Alternative Financial Guarantees for Environmental Liabilities under the ELD

Abstract

This article investigates which financial mechanisms other than liability insurance can be used to guarantee the discharge of the obligations of operators liable under the EC Environmental Liability Directive (ELD). In a first part, we examine the potential and the limitations of liability insurance for satisfying the objectives of the ELD and conclude that, at least in the short term, there is a need for alternative mechanisms. We describe the way alternative financial guarantees are presently used in international and domestic environmental liability legislation (I). Next, we study the financial security provisions of the ELD and their implementation by the member states (II). In a third part, we establish a typology of alternative security mechanisms and illustrate it with examples from domestic and international environmental liability legislation. We evaluate the various systems in the light of criteria which we have established on the basis of the text and policy objectives of the ELD (III).