Environmental Policy Introduction o Negative externalities Costs borne by parties external to a transaction Environmental Policy Market Failure and Negative Externalities o Socialize When two parties externalize some portion of the cost of their transaction on a noninvolved third party o Inefficient outcome Too much of a certain good will be produced or consumed relative to the overall costs and benefits to society Ex pollution not taking the cost of negative externalities o Deadweight loss The negative surplus to society of generating too much product at too low cost o Internalize Producers must share or pass on those costs pollution to the consumer of the good or service Consumption tax An added cost applied to a good or service thought to be generating a negative externality Ex Older inefficient automobiles Effective but hard to find perfect rate Difficult to achieve politically Subsidy or Negative Pigouvian tax Rewards people for making choices that society considers desirable Encourages transactions that have positive externalities Difficult to achieve politically Output standards Outright bans or limitations on the amount of a given externality that may be produced Often referred to as command and control regulation Critics argue o That the resources spent on the creation of a bureaucracy to implement such a regulatory system can lead to an inefficient use of resources o Advocate for taxes or subsidies instead Demand from public enacts these Public Opinion Political Parties and Environmental Policy Public Attitudes on the Environment o Public opinion has 5 characteristics that are useful in deciphering the public s attitude Direction Level of support that a citizen assigns to a specific policy Intensity How strongly a citizen feels about a given issue Salience The relative importance of a given issue relative to other issues Knowledge The level of information that a citizen possesses on a specific issue Stability How much volatility we observe in a citizen s attitude over time o Americans support increasing environmental taxes on others not themselves o Saliency trap The logical fallacy of believing that because a citizen has an opinion on some policy issue this opinion is a salient or important issue to them relative to other issues o Largest increases in water and air pollution in last 30 years are not from factories but American citizens Air Increase in vehicle miles traveled Water Personal use of herbicides fertilizers and pesticides Perceiving Policy Differences Between Parties o If citizens were to hold clear policy preferences on environmental issues they may have or believe they have less clear choices on which party best represents their preferences Cross Cutting Cleavages o When a person s interests are split between both parties Ex Pro choice Pro environment Pro guns Pro Austerity o Satisfice Person must make choice given limited information Legislative Initiatives in Environmental Policy DichloroDiphenylTrichloroethane DDT Pesticide use awareness that sparked US interest in environmental policy in the 60 s Cuyahoga River caught fire in 60 s from oil pollution which further sparked interest Major Legislative Initiatives o 1970 s transferred environmental policies from states power to national government o The National Environmental Policy Act NEPA Established national environmental priorities required overlook of Gov impact on environment created Council on Environmental Quality CEQ which advised President Agency that regulates environmental policy Conducts research o The EPA enforces o Clean Air Act Amendments Implemented pollution standards Pollution permitting system or Title V where Gov would issue permits to stationary sources limiting emissions Citizens could bring lawsuits against violators Stationary sources Fixed emitters of air pollution o Clean Water Act Amendments Created permitting system for point sources known as the National Pollution Discharge Elimination System NPDES Set limits on effluent Non points source pollution was not regulated under this Point sources Single identifiable sources of water pollution Effluent Amount of point source pollution o Resource Conservation and Recovery Act RCRA Regulate the creation transportation use and disposal of hazardous waste Cradle to grave approach Detailed tracking system o Safe Drinking Water Act Gave EPA authority to set standards for public water and enforce maintenance Systems required to meet standards for the Maximum Contaminant Level o Toxic Substances Control Act Created a process to test and document the potential toxic effects of existing and new chemicals Comprehensive Environmental Response Compensation and Liability o Act Established a polluter pays funding source for the cleanup of sites contaminated with hazardous materials Superfund establishes for funding are ranked and if high its on the National Priorities List Financed by tax on the petroleum and chemical industry Tax expired under Clinton Now funded through general revenue Implementing Environmental Policy 1 Bureaucrats are charged with implementing the legislature s policy and must interpret the legislature s statutory intent 2 Unelected bureaucrats are not neutral agents have own opinions 3 Delegation Issues and Implementation a Principal agent theory The study of the challenges faced whenever one actor the principal delegates authority to another actor the agent to carry out some task i Information asymmetry Principals lack key information on whether the agent s preferences differ and whether the agent is dutifully carrying out their responsibilities 4 Adverse Selection a Principals cannot be confident that the bureaucrats tasked with carrying out the policy at hand possess similar preferences i Solutions 1 Screening and Selection Intensive interview a Though most elected leaders cannot interview ALL potential candidates 5 Moral Hazard a Agents may have inadequate incentive to preform their duties i Bureaucrats do not bear full cost of the underperformance at their jobs since they re unelected ii When present principals have 2 choices 1 They can directly monitor their agent 2 They can construct outcome based incentive packages iii Ex Post control A principal s strategy of monitoring agent activity waiting for misbehavior and punishing them for their agents 1 Costly 2 Time consuming iv Ex ante tactics Refers to any actions that a principal takes prior to an agent s action to incentivize a desired behavior 1 Incentive packages that
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