This book examines the harmonization of environmental liability rules in a federal system from a law and economics perspective. The author uses public interest and private interest theories to examine at which level environmental liability rules best can be decided in a federal system. The harmonization of environmental liability rules in the European Union by means of Directive 2004/35/CE on Environmental Liability with Regard to the Prevention and Remedying of Environmental Damage induced this research. This directive gave rise to much controversy and conflict on the role of liability rules for environmental damage, and on the optimal policy level of liability rules for environmental damage in the EU. The book unravels the decision-making process behind the environmental liability directive, and the reasons and consequences of harmonization. The author examines whether the harmonization of environmental liability rules in the EU corresponds with the optimal policy level of environmental liability rules as propounded by the economic theory on federalism and, if not, how harmonization of environmental liability rules in the EU can be explained. The author concludes that the shift of environmental liability rules to the European level was inefficient and does not correspond with the economic criteria or centralization. Moreover, the content of the directive itself shows inefficiencies. At the same time, the analysis in this book makes clear that the existence and the content of the directive largely can be explained by private interest distortions.