Chapter 14

1. The Regulatory Record: Achievements and Obstacles Chapter 14

2. Introduction 1 • Criticisms of the current regulatory approach: • Inefficient: Often buys relatively small environmental benefits at a substantial cost? • Not cost-effective: Regardless of the goals, the existing regulatory system is more expensive than it need be

3. Introduction 2 • Criticisms of ANY regulatory approach • How do you deal with economic growth? (IPAT revisited) • How do you regulate non-point mobil sources? • How do you control the “leakage” problem?

4. Accomplishments of Environmental Regulation • Air pollution • Ambient concentrations of all the criteria air pollutants declined over the periods from 1978 to 2008 • For most Americans, the air today is substantially cleaner than it was for our parents’ generation • In many areas, some NAAQS are still violated. The biggest offender: ozone • The TRI and a regulatory deadline under the CAA amendments have had a significant impact on air toxic emissions

5. Ambient Air Quality

6. People Living in Non-Attainment Countries Source: EPA

7. Water Pollution • On average, fewer U.S. rivers and streams were in violation of water quality standards in the 1990s than in the 1970s • In 2000, about 40% of US streams, lakes, and estuaries were still too polluted to support fishing and swimming • Overall, small gains in water quality have been achieved over the last thirty years

8. Water Pollution • Increases in non-point water pollution, particularly agricultural runoff, have offset regulatory gains • Large investment in sewage treatment has barely held the line against population growth • Groundwater pollution from pesticides and hazardous waste dumps are an emerging environmental problem

9. Water Quality Trends

10. Hazardous Waste: Disposal • The goal of RCRA: prevent future Love Canals • Between 1986 and 1995 regulations reduced the flow of hazardous waste into landfills by 50%; and another 23% by 2005. • Rising disposal costs may have increased illegal dumping

11. Hazardous Waste: Clean-up • Cleanup of old dump sites has proceeded at a slow pace • Suerfund issues: • How Clean is Clean? • High transactions costs from joint and several liability • Superfund itself is not being replenished: private parties now bearing all clean-up costs

12. Chemicals and Pesticides • Estimated value of a life saved under the pesticide review process: $35 million • Is pesticide regulation inefficiently strict? • “Grandfathering” of old pesticides initially increased inefficiency

13. Endangered Species • Of the species listed in the late 1990s as either threatened or endangered • 41% are stable or improving • 35% are declining • 23% face an uncertain future • 1%--7 species--have gone extinct • 5 have been delisted • 11 have been upgraded from endangered to threatened

14. Normative Criticisms of Regulation • Examples of inefficiency: • Uniformity of standards • High level of protection afforded to remote areas under the CAA • For RCRA regulations, Superfund cleanups, and many pesticide rules, measured costs exceed measured benefits. • NOTE: Economists are not wrong to level these criticisms, but economists hold no special authority to tell society whether its goal should be efficiency or safety

15. Cost-Effectiveness Criticisms of Regulation • Economists do have special authority in cost-effectiveness analysis • Cost-effectiveness: achieving a desired goal at the lowest possible cost

16. Command-and-Control Regulation • CAC typifies most current regulation • Uniform emission standards • Sources are “commanded” to meet identical emission levels • Technology-based regulatory approach • This is the “control” part of CAC

17. Why is CAC Not Cost-Effective? A Preview • Forces all sources to reduce to the same amount, regardless of differences in reduction costs. • Forces all sources to utilize the same technology. This lack of flexibility raises costs, and reduces incentives for innovation. • Firms have an incentive not to do better • Firms must obtain regulatory clearance to seek an innovative, non-approved approach

18. Related Problem: Grandfathering and New Source Bias • Often, existing sources of pollution are “grandfathered” (not required to comply with new rules) to make legislation more politically feasible • This builds in a “new source bias” (a bias against new sources) • Higher costs are now attached to new investment which may lead firms and individuals to hold on to older, more polluting technologies

19. Beyond Regulation?Promoting Clean Technology • Economic growth can eventually swamp the regulatory process (IPAT again…) • Regulation has already picked off the “easy” targets: point and non-mobile. • Reduced pollution in one media is likely to “squeeze out” elsewhere: the leakage problem

20. Does regulation force fundamental technological change? • Strategy 1: firms reduce pollution using an end-of-the-pipe strategy • For example: adding on a scrubber to the “end of the pipe” • Strategy 2: firms to seek out whole new technologies that avoid emitting the pollutant of concern in the first place • Known as a pollution prevention strategy

21. Two Technologies for Particulate Control

22. The problem with regulation • If regulations are strict (eg expensive enough) firms may choose strategy 2, since x=y>z. • But incremental regulation seldom tips the balance– if regulation starts w/costs of x, and is occasionally tightened, firms stick with increasingly expensive end-of-pipe technologies.

23. Where are we headed? • Chapters 16-17: “Incentive-Based regulation” as a more cost-effective alternative to CAC • Chapters 18-19: Clean technology promotion as a complement to any type regulation.