The principle implies that whoever bears the responsibility for the negative (environmental) effects should incur costs associated with the damaging activity. If polluters are taxed on their harmful activities, society is compensated.

This involves taxing environmental negative externalities for the purpose of generating revenue while at the same time providing a disincentive for behaviour that results in the environmental negative externality. In an ideal situation, a closed loop structure could be established whereby the revenues generated through the eco-tax could be used to finance more sustainable alternatives. An alternative could be to use the revenues of the tax to compensate those who suffer as a consequence of the implemented taxation.

This way, not the whole society but only the polluting entities compensate for the negative externalities associated with their operations. Adopting this principle could have the two-fold effect of potentially discouraging harmful activities as well as providing additional revenues to the cities that could be spent tofund interventions like NBS.