Yet there is much confusion about the term. The following pages present a brief definition of the term and describe the major types of environmental liabilities in order to establish a framework for reviewing approaches and tools identified for expressing these liabilities in monetary terms. The term liability has important accounting and legal dimensions. Accounting institutions define liability as a A probable future sacrifice of economic benefits arising from present obligations to transfer assets or provide services in the future as a result of past transactions or events. More simply, a liability is a present obligation to make an expenditure or to provide a product or service in the future.
Liability has an important legal dimension as well.
A liability is a legally enforceable obligation, whether it is voluntarily entered into as a contractual obligation, or is imposed unilaterally, such as the liability to pay taxes. The law both establishes liabilities and determines who is responsible for discharging them. For the purposes of this document, an environmental liability is a legal obligation to make a future expenditure due to the past or ongoing manufacture, use, release, or threatened release of a particular substance, or other activities that adversely affect the environment. A potential environmental liability is a potential legal obligation to make a future expenditure due to the ongoing or future manufacture, use, release, or threatened release of a particular substance, or other activities that adversely affect the environment. An obligation is potential when it depends on future events or when a law or regulation creating the liability is not yet in effect.