California Gears Up for Emissions Battle
“A ballot initiative to suspend a milestone California law curbing greenhouse gas emissions is drawing a wave of contributions from out-of-state oil companies, raising concerns among conservationists as it emerges as a test of public support for potentially costly environmental measures during tough economic times.” (New York Times, Thursday)
The New York Times admits there are economic costs to environmental policy? Will wonders never cease.
FEE Timely Classic:
Most government attempts to protect the environment involve imposing detailed regulations on how, and how much, pollution must be reduced. This command-and-control approach does reduce pollution, but as I explained last month, it does so at high cost.
I now consider why the command-and-control approach is so popular politically. One possibility is that though command and control is a costly way to reduce pollution, there is no less costly way. Just because a policy is costly does not mean it is inefficient, unless there is a cheaper way of realizing the goal. So it may be that Congress and the EPA are concerned only with protecting environmental quality and have embraced this approach because, as costly as it is, it is cheaper than feasible alternatives.
We are about to see that this is not the case. The political popularity of command and control has far more to do with protecting special interests than with protecting the environment. Next month I shall discuss an alternative approach to environmental protection using market incentives, one that is resisted politically because it would do far more to protect the environment than to protect special interests.
I hope I don’t sound outrageously cynical when I say that employees of the EPA are willing to sacrifice environmental quality for personal gain. I hasten to add that I am not singling out EPA employees for special criticism. They are just like the rest of us. We all do things for personal benefit that harm the environment (almost everything we do causes some environmental harm). It shouldn’t be surprising that EPA employees do the same. Command-and-control policies are not the best for protecting the environment, but they are great for protecting (and expanding) EPA budgets and jobs. The EPA has more to do when it is involved in the details of pollution control than it would if decisions were shifted to those with more information on local conditions. As The Economist pointed out, “The EPA exists to regulate things, not to see the market do the job for it.”1 [1]
Few things are easier than convincing yourself of the social virtue of things that serve your interest, so most EPA officials are likely convinced that command-and-control policies are justified.
But even if they are motivated by civic virtue, EPA officials benefit by reducing pollution through detailed regulation. And since they are well organized and considered experts on pollution control, their views have significant influence on environmental policy.
Another political advantage for the command-and-control approach is its public appeal. If big businesses are polluting our environment, then nothing seems more appropriate than for government to step in and make them stop. Discussions about local knowledge and least-cost reduction are far too subtle to capture the attention of the public. Also, the market approach, which (as we shall see) allows people to pollute as much as they want as long as they are willing to pay a price, is easily dismissed with bumper-sticker phrases like “it’s a license to pollute.”
Don’t Throw Me in the Briar Patch
The public may believe that the command-and-control approach is the best way to get tough on big-business polluters, but businesses are among its most enthusiastic and politically influential supporters.
True, businesses often object to environmental regulations, but most of these objections are like Br’er Rabbit’s begging the fox not to throw him into the briar patch. True, businesses don’t like all environment regulations (they don’t want to be thrown just anywhere in the briar patch), but some types of regulation are just fine with them, especially big businesses.
Command-and-control regulation typically increases the costs of doing business. But those costs are often easier for a big business to handle than a small business, because large firms already have legal departments to deal with the inevitable litigation that comes with environmental regulation, and they can spread the costs of pollution control over more units of output.
Also, pollution-control regulation often reduces an industry’s output. This can increase industry profits by allowing firms to raise prices and act like a monopoly cartel, something that is normally illegal. For example, EPA regulations for reducing sulfur in gasoline have recently improved the profit outlook for refiners by causing them to shut down some plants.2 [2]
Sometimes command-and-control policies are intentionally used to protect an industry against competition at the expense of the environment. One blatant example involves air-pollution policy. The 1970 Clean Air Act established acceptable levels of several pollutants, including sulfur dioxide (SO2), the primary pollutant of coal-fired electric generating plants. While requiring those generating plants to reduce their SO2 emissions, the Act did not specify how. The cheapest way to reduce SO2 emissions is often to shift from high-sulfur eastern coal to low-sulfur western coal, and that is exactly what many coal-fired plants did, even some in the east. The alternative is to install stack scrubbers that remove much of the sulfur from the flue gas, but they are expensive, consume large amounts of energy, and often do less to reduce SO2 emissions than simply burning western coal.
Unsurprisingly, the eastern coal industry and the United Mine Workers Union were unhappy about the shift to western coal. (It requires little labor to mine and the labor is not heavily unionized.) So they were prepared to lobby for the elimination of the competitive advantage of western coal when the Clean Air Act was amended in 1977, even if it meant dirtier air and higher electricity bills. They backed amendments requiring that all new (or substantially modified) power plants install the “best available control technology,” which meant scrubbers, regardless of the sulfur content of the coal used. Furthermore, they pushed through a “local coal amendment” that outlawed “importing” western coal if it threatened jobs in eastern coal-mining states.
This command-and-control policy mandating how pollution has to be reduced means that coal-fired power plants have neither the incentive nor, in many cases, the legal right to reduce pollution as cheaply as possible. This mandate had nothing to do with protecting the environment, but a whole lot with protecting an organized interest group. Because of these amendments to the Clean Air Act, the price of electricity increased in all parts of the country (power plants in the west continued to use western coal but still had to install expensive scrubbers) and the environment was actually harmed in many parts of the country.3 [3]
Next month: a market approach that would improve the efficiency of pollution control.
Notes
- “William Reilly’s Green Precision Weapons,” The Economist, March 30, 1991, p. 28.
- Peter A. McKay, “New EPA Rules May Fuel Refiners’ Profits,” Wall Street Journal, February 2, 2001, p. C-1.
- For a more detailed discussion on the 1977 amendments to the Clean Air Act, see Peter Navarro, “The Politics of Air Pollution,” The Public Interest, Spring 1980, pp. 36–44.
Article printed from The Freeman | Ideas On Liberty: http://www.thefreemanonline.org
URL to article: http://www.thefreemanonline.org/columns/economic-notions-the-perverse-popularity-of-command-and-control/
URLs in this post:
[1] 1: #1
[2] 2: #2
[3] 3: #3
No comments:
Post a Comment