Thank you for the opportunity to speak to you this afternoon. It is an honor to be asked to share my thoughts with you regarding the future direction of environmental protection in America. While I have certainly found myself in disagreement with your organization on a number of different fronts, I can say with all honesty that the NRDC remains the most intellectually honest and credible organization of the environmental movement. Your invitation to Cato this morning indicates that a certain degree of mutual respect exists between our two organizations, and for that I am grateful. There are few organizations in the environmental movement that would be interested in pursuing the sort of dialogue that we are having this afternoon, and I can't emphasize enough how well I think this reflects on the seriousness of purpose here at the NRDC.
I would like to take advantage of the few moments I have with you this afternoon to dwell not on our areas of disagreement, but on our areas of agreement. I believe that there is more common ground between our two organizations than is generally recognized.
Areas of Principled Agreement
Let me lay out a few fundamental matters about which I suspect we may be in agreement:
When natural resources are unowned, unregulated, and exploited by any who find profit in their use, a "tragedy of the commons" (Garrett Hardin's phrase) arises which leads inevitably to their overuse and ruin.
Harmful environmental pollutants are an assault upon the property and persons of America and should not be countenanced by society any more than mugging or theft should be countenanced by society. Cost-benefit analysis in particular -- and political decision making in general -- is too often an attempt to determine whether these assaults on individuals are in the "public interest." I would argue that this kind of naked utilitarianism is alien to the principle of individual rights upon which this nation was founded and fundamentally at odds with the public health objectives of environmentalists.
Ideally, prices for goods and services should reflect the full cost of production, and that environmental costs are imperfectly accounted for in today's marketplace. The ideal method by which polluters should pay for their pollution is to be held legally and fiscally accountable for their actions.
Now, having said that, I think most of our disagreements are not about these fundamental principles; they are about empirical matters, such as whether chemical x or phenomenon y really constitutes an environmental or public health threat.
Yet we do seem to part company on how those principles upon which we largely agree should be put into practice. My point this afternoon is that environmental regulation as it currently exists does not embody those principles; they subvert it. I firmly believe that only by replacing those regulations with a tort-based approach can those principles ever be fully served, and that environmentalists should seriously consider whether their commitment to regulatory protections have blinded them to other, far greener, social arrangements and the inherent limitations of political regulation.
The Cul-de-Sac of Modern Environmentalism
Consider our first area of principled agreement; the dangers presented by an unregulated public commons. The NRDCs belief is that ecological resources are by definition public commons that must be centrally regulated and stewarded by bureaucratic agents lest they be recklessly despoiled by industry. Moreover, central planners must not only have near complete veto-power over private actions that might affect the environment; they must also be empowered to stipulate how much pollution is acceptable and exactly how each business is to go about controlling emissions and even, in some circumstances, how products are manufactured. The inescapable differences between millions of pollution sinks, environmental carrying capacities, and manufacturing processes are inevitably blurred and "averaged" in one-size-fits-all regulations that -- while not always efficient or environmentally optimal -- at least have the virtue of requiring fewer than a million regulators.
There are inherent problems with this approach that stymies the achievement of avoid environmental objectives.
First, command-and-control regulations -- which require regulators to determine exactly which technologies and what manufacturing methods are to be adopted for pollution control in every single facility in the nation -- place an informational burden on public officials that is impossible to meet in the real world. Every facility is different. Every air and water shed has different carrying capacities for different pollutants. There simply isn't enough manpower or expertise to carefully weigh the most efficient mandates or the most optimal controls necessary for each plant in each pollution shed.
Second, the determination of which pollutants pose ecological or health threats, and at what level of concentration those threats are realized, are made by political bodies who, as I'm sure you well realize, are motivated primarily by political -- not environmental, economic, or human health -- considerations. Even when those determinations are delegated to administrative "experts," (such as the EPA) the regulatory process is still subject the heavy crosswinds of politics and interest group considerations. Only by the sheerest political coincidences are appropriate standards ever adopted. For example, consider the range of acceptable public health risks that have been written into regulatory statutes; they vary from allowable mortality risks of 1 in 1,000 to 1 in 100 million. The only real explanation for this variance are the political considerations that went into the promulgation of each of those standards. This is a dangerous way to run the public health railroad.
Finally, the political determination of regulatory standards explicitly encourages a utilitarian approach to environmental protection. If environmental resources are always to be thought of as "public spaces" owned by all, then competing claims for how those public spaces are used are legitimized, politicized, and inevitably reduced to matters of interest group preference and political balancing. A claim that we should "use those spaces to maximize economic growth," is no less valid than a claim that we should "use those spaces to preserve environmental amenities." Such competing claims are almost always judged by the rubric of what best suits "the public interest" -- the definition of which is inevitably determined by politically charged and generally unknowledgeable elected officials.
And there is no way to remedy these fundamental problems. Electoral strength comes and goes. The pursuit of "better" elected officials or regulators will fail to substantively improve matters because the problem is incentives, not expertise or political morality. More regulation simply compounds the problem of inevitably sub-optimal regulation.
Let me suggest that we address not the symptoms, but the disease. And that disease is the politicization of the environmental commons. A better remedy is, in a nutshell, to remove environmental protection from the realm of politics and to return to the realm of law, where one's rights are the paramount concern, not someone's arbitrary opinion about "the public interest."
Privatizing the Public Commons: A "Greener" Way
By way of explanation, pollution should be thought of as a kind of trespass; the disposal of one's garbage or waste on the property of another. The fundamental premise of environmentalism is that it is the legislature's role to determine to what extent this trespass should be allowed and it is the executive branch's job to enforce those trespass limitations. Accordingly, remedies for these trespasses are political -- not private -- matters of concern.
Yet there is no reason why environmental resources cannot be owned by private parties. For example, the legal mechanics of private groundwater rights are conceptually no more difficult that the existing legal mechanics protecting private oil field rights. In England, private organizations such as fishing clubs own large stretches of rivers and streams and have filed thousands of successful law suits enjoining others from harming the delicate habitat they rely upon for their sport. And the right of ownership to air above one's property is frequently legally recognized. Use of chemical "tracers" in pollution discharges (an increasingly common practice in various studies) allow even difficult-to-detect emissions to be "branded" or "fingerprinted" and thus be traced back to the source.
An alternative environmental paradigm would hold that, if pollution is essentially a trespass upon private property, the private property owner -- not governmental agents -- should determine what is or is not acceptable and under what circumstances (or contractual arrangements) such trespass is to be allowed. Disputes should be brought to civil courts -- not politicized legislatures -- for adjudication.
If your neighbor starts dumping his garbage in your back yard, for instance, you wouldn't immediately think of going to the local government to lobby for regulations to control the time, place, manner, and content of his dumping. You would probably consider your backyard as your property, and threaten to file a nuisance complaint and/or take your neighbor to court to enjoin this violation of your property.
Granted, the example is a bit simple, but it neatly illustrates the essential point I am making. Pollution properly understood is a trespass, and such trespasses are properly enjoined by courts of law, not refereed by political bodies. Each individual should decide for his or her self how much pollution (trespass) they are willing to allow. If they can demonstrate in a court of law that the trespass crosses a certain threshold of significance and is potentially harmful (ruling out, for example, absurdities such as arguing that radio waves transmitted by a radio station represent a trespass), then courts should be empowered to enforce the property rights of that person and either require compensation for the trespass or even force the polluter to cease and desist the activity in question. On the other hand, if the polluter offers to pay the party in question to accept the discharge, then no trespass has occurred. In a sense, the property owner has "sold" part of his property to the discharger.
Pollution problems caused by discharges from multiple sources (which would make problematic the strait application of trespass law) have often been controlled by the "condominium" model of property ownership. For example, German communities currently maintain private associations for protecting the Ruhr, Wupper, and Emscher rivers; polluters are required to own shares of these associations and are assessed costs for maintaining water quality. This regime has worked admirably both in terms of economic efficiency and environmental quality.
Unfortunately, courts have generally held that regulatory standards preempt common law actions since regulations implicitly "nationalize" (and thus remove from the realm of private tort action) those resources that would otherwise be left to private parties to police.
Businesses would naturally face strong incentives to reduce pollution to the extent possible, innovate to discover cheaper and more efficient practices and technologies, make prior contract with potentially effected parties, and locate operations where the least amount of environmental harm is possible. A requirement that they hold environmental liability insurance would effectively transfer the regulatory functions of the EPA to the insurance industry, which would have even more incentive than the EPA currently does ensure that appropriate human health protections are in place. The current regulatory regime has not proven particularly effective at achieving any of those desired goals.
Carl Pope, president of the Sierra Club, agrees that this sort of approach "would yield restrictions on pollution more stringent than those embodied in any current federal and state pollution laws." That's certainly true if a pollutant is truly harmful or a significant nuisance, since individuals -- not governmental authorities -- would have the final say over how much pollution they are willing to tolerate on their property or person. It would also have the benefit of allowing an array of voluntary contractual relationships between polluter and polluted, internalize the cost of pollution (the holy grail of environmental economics), most directly achieve the goal of making the polluter, not the public, pay for pollution, and minimize the transaction costs and inefficiencies caused by politicized rulemaking. Environmental organizations like the NRDC would probably evolve into class-action legal groups to protect Americans from illegal environmental aggression.
Many of you, however, probably agree with Jimmy Breslin, who once warned; "Don't trust a brilliant idea unless it survives the hangover." Does "free market environmentalism," then, pass the hangover test? Yes. Prior to the progressive era, environmental pollution was primarily controlled -- not by public regulation -- but by the kind of common-law trespass and nuisance suits that I have just described. They were abandoned, according to Morton Horwitz, author of The Transformation of American Law (Vols. I and II) because they worked too well for the tastes of American businesses. Horwitz, a professor of history at Harvard University and winner of the Bancroft Prize in American History for the first volume of that book, argues that the business community chafed under the burden of liability suits stemming from pollution nuisances and successfully convinced the courts and public officials to relieve them of direct liability for pollution and environmental harms. Regulations meant to balance "the public interest" were instituted in there stead, releasing corporate American from private liability for all but the most egregious violations of property.
Addressing the Hard Cases: Performance-Based Regulation
Obviously, not all environmental problems are amenable to strict common-law remedies, but most are. Those that aren't should be dealt with by some sort of performance based regulation. While I know that NRDC remains suspicious of performance-based regulations, I am frankly mystified as to why. If businessmen are truly the narrow-minded profit maximizers imagined by many of your policy staff, then they will do a particularly good job finding efficient and imaginative ways to meet environmental objectives at the lowest possible cost, as though "led by an invisible hand" to promote an ultimate end --environmental protection -- "that was no part of their intentions." As long as performance-based standards can be monitored and policed by enforcement agencies, there is no reason to fear.
Common sense and experience tells us that individual plant managers are better equipped to discover the most efficient ways and methods to control pollution at their facilities than are EPA technicians and consultants. This is not only because those managers have more direct knowledge of their facilities and the technology of production, but because competition forces cost minimization, and even the most dedicated EPA official isn't go to lie awake nights searching for new solutions to pollution control problems.
As economists Daniel Klein and Pia Koskenoja point out, "When we go into a restaurant, for example, and order a crock of French onion soup, we specify only the desired output. We do not tell the chef how to slice the onions, grind the pepper, or grate the cheese. We do not tell the restaurant manager where to get the ingredients, how to store them, or how to train the employees. Customers merely specify the outputs, and as [Adam] Smith explained, entrepreneurs in the market attend to the inputs. Successful entrepreneurs are experts on local opportunities for effectively combining inputs, and they compete for customers by seeking to produce the outputs that customers desire."
Economist Tom Tietenberg has calculated that "performance-based" standards -- those that require regulators simply to decide how much pollution can be allowed from a facility and leaving it to the facility to meet that standard in whatever way it desires -- can reliably save from 50 percent to 260 percent on control costs. A 1990 joint Amoco-EPA study of a Yorktown, Virginia oil refinery found that federal environmental standards could be met at 20 percent of current costs if the refinery were allowed to adopt alternatives to EPA mandates.
While neither the common law or performance-based regulation is perfect (and many elements of those approaches require qualifications and special considerations that time does not permit us to get into this afternoon), we are not faced with a choice between perfect and imperfect public policies. The legal system may prove to be an expensive, inefficient, confusing, and costly means by which to address environmental concerns, but the political system shares all of those failings with the addition of one other; the raw politicization of the most basic questions of human protection and environmental health.
It's time to allow individual Americans, not self-aggrandizing politicians, to determine what those environmental ends should be. Its hard to think of a greener platform for the environmental movement as it enters the 21st century.