Chapter Key Points Understand the context of environmental issues— historical, national, international and political Understand the interplay of regulation.

Chapter

Key Points• Understand the context of environmental issues—

historical, national, international and political• Understand the interplay of regulation and free market

principles• Become familiar with the basic thrust of our major federal

environmental legislation• Identify available enforcement mechanisms, both civil

and criminal

17

Environmental Protection

Pollution is …

… a market failure. Economists categorize it as a negative externality, a “defect of the price

mechanism,” because polluters don’t pay for the resource they are using up.

… a worldwide problem. From air pollution in L.A. and China to water pollution in the Gulf of

Mexico and the Aral Sea to soil pollution in Japan and Europe. … global.

Global warming is largely caused by the worldwide burning of fossil fuels.

… political. Broad international support for the Kyoto Protocol contrasts sharply with

Pres. Bush’s refusal to ratify it.

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The Federal Framework

National Environmental Policy Act (NEPA): 1970 federal law committing the federal government to “use all practicable means” to conduct its affairs to promote “the general welfare” and operate in “harmony” with the environment.

Council on Environmental Quality (CEQ): Conducts studies, collects information, develops policy and legislative proposals for the president and Congress.

Environmental Impact Statement (EIS): NEPA requires that all “proposals for legislation and other major federal action significantly affecting the quality of the human environment” be accompanied by an EIS explaining the impact on the environment and detailing reasonable alternatives. A major private-sector action supported by federal funding or requiring federal permission may also require an EIS.

Environmental Protection Agency (EPA): The EPA’s duties include (1) gathering information, (2) conducting research, (3) assisting state and local pollution control efforts, and (4) administering many of the federal environmental laws.

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Clean Air Act of 1990 (CAA)

Federal clean air legislation passed in 1963, 1965, 1970 and 1977. The last two gave the EPA power to set and enforce national air quality standards.

The CAA of 1990 requires tougher auto emission controls, cleaner burning gasoline and new equipment to capture industrial and business pollution, with a general goal of reducing airborne pollutants by about 50%.

Illustrating the extremely technical, scientific and legal battles true of many of today’s pollution issues is the legal challenge to EPA’s 1997 amended standards for particulate matter and ozone. Whitman v. American Trucking Assoc. (S. Ct. 2001)

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Clean Water Act (CWA)

The purpose of the CWA is to “restore and maintain the chemical, physical, and biological integrity of the nation’s waters.”

This is to be achieved primarily by imposing limits on the amount of pollutants that may lawfully enter the “navigable” waters of the U.S. from any “point source” (typically a pipe).

One issue is what qualifies as “navigable” waters for purposes of regulation. Example: Solid Waste Agency of Northern Cook County v. U.S.

Army Corps of Engineers (S. Ct. 2001) A significant problem, not currently addressed by the CWA, is pollution

in surface water runoff.

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Waste Disposal Issues

Toxic Substances Control Act (TSCA): The purposes of this 1976 law are to identify toxic chemicals, assess their risks and control dangerous chemicals.

Resource Conservation and Recovery Act (RCRA): The most significant aspects of this 1976 law are probably its requirement of cradle-to-grave tracking of all hazardous waste products and the licensing requirement for owners and operators of hazardous waste disposal sites.

Superfund—Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA): The primary purpose of the Superfund is to clean up hazardous dumps and spills that have been included on the National Priorities List (NPL). Funding for the process has been problematic since 1995 when separate taxing authority on chemicals and petroleum lapsed.

Small Business Liability Relief and Brownfields Revitalization Act: A 2002 law that provides liability protection for prospective purchasers and contiguous property owners and authorizes increased funding for state and local programs that assess and clean up brownfields (less contaminated former industrial and commercial sites that are not on the Superfund NPL).

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Endangered Species Act (ESA)

Under the ESA, the Secretary of Commerce determines whether fish, wildlife or plant species should be listed as endangered or threatened. A species is “endangered” when it is in “danger of extinction

throughout all or a significant part of its range.” A species is “threatened” when it is “likely to become an

endangered species within the foreseeable future.” The ESA forbids any practice which would result in the

“taking” of any endangered species and forbids the degradation of endangered species’ habitats.

Example: Cook Inlet Beluga Whale v. Daley (D.C. D.C. 2001)

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Penalties and Enforcement under Federal Law

Very often, violators initially are warned and a compliance schedule is set out.

Fines have long been the standard remedy in governmental pollution enforcement.

In recent years, regulators have increasingly turned to Supplemental Environmental Projects (that is, some environmental “good work” in place of a fine) to settle wrongs.

The government may initiate civil or criminal actions against both firms and managers.

Many environmental statutes provide for the possibility of citizen suits, where an individual is empowered to challenge government environmental decisions and generally to demand both governmental and private-sector compliance with the law. Example: Cook Inlet Beluga Whale v. Daley (D.C. D.C. 2001)

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State and Local Regulation

Under constitutional police powers, state and local governments have the right to impose various controls on citizens to protect and maintain the public health, safety and general welfare, which they have used to address environmental issues.

Federal law assigns states primary enforcement power under statutes such as the Clean Water Act, but only so long as that enforcement equals federal standards.

About half of the states have enacted statutes designed to block government regulatory takings without just compensation.

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The Common Law

A private nuisance is a substantial and unreasonable invasion of the private use and enjoyment of one’s land.

A public nuisance is an unreasonable interference with a right common to the public.

A trespass occurs with any intentional invasion of an individual’s right to the exclusive use of his or her own property.

Nuisance and trespass causes of action have been entered for such offenses as fouling a neighbor’s water, flooding another’s land, or causing excessive noise, smell or particulate matter on another’s property.

Negligence and strict liability claims may also arise from pollution cases. For example, the use of toxic chemicals might be so abnormally dangerous as to provoke a strict liability claim.

The remedies available are monetary damages for the harm suffered or an injunction to prevent similar conduct in the future, or both.

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The Free Market and Pollution Control

Pollution Credits: The federal government decided in the early 1990s to cut air pollution from utilities and some big factories by setting a cap on the number of tons of pollutants to be permitted in the air and then issuing pollution credits. “Dirty” plants can either buy expensive new equipment to cut emissions or they can buy pollution credits from “clean” companies that do not need them. The total credits available are lower than total emissions before the program began.

Electric utilities in 1999 produced about 41% more electricity than in 1980, while emitting 25% fewer tons of sulfur dioxide.

The same principles are expected to be applied worldwide to greenhouse gases, principally carbon dioxide.

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Pollution Control and Taxes

Tax provisions can also affect behavior. There is a federal tax deduction, whether or not one itemizes, for part of

the cost of purchasing a new hybrid gas-electric car, such as the Toyota Prius.

There is a federal tax-free fringe benefit to employees through a payroll deduction purchase of commuter vouchers or transit passes.

In 1991, Sweden introduced a sulphur tax that led to a drop in the sulphur content of fuels to 50% below the legal requirements.

Norway’s 1991 carbon tax lowered emissions from power plants by 21%.

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Government Subsidies and Pollution

Government subsidies often directly harm the environment. For example, we subsidize the cost of fuel by about 70 cents per gallon, thus encouraging more driving.

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The Business Response

Positive: Environmental responsiveness from companies is often generated by market

pressure. Being seen as “green” by consumers is an important ingredient in contemporary business strategy.

An interesting recent study found a strong relationship between environmental high performance and high profitability.

Major companies, such as DuPont, BP Amoco, Ford and GM are making voluntary and substantial cuts in greenhouse-gas emission.

Negative: In April 2001, W.R. Grace filed for Chapter 11 bankruptcy, with over

124,000 personal injury lawsuits filed against it. Allegedly, before filing for bankruptcy, Grace shifted over $4.5 billion in

assets to other companies. One year into the bankruptcy proceeding, Grace’s attorneys have filed a

request for $36 million in attorneys’ fees associated with the case.

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