Economic Report of the President 1994 - The American Presidency ...

The Administration's proposal seeks to limit these transactionscosts by streamlining the liability allocation process and making itmore fair. The new allocation process is based upon nonbinding arbitration,in which PRPs are assigned a share of liability based onfactors such as the volume and toxicity of their wastes. PRPs whosettle for their assigned shares would surrender their rights to pursueother PRPs for contribution, be protected from suits by otherPRPs, and be offered, for a fee, protection from future liability arisingfrom remedy failure or undiscovered harms. As an added incentiveto settle, the EPA would pay settling parties for their shareof the "orphan shares"—the share of liability attributed to an identifiedbut insolvent party—but nonsettling parties could still beheld liable for all or part of the "orphan share."The Administration proposal also addresses the growing problemof Superfund-related insurance litigation. The problem arises becauseinsurance contracts written before Superfund was enacteddid not expressly allocate Superfund liabilities. Subsequently,courts in some States have interpreted those contracts to requireinsurance companies to assume most Superfund liabilities, butcourts in some other States have held the opposite. The scope ofinsurers' liability in most States is undecided. Building on a proposaloriginally suggested by the insurance industry, the Administrationproposal calls for creation of an Environmental InsuranceResolution Fund financed through fees and assessments on propertyand casualty insurers. If the PRPs can show sufficient insurancecoverage before 1986, the fund would be used to settle theirinsurance claims for cleanup and restoration costs at pre-1986 NPLsites, as well as some costs at non-NPL sites, at rates determinedsimultaneously for all of a PRP's sites. The combination of the allocationprocess and the insurance settlement process should substantiallyreduce transactions costs and increase fairness.SUSTAINABLE DEVELOPMENT AND GREENACCOUNTINGAccording to the 1987 report of the World Commission on Environmentand Development, sustainable development is that which"meets the needs of the present without compromising the abilityof future generations to meet their own needs." In short, futuregenerations must be able to attain a quality of life, in both economicand environmental terms, equal to ours if they desire. Tomake this possible, the present generation must leave the futurewith the wherewithal—the "social capital," consisting of human,natural, and physical (manmade) capital—to create our kind of lifeor a life of at least equal quality to ours. Although this definitionis widely accepted, its interpretation remains subject to debate.One controversy concerns the extent to which the three types of188