Lender Liability: Apportioning the Cost of Environmental Remediation
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As the full extent of damage resulting from past environmental practices has been
realised, governments around the world have attempted to allocate the cost of clean-up
to those responsible for pollution generating activities. As a result of seeking to make
polluters pay. Lender liability laws have been enacted providing for creditors to pay the
cost of remedial measures for the environmental damage caused by borrowers. In this
paper, the desirability and effectiveness of lender liability laws as a mechanism to fund
the clean-up of past environmental damage and prevent future environmental damage,
are examined within an institutional framework. In the presence of high transaction
costs. Liability laws are unlikely to be effective in achieving the desired outcomes given
the attenuated structure of entitlements they generate.