DEPARTMENT OF PUBLIC POLICY

POL 661: Environmental Law

Lecture 2: Do We Need Environmental Law? Where Do Environmental Laws Come From? Introduction
Those who have studied economics may understand the arguments favoring a freemarket analysis of environmental issues. What this means, at its heart, is there is no need for government to regulate the environment (we do not need environmental laws). Rather, the free marketplace of ideas can better control the quality of the environment. Many influential thinkers have advocated this position.1 Of course, we do have government regulation of the environment (otherwise we would not be reviewing environmental laws here). Aside from other transaction costs, the actual amount of the federal budget that is spent on the environment is annually around 3%. That is not too significant a number considering other spending priorities such as defense (@ 20%), Medicare & Medicaid (@ 22%), and even the servicing (interest payments) of our national debt (@ 7%).2 So, now that we know we have chosen (as a nation) to have public controls on the environment3, the question becomes: do we really need these public controls? Assuming
1

For a summary of the ideas behind the use of private mechanisms to control environmental harms, see the following video summary on Coase Theorem: https://www.youtube.com/watch?v=zcPRmh5AIrI
2 3

These are 2012 actual federal budget numbers.

Regulation is the fundamental control mechanism for environmental laws. Most of the environmental laws you will be reviewing in this course follow the command-and-control form of regulation where a command establishes a particular goal, and then the law develops mechanisms of control to ensure the command (goal) is reached. For example, the Clean Air Act establishes air quality standards (the command) and then sets forth ways in which the government can enforce those standards (the control). Note this form of government intervention, via regulation, is fundamentally different from the private mechanisms of control favored by free market supporters such as Coase. In a private control world, the extent of government intervention in environmental affairs would be to enforce the contractual obligations that were established between private parties after the

Page 2 of 9 the answer is yes, a closely connected question is: where does government get the power to enact such controls? Both of these questions are at the heart of our materials for this module. As you explore these materials, take the time to consider these questions, as well as the policy implications suggested from the previous module. (Think: Is there a better way to control environmental harms? Maybe there is!)4

Do We Need Environmental Laws?

As you review the historical account in the Firestone text, a few things should become apparent. First, our combined increases in population and technology (through the industrial revolution) have increased our general rates of consumption. This in turn has historically led us to the point where we need to account for our actions, particularly as our actions impact natural systems. In the United States, regulation of the environment

rights of the parties were clearly established. So, for example, if one is given ownership over a natural resource (say water quality), that person can contract with others who might harm that resource to be directly compensated for the harm. The amount paid should be an accurate reflection of the amount of harm occurring. Thus, only efficient amounts of environmental harm would be allowed to occur because the market forces would keep the amount of environmental harm in-check. Of course, we can contrast this concept with our earlier discussion of natural system dynamics and changes in equilibrium states; is it likely that these individual transactions will be capable of seeing the aggregate environmental harm occurring in time to prevent the harm (like the lily pad example)?
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For example, as noted in the earlier footnote, many of the environmental laws we will be exploring in detail are command-and-control types of regulations; the law sets a standard and then enforces that standard through actively seeking out noncompliance of the standard. This kind of control is sometimes criticized as being expensive and time consuming; government must constantly enforce the standards that are set. Some suggest superior methods exist to control environmental harms. Examples include the privatization of environmental assets (like the air or water) as noted earlier under Coase Theorem. Others suggest establishing a monetary number for environmental harm and then working to meet that goal through the internalization of such harms in pricing mechanisms. An example of this would be a tax that internalizes the environmental harm caused by a particular activity. For example, electricity generated through burning coal causes air pollution whereas electricity generated through solar or wind power does not cause such air pollution. If one can calculate the marginal cost of the pollution in the air (per unit of pollution), then this cost could be added as a tax to the actual production cost of electricity when the production method (like burning coal) results in the pollution of the air. The environmental tax would make the cost of electricity more expensive when generated from coal thus making non-polluting alternatives (like solar and wind) more competitive (because the tax would not be added to the costs of production methods that did not cause air pollution). The tax would be self-enforcing because the harm is already incorporated into the price.

Page 3 of 9 is the preferred public form of accounting. An example may help place this statement into context. Do you speed? (By speeding, I mean traveling over the posted speed limit lets say going faster than 65 in a 65mph zone). If so, why? Is it because everyone else is doing it? Is it because if you do not (at least in areas where I drive in MA) you could be overtaken by an approaching vehicle doing 95mph? Whatever the reason, you might argue there are more reasons to speed than there are to stay within the speed limit (if you speed on a regular basis). And this is the case even when it is against the LAW to do so! Moreover, this is the case even though you are aware it is against the law to speed. Well, apply this same rationale to environmental issues. Consider the further example. You are a business that produces widgets. In the production process, you have waste materials. There is a pit in the back of your business where you can place this waste material at no additional cost to you. In fact, by removing the waste without cost, you can keep the price of your widgets lower and remain competitive in an open market (in comparison to other widget makers). Let us now say you have the choice of either placing the waste in the pit or having it removed form your site and recycled. However, the removal costs you 5 cents per widget. If you pass this cost on to the consumer (raise your prices), you are no longer competitive with other widget makers. What should you do? What would any reasonable person do under similar circumstances? These examples attempt to highlight one reason environmental laws are important today. As a society, we need to create incentives for people to act in a manner that is beneficial for society (even when it may not benefit them individually). The main way we create such incentives is through the passage of laws. Environmental laws are specifically catered to ensure the public benefit of the environment is not degraded at the hands of private action. Thus, we need environmental laws (and strong enforcement) because many times individual private actions are harmful to the public benefit, particularly when those private actions are aggregated (added up). This is shown clearly in the text as you review the historical context from which environmental laws have arisen. How should environmental laws be implemented is a different question, a more normative question that gets into value systems and individual beliefs, which highlights the distinction between ecologists and economists described in the Firestone reading. Economists generally believe in a benefit/cost approach to environmental issues. That is, the environmental harm that is caused by an activity must be balanced against the benefits of the offending activity. (We will see this benefit/cost approach play out when we talk about land use, and the Boomer case in particular). Alternatively, ecologists believe any environmentally detrimental activity must be banned regardless of its economic benefit. In many ways, ecologists are focusing on the natural system and the lily pad-type problem discussed earlier; the fear of small changes aggregating together to lead to large changes in the system, and potentially an equilibrium shift in the system itself, makes the aggregate costs outweigh the aggregate benefits even when marginal

Page 4 of 9 benefits seems to outweigh the marginal costs on a case-by-case basis.5 Another way of saying this is that, sometimes, individually rational decisions can lead to collectively irrational results; when these individually rational decisions lead to collectively bad outcomes for the environment, it often comes down to government to intervene in the individual actions to ensure the collectively bad result (environmental harm) does not occur. Compare these two approaches to the values discussed above. So, who is right? Can you begin to see how much values play a role in the underlying system of environmental laws (what we choose to regulate, why we choose to regulate it, etc.)? At the heart of a benefit/cost approach is the idea that all benefits and costs are being considered. The example of the pollution in making widgets above helps us understand this is not always true; the owner of the company may have incentives to externalize the costs associated with widget production, specifically the pollution created in the process. If the owner does not value the land and impacts associated with placing the pollution into the pit (including potential contamination of groundwater, soil, etc.), then the costs associated with the pollution are not really part of the benefit/cost analysis. Rather, the costs of pollution in creating the widget are spread out (externalized) to the environment and thus society at-large (even those of us who do not benefit from the creation of widgets). In these kinds of cases, market failures can occur where not all of the costs are being realized so the benefit/cost analysis is incomplete. Environmental laws can help to internalize some of these environmental costs to prevent a market failure from harming our environmental assets. One way to understand why market failures occur in environmental problems is to get an understanding of environmental assets based on property right characteristics. If we look at two characteristics of property rights divisibility and excludability we find four major categories of property rights visually represented here:

When we look at decisions on an individual basis, the small costs of pollution towards the environment might seem insignificant; one person placing their waste in a large waterway does not indicate any real harm to the waterway as a whole. Thus, on the margin (focusing solely on the individual case), the benefits may legitimately seem to outweigh the costs. However, if every person places their individual waste into the same waterway, then there is a greater chance that the collective impact of these actions (in the aggregate) will result in significant harm to the waterway. If this harm results in an equilibrium shift where the waterway now is irreparably polluted, then the costs (both today and for future generations) legitimately outweighs any benefits that accrued by those individuals dumping their waste into the waterway. Ecologists tend to focus on these collective problems when thinking about potential harms to the environment.

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Market failures tend to occur where the property right characteristics show low excludability and high divisibility. Common pool resources, as identified above, are the kinds of resources that show these two property right characteristics. If we look at the figure to see the other kinds, we can see that common pool resources tend to be those types of natural system assets where most environmental problems occur (air, ocean, etc.). The fact that one cannot exclude another from the resource (low excludability) means people can utilize the resource even though they have no ownership interest in the resource. For example, the widget maker dumping its waste into the waterway makes sense when there is no ownership over the waterway: they are not prevented from dumping the waste; they are not violating anothers property right; they have no exclusive property right over the waterway. Thus, because there is no ownership and thus ability to exclude, there is the capacity to do harm with little consequence to the individual doing the harm. However, the harm is divisible (high divisibility), meaning the water that is polluted is not available for another use; the polluted water is divisible from other units of water in the waterway.6 The divisibility creates the capacity for the waterway to be harmed. Thus, the market failure is really the result of externalizing costs on natural resources where those costs are capable of aggregating to the point of creating harm to humans (via pollution, climate change, etc.). When this is a market failure, government often needs to step in and fix the problem. The actual way in which to fix the problem depends on a variety of factors. For example, Coase would argue assigning well defined property rights
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Contrast this with gravity, which is not divisible, meaning no matter how much of it you use there is still plenty of it available for others to use.

Page 6 of 9 would fix the problem; the ownership rights created would make the resource excludable and parties could then negotiate an efficient way of managing the environmental asset.7 Others might argue taxing is a superior method, where the generator of the pollution is taxed for each unit of pollution created (in our example the Widget maker). Still others might argue a command-and-control framework is best, where the government steps in and prevents the Widget maker from placing their pollution into the waterway without a permit, and then controls the permitting process to ensure the quality of the waterway is maintained over time. We will see examples of these different approaches to environmental law as we continue along with the materials. As we move through the materials, consider the categories of property rights identified above based on the characteristics of excludability and divisibility; we will tend to find the more difficult environmental issues to manage (from both a policy and law standpoint) tend to be those that exhibit common pool resource characteristics. A more elaborate discussion of the reasons why these kinds of resources tend to present difficult environmental problems is explored in the environmental policy course.

Where Do Environmental Laws Come From?

What is the Source of Environmental Law? This question is really about our form of government in the United States, and how policy is translated into law as the implementation of policy directives. As a matter of civics, recall that our government is separated into three branches: The legislature (Congress) who creates law by passing statutes. The executive (President) who implements and law. The judiciary (Courts) who enforces legal principles by interpreting law.

Each branch has a role in environmental law, but the Legislature (Congress) has the primary role in making environmental policy live by passing statutes on behalf of the environment. In order for the legislature to do so, it must have the power to pass statutes that regulate the environment. Thus, we must look to foundational legal principles (like the U.S. Constitution which creates the different branches of government) to determine if Congress has the power to pass statutes that protect the environment. As the book states, the source of power to regulate the environment at the federal level comes from the Commerce Clause of the U.S. Constitution. This is mainly because there is no specific constitutional provision dealing with environmental issues explicitly, so the federal government gets jurisdiction to protect the environment through its capacity to regulate commerce between the several states (interstate commerce). There is a lot more in terms of understanding the legal relationships within this system of federalism (federal and state government interactions), but it is enough to know there is a source of environmental law at the federal level and it is based on regulating commerce between
7

Recall Coase Theorem: https://www.youtube.com/watch?v=zcPRmh5AIrI

Page 7 of 9 the states. The source of environmental law at the state level is the 10th Amendment reserved powers (police powers) of the state to regulate the health, safety, and welfare of its citizenry; we will see the 10th Amendment powers in greater detail in the land use section of the materials (under public controls of land). A basic representation of a hierarchy of law is shown below:

The hierarchy representation above helps to place the different kinds of laws we observe in environmental law into context. At the very top of our pyramid here is the U.S. Constitution (C), which is the supreme law of the land.8 Under the U.S. Constitution exist state constitutions and then federal and state laws (L). Under the laws exist regulations (R).9 Any law that violates a constitutional principle is unconstitutional.

Another way of saying this is that the U.S. Constitution sets a minimum standard by which all other laws must comply. For example, if the U.S. Constitution states that any law discriminating against race is unconstitutional, then that sets a minimum standard indicating racial discrimination is unconstitutional. However, other laws can go further than this minimum standard by, for example, including other categories into discrimination, such as gender or age. The only thing a law cannot do is make discrimination based on race legal because this would fall below the minimum standard established by the U.S. Constitution.
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Regulations are rules (quasi-laws) passed by administrative agencies (under the Executive Branch of government) meant to implement the goals of statutes passed by

Page 8 of 9 Likewise, and regulation that violates a law is void. This relationship between the constitution, laws, and regulations is shown below:

Much of environmental law is implemented by federal and state agencies like the Federal Environmental Protection Agency (EPA). These agencies are often given the power by the legislature to develop rules that implement legislative intent.10 The agency is then left to create regulations to achieve the goal of the legislature. The regulations must be within the powers granted to the agency by the legislature. For example, if the Congress. Regulations are an example of administrative law, and this area of law is taken up in greater detail in the administrative law course.
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For example, the Clean Water Act is a federal law that is meant to protect the nations waters by preserving the biological, physical, and chemical integrity of those waters. The Act itself is silent on how this will be done precisely and delegates the responsibility for meeting this general policy goal to the particular agency identified (in this case the EPA) in the statute. The agency then implements the goal by creating regulations (rules) that set standards by which the goal of the statute (preserving the biological, physical, and chemical integrity of the nations waters) can be met. If the agency passes rules that are outside of its delegated authority by the statute, then the regulation is like the orange X above in the figure: it is outside the statutory authority granted by the legislatures (the blue box). Note: if the agency rule is also unconstitutional, then it would be like the red X in the figure above: it would be outside the statutory delegation and outside constitutional limits.

Page 9 of 9 agency engaged in the orange X action identified above through a regulation, then that action would likely be outside of its delegated authority because the act itself is outside the box of laws (blue box) and regulations (orange box) in which the action must take place. In summary, environmental laws come from a variety of sources, but those sources must all come back to an original jurisdictional element. For federal environmental law, the original jurisdiction is the Commerce Clause of the U.S. Constitution. Legislatures like Congress must make sure federal laws are within that constitutional mandate and agencies must make sure their regulations are in-line with the statutes that give the agency authority (power) to create the regulations. Understanding this general framework will be helpful as you continue through the materials provided in the course. A kind of conceptual checkbox question method (decision tree) that can be used to help understand these concepts in context when analyzing a rule includes the following: Is the agency action (what the agency is actually doing) supported by a rule enacted by the agency? If yes, then is the rule created by the agency within the statutory authority (delegated authority) granted by Congress? If yes, then is the statutory authority (either facially or as it is being applied in this instance) allowed under the U.S. Constitution; is the action constitutional?

Conclusion
You should now be properly introduced to the concept of environmental law. I hope this introductory material has allowed you to consider the question: what is environmental law? Practically, it means something different to each person. To me, it represents a formal process for resolving disagreements about how we interact with nature. To others, it is a promise of protecting vital resources for future generations (ensuring sustainable living). No matter your view, environmental law is an important tool in confronting environmental issues. It has developed historically from the context of waste prevention to more recent uses including the protection of biodiversity through such laws as the Endangered Species Act. If you were to categorize levels of importance in environmental law, you might find most laws deal with human health protection. More recent laws expand to cover issues we might categorize under sustainability and aesthetics (the protection of biodiversity and wild and/or scenic places). Whether these environmental laws should focus more on balancing harms or banning them depends largely on your perspective (whether you think economically or ecologically). END OF SECTION.