A Smarter Way to Practice Environmentalism

 

As the EPA examines how to regulate greenhouse gas emissions from coal-fired power plants, the federal government is once again engaged in the tricky business of figuring out the proper standards by which to regulate environmental harms. As I argue in my new column for Defining Ideas from the Hoover Institution, they ought to start by rethinking the entire approach that has dominated over the past several decades:

…[T]hese current disputes could have been avoided as far back as 1970 by following one simple maxim: The EPA should regulate outputs, not inputs. That approach derives from the sensible rules governing private lawsuits against polluters under the judge-made law of nuisance, which operates on a strict liability standard that does not allow a polluter to defeat liability by claiming that its emissions are cost justified. Instead, in all cases, the Court measures damages to victims solely by the amount of harm that the pollution causes, without considering the cost that private parties must incur to reduce or eliminate that pollution. 

Further:

At this point, the individual firm is forced to ask whether its gains from current production are sufficient to justify the heavy damages that it must pay to others. Often that answer is no, so that the firm will then voluntarily cut back on its emissions to minimize the sum of three variables: the cost of pollution, the cost of pollution prevention, and the administrative costs of making these calculations. If the costs of pollution are correctly set, the firm will make the right social decision on its own initiative.

Now that the government is out of the business of measuring inputs, it will no longer have to make independent judgments about the “best available technology” (BAT) for pollution, which typically “is a case-by-case determination of an emission limit and/or control technique which, taking into account environmental, energy, and economic considerations, represents the maximum emission control achievable by any new or modified source of air pollution.” No one knows how to make these determinations, which require deciding whether a reduction of 90 percent pollution at a cost of $1 million is preferable under the law to a reduction of 99 percent of pollution at the cost of $10 million, when the net profits before regulation are $5 million.

Instead of these intractable disputes, it’s better to ask whether, at the margin, the additional cost of pollution control is justified by the environmental gains achieved. Only a firm has the information needed to make these continuous adjustments. Let the government set the per-unit tariff for pollution and the firm will figure out its compliance strategy, independent of political machinations. To be sure, this system requires some collective measurement of pollution costs from various types of emissions. But any system of state regulation has to ask that question, including one that uses BAT.

For a more thorough analysis, read the column in full.

What do you think? Will we ever approach environmental protection with more economically sensible policies?

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  1. Guruforhire Inactive
    Guruforhire
    @Guruforhire

    I agree with you nearly entirely.

    Unfortunately, it still relies on some amount of good faith, that is well past the point of being rationally assumed.

    • #1
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