THE POTENTIAL USE OF POLLUTION INSURANCE AS ENVIRONMENTAL POLICY: AN EMPIRICAL ANALYSIS

Market-based environmental policies have been forwarded as alternatives to current pollution control policies. Implementation of the "polluter pays" principle and governmental enforcement of pollution clean-up have led to astronomical environmental liabilities and clean-up costs, which may threaten the survival of many productive ventures, unless producers can spread pollution risk through insurance. An emission constrained target MOTAD LP (TMLP) model showed that pollution insurance for irrigation farmers can be a feasible and efficient solution to agricultural salinization problems in the Loskop Valley, and fairly low salinity standards with pollution insurance will still be reconcilable with profitable farming. Pollution insurance appears to hold promise for applying the "polluter pays" principles also to non-point pollution. Site specific studies are needed for pollution policy, and more research is needed on pollution standards.