Innovation and the precautionary principle

Abstract

Recent environmental policies favour the polluter pays principle. This principle points out the pollutant financial liability for the eventual incidents induced by his activities. In this context, we analyse the decision of an agent to invest in new industrial activities, the consequences of which on human health and the environment are initially unknown. It is not possible for him to delay investing, but the agent has the opportunity to acquire information and to reduce the cost of an accident. This allows the agent to reduce uncertainty regarding dangers associated with the project and to limit potential damages that it might cause. However, the agent's chosen level of these actions may be considered as insufficient and not acceptable by Society as response in the face of a possible danger. Precautionary state regulation may then be introduced. We get that this regulation may slow down innovation and may favour innovation in countries with less safety requirements. We find that agent may get around the goal of the regulation by ignoring the information on the dangerousness of its project. We then propose some policy tools which stimulate innovation and impose a certain level of risk considered as acceptable for Society to the agent. Finally, we use a numerical analysis based on the Monsanto Company for studying the agent's behaviour with different regulatory frameworks.

The precautionary principle and unintended consequences

“…GMOs are one example, where corporations such as Monsanto exercise power via patents on GMO seeds and its resulting control over many farms. Many proponents often cite the PP as necessary to prevent large corporations from gaining a stranglehold over the marketplace (Orset, 2014). Create incentives to pursue safer technologies : When the PP prevents one technology from being implemented, other safer technologies may develop as substitutes.…”

“…GMOs are one example, where corporations such as Monsanto exercise power via patents on GMO seeds and its resulting control over many farms. Many proponents often cite the PP as necessary to prevent large corporations from gaining a stranglehold over the marketplace (Orset, 2014).…”

“…The principle is literally paralyzing – forbidding inaction, stringent regulation, and everything in between. The reason is that in the relevant cases, every step, including inaction, creates a risk to health, the environment, or both.” For example, in the above discussion regarding commercial drones, if the PP – because of uncertainty – banned all uses of commercial drones, many benefits to agriculture, commerce and health would be forgone. Stifle innovation : While the PP can foster innovation by creating alternatives to high-risk technologies, it also can stifle innovation and can shift innovation to countries with less stringent PP policies (Orset, 2014). Failing to develop a technology eliminates all the benefits that will flow from the technology.…”

“…Stifle innovation : While the PP can foster innovation by creating alternatives to high-risk technologies, it also can stifle innovation and can shift innovation to countries with less stringent PP policies (Orset, 2014). Failing to develop a technology eliminates all the benefits that will flow from the technology.…”