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In environmental law, the polluter pays principle is enacted to make the party responsible for producing pollution responsible for paying for the damage done to the natural environment. It is regarded as a regional custom because of the strong support it has received in most Organisation for Economic Co-operation and Development (OECD) and European Union countries. It is a fundamental principle in US environmental law.
According to the French historian of the environment Jean-Baptiste Fressoz, financial compensation (not named "polluter pays principle" at that time) is already the regulation principle of pollution favoured by industrials in the nineteenth century. He wrote that: "This principle, which is now offered as a new solution, actually accompanied the process of industrialisation, and was intended by the manufacturers themselves."
The polluter pays principle underpins environmental policy such as an ecotax, which, if enacted by government, deters and essentially reduces greenhouse gas emissions. This principle is based on the fact that as much as pollution is unavoidable, the person or industry that is responsible for the pollution must pay some money for the rehabilitation of the polluted environment.
The state of New South Wales in Australia has included the polluter pay principle with the other principles of ecologically sustainable development in the objectives of the Environment Protection Authority.
The polluter pays principle is set out in the Treaty on the Functioning of the European Union  and Directive 2004/35/EC of the European Parliament and of the Council of 21 April 2004 on environmental liability with regard to the prevention and remedying of environmental damage is based on this principle. The directive entered into force on 30 April 2004; member states were allowed three years to transpose the directive into their domestic law and by July 2010 all member states had completed this.
In France, the Charter for the Environment contains a formulation of the polluter pays principle (article 4):
Everyone shall be required, in the conditions provided for by law, to contribute to the making good of any damage he or she may have caused to the environment.
The polluter pays principle is also known as extended producer responsibility (EPR). This is a concept that was probably first described by Thomas Lindhqvist for the Swedish government in 1990. EPR seeks to shift the responsibility of dealing with waste from governments (and thus, taxpayers and society at large) to the entities producing it. In effect, it internalised the cost of waste disposal into the cost of the product, theoretically meaning that the producers will improve the waste profile of their products, thus decreasing waste and increasing possibilities for reuse and recycling.
The Organisation for Economic Co-operation and Development defines extended producer responsibility as:
a concept where manufacturers and importers of products should bear a significant degree of responsibility for the environmental impacts of their products throughout the product life-cycle, including upstream impacts inherent in the selection of materials for the products, impacts from manufacturers’ production process itself, and downstream impacts from the use and disposal of the products. Producers accept their responsibility when designing their products to minimise life-cycle environmental impacts, and when accepting legal, physical or socio-economic responsibility for environmental impacts that cannot be eliminated by design.
The waste management in Switzerland is based on the polluter pays principle. Bin bags (for municipal solid waste) are taxed with pay-per-bag fees in three quarters of the communes (and the recycling rate doubled in twenty years).
The Environmental Damage (Prevention and Remediation) Regulations 2009 (for England) and the Environmental Damage (Prevention and Remediation) (Wales) Regulations 2009 (for Wales) established the operation of the polluter pays principle.
The principle is employed in all of the major US pollution control laws: Clean Air Act, Clean Water Act, Resource Conservation and Recovery Act (solid waste and hazardous waste management), and Superfund (cleanup of abandoned waste sites).
Some eco-taxes underpinned by the polluter pays principle include:
The US Environmental Protection Agency (EPA) has observed that the polluter pays principle has typically not been fully implemented in US laws and programs. For example, drinking water and sewage treatment services are subsidized and there are limited mechanisms in place to fully assess polluters for treatment costs.
The Zimbabwe Environmental Management Act of 2002  prohibits the discharge of pollutants into the environment. In line with the "Polluter Pays" principle, the Act requires a polluter to meet the cost of decontaminating the polluted environment.