A risky business

May 31, 1996

Joanne Linnerooth-Bayer looks at whether risk can be traded globally

Do individuals, firms or even countries have a social responsibility to accept risks from activities such as waste generation, or can these risks be traded in the local and global marketplace?

This is a central question underlying many risk policy debates.

In a 1992 memorandum, World Bank economist Lawrence Summers argued for a global hazardous waste market where rich countries could pay poor countries to take their waste, a practice now partly limited by the European Union and other bodies. For the economist, if a country knowledgeably consents to accepting risks for adequate compensation (which can be used to reduce more severe risks to the public) and if the country has an adequate infrastructure, then this benefits both. To disallow this transaction is inefficient and paternalistic.

But many view a global waste market as irresponsible and immoral. Opponents argue that shipping waste to poor countries is a further exploitation of the poor. An International Institute of Applied Systems Analysis survey in Austria illustrates the strength of this view. Eighty-four per cent of respondents were opposed to shipping waste to their eastern neighbours, even if the importing country gave its consent and it could be shown that the transaction (with compensation) had the potential for lowering public risks. The reason most often cited was that Austrians have a responsibility to deal with their own waste.

The market allocation of risks is also controversial, which underlies recent strategies to site hazardous waste facilities. Many countries are now moving towards voluntary procedures that give locals the right of consent. Advocates of the market argue that if a site is proved to be technically qualified and if the people have full authority to make the final decision, then a market should evolve where communities bid for compensation.

Not everyone shares this view. Since the poor are willing to accept loss compensation, egalitarian critics claim the burden of living near dangerous waste facilities inevitably and unjustly lands on minority and vulnerable communities. Not surprisingly, almost all attempts to use bidding and other market mechanisms to site hazardous waste facilities have met strong opposition. The IIASA survey showed that only about one-third of the Austrian public support the idea of marketing hazardous facilities, and many view compensation as a bribe.

The challenge is to design procedures that can accommodate all these differences.

Joanne Linnerooth-Bayer is at the International Institute of Applied Systems Analysis, Austria.

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