(This article originally published in Forum for Applied Research & Public Policy Vol. 13, 1998)
Modern environmental policy developed in the 1970s as environmental protection became a national concern. Prior to that time, most environmental responsibilities were left in the hands of state and local governments, if they were addressed at all. Yet beginning in 1969, Congress enacted a series of sweeping federal statutes to regulate environmental quality at the national level. All but a few federal environmental responsibilities were centralized in a single agency, the U.S. Environmental Protection Agency (EPA), empowered by new laws to protect the air, water, and soil.
Most of the early federal environmental programs seemed to work well. Whether or not they generated the greatest environmental bang for the buck, many indicators of environmental quality improved significantly in the succeeding 25 years. The gains were sufficiently substantial that few raised questions to cost so long as the air and water were getting cleaner. To many, environmental policy was one of the few areas where federal programs clearly worked.
Today, however, the consensus in favor of a centralized, national approach to environmental policy is disintegrating. Environmental analysts, government officials, and activists across the environmental spectrum are calling for greater local control in environmental policy and are looking to places other than Washington, D.C., for solutions to environmental problems.1 State officials are particularly aggressive. In 1994, several state environmental agency heads formed the Environmental Council of the States (ECOS) to lobby for greater state flexibility. "State environmental leaders could no longer stand by and let EPA take the lead," explains Mary Gade, Director of the Illinois Environmental Protection Agency. "States were quite simply ‘Fed up.’"2
The reason for the disintegrating consensus is straightforward: the basic policy framework enacted in the 1970s does not serve America well in the 1990s. Costs have escalated to the point where Americans now spend well over $150 billion complying with environmental regulations, and the results are dwindling. Some laws, such as Superfund and the Endangered Species Act, are outright failures, at time exacerbating the environmental problems they were meant to solve. As regulatory commands piled up bureaucratic controls, the system has neared a breaking point. In the words of law professor Richard Stewart of New York University, "The system has grown to the point where it amounts to nothing less than a massive effort at Soviet-style planning of the economy to achieve environmental goals."3
Of particular concern is the ability of a national, centralized regulatory structure to address environmental problems that are largely local and regional in nature. The EPA’s Scientific Advisory Board concluded in 1990 that most remaining environmental problems "are site-specific, varying from area to area and requiring tailored controls at the regional, state, or local level for effective mitigation." Yet current programs fail to allow state and local governments sufficient flexibility in tailoring their programs to local needs. According to the United States Advisory Commission on Intergovernmental Relations, "Federal rules and procedures governing decision-making for protecting the environment often are complex, conflicting, difficult to apply, adversarial, costly, inflexible and uncertain."4
State and local officials increasingly complain that federal laws and regulations force them to implement environmental programs that make little sense in their part of the country, diverting resources from more pressing concerns. As a Columbus, Ohio, health official said a few years ago, "The new rules coming out of Washington are taking money from decent programs and making me waste them on less important problems."5
State environmental agencies must follow federal dictates governing minute details of regulatory programs that are not simply for pollution control purposes. Federal regulations require states to provide for the requisite amount of public participation and opportunities for litigation by citizens and even ensure that permitting programs meet EPA’s standards for environmental justice. Whereas the Clean Water Act speaks of preserving and protecting the states’ primary role in pollution control, "under the present scheme of the Act, the states generally have a choice between acquiescing to federal proscriptions or ultimately facing the prospect of federal exemption," notes environmental attorney Mark Pifher of Colorado Springs, Colorado.6
In this context, it should be no surprise that many analysts are calling for a return of substantial policymaking authority to state and local governments. In 1995, for instance, the National Academy of Public Administration (NAPA) concluded that "EPA and Congress need to hand more responsibility and decision-making authority over to the states."7 ECOS calls for "the long overdue transfer of power in the state-federal partnership."8 David Schoenbrod, an attorney formerly with the Natural Resources Defense Council, argues that the historical preference for federal regulation is misguided. "The popular desire for a clean environment can be realized with far more common sense by returning control of local government," Schoenbrod says.9 NAPA, ECOS, and Schoenbrod are but three voices in a growing chorus calling for a new environmental federalism that would return greater environmental policymaking responsibility to the states.
America is a broad and diverse country, and environmental concerns, preferences, and problems vary from place to place. The local and regional nature of many environmental problems means that local knowledge and expertise is necessary to develop proper solutions. Such localized knowledge is inevitably beyond the reach of even the most intrepid federal regulators. For example, the most effective and equitable strategy for controlling ozone precursors will vary from city to city depending upon the local mix of stationary and mobile sources, the relative age of the automobile fleet, and dominant weather conditions. As University of Kansas law professor Henry Butler and Cornell law professor Jonathan Macey noted in a recent study, "Federal regulators never have been and never will be able to acquire and assimilate the enormous amount of information necessary to make optimal regulatory judgments that reflect the technical requirements of particular locations and pollution sources."10 One-size-fits-all can very easily become one-size-fits-nobody.
Moreover, when policies are nationalized, it can become difficult to address the concerns of those communities that suffer disproportionately from policy errors or omissions. Local environmental concerns must compete against national political priorities. A small town that needs to devote resources to improving the quality of its drinking water must compete for federal funds and attention with whatever environmental concern is on the evening news. Federal agencies and national politicians are less responsive to local needs than more local institutions and officials. As Mary Gade explains, "States are closest to their constituents and problems, bringing a necessary sensitivity and perspective to local environmental issues that even EPA’s 10 regional offices, often many hundreds of miles away, can’t have."11
The public’s broad support for environmental protection is often confused with public support of existing policies, in particular, and an extensive federal role in environmental policy more generally. Yet when voters are given the choices as to which level of government they would prefer to direct environmental policy, they almost invariably choose state and local governments over the federal government. In 1996, a national poll of registered voters found that Americans, by a margin of nearly two-to-one, would choose to have most environmental priorities set at the state or local level rather than in Washington. Democratic pollster Stanley Greenberg also found that "for ordinary citizens, devolution is a way of making the environmental regime more responsive, more flexible and sensible."13
Nearly all environmental analysts recognize the need to experiment with new approaches to environmental protection—approaches that are more flexible and market-oriented or rely upon stewardship and voluntary arrangements. Yet despite substantial talk about using incentives and cooperative approaches, the underlying nature of federal mandates has not changed. It is hard to teach old bureaucrats new tricks. Efforts to "reinvent environmental regulation" have yielded paltry results, and to date every substantial legislative initiative to reform environmental law has died in Congress. Even the Unfunded Mandates Reform Act, vehemently opposed by most major environmental groups, does no more than place an inconsequential procedural hurdle before the enactment of new environmental mandates. Existing environmental rules remain untouched.
Although the federal regulatory system has shown itself to be inordinately stubborn and resistant to change, this is not the case at the state level. Despite extensive federal involvement in environmental policy, many states have become green "laboratories of democracy," experimenting with new ways of advancing environmental policy debate centers on Washington, states are developing the next generation of environmental policies, from air quality to park management.14
For instance, 40 states have their own hazardous waste site cleanup program. The performance of these programs puts the federal Superfund program to shame. States are cleaning up hazardous waste sites faster and less expensively than the federal government. It typically costs $25-30 million to clean up a single site in the federal Superfund program, and the average cleanup time is about 10 years. By comparison, Minnesota is cleaning up sites for less than $5 million each and completing cleanups in only a few years. Winston Porter, who used to run the Superfund program at the EPA and now heads the Waste Policy Center in Leesburg, Virginia, reported in 1995 that New York, California, and Wisconsin had each remediated approximately 200 sites. That means that these three states had each cleaned up about as many sites as the entire federal program with no significant drop-off of public health protections.15
In Michigan, an executive order requires the Department of Environmental Quality to perform cost-benefit analyses of new rules. The executive order also requires coordination with a central executive office, much as is supposed to happen on the federal level with the White House Office of Management and Budget. The order also requires the review of old rules. Phase one of that program examined 287 Department of Environmental Quality regulations and got rid of 100 rules identified as wasteful or duplicative. Interestingly enough, despite centralized review and cost-benefit analysis, Michigan sped up the rate at which new regulations could be issued. The amount of time to issue new regulations dropped from an average of two years to only seven months.
Comparing state and federal resource management creates another stark picture. National forests lose money on timber sales and have a poor record of environmental protection; state forests, such as those in Montana, turn a profit form timber management and have superior environmental performance.16 States such as Texas and New Hampshire have taken steps to make their parks self-sufficient while improving the services offered to local residents.17
Environmental concern has focused on the plight of fisheries in recent years, and with good reason. Overfishing plagues many fish stocks. Virginia implemented individual transferable quotas for a state fishery, and the program is popular with environmentalists and fishers alike. Yet federal law prohibits regional fishing councils from adopting similar steps in coastal fisheries purportedly under federal protection.
State officials, closer to the environmental and economic concerns of their residents than those of federal officials, are seeking to solve environmental problems. Regrettably, federal environmental standards and regulatory requirements stand in the way. States that attempt new approaches to pressing problems often must seek federal approval; failure to comply with EPA demands can result in severe sanctions, including the loss of highway funds and the direct imposition of federal controls. Federal environmental regulations, along with the mindset that all environmental problems require national solutions, are a serious obstacle to the policy innovation necessary to address contemporary environmental concerns.
Arguments for devolving environmental policy to state and local officials immediately encounter resistance from federal regulators and Washington-based environmental activists. The three basic arguments against decentralizing environmental policy are that 1) there are economies of scale that require a substantial federal role; 2) if the federal government is not actively involved there will be a race to the bottom as states compete for business; and 3) pollution knows no boundaries, so there will be substantial environmental spillovers across state borders. These arguments sound compelling at first blush and are generally accepted as the reasons why federal environmental laws were enacted in the first place, but none of these arguments can justify the current structure of environmental policy.
Economics of Scale
The economies of scale argument does not justify federal hegemony in the environmental policy in the 1990s, if it ever did. As noted above, the current generation of environmental concerns are heterogeneous and require specialized knowledge that is typically available only at the state level.
When the first generation of federal environmental statutes was enacted, relatively little was known about environmental policy. Research and analysis were necessary to identify all but the most obvious problems and solutions, so it seemed logical that centralizing expertise would allow for a sound setting of priorities. Today, however, states spend more money on environmental matters and employ more environmental bureaucrats than does the federal government. Research on environmental issues has proliferated and is easily available through research libraries and the Internet. Centralized expertise is no longer necessary and can actually be counterproductive. Indeed, it is possible to conclude, like Butler and Macey, that "whatever the economies of scale associated with the centralization of environmental policy, they are surely overwhelmed by the diseconomies of scale in centralized administration.18
Economies of scale played a role in the initial nationalization of environmental policy, but not in the way most people think. Many states rushed to enact environmental regulations as concern for environmental protection mounted in the 1960s. Massachusetts, for example, passed the nation’s first coastal wetland protection statute in 1963, nearly a decade before the federal government got into the act.
State efforts, market forces, private conservation, and other factors produced significant environmental gains in some areas prior to federal intervention.19 When the federal government finally got involved with enacting environmental controls, it overrode state standards. The first federal regulatory scheme for controlling air pollution, The Air Quality Act of 1967, explicitly prohibited states from regulating automobile emissions and erected barriers to the imposition of more stringent controls on utilities. This was no coincidence. Large national industries supported federal intervention because they saw federal standards as a way of preempting a patchwork of standards tailored to local concerns.20
Race to the Bottom
The race-to-the-bottom argument is rather straightforward: faced with the prospect of competition from other states, states will lower their environmental standards to attract and retain corporate investment. This argument is also flawed.
Richard Revesz of New York University Law School argues compellingly that "contrary to prevailing assumptions, competition among states for industry should not be expected to lead to a race that decreases social welfare; indeed, as in other areas, such competition can be expected to produce an efficient allocation of industrial activity among the states."21
In practice, states that under-protect the environment are as likely to lose out from interstate competition as those that over-protect the environment, and federal regulation is unlikely to produce a more favorable result. This is true, in part, because if states compete by seeking to enact policies more favorable to corporate interests, federal environmental standards do not prevent this competition from occurring; they simply shift the competition into other policy realms.
If states cannot lower the burdens imposed by environmental regulations but still desire to compete, they will simply lower other burdens, such as occupational safety standards or corporate tax rates. Thus, if interstate competition produces social welfare losses, establishing federal floors in a few select areas such as environmental protection will not prevent states from competing in a destructive manner. Establishing federal floors in one policy area may even force competition into areas where the net social welfare losses are greater, leaving even worse off those whom federal regulations were intended to protect. Of course, this argument assumes that interstate competition is a bad thing, but this assumption itself is highly questionable.
Revesz’s review of the theoretical literature demonstrates that race-to-the-bottom arguments in the environmental area have been made for the last two decades with essentially no theoretical foundation."22
There is a fundamental conceptual problem with the race-to-the-bottom argument, for it assumes that any change to existing environmental standards or regulations that makes them less onerous and burdensome must necessarily come at the expense of environmental protection and overall social welfare. This presumption is unfounded. There is no doubt that alternative approaches to environmental protection can often produce equivalent or superior environmental performance at less economic cost. States are demonstrating this fact despite substantial federal barriers to policy innovation. Indeed, states are more aggressive than EPA in seeking to adequately measure the actual environmental results of various programs, instead of simply assuming that more inspections, fines, and penalties equal a cleaner world.26
Given the strong public support for environmental protection, it is just as likely that states will compete on both economic and environmental grounds. Under this model, state legislators and executive officials will seek out innovative ways of making environmental programs more flexible, predictable, and efficient, without compromising environmental quality. Interstate competition accelerates experimentation with policy alternatives. In the long run, this fosters policy innovation that increases social welfare as states learn from their own experiments and those conducted elsewhere. Not every policy experiment will be successful or worthwhile, but such experimentation is necessary to discover what policy arrangements are best able to fulfill environmental and social policy goals.
Spillovers
Some fear there are spillover problems, requiring continued federal involvement in environmental policy. Cross-boundary pollution, like any interstate externality, is a valid concern in environmental policy. If State A can pollute State B without fear of retribution, it has successfully externalized its environmental costs. Absent some external controls or dispute resolution system, this situation can lead to significant environmental harm. But the mere existence of such externalities does not necessarily call for a centralized regulatory bureaucracy. There are other means of dealing with at least some spillover problems, including compacts, regional authorities, and common law nuisance actions.27
It is interesting to note that prior to the enactment of the Clean Water Act, downstream jurisdictions had a federal common law cause of action against upstream polluters. In Illinois v. Milwaukee, the U.S. Supreme Court declared that "a State with high water quality standards may well ask that its strict standards be honored and that it not be compelled to lower itself to the more degrading standards of a neighbor."28 Yet once the Clean Water Act was passed, this remedy for interstate water pollution was eliminated.29
Pollution tends to ignore political boundaries, but that does not mean that every environmental problem is national. Where environmental concerns are regional in scope, there is an argument for entrusting a regionally based entity or group with devising an adequate solution. It is also worth noting that while concerns about spillovers are generally accepted as an explanation for nationalization, many national statutes are more focused on intrastate pollution than interstate pollution and that even where federal rules address potential spillover effects, federal enforcement has been less strict in the interstate context.30
The most costly and controversial portions of the Clean Air Act are not those that deal with interstate pollution concerns, but rather those that address urban air quality, something that is almost always a predominantly local issue. Houston’s failure to meet the National Ambient Air Quality Standard for ozone does not affect Baton Rouge, let alone Philadelphia. At most, the deterioration of urban air quality would call for a federal role in facilitating regional dispute resolution. Federal air quality standards, however, cannot be justified on spillover concerns.
What is true with federal air standards is true with most federal environmental regulations: they do not address interstate spillovers. Courts have even begun, albeit haltingly, to consider whether federal environmental regulations exceed Congress’ power to regulate interstate commerce under the Constitution. Most recently, the Fourth Circuit Court of Appeals threw out federal efforts to prosecute a developer for filling wetlands for, among other things, failing to demonstrate that the wetlands in question affected interstate commerce.31
The reality is that environmental problems that are national in scope are still the exception, not the norm. As Clemson University professor Bruce Yandle notes, there are local, regional, and perhaps even global environmental problems, but no environmental concerns are truly national.32 Drinking water systems, for instance, serve local communities. And Superfund sites attract media attention, but rarely, if ever, result in interstate contamination of groundwater. Thus, even if one accepts the spillover argument for national environmental regulation, it cannot be used to justify regulation in each and every case.
Yale professor Daniel Esty makes the argument that U.S. environmental policy should be informed by the idea of subsidiarity. That is, each environmental problem should be dealt with by the level of government—local, state, national, international—best positioned to address that particular concern. As Esty explains, "The challenge is to find the best fit possible between environmental problems and regulatory responses—not to pick a single level of government for all problems."33 Were this principle to be adopted, it would require a wholesale reorganization of current environmental policy—and for good reason.
There is a lot of talk about developing the next generation of environmental policies, but it is time for action. The federal government has shown itself to be unable to pursue substantive environmental reform, while states have struggled to fill those policy niches left unoccupied by the federal regulatory structure. It is not enough today, however, to simply allow states to experiment with new ways to comply with federal targets. Rather states must be free to set their own priorities and develop new methods of reconciling economic and environmental concerns. Interstate externalities may well call for federal intervention, but a handful of regional spillovers cannot justify the size and scope of the current federal environmental enterprise.
A new environmental federalism will unleash greater experimentation and innovation at the state level. Undoubtedly, not all these experiments will be good. Some might even be quite bad. But only through experimentation with new ideas can new policy approaches be developed and refined, and there is no better way to encourage such innovation than through interstate competition.
A substantial percentage of the American people believe there is nothing incompatible with more localized control and greater environmental protection. It is time for federal policymakers to them they are right.
Footnotes
1. Grassroots environmental groups are increasingly focused on local environmental concerns and are less focused on affecting policymaking in Washington, DC. See Jonathan Adler, Environmentalism at the Crossroads: Green Activism in America (Washington, DC: Capital Research Center, 1995), pp. 109-114, 144-146.
2. Mary A. Gade, "When the States Come Marching In," Natural Resources & Environment 10 (Winter 1996), pp. 4-5.
3. Richard B. Stewart, "Controlling Environmental Risks through Economic Incentives," Columbia Journal of Environmental Law 13 (1988), p. 154.
4. U.S. Advisory Commission on Intergovernmental Relations, Intergovernmental Decisionmaking for Environmental for Environmental Protection and Public Works (1992), p. 1.
5. Quoted in Keith Schneider, "How a Rebellion over Environmental Rules Grew from a Patch of Weeds," New York Times (March 24, 1993).
6. Mark T. Pifher, "The Clean Water Act: Cooperative Federalism?" Natural Resources & Environment 12 (Summer 1997), p. 34.
7. National Academy of Public Administration, Setting Priorities, Getting Results: A New Direction for the Environmental Protection Agency (1995), cited in National Academy of Public Administration, Resolving the Paradox of Environmental Protection (Washington, DC, 1997), p. 5.
8. Gade, p. 3.
9. David Schoenbrod, Time for the Federal Aristocracy to Give Up Power, Policy Study No. 144 (St. Louis, Center for the Study of American Business, February 1998), p. 2.
10. Henry N. Butler and Jonathan R. Macey, Using Federalism to Improve Environmental Policy (Washington, DC: American Enterprise Institute, 1996), p. 27.
11. Gade, p.4.
12. Jonathan H. Adler and Kellyanne Fitzpatrick, "For the Environment, Against Overregulation," Wall Street Journal (July 29, 1997). This article summarizes the results of the Polling Company, A National Survey of Attitudes on Environmental Policy (Washington, DC: Competitive Enterprise Institute, 1996).
13. Stanley B. Greenberg, Against the Tide: In Defense of Environmental Quality (Washington, DC: Greenberg Research Inc., 1995).
14. A catalog of state level innovations in environmental policy can be found on the Environmental Council of the States' web site: http://www.sso.org/ecos/innovate.htm.
15. J. Winston Porter, "Cleaning up Superfund: The Case for State Environmental Leadership," Reason Foundation Policy Study 195 (Los Angeles, CA: Reason Foundation, 1995).
17. See Donald Leal and Holly Lippke Fretwell, "Back to the future to Save Our Parks," PERC Policy Series PS-10 (Bozeman, MT: Political Economy Research Center, June 1997).
18. Butler and Macey, p. 27.
19. For instance, Paul Portney notes that "at least some measures of air quality were improving at an impressive rate before 1970." Paul Portney, "Air Pollution Policy," in Public Policies for Environmental Protection, P. Portney, ed. (Washington, DC: Resources for th efuture, 1990), p. 51. See also Robert Crandall, Controlling Industrial Pollution: The Economics and Politics of Clean Air (Washington, D.C.: Brookings Institution, 1983), p. 19; and Indur Goklany, "Richer Is Cleaner," in The True State of the Planet, R. Bailey, ed. (New York: Free Press, 1995).
20. Schoenbrod, p. 7. See also, E. Donald Elliott, Bruce a. Ackerman, and John C. Milliam, "Towards a Theory of Statutory Evolution: The Federalization of Environmental Law," Journali of Law, Economics and Organization 1 (1985), pp. 330-33.
21. Richard Revesz, "Rehabilitating Interstate Competition: Rethinking the 'Race-to-the-Bottom' Rationale for Federal Environmental Regulation," New York University Law Review 67 (December 1992), pp. 1211-12.
22. Revesz, p. 1244.
23. Dana C. joel, "Rhetoric vs. Reality: New Jersey Regulatory Reform," Regulation 2 (1996), p. 55.
24. Jeanne Herb, "Success and hte Single Permit, " Environmental Forum 14 (November/December 1997), p. 17.
25. Robert E. Roberts, "Debunking the 'Race to the Bottom' Myth," Ecostates (November 1997), p. 14; http://www.sso.org/ecos/oldnews.htm.
26. See, e.g., Virginia Wetherell, "counting Results," Environmental Forum, (January/Feburary 1998), p. 21.
27. See, e.g., Bruce Yandle, Common Sense and Common Law for the Environment (Lanham, MD: Rowman & Littlefield, 1997).
28. Illinois v. Milwaukee, 406 U.S. 91, 107 (1972).
29. See Milwaukee v. Illinois, 451 U.S. 304 (1981).
30. Schoenbrod, pp. 3-4.
31. United States v. Wilson, 133 f.3d 251, 257 (4th Cir. 1997).
32. Comments of Bruce Yandle in The Common Law Approach to Pollution Prevention: A Roundtable Discussion (Center for Private Conservation, March 1998), p. 11.
33. Daniel C. Esty, "Revitalizing Environmental Federalism," Michigan Law Review, 95 (1996), p. 574.
Portions of this paper were completed while the author was serving as a research fellow at the Political Economy Research Center in Bozeman, Montana.