Benefits from Environmental Regulation

1
Benefits from Environmental Regulation

• Environmental quality is a public good -
• Every good has a
• private cost and a
• social cost

2
Externalities

• Negative externalities
• (social cost-social benefits)gt(private
  cost-private benefits)
• Positive externalities
• (social benefit-social cost)gt(private
  benefit-private cost) (nonproducers and
  nonconsumers are helped)

3
Equilibrium and Economic Efficiency
B
A
C
Deadweight social loss
C
4
Environmental Protection Regulation

• Environmental Protection Agency
• Largest regulatory agency
• Requesting 7.3 billion for FY2002 and 17,500
  employees

5
Agency Structure

• Independent agency that reports directly to the
  president
• Headed by a single person and
• Not in an executive branch department
• Organized along program responsibilities
• Has 10 regional offices

6
Authorizing Legislation

• National Environmental Policy Act - 1969

7
Agency Support

• Often supporting Congress, some Presidents,
  environmental quality advocacy coalition, the
  courts, some industries
• Often opposed the economic rationality advocacy
  coalition, labor unions, some Presidents, some
  industries, recently state and local governments

8
The Environment

• Most significant effects on manufacturing and
  local government
• Technological factors are critical
• Complexity and salience

9
Four Eras of Pollution Control

• The era of nondecisionmaking 1940s to 1960s
• Public awareness and federal response 1960s to
  1970s
• Deregulation, devolution, and defunding the
  Reagan years 1980s
• Competition and compromise - current

10
Policy Tools

• Prohibitions
• Command and control regulations
• Licensing and use restrictions
• Market-like incentives
• Marketable discharge permits
• Fiscal inducements
• Information

11
Air Quality Regulation

• The Clean Air Acts
• Clean Air Act of 1970 - protect and improve air
  quality

12
Clean Air Act

• 1970
• Reauthorized in 1977

13
Clean Air Act

• 1990 Amendments strengthened act

14
Acid-Rain Emissions Trading Program - A Market
Incentive

• Government sets a cap that reduces the number of
  tons of sulfur dioxide emitted
• Issued 110 of nations dirtiest power plants
  tradable certificates that matched their share of
  the cap
• Some had certificates to sell others needed to
  buy
• Sold on the Chicago Board of Trade annually

15
Water Quality

• Federal Water Pollution Control Act, 1972 (Clear
  Water Act)
• zero pollutant discharge by 1985, all waters
  fishable and swimmable by 1983
• states responsible
• National Pollutant Discharge Elimination System
• Amended in 1977

16
Shortcomings of FWPCA

• Focused on point sources of water pollution
• Nonpoint pollution accounts for nearly 2/3rds of
  water pollutants
• Ignored toxic water pollutants
• Municipal waste water treatment grant program
  cost too much

17
Water Quality Act of 1987

• Addressed nonpoint water pollution -
• Focus more on trace toxic elements,
• requires municipal systems to use aggressive
  pretreatment
• One-time grants for municipal systems

18
July 2000 Rule

• Cracks down on dirty runoff
• States will decide who will be responsible for
  reducing runoff and how
• Unit of measure is TMDL

19
EPD Recent State Requirement
20
Safe Drinking Water Act of 1974

• Authorizes EPA to set safe standards of purity
• Requires all owners or operators of public water
  systems to comply with primary standards

21
Regulating Hazardous Wastes

• Resource Conservation and Recovery Act (RCRA) -
  safe storage, treatment, and disposal of
  hazardous wastes

22
RCRA

• Amended in 1984
• extended regulations to small quantity generators
• banned untreated wastes from landfills
• required EPA to develop treatment and disposal
  standards and set standards that would take
  effect if EPA didnt write their own

23
Comprehensive Environmental Response,
Compensation Liability Act (CERCLA - Superfund)

• Defining event was Love Canal
• Clean up worst abandoned hazardous waste sites
  and assess liability
• All toxic waste sites
• Strict, joint, and several liability principle
• Created a fund to pay for cleanup when
  responsible parties couldnt or wouldnt

24
CERCLA Amendments

• Superfund Amendments and Reauthorization Act
  (SARA)
• Emergency Planning and Community Right to Know
  (EPCRA)

25
Regulating Pesticides

• Regulates the products
• EPA authorization comes from Federal Insecticide,
  Fungicide, and Rodenticide ACT (FIFRA) of 1947
• purpose to protect farmers but 1972 amendment
  added environment protection
• Pesticide must be registered with EPA
• EPA must produce standards to ensure safety

26
FIFRA

• EPA must
• Test pesticides for safety
• Require registration
• Use restrictions and prohibitions

27
Amendments to Pesticide Regulation

• Regulations relaxed in Reagan administration
• With1988 amendments compensation when a pesticide
  is banned is to applicators rather than
  manufacturer
• Must review all active pesticide ingredients

28
Evaluating Environmental Regulations

• Compliance monitoring
• Three changes suggested

29
Costs and Benefits of Regulation

• We spend BIG bucks (130 billion in 1995
• Benefits outweigh costs for air quality, equal
  costs for water quality.
• Costs far outweigh benefits for hazardous waste
  regulation
• Doesnt appear to have major costs to economy

30
How Effective?

• Major reductions in many emissions dramatically
  better air quality in most polluted urban areas
• Evidence there is also improved water quality
• Question is would it have happened without
  regulation?
• Significant reductions in TRIs

31
How Well Has Superfund Worked?
32
Obstacles to Environmental Regulation

• Issues over property rights
• Unfunded mandates to state and local governments
• Risk based regulation using risk assessment and
  risk management

33
Who Benefits?
34
Priorities

• Clean air
• Clean and safe water
• Safe food
• Pollution prevention
• Better waste management
• Reducing global and cross-border risks
• Expanding Americans right to know