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Sustainability News

ASU Sustainability News School of Sustainability News

February 15, 2012

Kerry SmithWhether it’s building an oil pipeline, drilling for fuel in the ocean or “fracking” to flush natural gas out of the Earth, we’re often asked to believe the process is safe, when companies want to do something that could have big benefits. But that process also could be potentially disastrous for the environment.

Now, an economics professor at ASU’s W. P. Carey School of Business has a way for these companies to show the public that the risks will be managed – by requiring them to post the estimated costs of a spill or major environmental side effect ahead of time through the creation of refundable environmental bonds.

“If the risks are manageable, as proponents suggest, then raising the money for the bonds should not be a challenge,” explains V. Kerry Smith, an environmental economist, who is a member of the National Academy of Sciences. “In each case, the requirement for an environmental bond shifts the responsibility for who assumes the risk of any catastrophic event of large-scale development to those arguing the risks are small. When enough others agree, we should have a robust market for those willing to assume the resulting environmental risks.”

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