By David Schoenbrod, Richard B. Stewart and Katrina M. Wyman, Yale University Press, 151 pages, $35
This slender but by no means modest volume seeks to redesign U.S. environmental policies for the next several generations and to outline for the Obama Administration how it should go about that task. The authors’ central premise is that “hierarchical” environmental regulation, while useful to launch the environmental era in the 1970s, is now collapsing of its own bureaucratic weight and should be largely replaced by flexible self-regulating market mechanisms like the “cap and trade” provisions that helped reduce sulfur dioxide emissions in the electric power industry in the 1990s.
The authors’ message is that only by turning to market solutions to solve its major environmental challenges can the U.S. overcome the partisan divide that has frustrated major Congressional action for the past 15 years and created a regulatory “logjam” that the authors posit is the reason we have failed to improve our air, water, forests and oceans or deal effectively with climate change.
The authors, one of whom (Stewart) helped develop the sulfur dioxide program, are professors at New York University and New York Law Schools (Schoenbrod is also a scholar at the American Enterprise Institute). This book grew out of a 2008 conference, with the same name, that they sponsored at NYU School of Law. A few dissenters at the conference, including one of the luncheon speakers, suggested that the major cause of U.S. environmental backsliding was the failure to fund adequate federal and state enforcement of existing laws—in short too little rather than too much regulation. After all, during the Reagan and both Bush administrations (20 years in all), many presidential appointees worked affirmatively to undo or frustrate statutory protection of water, wildlife, forests, regional air sheds and the atmosphere.
While the Clinton administration had a stronger interest in environmental protection, its ability to advance that agenda was limited by the loss of a Congressional majority in 1994 (when Newt Gingrich and the “Contract With America” briefly held sway) and impeachment proceedings during the president’s second term.
Meanwhile the European Union leap-frogged beyond the U.S. in environmental protection by adopting comprehensive new requirements for chemical registration, recycling of consumer products, transboundary air pollution and life-cycle environmental impact assessment for industrial installations and enforceable commitments under the Kyoto Protocol to reduce greenhouse gas emissions.
After stating their concern with existing environmental policy—excessive top-down regulation—the authors outline four principles that they believe should underlie all future environmental regulation. These principles can be paraphrased as follows: (1) “hierarchical” regulation should be “complemented” by market and property right mechanisms such as cap-and-trade and information disclosure whenever feasible to achieve environmental goals; (2) federal agencies should be responsible for national and international environmental issues, and states should have independent responsibility for local ones; (3) trade-offs between environmental and economic costs should be made openly by Congress; and (4) regulators should move beyond single-focus environmental analyses and recognize the cross-cutting nature of modern environmental problems.
These principles, disarmingly attractive, form the basis for the authors’ discussion of the major areas where they believe U.S. environmental policy can be revitalized by their market-driven approach. Some of these ideas (the ones I tend to like) have less to do with market flexibility than with more efficient or better informed agency decisionmaking. The authors propose, for example, that the Environmental Protection Agency (EPA) assume direct permitting responsibility for major facilities currently subject to State Implementation Plans (SIPs) under the Clear Air Act and for other activities currently regulated by states under Clean Water Act delegations from EPA. (A similar approach could also be taken to Federal Energy Regulatory Commission licensing for new “smart grid” interstate electric transmission lines, which are currently subject to state-by-state approval).
While this proposal would, as the authors suggest, help reduce parochial opposition and patchwork quilt regulation of nationally important facilities, it would expand, rather than reduce, EPA’s administrative responsibilities and require corresponding budget increases. Similarly, the authors’ proposal to eliminate SIPs entirely and let states decide “local” air, water and other environmental matters on their own ignores the connection of many local land, air, water and coastal resources to national environmental policy and the consequent need for a substitute form of EPA oversight in order to assure state environmental enforcement and avoid a resumed “race to the bottom” among states competing for new commercial or infrastructure investments.
It is hard to disagree with the authors’ proposal that economic-environmental trade-offs be recognized (and authorized) more explicitly than under most existing laws. However, their suggestion that Congress, rather than agencies operating under statutory authority, strike the case-by-case or industry-by-industry balance between those interests seems a prescription for even more paralysis than at present.
On the other hand, their call for EPA and other agencies to recognize that environmental policy often requires trade-offs among competing environmental interests (water consumption versus air quality, for example) is on the mark and could, and should, be implemented even in the context of the hierarchical regulation that the authors wish to reduce. Indeed, the requirements for “hard look” environmental assessments under the National Environmental Policy Act appear to authorize precisely the kind of informed environmental balancing that the authors advocate.
Climate change offers the best opportunity to put into practice the authors’ hope to replace agency rules with marketplace flexibility because of the nation’s relatively successful experience with sulfur dioxide cap-and-trade, the support of many environmental organizations for a similar approach to carbon emissions, the global (rather than local) nature of climate change impacts and the fact that both the European Union and a significant number of U.S. states are already conducting such market programs in an effort to reduce greenhouse gases.
As the authors acknowledge, there are important problems still to be solved with respect to cap-and-trade for greenhouse gases (including full auctions for emission credits, verification for “clean development mechanism” projects in developing countries and border adjustments for products not subject to similar restrictions abroad), leading some economists and environmentalists to prefer a national carbon tax.
However, one irony is that both cap-and-trade and carbon taxation has recently lost its luster for many conservatives who still champion in other venues the kind of market flexibility advocated by the authors. In part this may reflect popular disenchantment with the “Wall Street traders” who are presumed to be the prime beneficiaries of carbon trading. In addition, the sheer complexity of the auction procedures and credit allocations of cap-and-trade as reflected in the Waxman-Markey and Kerry-Boxer bills has demonstrated to many conservatives that even this free-market tool cannot function properly without significant costs to industry and vigorous regulatory oversight.
Although the authors’ clarion call for market mechanisms in lieu of hierarchical regulation may fail to persuade many readers and some of their specific proposals may seem to contradict that call, professors Schoenbrod, Stewart and Wyman deserve real credit for attempting to fashion a comprehensive and concisely-stated new approach to environmental policy.
For those who agree with their overall approach, this book can serve (as likely intended) as a roadmap for legislative action. For those who (like me) disagree with their diagnosis and much of their prescription, this is nevertheless a thought-provoking book and a welcome opportunity to grapple with some of the central environmental issues facing our nation.
Stephen L. Kass is a co-director of the environmental practice group at Carter Ledyard & Milburn and an adjunct professor of international environmental law at Brooklyn Law School.