The Environmental Law and Economics of Hazardous Waste Management Regulations

We provide a more comprehensive theoretical analysis of existing hazardous waste regulations than is currently available. We model a representative waste generator and a representative waste disposer choosing care and output in a market for waste disposal under alternative combinations of ex post strict liability and ex ante care standards. We highlight a tension between motivating efficient care and motivating efficient waste volume that provides a justification for the joint use of fixed-share strict liability (including joint and several liability) and ex ante care standards. However, we find that there exists a strict liability rule that is contingent on firms’ care choices and waste volume that can induce an efficient outcome without the use of care standards. We also model enforcement of care standards and examine how optimal enforcement effort and strict liability interact, and how enforcement costs affect the choices of efficient care standards and liability shares.