INDEMNITY FOR COMPANIES ADVERSELY AFFECTED BY ENVIRONMENTAL REGULATION CHANGES

The problem addressed by this paper is the conditions under which the government may wish to indemnify firms for losses suffered when environmental regulations are revised. Larger firms are likely to be in a better competitive position than smaller firms when environmental standards are raised. Financial risks discourage firms from investing in environmental capital unless some of the cost is shared by the public. Not having a compensation program will slow compliance with new regulations and make markets less competitive. The examples o f TRIS and the herbicides 2,4,5-T and Silvex are described.