Criteria for Evaluating Environmental Policies

1. Criteria for Evaluating Environmental Policies Field, chapter 9

2. Policy Criteria • In evaluating the effectiveness and appropriateness of a policy for addressing a given problem in environmental pollution control, it is important to have clearly in mind a set of policy evaluation criteria.

3. List • Their ability to achieve efficient and cost-effective reductions in pollution. • Their fairness. • The incentives they offer to people to search for better solutions. • Their enforceability. • The extent to which they agree with certain moral precepts.

4. EFFICIENCY • An efficient policy is where marginal abatement costs and marginal damages are equal. • One way of thinking about environmental policies is along a continuum from centralized to decentralized. • A centralized policy requires that some control administrative agency be responsible for determining what is to be done.

5. Measurement • To achieve efficiency in a centralized policy, the regulatory agency in charge must have knowledge of the relevant marginal abatement cost and marginal damage functions, then take steps to move the situation to the point where they are equal. • It is often the case that environmental damages cannot be measured accurately.

6. Cost Effectiveness • Measurement issues makes it useful to employ cost-effectiveness as a primary policy criterion. • A policy is cost-effective if it produces the maximum environmental improvement possible for the resources being expended or, equivalently, it achieves a given amount of environmental improvement at the least possible cost. • For a policy to be efficient it must be cost-effective, but not necessarily vice versa.

7. Less Abatement than Desired • If programs are not cost-effective, administrators will tend to set less restrictive targets in terms of desired amounts of emission reductions. • The real problem with having costs higher than they need to be is that society will be inclined to set its objectives too low in terms of the amount of emission reduction sought.

9. FAIRNESS • Equity is, first and foremost, a matter of morality and the concerns about how the benefits and costs of environmental improvements ought to be distributed among members of society. • It has to be recognized that there is no agreement on how much weight should be put on the two objectives: efficiency and distribution.

11. Environmental Justice • The concern is that racial minorities and low-income people are disproportionately exposed to environmental contaminants, both those outside the home such as air and water pollution and those within the home and workplace such as lead. • It’s possible that low-income households locate close to hazardous waste sites because property values are lower.

12. INCENTIVES FOR LONG-RUN IMPROVEMENTS • It is firms and consumers whose decisions actually determine the range and extent of environmental impacts. • The incentives facing these private parties determine how and where these impacts will be reduced. • Do environmental policies provide strong incentives for individuals and groups to find new, innovative ways of reducing their impacts on the environment?

13. Incentives for R&D • Shifting downward the marginal abatement cost function makes it cheaper to secure reductions in emissions, because this will justify higher levels of environmental quality.

14. ENFORCEABILITY • There perhaps is a natural tendency among people to think that enacting a law automatically leads to the rectification of the problem to which it is addressed. • Among the environmental community this tendency is depressingly strong. • Enforcementrequires energy and resources. • There will always be people whose interests lie in not having environmental policies enforced.

15. Compliance • The GAO once surveyed a large number of major wastewater dischargers in the country. • They found that a substantial fraction (more than one-third) of the sources were not in compliance. • RFF surveyed state enforcement agencies to determine common practices and costs associated with enforcing pollution-control regulations. • A widespread practice is for agencies to require self-reportingof emissions by firms.

17. Enforcement • There are two main steps in enforcement: • Monitoring refers to measuring the performance in comparison to whatever requirements are set out in the relevant law. • Sanctioning refers to the task of bringing to justice those whom monitoring has shown to be in violation of the law. • Authorities often seek to achieve voluntary compliance encouraging violators to remedy the situation w/o penalty.

18. Paradox • One might think that the greater the sanctions—higher fines, long jail terms for violators, and so on—the more the law would deter violators. • But the higher the penalties, the more reluctant courts may be to apply them. • The threat to close down violators, or even to levy stiff financial penalties, can in turn threaten the economic livelihoods of large numbers of people.

19.  MORAL CONSIDERATIONS • The innate feelings that people have about what is right and wrong affect the way they look at different environmental policies. • Take, for example, the question of choosing between effluent taxes and effluent subsidies. • Subsidies may be more effective. • Some people regard polluting behavior as essentially immoral. • Those who cause a problem ought to bear the major burden of alleviating it.

20. GOVERNMENT FAILURE • Government failure means that it cannot simply be assumed that each and every attempt at public environmental policy will make the situation better. • Government failure refers to systematic tendencies and incentives within legislatures and regulating agencies that work against the attainment of efficient and equitable public policy. • Outcomes in the political process may not resemble informed, rational public policy that advances the welfare of society. • The process could make the situation worse in some circumstances. (See Anderson, Political Environmentalism)

21. SUMMARY • Efficiency and cost-effectiveness • Equity • Incentives for long-run innovations • Enforceability • Agreement with moral precepts • Several traditional decentralized approaches, (ch 10) • The use of standards, a centralized approach that has been the most frequently used historically (ch 11) • Incentive-based policies (chs 12-13)