Suppose a law is enacted in which everyone is compensated fully for whatever environmental damages he or she suffers. What would the incentives of...

Great idea! I suppose the main incentive would be that it
would encourage the chief polluters of the world to curb their excesses and invest in
greener forms of energy. When I first read this question, I immediately thought of the
way in which those that suffer most from environmental pollution are actually those that
are the poorest and most vulnerable individuals in the world anyway. I am thining of,
for example, tribes in the Amazon rainforest who have had their way of life destroyed
thanks to logging, or the poor in Bangladesh who have found the increased incidence of
flooding damaging their already precarious existence. Even though such a law is
extremely unlikely to ever be introduced, as there would be massive difficulties in
terms of identifying those who had suffered, it would cause developing countries and
multi-national businesses to definitely consider their carbon footprint and investigate
other greener ways of doing what they do.

In one sense,
this is the biggest issue with environmental pollution. There is no tangible cost that
comes back straight away at the polluters. Whilst there is of course a cost, it is much
more long-term and often impacts others far more than it ever impacts those doing the
polluting. Such a law would make polluting hurt for the polluter, which should cause
them to think twice about their actions.