This book focuses on ecological damage: the damage to private natural resources which have an ecological value in excess of their market value and the damage to public natural resources. Its aim is to design a compensation system, taking into account the interaction between regulation, liability rules and compensation mechanisms (such as liability insurance, direct insurance, risk-sharing agreements, environmental funds, other guarantees and capital markets), to both prevent and compensate for ecological damage. Three new compensation models are proposed in this research, mainly based on the desirability and feasibility of a mandatory financial security system. In addition to briefly exploring the existing experience in the US, the EU and international regimes, this book also provides both theoretical and empirical research on the Chinese compensation system, which the existing literature has largely neglected. This book will be of interest to legal scholars, environmental agencies and insurers, and students.

Table of Contents:
CHAPTER 1: INTRODUCTION 1. Background 2. Research Questions and Problem Definitions 3. Methodology 4. Structure Part I Compensation Models for Ecological Damage: Theoretical Framework CHAPTER 2: THE DEFINITIONS AND CHARACTERISTICS OF ECOLOGICAL DAMAGE 1. Introduction 2. The Choice of a Concept - Environmental Damage, Ecological Damage and Natural Resources Damage 2.1. Relevant Concepts in Legal Documents and Literature 2.1.1. Concepts in Legislation and Treaties 2.1.1.1. Environmental Damage 2.1.1.2. Pollution 2.1.1.3. Damage to the Environment, Impairment of the Environment and other Related Concepts 2.1.1.4. Natural Resources Damage 2.1.2. Concepts in Literature 2.1.2.1. Environmental Damage and Pollution Damage 2.1.2.2. Natural Resources Damage 2.1.2.3. Ecological Damage 2.2. The Choice of the Concept 2.2.1. Environment, Natural Resources and Ecology 2.2.2. The Choice and Definition of Concepts 3. The Characteristics of Ecological Damage 3.1. The Concept of Damage in Tort Law 3.1.1. Damage and Relevant Concepts 3.1.2. Definition of Damage 3.1.3. Pecuniary and Non-Pecuniary Losses 3.2. Ecological Damage: Does it Fit into the Traditional Tort Regimes? 3.2.1. Damage to Owned Natural Resources 3.2.2. Damage to Un-owned Natural Resources 3.2.2.1. Cost of Restoration 3.2.2.2. No Restoration 3.2.3. Other Characteristics of Ecological Damage 4. Definition of Compensation 5. Conclusion CHAPTER 3: LEGAL RULES CONCERNING THE PREVENTION OF ECOLOGICAL DAMAGE: ECONOMIC OBSERVATIONS 1. Introduction 1.1. Regulation and Liability 2. Liability Rules for Ecological Damage 2.1. The Criteria in Designing Optimal Liability Rules 2.2. Standing 2.2.1. Legal Analysis 2.2.1.1. Standing in the U.S 2.2.1.2. Standing in the EU 2.2.2. Tested in Economics 2.2.2.1. Public Authority 2.2.2.2. Environmental NGOs 2.2.2.3. Individuals 2.3. Liable Parties 2.3.1. Economic Analysis 2.3.2. Applied to Ecological Damage 2.3.2.1. Definition of Liable Party 2.3.2.2. Limitation of Victims Claiming against other Parties and Recourses 2.4. Liability Standards 2.4.1. Economic Analysis 2.4.1.1. Primary Costs 2.4.1.2. Tertiary Costs 2.4.2. Liability Standards for Ecological Damage 2.5. Causation and Multiple Tortfeasors 2.5.1. Economic Analysis 2.5.1.1. Uncertain Causation 2.5.1.2. Multiple Tortfeasors 2.5.2. Applied to Ecological Damage 2.5.2.1. Uncertain Causation 2.5.2.2. Multiple Tortfeasors 2.6. Damages 2.6.1. Economic Analysis 2.6.2. Applied to Ecological Damage 3. The Evaluation of Liability Rules 3.1. How Do Liability Rules Contribute to Prevention and Compensation? 3.1.1. Compensation 3.1.2. Prevention 3.2. Remedies - Compensation Mechanisms 3.2.1. Compensation 3.2.2. Prevention 3.2.3. Risk Spreading and Costs 4. Conclusion CHAPTER 4: ANALYSIS OF SPECIFIC COMPENSATION MECHANISMS 1. Introduction 1.1. A Brief Overview of Compensation Mechanisms for Ecological Damage 1.2. Criteria for Compensation Mechanisms: Compensation, Prevention and Costs 2. Liability Insurance 2.1. The Basic Rationale of Liability Insurance 2.1.1. Risk Aversion and the Law of Large Numbers 2.1.2. Insurability 2.1.3. Problems of Insurance 2.1.3.1. Moral Hazard 2.1.3.2. Adverse Selection 2.2. Liability Insurance for Ecological Damage 2.2.1. Insurability of Liability for Ecological Damage 2.2.1.1. Characteristics of Ecological Damage Influencing Insurability 2.2.1.2. Liability Rules Influencing Insurability 2.2.2. Moral Hazard and Adverse Selection 2.3. The Evaluation of Liability Insurance 2.3.1. Primary Costs (Prevention) 2.3.2. Secondary Costs (Compensation) 2.3.3. Tertiary Costs 2.3.4. Interaction between the Different Costs Reduction Goals 2.4. Compulsory Insurance 3. First-party and Direct Insurance 3.1. Introduction: First-party Insurance and Direct Insurance 3.2. The Feasibility of First-party Insurance and Direct Insurance in the Environmental Context 3.2.1. First-party Insurance 3.2.2. Direct Insurance 3.2.2.1. Ecological Damage 3.2.2.2. Traditional Damage 3.3. The Evaluation of First-party Insurance and Direct Insurance 3.3.1. First-party Insurance 3.3.1.1. Primary Costs (Prevention) 3.3.1.2. Secondary Costs (Compensation) 3.3.2. Direct Insurance 3.3.2.1. For Ecological Damage 3.3.2.2. For Traditional Damage 4. Risk-sharing Agreements 4.1. Introduction to Risk-sharing Agreements 4.2. Specific Institutional Arrangements of a Risk-sharing Agreement 4.2.1. Examples of Risk-sharing Agreements 4.2.2. Institutional Arrangements 4.3. Evaluation of Risk-sharing Agreements 4.3.1. Primary Costs 4.3.2. Secondary Costs 4.3.3. Tertiary Costs 5. Environmental Funds 5.1. Introduction: the Various Types of Environmental Funds 5.1.1. Funds with or without Risk-spreading Functions and Ways to Finance the Funds 5.1.2. Funds Established for the Benefits of Victims and Injurers 5.1.3. Relationship to Liability Rules and Insurance 5.2. Evaluation of the Various Funds 5.2.1. Environmental Funds to Cover Liability 5.2.1.1. Environmental Funds as One Type of Financial Guarantees 5.2.1.2. Funds Offering an Upper Layer of Compensation 5.2.2. Complementary Funds 5.2.3. Environmental Funds Irrespective of Liability 5.3. Conclusion 6. Security Mechanisms Provided by the Liable Party or by a Third-party Guarantor 6.1. The Various Security Mechanisms 6.1.1. Self-insurance and Captives 6.1.2. Mortgages and Liens 6.1.3. Deposits, Trust Funds and Escrow Agreements 6.1.4. Corporate Guarantees, Bank Guarantees and Surety Bonds 6.2. Analysis: From the Perspective of Compensation and Prevention 6.2.1. Self-insurance and Captives 6.2.2. Mortgages and Liens 6.2.3. Deposits, Trust Funds and Escrow Agreements 6.2.4. Corporate Guarantees, Bank Guarantees and Surety Bonds 7. The Use of the Capital Market to Provide Coverage 8. Conclusion: Comparison between Individual Instruments and Policy Recommendations 8.1. Liability Insurance 8.2. First-party Insurance and Direct Insurance 8.3. Risk-sharing Agreement 8.4. Environmental Funds 8.5. Guarantees by the Polluters CHAPTER 5: COMPENSATION MODELS FOR ECOLOGICAL DAMAGE 1. Introduction 2. Proposed Models to Prevent and Compensate for Ecological Damage 2.1. Compensation, Liability Rules, and Insolvency 2.1.1. Recalling Characteristics of Ecological Damage 2.1.2. Mandatory Financial Security 2.2. Models of Compensation 2.2.1. Model 1: Mandatory Financial Security 2.2.2. Model II: Voluntary Financial Security 2.2.3. Model III: Optimal Financial Cap 3. Towards a Multilayered Approach to Compensate for Ecological Damage 3.1. Factors Influencing the Choice of Instruments 3.2. When the Liable Party is Identifiable 3.3. When the Liable Party is not Identifiable Part II Empirical Part CHAPTER 6: COMPENSATION SYSTEMS UNDER THE INTERNATIONAL REGIME 1. International Compensation System for Oil Pollution 1.1. Liability Rules under the International Regimes on Compensation for Oil Pollution 1.1.1. Liability Rules under the CLC Regime 1.1.1.1. The Adoption of the 1969 CLC and the 1971 Fund Convention 1.1.1.2. The 1984 and 1992 Protocols 1.1.2. Liability Rules under the Bunker Convention 1.2. Compensation Instruments for Oil Pollution Damage 1.2.1. Protection and Indemnity Policies 1.2.2. Compensation Funds 1.2.2.1. The 1971 Fund 1.2.2.2. The 1992 Fund and the winding up of the 1971 Fund 1.2.2.3. The 2003 Supplementary Fund 1.3. Critical Analysis 2. The International Compensation System for Nuclear Damage 2.1. International Regimes for Compensation of Nuclear Damage 2.1.1. Origins of International Regimes 2.1.2. First Generation of Nuclear Liability Conventions 2.1.2.1. Strict Liability 2.1.2.2. Channeling of Liability 2.1.2.3. Limited Liability 2.1.2.4. Financial Security 2.1.2.5. Exclusive Jurisdiction 2.1.2.6. Public Funding 2.1.3. The Second Generation of Nuclear Liability Conventions 2.1.3.1. General Issues 2.1.3.2. The Coverage of Environmental Damage 2.2. Evaluation from a Law and Economics Perspective 2.2.1. Liability 2.2.2. Financial Security 2.2.2.1. Public Funds 2.2.2.2. Insurance 2.2.2.3. Pooling CHAPTER 7: COMPENSATION SYSTEMS IN THE U.S 1. Compensation System for Nuclear Damage in the U.S 1.1. Liability for Nuclear Damage 1.2. The Requirement of Financial Protection 1.2.1. Financial Requirement for Third-party Liability 1.2.2. Financial Requirement for Property Damage 1.2.3. Compensation under the Convention on Supplementary Compensation 1.2.4. Financial Requirement for Decommissioning Nuclear Facilities and Financing for Nuclear Waste Disposal 1.3. The Instruments to Compensate for Nuclear Damage 1.3.1. Nuclear Liability Insurance 1.3.1.1. Basic Content 1.3.1.2. Risk Differentiation 1.3.2. The Retrospective Premiums Scheme 1.3.3. The Mutual Pool for Property Damage 1.4. Critical Analysis 1.4.1. Combined Use of Regulation, Liability and Compensation Instruments 1.4.2. Is there a Subsidy for the Nuclear Sector? 1.4.3. Compulsory Financial Requirements 1.4.4. Multiple Layers of Compensation Instruments 1.4.5. Use of Insurance and Risk-sharing Pools 1.4.6. Private Interest Approach 2. The Compensation System for Natural Resources Damage in the U.S 2.1. Introduction 2.2. Compensation System for Oil Pollution 2.2.1. Liability for Oil Pollution 2.2.1.1. Liability under the OPA 2.2.1.2. State Statutes 2.2.2. Financial Responsibility and Trust Fund 2.2.2.1. Financial Responsibility: General 2.2.2.2. P&I Clubs and Insurance 2.2.2.3. Trust Fund 2.3. Compensation System for Damage Caused by Hazardous Substances 2.3.1. Liability under the CERCLA 2.3.1.1. Response Action and Natural Resources Damage 2.3.1.2. Responsible Parties and the Scope of Liability 2.3.1.3. Stringent Liability and the Relief of Liability 2.3.2. Financial Responsibility and the Trust Funds under the CERCLA 2.3.2.1. Financial Responsibility: General 2.3.2.2. Insurance 2.3.2.3. Trust Funds 2.4. Empirical Data about Natural Resources Damage in the U.S. 2.5. Economic Analysis 2.5.1. Liability Rules 2.5.1.1. Liability Rules under the OPA 2.5.1.2. Liability Rules under the CERCLA 2.5.2. Financial Responsibility 2.5.2.1. Financial Responsibility under the OPA 2.5.2.2. Financial Responsibility under the CERCLA 2.5.3. Trust Funds 2.5.3.1. Trust Fund under the OPA 2.5.3.2. Trust Fund under the CERCLA CHAPTER 8: COMPENSATION SYSTEMS IN THE EU AND SOME EU MEMBER STATES 1. The Compensation System under the ELD 2. Compensation Mechanisms Used in Member States 2.1. Liability Insurance in Germany 2.2. Direct Insurance in the Netherlands 2.3. Risk-sharing Agreements in Germany 2.3.1. Nuclear Liability 2.3.2. Pooling System 2.4. Environmental Funds in the Netherlands 3. Critical Analysis CHAPTER 9: CONCLUSION OF PART II 1. A Comparison of the Systems 2. The Compensation Models 3. The Choice between Different Compensation Instruments 4. The Divergence of Practice from Theoretical Models and Indicators 4.1. Inefficiency of Liability Rules 4.2. Broad Use of Environmental Funds 4.3. Implementation of Financial Requirement Part III Towards an Efficient Compensation System in China CHAPTER 10: COMPENSATION SYSTEM FOR ECOLOGICAL DAMAGE IN CHINA AND POLICY RECOMMENDATIONS 1. Introduction 1.1. Theory: Environmental Liability in Past and Present 1.1.1. Basis of Liability 1.1.2. Scope of Liability: Is Natural Resources Damage Covered? 1.1.3. Standing 1.1.4. Causation, Multiple Tortfeasors and Burden of Proof 1.1.5. Quantification 1.2. Practice 1.2.1. Who Acts after an Accident? 1.2.2. Barriers to Access to Justice 1.2.3. NGOs 1.2.4. Remedies 1.3. Summary 2. Environmental Insurance 2.1. Theory 2.1.1. Statutory Background 2.1.2. Theoretical Insurance Options 2.2. Practice 2.2.1. Insolvency Risk - Compulsory Insurance? 2.2.2. Environmental Insurance in Practice 2.2.3. Difficulties and Limits 2.3. Summary 3. Compensation for Vessel-induced Marine Oil Pollution 3.1. Theory 3.1.1. Scope of Compensable Damage and Quantification of Damage 3.1.2. Standing 3.1.3. Mandatory Financial Security 3.1.4. Compensation Funds 3.2. Practice 3.2.1. Filing Claims 3.2.2. Compensation via P&I Clubs 3.2.3. Remedies 3.2.4. Cases 3.2.5. Challenges 4. Economic Analysis of the Chinese Compensation System for Natural Resources Damage 4.1. Liability Rules 4.2. Insurance 4.3. Marine Oil Pollution 5. Recommendations to Improve the Compensation System 5.1. Legal Framework 5.2. Practical Issues CHAPTER 11: CONCLUSION AND POLICY RECOMMENDATIONS 1. Summary 2. Proposed Models to Prevent and Compensate for Ecological Damage 3. Indicators to Choose Compensation Instruments and a Multilayered Compensation Approach 4. The Compensation System in China and Policy Recommendations 5. Limits and Future Research SUMMARY: COMPENSATING ECOLOGICAL DAMAGE: COMPARATIVE AND ECONOMIC OBSERVATIONS 391 SAMENVATTING: COMPENSATIE VOOR ECOLOGISCHE SCHADE: RECHTSVERGELIJKENDE EN ECONOMISCHE BESCHOUWINGEN POLICY DOCUMENTS, GUIDELINES, REPORTS LEGISLATION BIBLIOGRAPHY CURRICULUM VITAE