Public Policies for Environmental Protection

Paul Professor Portney, Robert N. Professor Stavins, Paul Portney, Robert N. Stavins, Paul Professor Portney, Robert N. Professor Stavins

• Publisher: Routledge
• Year: 2010
• eBook ISBN: 9781136524790
• Topic: Biological Sciences
• Subtopic: Ecology
• Index: Biological Sciences

The first edition of Public Policies for Environmental Protection contributed significantly to the incorporation of economic analysis in the study of environmental policy. Fully revised to account for changes in the institutional, legal, and regulatory framework of environmental policy, the second edition features updated chapters on the EPA and federal regulation, air and water pollution policy, and hazardous and toxic substances. It includes entirely new chapters on market-based environmental policies, global climate change, solid waste, and, for the first time, coverage of the Safe Drinking Water Act.
Portney, Stavins, and their contributors provide an invaluable resource for researchers, policymakers, industry professionals, and journalists---anyone who needs up-to-date information on U.S. environmental policy. With their careful explanation of policy alternatives, the authors provide an ideal book for students in courses about environmental economics or environmental politics.

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Introduction

Paul R. Portney and Robert N. Stavins

In the decade that has passed since the appearance of the first edition of Public Policies for Environmental Protection, significant changes have occurred in U.S. environmental policies, related policy debates, and the context in which they have occurred. In this chapter, we briefly review these policy developments and describe how the book has evolved to reflect them. We also describe the scope and level of the book, and highlight ways in which it can be used as a complement to texts and other readings in the science, economics, and politics of the environment. Finally, we provide brief previews of the book’s chapters.

Environmental Policy Developments and Trends since 1989

Six trends, of varying importance, stand out. First, interest in market-based instruments for environmental protection has greatly increased, as evidenced by the creation of the sulfur dioxide allowance trading program in the 1990 amendments to the Clean Air Act (CAA). Second, there has been a proliferation of information provision programs, such as the expansion of the Toxics Release Inventory. Third, there has been a moderate expansion in the use of benefit–cost analysis under several environmental statutes and executive orders. Fourth, distributional issues on both the benefit and cost sides of the regulatory equation have gained heightened attention, often under the rubric of “environmental justice.” Fifth, concerns about global climate change have emerged as an important focal point of many policy debates. Sixth and finally, there has been an upsurge of recycling activity and a related new focus of federal waste management policy.

Market-Based Instruments

The most striking change that has taken place since the first edition of this book is with regard to the employment of economic-incentive or market-based environmental policy instruments, approaches that encourage behavior through market signals rather than through explicit directives regarding pollution control levels or methods. These policy instruments, such as tradable permits, pollution charges, and deposit–refund systems, are often characterized as “harnessing market forces” because, if they are well designed and implemented, they encourage firms (and/or individuals) to undertake pollution control efforts that are in their own interests and that collectively meet policy goals. In political terms, market-based instruments have by now moved center stage, and policy debates look very different from when these ideas were characterized as “licenses to pollute” or dismissed as impractical. Indeed, market-based instruments often seem to have become the new conventional wisdom among policymakers in the environmental realm, at least in the United States.

In 1989, the federal government set up a tradable permit system and levied an excise tax on specific chlorofluorocarbons to meet international obligations established under the Montreal Protocol that limit the release of chemicals that deplete stratospheric ozone. One year later, the U.S. Environmental Protection Agency (EPA) began to allow averaging, banking, and trading of credits for nitrogen oxide and particulate emissions reductions among eleven heavy-duty truck and bus engine manufacturers. Also enacted in 1990 was the most important application ever made of a market-based instrument for environmental protection: the tradable permit system intended to reduce sulfur dioxide emissions by 10 million tons below 1980 levels. A robust market of bilateral sulfur dioxide permit trading gradually emerged, resulting in cost savings on the order of $1 billion annually (Carlson and others 2000). Subsequently, twelve northeastern states and the District of Columbia, under EPA guidance, implemented a regional nitrogen oxide cap-and-trade system. Potential compliance cost savings of 40–47% have been estimated for the period 1999–2003 (Farrell and others 1999).

In addition, considerable action with market-based instruments has taken place at the state and local level. The South Coast Air Quality Management District, which is responsible for controlling emissions in a four-county area of southern California, launched a tradable permit program in January 1994 to reduce nitrogen oxide and sulfur dioxide emissions in the Los Angeles area. One prospective analysis predicted 42% cost savings, amounting to $58 million annually (Anderson 1997). Also since 1989, California, Colorado, Georgia, Illinois, Louisiana, Michigan, and New York have established emissions credit programs for nitrogen oxides and volatile organic compounds, authorized under EPA’s emissions trading program framework (Bryner 1999).

Information Programs

Over the past decade, information-based environmental policies have proliferated. Most prominently, the U.S. Toxics Release Inventory (TRI), mandated in 1986 under the Emergency Planning and Community Right-to-Know Act, requires firms to report to local emergency planning agencies information on use, storage, and release of hazardous chemicals. Such information reporting serves compliance and enforcement purposes, but also may increase public awareness of firms’ actions; in turn, this could encourage firms to alter their behavior, although the evidence is mixed (Konar and Cohen 1997; Hamilton and Viscusi 1999).

The U.S. Energy Policy and Conservation Act (EPCA) of 1975 requires that some household appliances carry labels with information on energy efficiency and estimated annual energy costs and that new cars carry labels indicating fuel efficiency. The Energy Policy Act of 1992 added fluorescent and incandescent lamps to the list of products requiring labels, and it expanded the EPCA labeling requirements to include water flow information for showerheads, faucets, and toilets. Since 1996, EPA also requires uniform labeling of certain types of rechargeable batteries (U.S. EPA 2000).

Notification requirements extend to the public sector, as well. The 1996 Amendments to the Safe Drinking Water Act require all community drinking water systems to mail to each customer an annual report containing information about source water quality and the levels of various contaminants.

Expanded Use of Benefit–Cost Analysis and Distributional Issues

Although the use of benefit–cost analysis in environmental regulation has not increased dramatically since 1989, it has been expanded by Presidential executive orders and legislation. (The Flood Control Act of 1936 may include the first legislative mandate to use benefit–cost analysis. Since then, several statutes have been interpreted as restricting the ability of regulators to consider benefits and costs, while others clearly require regulators to consider them; see Arrow and others 1996.) Presidents Carter, Reagan, Bush, and Clinton all introduced formal processes for reviewing economic implications of major environmental, health, and safety regulations. In 1993, President Clinton replaced Executive Orders 12291 and 12498 (issued by President Reagan) with Executive Orders 12866 and 12875, whereby regulation is considered appropriate only upon “reasoned justification that benefits justify costs,” and benefit–cost analysis is required for all “significant regulatory actions.”

Congress has supported requirements for benefit–cost analysis only in selected contexts. Section 812 of Title VII of the CAA amendments of 1990 requires EPA to conduct a comprehensive analysis of the retrospective benefits and costs of CAA from 1970 to 1990, in addition to biennial analyses of the benefits and costs of the 1990 amendments, which must include future projections. EPA issued its final retrospective report in October 1997, following six years of controversial development and review. The agency’s first prospective report, covering the period 1990–2010, was released in November 1999 (U.S. EPA 1999).

The 1996 amendments to the Safe Drinking Water Act allow EPA to consider overall risk reduction when setting standards and direct EPA to conduct benefit–cost analyses for new regulations. Further, these amendments allow EPA to adjust maximum contaminant levels in light of the results of benefit– cost analysis. More broadly, in 1995, Congress enacted the Unfunded Mandates Reform Act, which requires quantitative comparison of benefits and costs for all proposed and final rules, including environmental regulations, with an expected annual cost greater than or equal to $100 million. In addition, this act mandates that agencies choose the least-cost regulatory alternative or explain why the least-cost alternative was not chosen; evidence indicates, however, that these benefit–cost policies have had only limited effects on agency rulemaking (U.S. GAO 1998; Hahn and others 2000).

Distributional concerns have long been the focus of political debates and, in recent years, have become an explicit element in required economic analyses. Clinton’s Executive Orders require examination of “distributive impacts” and “equity.” In 1994, Executive Order 12898 formalized the President’s position by instructing federal agencies to identify and address “disproportionately high and adverse human health or environmental effects of its programs, policies, and activities on minority populations and low-income populations.” In addition, the Small Business Regulatory Enforcement Fairness Act of 1996 requires EPA (and other affected agencies) to prepare regulatory flexibility analysis of all rules with “significant economic impact” on a “substantial number” of small entities (businesses, nonprofits, and small government organizations).

Global Climate Policy

In 1989, little serious attention was paid by U.S. government agencies to the possibility of global climate change as a result of the greenhouse effect, which is linked primarily with the combustion of fossil fuels. Times have changed. Partly as a result of pronouncements by the United Nations–chartered Intergovernmental Panel on Climate Change, this problem is taken much more seriously today than it was five years ago, let alone a decade past. Although by the summer 2000 the United States has not ratified (and appears unlikely to ratify in the near future) the Kyoto Protocol—the international agreement establishing reduction targets for carbon dioxide and other greenhouse gases—a considerable amount of high-level policy discussion and legislative consideration focuses on this issue.

Recycling and Federal Waste Management Policy

Since 1990, there has been a significant increase in recycling activity in the United States and a related shift in emphasis of federal waste management policy. For example, President Clinton’s 1993 Executive Order 12873 requires federal agencies to purchase only recycled copy paper, and the 1996 Mercury-Containing and Rechargeable Battery Management Act initiated a national voluntary take-back system for rechargeable batteries. (In other words, those selling these batteries must accept them for disposal at the end of their useful life.) States and municipalities also have moved forward on these issues. Through the mid-1990s, sixteen states had some form of recycling investment tax credit, nine states had deposit–refund systems for beverage containers, and thirteen states had established standards for the recycled content of newsprint. At the local level, nearly 4,000 U.S. communities now levy user charges, often called pay-as-you-throw or unit-based pricing, on municipal solid waste, a substantial change from zero prices, which are still the overall norm (Miranda and others 1998).

Scope, Level, and Audience

Over the past ten years, environmental economics and environmental science textbooks have proliferated, and an increasing number of texts focus on environmental politics. Even the best of these texts, however, cannot (and are not intended to) provide timely surveys of the state of environmental policy. But this is precisely the purpose of this book, which can serve as an effective complement for a wide variety of texts in environmental economics, environmental science, and environmental politics courses and can likewise serve as a central source for courses in environmental policy.

The book should be useful for a diverse set of practitioners, as well as students at all levels. A central criterion used in editing the selections has been the notion that chapters should not only be sound, original, and well-written, but also nontechnical and hence broadly accessible. In order to address the important developments and trends reviewed above, the current edition introduces four new chapters: market-based instruments, global climate policy, hazardous waste and toxic substance policies, and solid waste policy. The book also includes fully updated versions of three other chapters on the evolution of federal environmental regulation, air pollution policy, and water pollution policy. Together these changes result in what is fundamentally a new book—and one that reflects the current state of U.S. environmental policy and the results of the current state of the art in analyzing such policy.

A few words about the scope of the book are in order. We focus exclusively on public policies in the environmental realm, chiefly those that reduce concentrations of pollution, as opposed to those that operate in the natural resources realm and achieve various goals of resource management. This means, for example, that whereas various types of public policies to reduce air and water pollutant emissions are reviewed, tradable development rights, wetlands mitigation banking, and tradable permit systems used to govern the allocation of fishing rights are not considered. The distinction between environmental and natural resource policies is sometimes arbitrary, but it is generally a useful distinction that matches the defined scope of many courses and the interest areas of many practitioners.

Chapter Highlights

Following this introduction, the book offers seven chapters that span the scope of U.S. environmental policy. First come two chapters on over-arching issues, “EPA and the Evolution of Regulation,” and “Market-Based Environmental Policies.” Successive chapters examine air pollution policy, climate change policy, water pollution policy, hazardous waste and toxic substances policies, and solid waste policy.

In Chapter 2, Paul Portney examines the justification for federal intervention in environmental, health, and safety regulation, and he reviews the evolution of federal regulation in the United States. He outlines the creation and growth of the U.S. Environmental Protection Agency from 1970 to the present and assesses two alternatives to conventional environmental regulation: legal liability and private negotiation/mediation. Portney also reviews the challenges of designing federal intervention (deciding when to intervene, through which level of government, and in pursuit of how much protection from risk), choosing the means of attainment of environmental standards (on a scale from direct, centralized regulation to incentive-based, decentralized regulation), and monitoring for compliance. The chapter considers how these challenges have resulted in a hybrid approach to environmental regulation. In closing, Portney highlights problems facing EPA in an era of complex environmental laws, high expectations, emphasis on redistributive goals, and complicated and expensive monitoring.

In Chapter 3, Robert Stavins begins by recognizing that nearly all environmental policies consist of two components: the identification of an overall goal and some means to achieve that goal. The chapter focuses exclusively on the second component, the means—the “instruments”—of environmental policy, and he considers, in particular, economic-incentive or market-based policy instruments. Stavins notes that it was some eighty years ago that economists first proposed the use of corrective taxes to internalize environmental and other externalities. Fifty years later, the portfolio of potential economic-incentive instruments was expanded to include quantity-based mechanisms— tradable permits. Thus, economic-incentive approaches to environmental protection are clearly not a new policy idea, and, over the past two decades, they have held varying degrees of prominence in environmental policy discussions. The chapter provides a comprehensive review of U.S. experiences with such market-based policy instruments, including pollution charges, deposit–refund systems, tradable permits, market barrier reductions, and government subsidy reductions.

In Chapter 4, Paul Portney provides a detailed review and assessment of U.S. air pollution policy. He describes the structure of the Clean Air Act, including the important series of amendments that have characterized its evolution over thirty years, and reviews trends in air quality in the United States. As a means of providing an assessment of the Clean Air Ac...

Table of contents

• Cover
• Title
• Copyright
• Contents
• 1. Introduction
• 2. EPA and the Evolution of Federal Regulation
• 3. Market-Based Environmental Policies
• 4. Air Pollution Policy
• 5. Climate Change Policy
• 6. Water Pollution Policy
• 7. Hazardous Waste and Toxic Substance Policies
• 8. Solid Waste Policy
• Index