Law and Economics

This chapter provides an economic perspective on the relationship between private law and climate change. The first aspect dealt with is the particular role of private law and more particularly private enforcement in the mitigation of greenhouse gas emissions. It is argued that given potential lobbying by interest groups, government regulation can sometimes be suboptimal, and thus victims may try to achieve a higher level of greenhouse gas emission mitigation via private enforcement. Next, the chapter looks at the role of private and public law in adaptation by discussing various instruments that could be employed to provide compensation to victims of climate change. Four instruments (liability rules, ex post government compensation, first party insurance, and government intervention as last resort) are compared from the perspective of their ability to provide compensation and prevention as well as their suitability to deal with climate change related damage. The chapter concludes that the best instrument to provide certain and adequate compensation is first party insurance.