McGraw-Hill/Irwin ©2007 by the McGraw-Hill Companies, Inc. All rights reserved.

17

Environmental ProtectionEnvironmental Protection

EnvironmentalProtection

Key Points• Understand the context of environmental issues—historical, national, international and political• Understand the interplay of regulation and free market principles• Understand key concepts, such as cost-benefit analysis and causation• Become familiar with the basic thrust of our major federal environmental legislation• Identify available enforcement mechanisms

Chapter 17

Pollution is …… a market failure.

• Economists categorize it as a negative externality, a “defect of the price mechanism,” because polluters don’t pay for the resource they are using up

… a worldwide problem.• From air pollution in L.A. and China to water

pollution in the Gulf of Mexico and “dead zones” around the world to soil pollution in Japan and the North Pole

… political.• Broad international support for the Kyoto Protocol

contrasts sharply with Pres. Bush’s refusal to ratify it

Pollution Control and The Free Market

Pollution Credits: The federal government decided in the early 1990s to cut air pollution from utilities by setting a cap on the amount of pollutants to be permitted and then issuing pollution credits; “dirty” plants can either buy expensive new equipment to cut emissions or they can buy pollution credits from other companies that can more cheaply reduce pollution; total credits available are lower than total emissions before the program began

• Comparing 1980 and 1999, electric utilities produced 41% more electricity in 1999, while emitting 25% fewer tons of sulfur dioxide

• The Kyoto Protocol uses the same principle to reduce worldwide emissions of greenhouse gases, principally carbon dioxide

Pollution Control and TaxesTax provisions can affect behavior:• There is a federal tax deduction, whether or not one

itemizes, for part of the cost of purchasing a new hybrid gas-electric car (such as the Toyota Prius)

• There is a federal tax-free fringe benefit allowed employees who purchase commuter or transit passes through a payroll deduction

• In 1991, Sweden introduced a sulphur tax that led to a drop in sulphur content of fuels to 50% below legal requirements

• Norway’s 1991 carbon tax lowered emissions from power plants by 21%

Key ConceptsCost-benefit analysis: In considering implementation of a particular

environmental protection, this requires comparing the cost of the protection to the value of the expected benefits (e.g., better health, less medical care)

Impact on future generations: Future generations “pay” for our current environmental decisions

Causation, correlation and coincidence: If A is observed and then B, science is needed to determine if A caused B, or A and B are correlated because both are caused by Z, or the happening of A and B in proximity was simply coincidence

Who pays: Should taxes pay for environmental measures (that is, all taxpayers)? Or should business (that is, consumers and/or investors)? Or should landowners?

Politics: The political party in control of the White House has a substantial impact on national environmental policy

The Federal Framework

National Environmental Policy Act (NEPA): 1970 federal law committing federal government to “use all practicable means” to conduct its affairs to promote “the general welfare” and operate in “harmony” with the environment

Council on Environmental Quality (CEQ): Conducts studies, collects information, develops policy and legislative proposals for president and Congress

Environmental Impact Statement (EIS): NEPA requires all “proposals for legislation and other major federal action significantly affecting the quality of the human environment” be accompanied by an EIS explaining impact on environment and detailing reasonable alternatives; a major private-sector action supported by federal funding or requiring federal permission may also require an EIS

Environmental Protection Agency (EPA): Duties include (1) gathering information, (2) conducting research, (3) assisting state and local pollution control efforts, and (4) administering many federal environmental laws

Clean Air Act of 1990 (CAA)

• Federal clean air legislation passed in 1963, 1965, 1970 and 1977; the last two gave the EPA power to set and enforce national air quality standards

• The CAA of 1990 requires tougher auto emission controls, cleaner burning gasoline and new equipment to capture industrial and business pollution, with goal of reducing airborne pollutants by about 50%

Example: Whitman v. American Trucking Assoc. (S. Ct. 2001)

Clean Water Act (CWA)• Purpose: To “restore and maintain the chemical, physical,

and biological integrity of the nation’s waters”• To be achieved primarily by imposing limits on amount of

pollutants that may lawfully enter “navigable” waters from any “point source” (typically a pipe)

• A significant problem, not currently addressed by the CWA, is pollution in surface water runoff

Example: Solid Waste Agency of Northern Cook County v. U.S. Army Corps of Engineers (S. Ct. 2001)

Waste Disposal IssuesToxic Substances Control Act (TSCA): Purposes of 1976 law are to

identify toxic chemicals, assess their risks and control dangerous chemicals

Resource Conservation and Recovery Act (RCRA): 1976 law which requires cradle-to-grave tracking of all hazardous waste products and licensing of owners and operators of hazardous waste disposal sites

Superfund—Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA): Primary purpose is to clean up hazardous dumps and spills included on the National Priorities List (NPL); funding has been problematic since separate taxing authority lapsed

Small Business Liability Relief and Brownfields Revitalization Act: 2002 law providing liability protection for prospective purchasers and contiguous property owners; authorizes increased funding for state and local programs that assess and clean up brownfields (less contaminated former industrial and commercial sites not on the Superfund NPL)

Endangered Species Act (ESA)

Secretary of Commerce determines whether fish, wildlife or plant species should be listed as endangered or threatened• A species is “endangered” when in “danger of

extinction throughout all or a significant part of its range”

• A species is “threatened” when “likely to become an endangered species within the foreseeable future”

ESA forbids any practice which would result in the “taking” of any endangered species and forbids degradation of endangered species’ habitats

Example: Cook Inlet Beluga Whale v. Daley (D.C. D.C. 2001)

Penalties and Enforcement• Violators initially warned and compliance schedule set• Fines• In recent years, use of Supplemental Environmental

Projects (that is, some environmental “good work” in place of a fine) to settle wrongs

• Civil or criminal actions against both firms and managers

• Citizen suits used to challenge government environmental decisions and demand compliance

Example: Cook Inlet Beluga Whale v. Daley (D.C. D.C. 2001)

State and Local Regulation

• Under their police powers, state and local governments can impose various controls to protect and maintain the public health, safety and general welfare

• Federal law assigns states primary enforcement power under statutes such as the Clean Water Act, but only so long as enforcement equals federal standards

Common Law Remedies

Private nuisance: Substantial and unreasonable invasion of private use and enjoyment of one’s land

Public nuisance: Unreasonable interference with a right common to the public

Trespass: Any intentional invasion of individual’s right to exclusive use of his or her own property

• Nuisance and trespass have been used for such offenses as fouling a neighbor’s water, flooding another’s land, or causing excessive noise, smell or particulate matter on another’s property

Negligence and strict liability: May also arise from pollution cases; for example, the use of toxic chemicals might be so abnormally dangerous as to provoke a strict liability claim

Remedies: Monetary damages for the harm suffered or an injunction to prevent similar conduct in the future, or both

Today’s Debates

Salmon or Jobs?: What to do about dams on the Salmon River

Global Warming: The international and scientific debate continues