The Cato Review of Business & Government
The Cato Review of Business & Government
William A. Niskanen is Chairman of the Cato Institute.
Many federal environmental laws are now subject to reauthorization, but Congress appears to be in no hurry. This is probably for the best, because there is little apparent consensus on the appropriate next steps. Shortly after the Clean Air Act Amendments of 1990 were signed, for example, all but a few of the nearly 200 environmental measures on state and local ballots that fall were defeated. The environmental movement had several symbolic victories in 1992, such as the Rio Earth Summit and the election of Al Gore as vice president, but the popular support for further measures has largely evaporated. Now is the time for reflection on the successes, problems, and failures of federal environmental legislation, with the hope that decisions on the next steps will be based on an informed and honest reflection on those issues.
First, those who are prone to criticize most recent environmental regulation should acknowledge that the first major federal environmental laws, however crude, were very effective. Most dimensions of air and water in most regions have improved substantially since 1970, despite a 27 percent increase in population and a 82 percent increase in total economic output. The benefits of the first Clean Air Act and Clean Water Act, for example, were almost surely higher than the cost, and those measures were broadly supported.
That may be the end of the success stories. Most environmental programs approved since 1972 have led to little measurable benefits but rapidly increasing costs in the form of private and public expenditures, regulatory uncertainty and delay, and litigation. Implementation of several of these programs has been scandalous:
The Endangered Species Act of 1973 authorized uncompensated restrictions on the use of land that may be habitat for listed species, and that authority has been broadened by interpretation to include subspecies (such as the northern spotted owl) and regional populations (such as the grey wolf). Not one species has been delisted as a clear consequence of the use of that authority. And those restrictions have cost billions of dollars, including a large degree of responsibility for the losses from the October 1993 California fires, and the prospect of tens of billions more.
In 1980, Congress approved the Superfund to clean up hazardous waste sites. For several reasons, this program has made no significant reductions in risk. The waste on many of those sites poses no risk to those offsite; for those sites, land-use restrictions are likely to be much more efficient than cleanup. Only a small share of the costs to date have been used for cleanup; the rest went to litigation and other transaction costs. The cleanup standards (e.g. soil safe enough for children to eat, water safe enough to drink) are unduly high; this has made the costs of the cleanup per site very high and severely limited the number of sites at which cleanup has been completed. This program has costs tens of billions of dollars to date and may cost hundreds of billions in prospect.
In the late 1980s, the Corps of Engineers began to require a permit for any action that reduces the amount of wetlands. The presumed authority for this regulation is the Clean Water Act, but this act limits the permit authority to actions that affect navigable waters and it does not mention the word or concept of wetlands. Moreover, the Corps has defined wetlands very broadly, including depressions that may be temporarily saturated but have no surface water. Despite their questionable statutory and scientific basis, those regulations have been rigorously enforced. The average time for approving individual permits is over a year, and more than half of the permits requested are withdrawn. Several people have been jailed for actions that most of us would regard as innocent or beneficial. The costs of those regulations to date have been the denial or delay of thousands of permits, the costs of mitigating actions required on approved permits, and the arbitrary penalties for violating those regulations. The several programs described above are ineffective, inefficient, and unjust, and they have provoked a growing protest by local governments and small property holders. The 1990 amendments to the Clean Air Act, however, are likely to result in even higher net costs. The smog provisions, for the first time, will require millions of commuters to leave their car at home, even though almost all urban areas outside of California now have satisfactory air quality; the cost of the several new smog regulations is expected to be about four times the value of the health benefits. (See the article by Lis and Chilton in this issue). The toxic provisions will require several hundred thousand small businesses-such as bakeries, dry cleaners, and paint shops-to have EPA permits, even though there is no significant epidemiological evidence that current levels of air toxics have adverse health effects. The acid rain provisions established an expensive program to reduce sulphur dioxide, even though a major 10-year study completed in 1990 concluded that acid rain has only small adverse effects and that the normal replacement of utility boilers would eliminate most of these effects. The 1990 amendments to the Clean Air Act, if fully implemented, will probably have the largest continuing net cost of any environmental law-unless we overreact to the threat of global warming.
Why did the environmental groups overreach? Why has Congress overreacted, slowing economic growth and eroding the political base for sustainable environmental policies? The major reasons why most environmental regulations now yield net costs, I suggest, are the following:
Environmentalism as a Moral Crusade. For many, environmentalism has become a form of nature religion in which any amount of pollution from human activity is a moral offense. For those who share this perspective a lower level of pollution is regarded as inherently good, whatever reduction of other values (economic output, time, liberty, etc.) is the price.
The Rejection of Economics. One of the casualties of doctrinaire environmentalism has been the loss of a limiting principle based on incremental benefits and costs. The economic perspective is based on a balance of those values. For a given technology, the cost of each successive increment in environmental quality generally increases. For a given income, the benefit of each successive increment of environmental quality declines. That leads to a reasonable conclusion that there is some optimal nonzero level of pollution that declines with improved technology and higher income. Congress and the courts, however, have progressively rejected the application of a benefit-cost criterion in setting heath, safety, and environmental standards. The Clinton administration seems to be of two minds on this issue. In September 1993, for example, the new executive order on regulatory review strongly endorsed the maximum net benefit criterion, but the proposed new pesticide legislation would ban consideration of the benefits of pesticide use and would set safety standards based on "reasonable certainty of no harm." The problem of setting standards based only on their safety effects, of course, is that there is no limiting principle. If "reasonable certainty" is interpreted as limiting harm to one person in a million, why isn't a one-in-a-billion standard even better?
The Distortion of Science. Economists have become accustomed to being ignored, but scientists are not. One other casualty of doctrinaire environmentalism is the distortion of science to justify progressively broader or tighter standards. The examples are legion. Most standards on carcinogens are based on extrapolating from the effects of high doses on rodents, by a compounding of conservative assumptions, to estimate the effects of low doses on humans; this process probably overestimates the risks to humans by several orders of magnitude. In numerous cases, a standard is based on a scientific possibility without any significant evidence of actual harm-a pattern common to the standards for CFCs, air toxins, and sulphur dioxide emissions; the proposed ban on smoking in the workplace; and the many proposed measures to reduce the threat of global warming. One consequence of the distortion of science is that substantial resources are spent to reduce minimal risk at the expense of other activities that would reduce risk at a much lower cost.
Politics. All of those issues, of course, are distorted by the lens of politics. Congressional second guessing has made regulators strongly biased toward minimizing the probability of approving an unsafe product with little concern for the costs and risks of not approving a safe product. The most pervasive bias of congressional politics is to specify types of regulation that serve the interest of some firm, industry, or region. The use of ethanol, for example, is strongly favored by both regulatory and tax preferences. The mandate to use coal scrubbers favored the use of high-sulphur coal. The pattern of setting higher standards on new products favors old technology and the slowest growing firms, industries, and regions. The most serious bias in congressional politics, however, is to overreact to perceived environmental crises-Love Canal, Times Beach, Three Mile Island, Exxon Valdez, Alar, etc.-by hasty, ill-conceived new legislation. Appropriate reflection on environmental policy should begin by recognizing that not one person died or was convicted of a criminal act as a consequence of any of those perceived crises. Where would thoughtful reflection lead us? I don't know. My inclination would be to repeal all federal environmental legislation enacted since 1972, but that won't happen and does not provide guidance about what, if anything, should be put in its place. Maybe we should start by seeking agreement on the principles that should guide federal environmental policy. Here is my suggested list:
Federal regulation should be limited to those environmental problems with significant interstate or international effects. Given the diversity of preferences and conditions, we should not set national standards to address local environmental problems.
Environmental quality is highly valued in the United States, but it is not our only value. For this reason, we are best served by further limiting federal environmental programs and regulations to those for which the incremental costs are no higher than the incremental benefits.
One way or the other, we need to establish common professional unbiased procedures and standards for risk assessment. This may require setting up an independent risk assessment group, either to conduct the basic risk assessments or to review the agency assessments.
For both efficiency and other values, some instruments of environmental policy are preferred to others. The following list of instruments, I suggest, best reflects those values-ranked from most preferred to most offensive: property rights and tort law (preferably accompanied by tort reform), marketable emission rights or permits, taxes or fees on emissions, output standards, general input standards, input standards only on new products, land-use restrictions not based on nuisance law. Many of the problems of current environmental policy are due to undue reliance on the least preferred instruments. The least efficient of current instruments, for example, are the widespread technical standards on new products. The most offensive current instrument is the growing use of land-use restrictions to preserve endangered species, wetlands, and historic properties-an instrument that may be unconstitutional and should be replaced by the purchase of easements.
Maybe above all, don't panic. The apocalyptics are wrong. We do not face a silent spring. Earth is not in the balance. Most health and environmental indicators continue to improve. We face several continuing environmental problems, but no apparent crises. These problems should be addressed calmly, professionally, and in ways that reflect our several shared values. Reflection may be good for the soul, but it may contribute to better policy only if it provokes and shapes a dialogue. Comments are welcome.
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