzed as an instrument of environmental policy. Interrelationships between injurers, victims, the legal system, insurers, and the environment serve to show that EIL may contribute to preserve the environment. However, peculiarities such as mass torts and uncertain behavior of courts serve to detract from the effectiveness of EIL. The question arises of whether these shortcomings are 1 mitigated or exacerbated by EIL insurance. The potential contribution of insurance to EIL is found to be undermined by partial market failure, which, however, can be alleviated by permitting the flotation of environmental risk warrants on capital markets.