The following is a description of the four basic principles that the project co-leaders suggested as a point of departure for concrete proposals. The first and second principles offer substantive guidance for reforming environmental laws through greater use of market mechanisms where feasible, and a realignment of responsibilities to strengthen the federal role in some areas and the role of the states in others. The third and fourth principles promote improved environmental governance by emphasizing the importance of mechanisms that make trade-offs openly and even-handedly, and adopting cross-cutting strategies to address the full scope of environmental problems.
Principle 1: Traditional hierarchical regulatory approaches should be complemented by market and property right-like mechanisms such as cap and trade programs, and information disclosure, whenever these tools can reliably achieve environmental objectives.
The first wave of federal environmental regulation was aimed at addressing easily understood gross insults to the environment – smog filled urban air, flammable rivers, uncontrolled smoke stacks and discharge pipes. Hierarchical command and control regulatory approaches were generally well-suited to addressing such problems. But these approaches now need to be augmented with additional regulatory tools to address a number of environmental problems that have proven intractable to hierarchical regulation (such as non-point water pollution) and new problems that have yet to be tackled (such as climate change).
Adding new regulatory approaches to the existing toolkit will make it possible to achieve greater environmental protection at less cost and thus help to break the legislative logjam. The history of Congressional efforts to address acid rain is illustrative. For a decade or so leading up to 1990, Congress was deadlocked on dealing with acid rain as regions of the country that stood to benefit from reducing acid rain encountered steep opposition from regions and from industries that stood to bear the cost of the necessary reductions. What allowed Congress to move forward was the then innovative idea of using a cap-and-trade program to reduce sulfur dioxide emissions. The cap-and-trade program legislated in 1990 significantly reduced the cost of addressing acid rain compared with conventional command-and-control regulation.
Regulatory strategies that rely on market mechanisms, property rights-like approaches and information systems, if properly designed, monitored, and enforced, can create networks that enlist the creative ideas and energies of many actors, in contrast to centralized hierarchies that can often cramp innovation and stretch federal regulators too thin. Such regulatory strategies are a useful supplement to, not a complete replacement of, traditional regulatory strategies. Importantly, regardless of the approach selected, sound enforcement and rigorous performance verification are necessary to achieve environmental gains.
Principle 2: Authority should be realigned so that the federal government has direct responsibility for national and transnational environmental problems, and states and their subdivisions have more independent responsibility for essentially local ones.
The landmark federal environmental legislation of the 1970s made federal agencies supremely responsible for solving environmental problems because of the perception of lack of expertise and political will at the state level. However, since 1990, the last time Congress passed a major piece of environmental legislation, states have stepped up to the plate on a host of environmental issues, including climate change and oceans degradation, offering exciting solutions that ultimately could be the model for federal efforts. The challenge now is to realign responsibilities between the federal government and the states to recognize the comparative advantages of both levels of government. In some cases this will require expanding existing federal authority, while in other cases it will be better to allow the states to take the lead.
This second principle is a call for specialization based on comparative advantage, not devolution or deregulation. The federal government should not be burdened with having to work through states to solve national and transnational problems and the states should have greater latitude, subject to federal backstops, to deal with essentially local problems. Such a realignment is necessary because the federal government has found it difficult to solve many national problems through the states, because states can be more nimble than the federal government in finding innovative solutions to local problems, and because federal regulators are stretched too thin. As William Ruckelshaus wrote in 1995: “Any senior EPA official will tell you that the agency has the resources to do not much more than ten percent of the things Congress has charged it to do.” The agency will be even more overburdened as it begins to deal with climate change.
Principle 3: Trade-offs should be faced openly and made on the basis of reliable information.
The environmental statutes of the 1970s often make it difficult to weigh explicitly the costs and other trade-offs involved in determining how much pollution to allow or how much of a resource to conserve. As a result, agencies charged with implementing these statutes often make these trade-offs in opaque ways that are inaccessible to public scrutiny and review. For example, in setting hierarchical technology-based controls for major air and water pollution sources, the U.S. Environmental Protection Agency (EPA) must and does weigh costs and feasibility against the extent of environmental benefit achieved, but does so in hundreds of different complex rulemaking proceedings, and often in highly technical jargon without explicitly confronting the tradeoffs presented.
Going forward, Congress should admit that trade-offs are inevitable in environmental protection, and statutes should openly speak to how these trade-offs should be made and by whom. Greater use of market-based incentives and information tools as suggested in principle one also should make trade-offs more transparent by generating information about them and promoting their explicit consideration in deciding protection priorities and goals. At the same time, the executive branch’s use of cost-benefit analysis to promote more rational environmental regulation should be reexamined to ensure that the underlying data, assumptions, and methodologies are up-to-date and even-handed and that the environmental benefits and co-benefits of regulation are given proper weight.
Principle 4: Regulatory approaches should be crosscutting and address underlying causes.
The governmental structures adopted in the 1970s compartmentalize environmental protection and natural resource management. EPA, despite its sweeping title, shares responsibility for environmental protection with, among other federal agencies, the Department of the Interior, including the Fish and Wildlife Service and the Bureau of Land Management, the Department of Agriculture including the Forest Service, and the Department of Commerce, including the National Oceanic and Atmospheric Agency. The EPA itself is divided into distinct media (such as air, waste, water) offices that operate largely independently of each other. Further, the political boundaries that circumscribe state and local environmental agency action are drawn irrespective of the contours of ecological systems and interdependencies.
While some degree of bureaucratic and geographic compartmentalization is inevitable, we should aim to minimize it and its ill effects. Cross-institution and cross-media approaches are needed to address the polycentric and interconnected nature of environmental problems such as climate change, the degradation of ocean environments and fisheries, the loss of biodiversity, and the degradation of fresh water watersheds and rangeland. Europe might provide inspiration for dealing with environmental problems more holistically as it is ahead of the U.S. in doing so.