World Student Community for Sustainable Development

by Teresa Zhang

In the face of new environmental regulation, companies have three possible courses of action. The most damaging yet most common response has been to oppose regulation, as epitomized by the automobile industry in the US. Whether by litigation or by legislative lobbying, many industries see this option in their best economic interest. This neither makes effective use of taxpayer dollars nor benefits the environment.

The next group of responses can be classified as “end-of-pipe†solutions. This is demonstrated again by the automobile industryâ€^TMs use of the catalytic converter, as well as by managing species only after they come to the brink of extinction, and cleaning up toxic waste after they have damaged local ecosystems. Similar actions may be responsible for marked improvements in air and water quality in the US, but any ecologist would explain that they do little more than provide temporary cover for damage in yet unregulated arenas.

The third and most beneficial course of action is to incorporate environment considerations into industrial and consumer behaviors sooner rather than later. Just as the innovations in design for manufacturing and design for assembly have enabled manufacturers to be more competitive by lowering costs, so too have those created under design for environment. The Dow chemical company, as well as a plethora of overseas businesses, have not only surpassed required environmental performance goals but have more than paid for initial costs with resulting profits (Porter 1995). From an economic or even a materials point of view, this model makes sense. Pollution can be interpreted as resources that have been used poorly, resulting in higher material costs, potentially harmful products, and complicated disposal. If the efficiency with which inputs are used is optimized, it is quite natural that money will be saved and resources will be saved. Improved productivity and efficiency generally mean cost savings and higher profits. Therefore, contrary to the claims of American mining industry, environmental regulations do not have to be in conflict with economics. Furthermore, firms stand to be even more competitive because of premiums on eco-friendly goods.

If what is good for society is also good for industry, why is this course of action the exception rather than the norm? Why do American companies drag their feet while foreign industries support stronger environmental regulations as a way to push innovations that ultimately make them more competitive?

While it is possible that foreign consumers of environmental goods are simply more farsighted than their American counterparts, there are many reasons for us to employ the two more detrimental courses of action built into US environmental regulations.

The bulk of environmental regulations in the US are characterized as “Command and Control†. In this approach, regulators set limits to emissions from various sources by requiring the best available technology (BAT). The Clean Air Act, Clean Water Act, Endangered Species Act and Comprehensive Environmental Response, Compensation, and Liability Act (Superfund) are the pillars of command and control regulations. They were major victories of the early American environmental movement and are still serve today as our most effective regulations.

The command and control paradigm was and continues to be so effective because, as its name implies, the regulations are tough. The government told firms across industries and across America were told what to do, when to do it and how to do it. The Clean Air Act set precise limits on outputs of sulfur dioxide, nitrogen oxides, carbon monoxide, volatile organic compounds, lead, particulate matter, and ozone. The Clean Water Act requires permits to dump any amount of pollutants into navigable waterways. Under the Endangered Species Act, we are not allowed to pick trillium flowers from our backyards, log trees containing Red-cockaded Woodpeckers, or trap wolves fed by our farms. The Clean Air and Water Acts required states to propose state implementation plans (SIP) on fixed timetables. Firms were required to comply by specific deadlines or face automatic penalty. These hard limits were implemented across the board. Because the competition was leveled in transition periods, the legislation ensured that there were no laggers. Every consumer of environmental goods was affected equally, mobilizing environmental progress throughout industry.

A second success of the command and control regulations of the 60â€^TMs and 70â€^TMs has been their ability to spread awareness of environmental issues among industry as well as the general public. Companies were forced to incorporate environmental considerations into their regular operations. The framework that was initiated to implement best available technologies can now be adapted to develop environment driven innovation.

Whereas pollution had previously been seen as an inevitable product of industry, people began to think of clean air and water as a basic right. The public was allowed into the regulatory process, as demonstrated by the public hearings required by the Clean Air and Water Acts. The Endangered Species Act is also fueled by public involvement. The protection of species under this act unfortunately almost always requires public initiated litigation. The lynx, the Barton Springs salamander, the killer whale and the infamous snail darter were all added only after messy and costly lawsuits.

However, the value of public involvement in environmental regulation has never surpassed that of the case of the toxic pollution of Love Canal, NY. The Superfund was set up to fund cleanup for sites like Love Canal, characterized by toxic contamination threatening human health, landowners unable to pay upfront, active grassroots lobbying, and high public awareness.

This feature of command and control regulations has been instrumental in the development of civil organizations that monitor, evaluate and advocate for the environment. These organizations, including the National Resources Defense Agency, Sierra Club, and Environmental Defense Fund, are our most influential proponents for the environment. Command and control regulations gave the public an opportunity to be involved, which positioned the issues of the environmental movement into the public eye.

The early environmental movement sought what the command and control approach provided: action and awareness. However, the state of the issue is no longer what it was when our mainstay regulations were first written. It is becoming more and more obvious that the response to such regulations fall within the first two categories: to oppose regulation and to implement costly end-of-pipe solutions. Our overseas analogs have proven that there exits a better option. The question for us now is how do we get to that third course of action? How are command and control regulations insufficient in provoking meaningful and economically viable innovation?

The first, and most obvious disadvantage to “Command and Control” environmental regulation is the static and narrow scope it enforces. There are a number of factors that contribute to this quality demonstrated by each piece of legislation.

To no fault of their own, the original writers of American environmental laws lacked an understanding of ecology. As a result, the Clean Air and Water Acts enforce the tendency of industry to incrementally displace damage, from air to water or water to solid waste, rather than to eliminate wastes at the root. Similarly, this lack of comprehensive understanding has produced legislation that deals with endangered species and toxic waste only after the damage has occurred and it is most difficult to manage.

Furthermore, the Clean Air Act implies that only the listed effluents are harmful. As the variety of emitted chemicals grows daily, the Clean Air Act grows more and more incomplete. Though the list of endangered species grows annually, it is far from complete. In reality, unknown numbers of species live and die without our knowledge. Though these two pieces of legislation have provision for reevaluation and growth, they do so incrementally. Without long-term goals or incentives for superior performance, industry is encouraged to continue to lag behind the Clean Air and Water Acts rather than to lead the market toward the truly beneficial innovations that have proven environmental regulations worthwhile throughout Europe.

The Clean Air and Water Acts are further hindered by the lack of mechanisms to understand the true gains to be made as a result of improved environmental performance. Regulations are unjustly viewed as costly and burdensome largely due to ecological ignorance and poor understanding of the entire economic system. Without proper accounting built into the legislation, there is little hope that industry will develop new perspectives.

Secondly, command and control regulations suffer because they are heavily wrapped up in intensive litigation, which is not only wasteful but also ineffective. 88% of Superfund expenditures go into litigation rather than cleanup (Porter 1995). While environmentalists sometimes use litigation to permanently delay development, the opposite is also true. The Clean Air, Clean Water and Endangered Species Acts have all undergone extensive examination that has seriously detained the progress of environmental mitigation.

This comes as no surprise considering the process by which the limits where derived. There was no communication between government and industry in writing the Clean Air and Water Acts, nor were there scientifically derived safe levels of contamination. As a result, industry has found room to dispute numbers they consider to be of dubious credibility. For example, the American automobile industry has strongly contested Corporate Average Fuel Economy (CAFE) standards and amendments in every step of the legal process. Yet vague definitions by nature left decisions to the courts. The jurisdiction of the Clean Water Act and the definition of endangered species were left to dispute. The development of the Clean Water Act is a perfect illustration of the instability of environmental regulations. Because the jurisdiction of the law was so influenced by court decisions, many acquired the hope that environmental regulations would change to their advantage or even blow over in time. Though “species†is defined within the body of the Endangered Species Act, dispute over the inclusion of invertebrates and marine plants in particular were prevalent until they were excluded in 1978 but then later reinstated (National Research Council 1995). Similarly, the constant extensions to Clean Air and Water Act deadlines indicated to firms that efforts to delay regulations, even permanently, might be justified.

The short timelines of the Clean Air and Water acts were detrimental beyond forcing short-term solutions as was discussed earlier. Some companies saw the deadlines as impossible to meet and hope to avoid compliance by other means, such as litigation. The Superfund still continues to be criticized for having unrealistic expectations. Even if firms want to clean up brown fields, they find it infeasible to do so and again adopt alternatives through the use of lawsuits.

Unlike the Clean Air and Water Acts, the Endangered Species Act and Superfund lack a “hammer†clause or automatic penalties for failure to comply. As a result, litigation was at times the only tool of action. New species can be added to the list without litigation but rarely is this the case. In fact, the Fish and Wildlife Service acknowledge the legal process by which species are added to the Endangered Species Act as a “rulemaking procedure†in Federal Register (US Fish and Wildlife Service 2001). Furthermore, it has been demonstrated that the number of species listed every year is not a function of the availability of science; rather it is a function of the political climate.

Correspondingly, areas may be listed in the Superfundâ€^TMs National Priorities List (NPL) by three distinct mechanisms. Like the first recipient of cleanup funding under this law, those who receive help are often those who cry the loudest. In reality all three require extensive litigation in congress and it is not unusual for applications to wait years before being listed. Perhaps most importantly, firms are apt to fight regulation because they see it in their best economic interest. All regulations seem punishing rather than beneficial to those it effects. To manufacturers, the Clean Air and Water Acts mean expensive equipment, not improved performance. To landowners, the Endangered Species Acts limits development rather than preserving ecological integrity. To taxpayers, Superfund is less money in hand, not improved health and quality of life. When pedestrians value getting across the street faster over the increased chance of being hit, they break the law. Likewise, laws seen as prohibitive without immediate gain will inevitably be neglected.

Whatever the cause, litigation is detrimental to the goals of environmental regulations because they build a framework in which those who are regulated can formulate arguments against them. In other words, litigation provokes dispute even in cases where both sides stand to win. Firms invest energy into developing cases against regulations rather than trying to innovate. Furthermore, firms are likely to convince themselves of their own arguments against environmental compliance.

The command and control approach has served us well, but because of these major drawbacks, there needs to be a major paradigm shift. Environmental innovations have been proven to be not only beneficial to society but also beneficial to industry. In order to be effective, environmental regulation needs to intrinsically make clear the advantages of improved environmental performance.

Regulations must primarily reflect an understanding of ecology, which is by nature flexible and dynamic. The development of regulations must be predictable, secure, and with reasonable phase-in periods. The focus should be on performance rather than technology, emissions, or even misleading ambient environmental health. There must be observable market incentives for continually improved performance derived from cooperation with industry and the regulatory bodies of other nations. Only this approach can mitigate the shortcomings of the command and control paradigm.

Teresa Zhang

References

Porter, Michael and Claas van der Linde (1995) “Green and Competitive†Harvard Business Review, 120-134.

National Research Council, Committee on Scientific Issues in the Endangered Species Act (1995) “Species Definitions and the Endangered Species Act†Science and the Endangered Species Act, 37-42.

US Fish and Wildlife Service (2001) Listing a Species as Threatened or Endangered viewed April 1, 2002