Pigovian Taxation at the Supranational Level: Fiscal Provisions of the International Oil Pollution Compensation Fund

Abstract

The International Oil Pollution Compensation Fund, viewed from the perspective of the public finance economist, encompasses a unique and little known effort to impose the generic features of a Pigovian environmental tax at the international level. The tax is part of an eclectic insurance and fiscal scheme for internalizing the negative externalities of oil pollution in international waters. Its link to the insurance component of the policy format tends to obscure its tax characteristics and to make it politically more acceptable as well. The IOPC Fund regime was established under the umbrella of two international treaties signed in 1969 and 1971 in the wake of the disastrous Torrey Canyon oil spill in British waters several years earlier. The tax may serve as a prototype for the use of economic incentive instruments in other international environmental problem areas.