Environmentalists Are Not Always Good For The Environment
Traditional environmentalism is typically portrayed as a crusade of good against evil. If you are against what environmentalist groups want, you are evil. In this cartoon view of the world, any relaxation of mandatory restraints on pollution is wrong, regardless of the actual impact such changes will have on the environment.
The latest example of this mindset is the environmentalists’ reaction to the recent changes in the New Source Review program at the Environmental Protection Agency. The Bush administration has proposed relaxing standards that would permit some upgrading of older plants without having to meet stricter new source standards. Under the 1977 Clean Air Act, companies can continue to utilize older factories that do not satisfy the more stringent pollution standards imposed on new facilities.
If companies decide to renovate older plants, however, they may have to satisfy costly "new source" standards. Firms that engage in major modifications of existing plants must obtain an EPA permit that is only issued if the renovation incorporates the "best available technology" for controlling pollution. This absolutist standard causes many firms to decide against renovating.
Environmentalists often attribute evil motivations to companies merely trying to survive in competitive markets. After all, those that passed the Clean Air Act had their hearts in the right place. How could they have known that those older plants with their old dirty technologies would have their productive lives extended?
Of course, environmentalists should have known. The self-righteous have a responsibility to move beyond proposals that just feel good. A simple application of economic principles would indicate that the current program extends the life of older technologies that increase production costs and degrade the environment. [1] Newer technologies that use less energy and have lower production costs tend to be cleaner technologies, even though they may not incorporate the "best available technology." When firms are deterred by New Source Review standards from engaging in gradual and continual renovation we all suffer.
A clean air regulation that actually makes the air dirtier is an example of what Cass Sunstein, a University of Chicago professor, terms a regulatory paradox. [2] The consequences are the opposite of what was intended. According to Professor Sunstein, the paradox arises from the, "government's failure to understand how the relevant actors -- administrators and regulated entities -- will adapt to regulatory programs."
One such glaring paradox he sees is the insistence on the "best available technology" for controlling new sources of pollution. It eliminates the incentives for innovations that might decrease production costs. Moreover, it encourages firms to postpone the implementation of new regulations by delaying the retirement of existing facilities. Unfortunately, these are the same firms that are the most familiar with the relevant production processes and are, therefore, the most likely source of new improved pollution control technologies.
It is important to not confuse traditional environmentalism with good environmental policy. If environmental groups are truly concerned about how regulation affects the environment, they should take a close look at the recent revision in the new source standards. Market oriented environmental policies may achieve a cleaner environment at a lower cost. [3] The EPA changed the New Source Review program after a careful analysis of the current program. [4] Their research has concluded that the changes will increase energy efficiency and encourage emission reduction.
Environmental groups, and those that turn to them for guidance, should review this work before engaging in personal attacks that cloud our understanding of these complicated issues. The elimination of a regulatory paradox is a win-win situation. It enhances personal freedom while improving the environment.
Notes
[1] Empirical evidence that regulations have increased the life of existing plants can be found in Michael T. Mahoney and Gordon L. Brady, "Capital Turnover and Marketable Pollution Rights," Journal of Law and Economics 3 (1988): 203-206; and Randy Nelson, et. al, "Differential Environmental Regulation: Effects on Electric Utility Turnover and Emissions," Review of Economics and Statistics 75 (1993): 368-373.
[2] Cass Sunstein, "Paradoxes of the Regulatory State," University of Chicago Law Review, 57 (Spring 1990): 407-440.
[3] Examples of cost savings can be found in Nathaniel O. Keohane, et. al., "The Choice of Regulatory Instruments in Environmental Policy," Harvard Environmental Law Review 22 (1998): 313-367.
[4] Information on the EPA New Source Review program can be found at http://www.epa.gov/nsr/.
Ralph R. Frasca is a professor of economics at the University of Dayton and a member of the Buckeye Institute's Board of Research Advisors.
