Precautionary principle and cost-benefit analysis: an examination of the criteria underpinning its justification  

Silvia Zorzetto (University of Milan)

Abstract

The analysis that is the subject of this paper is part of a broader study of the precautionary principle and risk. As is well known, the precautionary principle (“PP”) is regarded as a risk management principle and is considered here from this point of view. As a risk management principle, PP is much discussed, mainly because of its indeterminacy. Indeed, it is not at all clear what the content of PP is and, above all, what criteria or standards can be used for its concrete implementation (i.e. in the public and private sectors and in the various national and international contexts). This applies to the environment and other sectors, including health. In general, it is considered that the application of the precautionary principle must be justified by a cost-benefit analysis, as no precautionary measure is free and the failure to take precautionary measures entails costs too. In particular, the criteria used to justify PP – it is “efficient” from the point of view of cost-benefit analysis – are diverse and heterogeneous in the scientific literature, in the public debate and also in practise. Some of them are, for example, the de minimis approach, the de manifestis approach, the ALARA criterion (“As Low As Reasonably Achievable”), the ALARR criterion (“As Low As Reasonably Reasonable”), the BAT principle (“Best Available Techniques”, a version of which is supposed to take into account the economically justifiable conditions in the industry concerned, the so-called “affordability”), the BATNEEC principle (“Best Available Techniques Not Entailing Excessive Costs”), the BPEO principle (“Best Practicable Environmental Option”), the “Worst Case Analysis” criterion, the ‘Maxi-Min’ criterion (of which there are again several variants, such as the so-called “Mini-Max Regret Rule” or the “Insufficient Justification” principle), etc. In the present analysis, some of these criteria are considered in their main versions. In fact, each of them has variants. The aim is to show the values and theoretical premises that underlie each of these criteria, as well as the ethico-political choices that inevitably arise, not only in choosing between one criterion and another, but also in applying them. It is not a matter of taking sides with one criterion or the other. On the contrary, it is about arguing that the strength of PP lies in its flexibility and its ability to be an extremely powerful risk management tool precisely because it is variable in its content. However, the point is to use it consciously, and this conscious use depends precisely on the conscious selection of the various criteria that justify its use from the point of view of cost-benefit analysis. Such analysis shall not compare costs with benefits in the dark, i.e. not on the basis of undefined criteria/standards or misleading formulas, but on the basis of a weighted selection, which again cannot be had for free.

©2021 Italian Society of Law and Economics. All rights reserved.