Part II Analytical Approaches, Ch.10 Economics

This chapter explains that the starting point for the economic approach to both domestic as well as international environmental law is that environmental problems (including but not limited to environmental pollution) constitute a market failure. From this economic perspective transboundary environmental pollution emerges. Moreover, global environmental quality is, from an economic perspective, a so-called public good of which all states will benefit. But since no state can exclude others from benefitting from this global environmental good, there is a danger of ‘free-riding’ as a result of which this global public good (environmental quality) may be insufficiently produced. These starting points provide a basis for the emergence of international environmental law, more particularly treaty law. However, a classic paradigm in what has become known as the law and economics literature is the Coase Theorem. The chapter then addresses the likelihood of Coasean solutions to emerge as a remedy to transboundary environmental pollution. It also looks at reasons for states to conclude treaties.