Working Papers
R & D CMER
The Centre for the Management of Environmental Resources
ENVIRONMENTAL PROTECTION IN THE INFORMATION AGE
by
D. ESTY*
2001/87/EPS/CMER
This working paper was published in the context of INSEAD’s Centre for the Management of Environmental Resources, an R&D partnership sponsored by Ciba-Geigy, Danfoss, Otto Group and Royal Dutch/Shell and Sandoz AG.
* Visiting Professor of Economic and Political Sciences at INSEAD, Boulevard de Constance, 77305 Fontainebleau Cedex, France.
A working paper in the INSEAD Working Paper Series is intended as a means whereby a faculty researcher's thoughts and findings may be communicated to interested readers. The paper should be considered preliminary in nature and may require revision.
Printed at INSEAD, Fontainebleau, France. 1
ENVIRONMENTAL PROTECTION IN THE INFORMATION AGE
Daniel C. Esty* Yale Law School P.O. Box 208215 tel: (203) 432-1602/6256 fax: (203) 432-4871/3817
Draft 1 June 2001
*Yale Law School and Yale School of Forestry and Environmental Studies; former Deputy Chief of Staff and Deputy Assistant Administrator for Policy at the US Environmental Protection Agency. Thanks to Farrin Anello, Katy Fischer, Brian Fletcher, Phil Fortino, and Meryl Raymar for research assistance.
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Introduction In 1611, Thomas Benton built a pig sty behind his house in Norfolk, England. His neighbor, William Aldred complained about the smell, and when Benton refused to move the pigs, Aldred went to court. Rejecting Benton’s claim that “one ought not to have so delicate a nose that he cannot bear the smell of hogs,” and observing that the air had been “corrupted” by the stench of the pigs, the court ruled in Aldred’s favor and declared Benton’s pig sty to be a nuisance.1 Over the next century, the environmental rights identified in Aldred’s case – making spillovers of smells, smoke, or other pollution harms from one property owner on to another, even without a physical trespass, actionable under tort law – became the norm. In a 1702 case finding the failure to rebuild a wall separating a privy from the neighbor’s house a nuisance, Lord Holt spelled out the “ no externalities rule” in plain English: “every man must so use his own as not to damnify another.”2 In the intervening three centuries, as pollution control efforts expanded beyond the obvious harms of pig stys or broken-down privy walls, our strategies for protecting environmental rights have evolved considerably. Each refinement in strategy helped to resolve weaknesses in prior approaches to environmental protection, especially information shortcomings. But the essential goals of efficiency (internalizing externalities) and justice (making victims whole) have remained the same. The next step now looms ahead: a further restructuring of environmental decisionmaking and action based on the availability of Information Age tools, knowledge, and approaches. As data and information become ever more plentiful and dramatically less costly3, both the environmental problem
1Aldred’s Case, 77 Eng. Rep. 816 (1611).
2Tenant v. Goldwin, 92 Eng. Rep. 222 (1702).
3WILLIAM GATES, THE ROAD AHEAD (1995) (identifying breakthrough technologies); WILLIAM J. MITCHELL, E-TOPIA 13 (1999) (“[I]nformation has become dematerialized and disembodied; it is now whizzing round the world at warp speed, and in catex-crackling quantities, through computer networks.”); Ira S. Nathanson, Internet Infloglut and Invisible Data: Spamdexing Search Engines with Meta Tags, 12 HARV. J. L. & TECH. 43, 51 (1998) (describing the explosion of information accessible through free online search engines). 2 set and our response strategies will be reconfigured. In particular, a wide-ranging set of pollution tracking and taxing mechanisms creates the potential for more complete internalization of externalities with lower transaction costs and more appropriate compensation of victims. As I spell out below, computers, modern telecommunication devices, and related advances in sensors, statistical modeling, and other knowledge realms will increase our capacity to understand environmental threats and to manage regulatory complexity, allowing us to further decentralize, refine, and individually tailor environmental policies. In particular, the ability to delineate, defend and exchange environmental rights at low cost makes a more robust property rights regime possible. These same technical advances will also improve the efficacy of government-mandated pollution controls and permit a shift toward greater use of market mechanisms rather than command and control regulatory approaches. In addition, the advances of the Information Age may speed the process of norm diffusion and tighten the feedback loops that create a social context of environmental concern. Although the tenacity of the status quo and obstruction by interests who benefit from the current approach to environmental protection will conspire to create significant institutional obstacles to change, the pressures for systemic reform over time are great. And while the Digital Era may generate an economic boom that has “scale” effects (driving consumption and thus pollution up) and create new environmental challenges, an improved capacity to gather, sort, process, analyze, monitor, digest, and display data promises to enhance virtually all of the existing myriad of pollution control and natural resource management strategies. These changes will shift the optimal specificity of regulation and the mix of pollution control strategies that society deploys as the tradeoff among economic efficiency, administrative cost, justice, and other policy goals evolves. The core argument, advanced in the pages that follow, is that we stand on the verge of computer-led shift in the “Pareto frontier” for environmental protection with broad implications that have just begun to be considered. The pace and phase direction of this environmental revolution are hard to forecast, but the impact, I argue, will be profound over the coming decades. And the potential is already present today. Part I of this Article opens with a brief review of environmental protection theory. I outline the 3 core goals of environmental policy: (1) allocative efficiency through the internalization of externalities, (2) administrative efficiency through the adoption of least social cost strategies of intervention to correct externalities, and (3) making pollution victims whole, which I call the “justice condition.” I further explain how these goals interact to define a “policy possibility frontier.” Part II examines our existing models of environmental protection: (1) property rights utilizing tort and contract law, (2) command and control regulation, (3) economic-incentive-based regulation, (4) social context, and (5) the default option of doing nothing. I review the shortcomings that plague these approaches to pollution control, highlighting, in particular, the central role of information gaps and failures and thus the Information Age opportunities for progress. Part III expands the analysis of the opportunities for Information Age environmental gains, focusing in particular on the need to see the environmental challenge as more than a question of internalizing externalities. I argue that some pollution problems are better understood as “waste” or inefficiency based on ignorance or the use of unsophisticated technologies. But computer-driven technologies such as the Internet permit much faster identification of such mistakes and the dissemination of information on “best practices.” In other cases, environmental problems should be seen as a question of managing diversity in circumstances, tastes, and values. Information age technologies may, in such circumstances, allow a much greater degree of individually-tailored environmental choice as well as expanding and solidifying the “technical” foundations for personal environmental decisionmaking. For instance, expanded use of ecolabels and other sources of consumer information might position individual buyers to make food safety choices such as whether to eat products derived from genetically modified organisms (GMOs). Part IV examines how, both in theory and practice, the advances of the Information Age might be brought to bear in the environmental realm. I argue that breakthroughs in computers and communications technologies and the knowledge revolution they are spawning will change our understanding of the environmental problem set as well as our thinking about response strategies, both of which will drive, and ultimately be driven by, changing values toward environmental harms. As 4 these variables change, both iteratively and interactively, the environmental realm seems likely to be profoundly transformed. More plentiful and cheaper data and knowledge will enable both companies and consumers to overcome information-related market failures, thereby expanding the domain in which a property rights regime may function appropriately. Information Age breakthroughs also promise to facilitate improved regulation by reducing the spectrum of existing regulatory failures including technical and scientific shortcomings, administrative inefficiencies, structural (or jurisdictional) mismatches, and public choice distortions. Finally, low-cost access to environmental information will greatly enhance the capacity for environmental gains through a social context of “greener” markets and more sharply focused environmental pressures from “communities,” both geographic and issue-defined. Part V explores how the gains from a world of richer information might be brought about more quickly. I identify a number of policy interventions that would support efforts to lure or drive more relevant data and knowledge into environmental decisionmaking processes. I note that these strategies are particularly important in the short- to middle-run before the full effects of the Information Age naturally permeate society. Part VI reviews the obstacles to a more information-rich approach to pollution control and natural resource management. I discuss the fact that some changes brought about by the Information Age may be environmentally harmful and highlight the barriers that may limit the benefits generated by the Digital Revolution in the near future.
I close with some conclusions about the opportunities and challenges of Information Age environmental protection. I observe that advances in data availability and information management mark a watershed in pollution control and natural resource policymaking, requiring us to reconstruct our themes of environmental protection and to reconfigure our assumptions about the tradeoffs required. In particular, I see a significant opportunity to reduce our dependence on collective decisionmaking and thus to move toward a more refined environmentalism that better internalizes externalities, reduces costs, improves efficiency, promotes compensation for infringements of environmental property rights, and advances personal choice. 5
I. Understanding the Environmental Challenge The environmental challenge has long been understood as a question of externalities.4 Where private parties do not pay for the pollution harms they cause to others, the divergence between private costs and social costs results in allocative inefficiency. Concomitantly, economic theory tells us that the free market can be expected to produce an efficient and welfare-maximizing level of resource use, production, consumption, and environmental protection if the property rights over environmental resources are clearly defined and enforced and the transactions costs of negotiating their purchase and sale are negligible.5 In such circumstances, private party exchanges enforced by a simple framework of contract and tort rules generate an economically efficient environmental regime which internalizes pollution spillovers and other externalities. Benton either pays Aldred for the harm he suffers from the pigs next door or eliminates the spillover from the animals. From an economic perspective, the environmental problem can therefore be reduced to a matter of establishing and enforcing property rights as a mechanism for ensuring allocative efficiency.6 But as the Aldred case demonstrates, society has other goals as well. In particular, Aldred’s victory over Benton reveals two other policy aims: (1) a commitment to justice, whereby the victims of pollution spillovers are made whole (either through cessation of the harm or financial compensation for the injuries suffered), and (2) a “least social cost” process for achieving allocative efficiency and justice (minimizing the transaction costs). Internalizing externalities and thereby achieving allocative efficiency thus emerges as the central environmental policy goal subject to administrative efficiency constraints and justice (property rights
4A.C. PIGOU, THE ECONOMICS OF WELFARE (4th ed.1932); WILLIAM BAUMOL & WALLACE E. OATES, THE THEORY OF ENVIRONMENTAL POLICY (2nd ed. 1988).
5Harold Demsetz, Toward a Theory of Property Rights, 57 AM ECON. REV. 347 (1967).
6Many environmental commentators focus on internalizing externalities as the goal. See, e.g., Carol Rose, Rethinking Environmental Controls: Management Strategies for Common Resources, DUKE LAW JOURNAL 1 8-12.(1991) [hereinafter Rose, Rethinking]. 6 protection) concerns. Indeed, considerable attention has been paid in recent years to the costs of interventions to address externalities, both in terms of the actions required of the polluter (“user” or “control” costs) and the transaction (or administrative) costs of the intervention process. Great emphasis has been placed on achieving least social cost outcomes by finding ways to minimize the “overhead” involved in internalizing externalities and pushing the process only to the point at which marginal benefits match marginal costs. The aim can be stated as:
minimize ' (A + I + T) A = action costs (user or control costs) I = inaction costs (unabated harms borne by pollution victims as well as costs attributable to the allocative inefficiency caused by uninternalized externalities) T = transaction costs, which encompass –harm identification –“fate and transport” determination (establishing causal linkages from sources to impacts) –rights delineation –impact evaluation (epidemiological and ecological effects) –harm valuation –administration, including: •negotiation costs (contract) •court costs (tort) •policy decisions and enforcement (regulation)
But this formula is often applied in an oversimplified manner. Policymakers tend to ignore who bears the costs, especially residual (uninternalized) harms, and the interaction among these variables in defining a policy possibility frontier. For example, where policy interventions involve harm abatement mandates rather than money transfers from polluter to victim, a least social cost administrative efficiency constraint may come into conflict with our justice goal of full compensation for victims of pollution. In particular, if abatement does not result in full cost internalization, because, for example, further pollution control would cost more than the additional benefits to those suffering harms, a justice question remains open —and often goes unaddressed: Who bears the costs of the unabated emissions? Similar tradeoffs emerge when transaction costs are high. If, for instance, T>I 7 then we violate either the administrative efficiency condition by intervening and bearing the transaction costs or we give up allocative inefficiency and our justice condition in choosing not to act.
II. Environmental Protection Models In the years since Aldred won his claim against Benton, society has struggled to deal with increasingly diffuse and hard-to-track environmental problems that sprawl across space and time, making the identification of harms, the establishment of causal links from harm-causers to victims, the delineation of rights, the measurement and valuation of impacts, and the administration of a corrective regime all the more difficult. In response to this increased complexity and the extensive requirements of a property rights approach to full cost internalization and victim compensation, other pollution control strategies have emerged. To some extent, each new strategy developed in response to frustration with the shortcomings of the prior approaches to environmental protection. The private property rights model, for instance, bowed under the weight of industrialization in the 19th and 20th centuries.7 New types of diffuse harms emerged (especially emissions and effluent from factories), the number of polluters multiplied, and the ability to trace harms to specific harm-causers largely fell apart. The resulting information gaps and other implementation problems left the private rights model open to “market failures” that rendered a simple environmental strategy based on tort and contract law untenable in many circumstances. But it soon became apparent that government-agency-centered approaches to environmental protection, which emerged in response, created new vulnerabilities to regulatory failures including mistaken policy judgments, costly and time consuming analyses, structural mismatches (where the requisite cost-benefit analysis overlooks some harm-causers, beneficiaries, or cost-bearers), and public choice distortions. Each of the existing environmental protection models thus has strengths, but also
7David A. Westbrook, Liberal Environmental Jurisprudence, 27 U.C. DAVIS L. REV. 619 (1994) (providing a history of environmental controls). 8 weaknesses and limitations.8 To clarify how the Information Age might change our environmental situation, I review, in the sections that follow, the panoply of issues and difficulties that limit the effectiveness of environmental regimes based on: (1) property rights, (2) command and control regulation, (3) economic incentives, and (4) social context. I also highlight a fifth policy option, the default choice of doing nothing and letting harms lie where they fall. A. Making the Environmental Rights Market Work While Aldred could see and smell Benton’s pigs, today’s environmental problems are often much more diffuse and hard to track. Whether we focus on sulfur dioxide emissions from power plants, toxic chemical releases from factories, tailpipe emissions from cars, or chemicals that run off from farmers’ fields and suburban backyards into groundwater and surface waters, today’s pollution problems are often relatively invisible. With impacts spread across space and time, many effects are visible only on a cumulative basis. This ecological complexity makes the identification of harms, the delineation of property rights, the establishment of causal links from harm causers to victims, and the valuation of impacts extremely difficult. Individuals, in particular, are hard pressed to know when and to what extent their environmental “space” has been invaded and thus when and how to respond to invasions of their property rights. In a world where the only environmental tool is tort and contract law, pollutees face a range of obstacles to contracting or making a legal claim for compensation for the harms they face. These burdens can be characterized as: (1) technical, (2) institutional, and (3) strategic.
8The workings of these models have been discussed and analyzed in many places. See, e.g., RICHARD B. STEWART & JAMES E. KRIER, ENVIRONMENTAL LAW AND POLICY 198-324 (2d. ed. 1978) (discussing the reasons that private litigation does not address environmental problems in many cases); Richard B. Stewart & Cass R. Sunstein, Public Programs and Private Rights, 95 HARV. L. REV. 1193, 1236-37 (1982); Daniel C. Esty, Revitalizing Environmental Federalism, 95 MICH. L. REV. 570, 577- 584 (1996). I therefore focus in the following section on how well each approach does in providing economic efficiency, administrative efficiency, and justice. 9
1. Technical Challenges Beyond the realm of pig stys, individual victims are rarely positioned to understand the full parameters of the harms they face. Consider factory emissions. Identifying the source or sources of pollution, tracking the patterns of “fate and transport,” establishing precise causal links between emissions and harm, and spelling out the scope of damages (both ecological and epidemiological) represent enormous technical burdens. Some problems only emerge after pollutants concentrate spatially. A thousand cars in LA poses no problem; a million is another story. Others are marked by cumulative impacts from multiple sources and sometimes interactions among different types of emissions. Indeed, the air in any city is a “soup” of chemicals from hundreds of major sources and thousands or even millions of minor ones. Still other problems only become visible over time as injuries accumulate. It took decades for the build-up of chlorofluorocarbons to cause the ozone layer to thin. Even where precise physical harms can be tracked to specific pollution sources, a further technical challenge emerges in trying to place a value on the injuries identified. The valuation burden is partly technical, involving risk-benefit assessments, but is also partly philosophical insofar as there is no “scientific” answer to questions such as: What is a lost year of life worth? Or how much compensation should be paid for the obstruction by smog of a pretty view? One of the critical questions in environmental protection is who makes the “action” decision about whether pollution controls will be implemented and if so, what sort of abatement efforts will be undertaken. While a tort-based protection regime requires courts to assess victim damages (which they may well not be positioned to do9), in general, the awarding of damages shifts the burden of making pollution control decisions back onto the polluter, who is generally reasonably well-situated to understand the specific circumstances (leading to the harm) and to make an appropriate action decision. Of course, in some cases, a determination of liability (or non-liability) simply becomes a prelude to negotiation among polluter and pollutee. Such negotiations can be
9CARNEGIE COMMISSION ON SCIENCE, TECHNOLOGY, AND GOVERNMENT, SCIENCE AND TECHNOLOGY IN JUDICIAL DECISIONMAKING: CREATING OPPORTUNITIES AND MEETING CHALLENGES (1993). 10 expected to produce socially optimal results only to the extent that both parties are well informed about the issues under debate—the type and extent of harms, the value of the resulting injuries, and the options available for mitigation. 2. Institutional Obstacles Even if the technical challenges can be surmounted, victims will have a hard time forcing mitigation or collecting compensation unless legal and political institutions are in place to delineate property rights, settle boundary issues, and adjudicate disputes over the value of property rights infringements. Defining the physical boundaries of environmental resources, clarifying what constitutes “reasonable” use by others, and placing a value on both public health and ecological injuries all entail costs and depend on the presence of a functioning legal regime. Absent such a structure, the requisite backdrop of contract and tort law may not be in place to facilitate negotiation over environmental rights and to ensure low-cost vindication of these rights where they are infringed. Even where the requisite institutions are in place, fair, efficient, and appropriate outcomes are not guaranteed. Access to the legal system may be limited by the cost of bringing a case or other requirements. Asymmetries between harm-causers (often large entities) and victims (often diffuse individuals with small personal losses) may add to the burden of staking a claim. Corruption or public choice failures may further distort results. 3. Strategic behavior. Even if we assume that all the technical and political/legal challenges identified above could be resolved, there would remain another set of difficulties that inhibit a property rights approach to protecting resources. Specifically, even where a range of acceptable outcomes might make bargaining over property rights feasible, people often do not arrive at agreement because of strategic behavior and positioning.10 Asymmetries in size and power often shape environmental outcomes. Who bears the technical and institutional costs of environmental protection matters far more than many legal
10Richard A. Epstein, Holdouts, Externalities, and the Single Owner: One More Salute to Ronald Coase, 36 J.L. & ECON. 553, 582-84 (1993) (discussing the effects of strategic behavior).
11 commentators have acknowledged. Diffuse and small victims, whose capacity to expend resources in defense of their rights is limited, will often be overmatched by the large and concentrated focused polluters lined up against them.11 These circumstances may embolden polluters into protracted legal maneuvering rather than payment of compensation. In other cases, victims may act unreasonably and seek extortionate levels of compensation for their injuries. Thus, bullies, holdouts, free riders, and other types of strategic bargaining may prevent efficiency-enhancing trades from taking place or the smooth adjudication of disputes over environmental property rights.12 The farther we move from the two-party case of Aldred and Benton and their straightforward problem over pig odor toward the more typical multi-party, causally complex, technically difficult problem arising in the interstices of environmental rights, the more likely it is that a property rights approach to environmental protection will fail. Fundamentally, as Coase demonstrated, market solutions to environmental spillovers will be efficient if transaction costs are low. But the Coasian paradigm of small numbers of parties involved and easy access to information cannot be taken for granted. In our Industrial Era, many environmental problems involve large numbers of actors and insufficient information. Adequate, never mind perfect information is almost never available. Transaction costs thus become a critical issue, as scholars have stressed for several decades.13 As the technical, political/legal, and strategic issues mount, so do the odds of market failure, legal inaction, and
11Bruce A. Ackerman, Beyond Carolene Products, 98 HARV. L. REV. 713, 723-6 (1985) (difficulty of mobilizing different groups).
12Id.
13BAUMOL & OATES, supra, note __; Guido Calabresi, The Pointlessness of Pareto: Carrying Coase Further, 100 YALE L. J. 1211, 1218 (1991)[hereinafter Calabresi, Pointlessness]; Stephen Cheung, The Structure of the Contract and the Theory of a Non-Exclusive Resource,” 13 J. L. & ECON. 49, 64-67 (1970)[hereinafter Cheung, Structure]; James Krier, Commentary, The Irrational National Air Quality Standards: Macro- and Micro-Mistakes, 22 UCLA L. REV. 323, 326-28 (1974); Richard B. Stewart, Pyramids of Sacrifice? Problems of Federalism in Mandating State Implementation of National Environmental Policy, 86 YALE L. J. 1196; Oliver E. Williamson, Corporate Governance, 94 YALE L.J. 1197 (1984). Oliver E. Williamson, Transaction Cost Economics, in 1 HANDBOOK OF INDUSTRIAL ORG. 135 (1982) (Richard Schmalensee & Robert E. Willy, 12 inadequate compensation under a property rights regime.14
B. The Regulatory Model: Command and Control In the face of information gaps and bargaining dynamics that limit the viability in many circumstances of a market-based exchange of environmental rights, an alternative model of environmental problem solving based on statutory regulation, emerged.15 The regulatory model, with basic environmental standards set legislatively and specific rules established administratively addresses some of the pitfalls in a property rights regime. But other weaknesses remain, and some new vulnerabilities are created. 1. Gains from Collectivization Command and control regulation “collectivizes” critical dimensions of environmental decisionmaking. Most notably, responsibility for harm identification and valuation shifts from pollution victims to the government. Centralized data collection and analysis generates economies of scale in the technical activities that underlie the identification of pollution sources, rights delineation, impact assessment, and harm valuation. The shift toward a governmental model also tends to bring greater expertise to bear in the environmental protection process. In addition, regulators can look for generalized patterns of emissions and harm. In effect, the statutory environmental model permits a “short cut,” whereby regulators assert a causal nexus between pollution and injuries where the facts might have been too limited to support a particularized legal claim under the law of tort.16 Where, for
14Calabresi, Pointlessness, supra note__ at 1218-19 (noting that failures of knowledge, organization and compensation often keep us from achieving what is theoretically possible); Oliver Williamson, Transaction Cost Economics: The Governance of Contractual Relations, 22 J. L. & ECON. 3 (1979) (noting how transaction costs affect outcomes) [hereinafter Williamson, Transaction Costs].
15RICHARD N.L. ANDREWS, MANAGING THE ENVIRONMENT, MANAGING OURSELVES (1999) (reviewing the evolution toward regulation in American environmental policymaking); [need other cites on history of enviro regulation}.
16See Calabresi and others discussing this bridging of the causal “gap.” 13 instance, despite significant public health evidence, Missouri could not tie its increased incidence of water-borne disease to the flow of Chicago sewage carried by a rechanneled river, regulators will make the inference.17 The shift from seeking to identify individual harms traced to specific emitters to a search for more general emissions-to-victims linkages based on broad trends transforms the analytic underpinnings of pollution control. Centralizing data collection and analysis serves to counterbalance the asymmetries of organization, political activity, and legal capacity that make it irrational from a cost-benefit point of view for an individual suffering slight harm to challenge polluting entities. By shifting the burden of staking a claim off individuals, it becomes more likely that the small harms suffered by a widely dispersed population might be aggregated in a fashion that makes it worthwhile to address the uninternalized externalities. In brief, command and control regulations, based on government-defined pollution control technologies or emissions standards, represent a way to overcome individual analytic incapacity, achieve scale economies in the technical dimensions of environmental protection, and fill by fiat the information gaps (and related doubts about causal connections) that plague a property rights- based environmental strategy.18 Similarly, by mandating pollution control rules and requirements, regulatory strategies limit the institutional obstacles to recovery that individuals of harms face and the risk that strategic behavior in negotiations (by either polluters or victims) will derail agreement on compensation.
17Missouri v. Illinois 200 U.S. 496 (1906).
18See, e.g., Harold Demsetz, Toward a Theory of Property Rights, 57 AM. ECON. REV. 347, 348-49 (1967) (arguing that property rights should be arranged so as to internalize as many externalities as possible); James L. Huffman, Thirtieth Anniversary Edition Essay: The Past and Future of Environmental Law, 30 ENVT’L. L. 23, 26-7 (2000) (“from the economic perspective, high transaction costs, free riders, and poorly defined or nonexistent property rights result in private choices that fail to internalize many environmental costs. Pursuant to this market failure theory of environmental regulation, it falls to government to impose standards that force private actors to effectively internalize environmental costs. The regulator’s task is to command that allocation of environmental resources the market would deliver if there were no market failure.”).
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Concerns about information gaps, strategic positioning, and the dynamics of bargaining have led to a great deal of theoretical work on the optimal structure of rules—and who is given what role in the adjudication process.19 In his pathbreaking work, Guido Calabresi highlighted the possibility that a shift to liability rules from property rules might reduce vulnerability to transaction costs imposed by holdouts and other inefficiencies that arise from strategic bargaining. He showed that liability rules, which collectivize the damages assessment process, generate efficiency gains. Calabresi further demonstrated that, in a world of less-than-perfect information, it is important to structure the legal regime so as to create incentives for information production and for the least-cost avoiders to act.20 In effect, regulation through legislatively determined and agency implemented standards takes Calabresi’s insight about the benefits of liability rules over property rules and applies the same logic across all dimensions of the environmental decisionmaking process. At the center of this strategy lies a shift in the scale of analysis from the individual to the community. In addition to eliminating the
19IAN AYRES & JOHN BRAITHWAITE, RESPONSIVE REGULATION: TRANSCENDING THE DEREGULATION DEBATE (OXFORD UNIVERSITY PRESS 1992); Ian Ayres & Eric Talley, Solomonic Bargaining: Dividing A Legal Entitlement To Facilitate Coasean Trade, 104 YALE L. J. 1027 (1995); Ian Ayres & Eric Talley, Distinguishing Between Consensual and Nonconsensual Advantages of Liability Rules, 105 YALE L. J. 235 (1995). Ayres and Talley as well as Kaplow and Shavell, for example, have demonstrated that where information is asymmetric, property rules may not produce superior results from an efficiency perspective. Ayres and Balkin have demonstrated that an even more refined analysis distinguishing between higher-order liability rules and first-order liability principles might further enhance efficiency. See Ian Ayres & J. Balkin, Legal Entitlements as Auctions: Property Rules, Liability Rules, and Beyond, 106 YALE L. J. 703, 707 (1997). This literature has now been extended to suggest not only that the degree of information available should affect the legal regime that is employed, but also to note that the type of legal regime employed may have important effects on the degree of information that is produced and made available to decisionmakers. Kaplow and Shavell argue that liability rules may allow the government to harness information that a harm-causer (polluter) possesses. See Kaplow & Shavell, Economic Analysis, supra, note 67 at 725. But Ayres & Balkin observe that a first-order liability rule does not go far enough in harnessing the private party’s information. See Ayres & Balkin, Entitlements as Auctions, supra at 720. It makes sense to try to extract not only the information that is proprietary to the polluter, but also the information that is held by the pollutee.
20Guido Calabresi & Douglas Melamed, Property Rules, Liability Rules, and Inalienability: One View of the Cathedral, 85 HARV. L. REV. 1089 (1972); GUIDO CALABRESI, THE COST OF ACCIDENTS: A LEGAL AND ECONOMIC ANALYSIS, 1970; Frank Michaelman, Pollution as a Tort: A Non-Existential Perspective on Calabresi’s Costs, 80 YALE L. J. 647 (1971). 15 detailed and highly particularized information demands of a tort-law approach to addressing environmental harms, lodging environmental authority in an administrative agency (such as the Environmental Protection Agency) lowers transaction by making problem identification, data collection, fate and transport analysis, epidemiological and ecological studies, risk assessment, and cost-benefit analyses collective responsibilities. Agency decisionmaking also applies community not individual values and valuations, reducing the risk of strategic behavior or other transaction costs imposed by individuals with “outlier” valuations. Command and control regulation also collectivizes the policy or “action” decision. Rather than doing hundreds, or thousands, or even millions of individual harm analyses, the regulating agency, using “gross average” data and collective judgments, does a small number of cost-benefit calculations. It then develops general rules and broad-based policies that it applies across-the-board, accruing significant savings in analytic and administrative costs. It is important to note, moreover, that even if the overall “system costs” do not fall— i.e., the information burden on the agency remains high21—the shift in decisionmaking responsibility to governmental authorities transforms the environmental protection calculus. Notably, individual property rights holders are relieved of significant costs that they otherwise have to bear to vindicate their infringed environmental property rights. In addition, to the extent that pollution control and natural resource management problems have a scientific or technical dimension, it may well be that regulatory agencies, staffed by skilled technocrats, are better positioned to undertake the analytic activities that would otherwise fall on individuals and better situated than courts to do harm valuations and thus to make sound environmental decisions. Thus, in at least some circumstances, command and control regulation offers a promise of lower technical, political/legal, and strategic costs yielding outcomes that internalize externalities, and protect property rights at lower social cost than a tort and contract based regime. 2. Ongoing Technical Limitations
21While the strategic positioning that obstructs negotiations may be eliminated, new types of strategic behavior—aimed at shaping legislative or regulatory outcomes—may emerge.
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While a centralized approach to environmental policymaking transforms the data and information problem, it does not eliminate the need for vast quantities of data. In trying to track the full range of pollutants under a diversity of circumstances and to make decisions about how to respond to them in the face of the same uncertainties that undermine a property rights regime, regulators face an immutable reality: good environmental decisionmaking is highly data intensive. While there is a big potential for cost savings in shifting from case-by-case decisionmaking to agency analysis and rulemaking, collectivization comes at a cost. When the government decides what abatement technologies will be deployed, imposing a single standard on large classes of polluters, errors of over- generalization accrue.22 In disregarding differences in circumstances, divergent values, and variations in capacities to respond, command and control regimes impose pollution control strategies that entails costs for the regulated community as a whole that are almost always higher than they need to be.23 Reduced transaction costs are, in effect, purchased at the price of higher “action” costs. The greater the diversity of circumstances and capacities, the higher the welfare losses from the lack of particularization under the command and control model. Just as the shift from property rules to liability rules achieves efficiency gains at the expense of individualization, the transfer of the environmental regime from case-by-case contract negotiation or tort adjudication to en masse regulation involves a tradeoff. They very act of collectivizing and generalizing source identification, rights delineation, and harm valuation substitutes “average” exposures and impacts
22See, e.g., J. CLARENCE DAVIES & JAN MAZUREK, POLLUTION CONTROL IN THE UNITED STATES: EVALUATING THE SYSTEM 15-16, 135-137, 278-280 (1998); CHARLES D. KOLSTAD, ENVIRONMENTAL ECONOMICS 139-143 (2000) (discussing the implications and inefficiencies of the “command and control” approach to pollution regulation); Richard B. Stewart, The 1991 Bellagio Conference on U.S.- U.S.S.R. Environmental Protection Institution: Models for Environmental Regulation: Central Planning Versus Market-Based Approaches, 19 B.C. ENVTL. AFF. L. REV 547, 550-552 (1992) (discussing problems with technology-based regulatory standards).
23Richard Stewart, A New Generation of Environmental Regulation? 29 CAP. U.L. REV. 21, 30-31 (2001) (“Command environmental regulation is a form of central economic planning that shares the inherent inefficiencies of all such systems.”) 17 and general principles for individualized preferences, values, and judgments. Unless regulations are established with reference to individual harms and results and particularized policy requirements, they cannot be as “accurate” from a pure cost internalization standpoint. In reality, the data on which command and control policies are based usually derive not only from averaging but also from extrapolation. Analyses are done on a subset of the population, which sometimes will be a very small sample or one that is not representative. The greater the heterogeneity (the greater the standard deviation around the mean), the larger the policy errors.24 These errors—polluters both under-regulated and over-regulated and victims both under- protected and overprotected (or under-compensated or over-compensated)—represent the price paid in higher action and inaction costs for reduced transactions costs. Again, precision is sacrificed to reduce the administrative burden.25 Implicitly, the information costs of full externality internalization (and perhaps justice too) are judged to be too high. Simply put, even though the analytic burden on each individual is reduced under a command and control regulatory regime, the cumulative costs of the environmental system remain very high. Government agencies either consume significant resources tracking, analyzing, and responding to environmental harms (which allows them to reduce the “failure costs” of over- or under-regulation) or they take short cuts that reduce their administrative costs but inflict inefficiencies on society in the form of misguided standards and programs (that lead to either unnecessarily high “user” costs or “failure” costs or both). 3. Institutional Shortcomings Moreover, the regulatory model, with its dependence on “bureaucratic” decisionmaking often falls short in practice of its theoretical potential. In aggregating victim interests and tracking down
24Robert Mendelsohn, Regulating Heterogeneous Emissions, 13 J. ENVTL. ECON. & MGMT. 301 (1986) (demonstrating that greater heterogenity leads to higher welfare losses from standardized policies).
25RICHARD EPSTEIN, SIMPLE RULES FOR A COMPLEX WORLD 30-36 (1995). But see Louis Kaplow, A Model of the Optimal Complexity of Legal Rules, 11 J. L ECON. & ORG. 150, 161 (1995). The “optimal specificity” issues will be discussed in greater detail below.
18 polluters “wholesale,” government intervention may reduce some market failures and may improve social welfare.26 But, in many cases, governments underperform as a result of a wide range of well- documented regulatory failures.27 As noted above, command and control strategies may yield suboptimal results because bureaucratic decisionmakers do not have the technical information needed to fully and appropriately internalize externalities. In addition, weaknesses in institutional structures, especially the lack of incentives for efficiency and productivity, may result in a regulatory system that costs more than is necessary to operate.28 And the expanded role of government in the regulatory process creates new scope for errors and inefficiencies. Notably, when government dictates the actions polluters must take they must either invest in highly detailed knowledge of each industry so as to regulate with sufficient particularity or accept a high probability of “action” costs that are higher than need be. Command and control mandates also tend to chill innovation29 and they fail to reward “over fulfillment”
26Esty, Revitalizing supra note __ at 652-53. A number of pollutants have been reduced by 70 percent or more since 1970, including “lead in the air; DDT and PCBs in wildlife and people; mercury pollution in the Great Lakes; strontium 90 in the food chain; and in some local rivers, phosphate pollution.” Barry Commoner, Failure of the Environmental Effort, 18 ENVT’L. L. REP. 10195 (1988) quoted in PERCIVAL, ET AL., supra note __, at 1241. Further, by 1992 all sewage generated in the US was subject to treatment prior to being discharged into the waterways and the rate of wetland conversion has slowed significantly since 1974. Erin Schiller, Earth Day is a Time for Us All to Celebrate, VENTURA COUNTRY STAR, Apr. 20, 1999 at B13.
27CLARENCE DAVIES & JAN MAZUREK, POLLUTION CONTROL IN THE UNITED STATES: EVALUATING THE SYSTEM (1998) (describing how fragmented systems of control, complexity of legislative provisions, ineffective administrative remedies, and scarcity of necessary information result in regulatory failure); see also MARC LANDY ET AL, THE ENVIRONMENTAL PROTECTION AGENCY: ASKING THE WRONG QUESTIONS 283-88 (1990).
28JERRY L. MASHAW, GREED, CHAOS, AND GOVERNANCE: USING PUBLIC CHOICE TO IMPROVE PUBLIC LAW 121-22 (1997) (describing in principal-agent terms problems of delegated regulation); JAMES Q. WILSON, BUREAUCRACY: WHAT GOVERNMENT AGENCIES DO AND WHY THEY DO IT, 117-20, 197 (1989) (arguing that in the public sector, it is difficult to assess performance and to distribute rewards and penalties once assessment is made); Stewart, supra note __.
29DAVIES & MAZUREK, POLLUTION CONTROL, supra note __; Percival, supra, note 74 at 166 (“Opponents of technology based [command and control] regulation argue that one of its most pernicious features is that it actually retards technological innovation by reducing incentives to develop better control measures.”)
19 of goals.30 More fundamentally, where environmental problems do not match the scope of authority of the regulating agency, accurate cost-benefit calculations and thus judgments about the appropriate level of intervention become hard to make.31 Where such jurisdictional or “structural” mismatches exist, burdens (and benefits) that fall beyond the jurisdictional boundaries of the regulating entity are often disregarded,32 resulting in a significant potential for under- or over-regulation.33 Regulatory regimes are also subject to capture and other “public choice” failures.34 Special interest distortions of the regulatory process, both directly through campaign contributions to decision makers and indirectly to the contribution of self-serving data and information to the technical decision
30Once an approved approach to pollution control is identified, there is a significant “lock in” effect. Having invested in what is required to meet the standards, the regulated industry has little reason to think about ways to achieve better results. In disregarding the diversity of circumstances and the variation in capacities to respond, command and control regimes impose costs on the regulated community as a whole that are almost always higher than they need to be. And the greater the diversity of circumstances and capacities, the higher the welfare losses. See Michael Porter and Claas van der Linde, Green and Competitive: Ending the Stalemate, 73 HARV. BUS. REV. 120 (1995). More recent work on regulation effects on innovation build on Williamson’s pathbreaking work. See, e.g., OLIVER WILLIAMSON, THE ECONOMIC INSTITUTIONS OF CAPITALISM (1985) at 43-63 (discussing the “lock-in” effects.)
31Henry N. Butler & Jonathon R. Macey, Externalities and the Matching Principle: The Case for Reallocating Environmental Regulatory Authority, 14 YALE L. POL’Y. REV. 26-66 (1996) (arguing that the size of the geographic area impacted by a pollutant should be used as a guide in selecting the appropriate level of government in order to achieve efficient regulation)[hereinafter Butler & Macey, Matching Principle].
32MANCUR OLSON, THE LOGIC OF COLLECTIVE ACTION: PUBLIC GOODS AND THE THEORY OF GROUPS (1965).
33See Esty, Revitalizing, supra, note __ at 587-97 (describing various structural or “jurisdictional” failures in the environmental domain).
34Mashaw, supra, note ___at 10-29; Matthew McCubbins, Roger Noll & Barry Weingast, Structure and Process, Politics and Policy: Administrative Arrangements and the Political Control of Agencies, 75 VA. L. REV. 431-82 (1989). 20 process.35 In addition, various types of strategic behavior may emerge. For example, polluters sometimes exaggerate the control costs they are bearing in order to skew the regulatory cost-benefit calculus. They wish to show that: A + T > I, and thus that further regulation is economically irrational. In effect, there is a moral hazard problem that may keep the regulated community from implementing pollution control mandates in an efficient manner. Ultimately, command and control regulations are only as good as the information base on which they are built.36 Because information has a price, the policy process involves tradeoffs of accuracy and specificity versus administrative cost. Depending on how the errors fall (or which special interests dominate), the regulations that emerge may be inefficiently lax or strict. The higher the degree of uncertainty in the decisionmaking process, the greater the risk that government efforts to fill the information gap will go awry and that special interests will take advantage of the chaos to insert their own preferences.37 Errors are especially likely where harms are spread spatially and temporally— multiplying the vectors of uncertainty.
35Nathaniel O. Keohane et al., The Choice of Regulatory Instruments in Environmental Policy, 22 HARV. ENVT’L. L. REV. 313, 347-53 (1998) (arguing that environmental regulations reflect industry preferences); B. Peter Pashigian, Environmental Regulation: Whose Self-Interests Are Being Protected?, 23 ECON. INQUIRY 551, 573-79 (1985) (using voting analysis to show impacts of special interests on environmental policy); BRUCE A. ACKERMAN & WILLIAM T. HASSLER, CLEAN COAL/DIRTY AIR 29-35 (1981) (explaining how Appalachian coal interests affected legislative coalition building around 1977 Clean Air Act).
36For example, the failure of the Clean Water Act to achieve many of its objectives has often been traced to a lack of underlying information. Indeed, the EPA’s National Water Quality Inventory covers only 17 percent of rivers and streams and 42 percent of other water bodies. See Michael E. Kraft & Norman J. Vig, Environmental Policy from the Seventies to the Nineties: Continuity and Change in ENVIRONMENTAL POLICY IN THE 1990S: TOWARD A NEW AGENDA 3, 20-21 (Norman J. Vig & Michael E. Kraft eds., 1990) (discussing data and information gaps).
37In fact, a good bit of special interest manipulation occurs under the “cover” of trying to fill scientific, technical or “factual” gaps. See Wendy Wagner, Science Charade: Toxic Risk Regulation, 95 COLUM. L. REV. 1613, 1617-50 (1995); Howard A. Latin, Good Science, Bad Regulation, and Toxic Risk Assessment, 5 YALE J. ON REG. 89 (1988).
21
But it is important to be clear on the no-transaction-cost theoretical ideal: we would like to identify and place a value on each unit of harm, no matter how small, and then trace that unit to its source so that the emitter, who would then be charged fully for all the damages caused. As noted earlier, because transaction costs may swamp the benefits to be obtained by policy intervention, a great deal of attention has been given to the optimal specificity of rules in the environmental context and to the possibility that non-intervention will be socially optimal.38 Carol Rose, for example, argues that a “do nothing” strategy may represent an optimal environmental approach where “overuse” or “failure” costs are low.39 Plainly, if I < A + T than a do-nothing strategy represents the least social cost policy approach.
C. Do Nothing Approach Where supply of a resource is relatively plentiful and the demand pressures are not significant, a “no environmental regime” model may be optimal. The tailpipe emissions from a few cars in an unpopulated area will scarcely affect air quality and thus instituting a complex regulatory program for these vehicles alone would not be justified from a cost-benefit prospective. A do nothing strategy might also optimize social welfare where regulatory interventions are misguided and thus worsen, rather than improve, outcomes. Such cases, sometimes discussed in the context of the “nirvana fallacy,” could arise as a result of pervasive public choice distortions or other failures in the process of governmental
38The literature on the optimal specificity of regulation highlights this tradeoff. See, e.g., RICHARD POSNER, AN ECONOMIC ANALYSIS OF LAW 367-70 (4th ed 1992); see also Calabresi, Pointlessness, supra, note __ at 1230-35 (discussing how technological innovation operates and can be categorized; Colin Diver, The Optimal Precision of Administrative Rules, 93 YALE L. J. 65 (1983). The environmental challenge is also a question of where to seek to promote technological advances that shift the “Pareto frontier” outwards.
39See Rose, Rethinking Environmental Control, at 17 (explaining how a do-nothing strategy may be optimal under certain conditions).
22 intervention.40 The “do nothing” line of logic thus tracks a powerful intuition: it makes no sense to seek to internalize externalities if the cost of doing so will be high and the gains to be had are low. But the do nothing policy choice may be arrived at by mistake, in particular as a result of an unsophisticated cost-benefit calculus logic. First, a least-social-cost focus may underattend to justice and other non-economic costs of having innocent victims absorb pollution losses. Too often regulatory calculations in the environmental context incorporate only tangible economic variables, and sometimes only those that are easily quantified. Thus, a price is placed on the stench that Aldred must face from Benton’s pigs and on the cost that Benton faces from building a wall, moving the animals or otherwise mitigating the harm. These costs become the basis for the regulatory decision. Under a command and control regime, Benton may well be required to undertake some action. But often the regulatory mandate—e.g., building a wall— reduces but does not eliminate the harm. The residual impact on Aldred is ignored. In effect, the remaining smell falls under a “do nothing” regime, which forces the polutee to bear costs on an uncompensated basis. Second, the complexity of addressing environmental harms and high transaction costs implicit in sorting out specific responsibility and appropriate compensation has led to a series of practices and presumptions, which provide a basis for rationalizing the default to a do nothing approach—short- circuiting the process of full and systematic environmental protection. These presumptions frequently depend on counterfactual assumptions and ignore the justice implications of letting harms lie where they fall. As I explain below, these crude attempts to justify “do nothing” outcomes represent a serious pathology in our existing world of pervasive information shortcomings. 1. No Visible Harm Means No Harm. Just as Justice Holmes could not see the connection between Chicago’s sewage and the outbreak
40Peter S. Menell, Institutional Fantasylands: From Scientific Management to Free Market Environmentalism, 15 HARV. J. L. & PUB. POLY. 489 (1992); see also Maxwell L. Stearns, The Misguided Renaissance of Social Choice, 103 YALE L.J. 1219, 1229 (1994). 23
of typhoid of St. Louis in the infamous case of Missouri v. Illinois41 and therefore concluded that there must not be a recompensable harm, pollution frequently goes unabated and unaddressed if the causal link between the emissions source and victim is not obvious. It is perhaps human nature to want to see, smell, hear, taste, or feel the purported link from harm to victim as a test of whether the problem is real and as a way to judge how serious it is. But the dismissal of harms that cannot be traced by the human senses is intellectually and ecologically curious if not indefensible.42 Modern science permits us to detect many things that an average person cannot “sense.”43 Nevertheless, the maxim “out of sight, out of mind” continues to hold significant sway in the environmental realm.44 More troublingly, the “out of sight means no big harm” legend frequently leads to an abbreviated environmental impact analysis and limited policy consideration. Consider indoor air pollution or residual outdoor air emissions. Rather than making some attempt to get a fix on these hard-to-see issues, policymakers (especially elected officials) tend to skip over them and to leap to an assumption that a “do nothing” approach is optimal.45
41Missouri v. Illinois 200 U.S. 496 (1906).
42ROBYN N. DAWES, EVERYDAY IRRATIONALITY: HOW PSEUDO-SCIENTISTS, LUNATICS, AND THE REST OF US SYSTEMATICALLY FAIL TO THINK RATIONALLY (2001) (explaining how and why people make such errors).
43 Technologies, which detect unseen pollutants are being developed by universities, governments, and private companies. For instance, see the Heterodyned Holographic FTS Project at Imperial College (
44JOHN GRAHAM & JONATHAN WIENER, RISK V. RISK: TRADEOFFS IN PROTECTING HEALTH AND THE ENVIRONMENT (1995); Cass R. Sunstein, Economics & Real People, 3 GREEN BAG 2d 397, 400 (2000) (describing the “availability heuristic” and the tendency of the public to assign greater seriousness to those risks more easily called to mind or made visible through publicity); Cass Sunstein, Cognition and Cost-Benefit Analysis 9-12 (University of Chicago Law School, John M. Olin Law & Economics Working Paper N. 85 (2d series).
45This tendency persists even where there is some evidence that the problems are real. See e.g., Joel Schwartz, Short Term Fluctuations in Air Pollution and Hospital Admissions of the Elderly for 24
2. Myth of Endless Abundance. If a resource is not scarce or otherwise under pressure, a regime of no controls may well be optimal.46 In the early nineteenth century, when land seemed endlessly available in the American West, it made sense to permit “free” exploitation of the resources available. But the obverse of this principle is that resources under pressure must somehow be allocated or managed to avoid over-exploitation and market failure as well as infringements on property rights. In our modern (crowded) world, free is almost never the right price. First, resources that appear to be inexhaustible may ultimately not be. There is no longer an endless supply of land in the West. And we now know that the seemingly inexhaustible supply of fish in the oceans has real limits. Second, long after a resource has come under pressure, demands for free access may continue. The embedded expectations of those who have previously enjoyed low- or no-cost access to the resource are hard to dislodge.47 This type of expectations-created unhappiness can be seen still in the American West where the myth of endless abundance persists, leading to complaints from Montana ranchers about higher
Respiratory Disease, THORAX, 1995, at 531 (finding that "Air pollution concentrations within current guidelines were associated with increased respiratory hospital admissions of the elderly" in New Haven, Connecticut and Tacoma, Washington); Joel Schwartz, Short Term Effects of Ambient Sulphur Dioxide and Particulate Matter on Mortality in 12 European Cities Results From Time Series Data >From the APHEA Project, 314 BRITISH MEDICAL JOURNAL 1658 (1997) (suggesting that exposure to particulate matter and sulfur dioxide poses a relatively small but significant health risk to humans). Note that in some cases, “hard-to-see” may translate into greater fear, leading to a presumption of harm even where the real risk is small. The infamous Alar scare provides one such example. See Eileen O. van Ravenswaay & John P. Hoehn, The Impact of Health Risk Information on Food Demand: A Case Study of Alar and Apples, in ECONOMICS OF FOOD SAFETY 155 (Julie A. Caswell ed., 1991).
46Rose, Rethinking Environmental Control, supra note __, at 17.
47Robert Ellickson, Bringing Culture and Human Frailty to Rational Actors: A Critique of Classical Law and Economics, Symposium on Post-Chicago Law and Economics, 65 CHI.-KENT L. REV. 23, 37- 8 (1989) (arguing that the loss of “psychologically vested” rights is felt more deeply than the loss of prospective rights).
25 grazing fees for their cattle ranging on federal lands and from farmers in California’s Central Valley about having to pay market prices for water.48 If the reality of scarcity and thus the fact of resource competition is not yet apparent, it may be especially difficult to convince resource users that a pricing mechanism needs to be put in place or other regulation established to prevent overexploitation. While New England fishermen may realize, for example, that it is getting harder to fill a trawler with cod, they complain bitterly about any regime of controls designed to protect fish stocks.49 3. Assumption of Rough Reciprocity. A corollary of the theory that abundant resources need not be managed is the notion that if pollution harms or resources consumed are roughly reciprocal, then the cost of intervention to internalize externalities will not be justified. In particular, if A is causing ten units of harm to B with the smoke from his coal furnace, but B is causing ten units of harm to A with the smoke from his coal furnace, it makes little sense (or so the theory goes) for A to be required to pay B for the ten units of harm only for B to pay A the same amount back again. The reciprocity rationale is, however, a crude rule and increasingly inappropriate in our modern
48Although the rate charged for grazing rights per animal unit on federal lands continues to be significantly lower than that charged on private lands, efforts to raise grazing fees on federal lands spark strong resistance from ranchers and, more importantly, their representatives in Congress. A 1993 proposal to narrow the disparity between grazing fees on public and private lands by indexing federal grazing fees to a “basic value” reflecting changes in private grazing lease rates was abandoned in the face of voluble opposition from the regulated community, even though the cost of federal grazing fees would still have been far below private lease rates. See Karl N. Arruda & Christopher Watson, The Rise and Fall of Grazing Reform, 32 LAND & WATER L. REV. 413, 428-32 (1997). Similarly, though reportedly paying in the range of a few dollars per acre foot for the same water that city residents were paying hundreds of dollars per acre foot for and as a result of federal subsidies in 1991, farmers in the Central Valley staunchly opposed changes in the status quo. Gogek, Water Subsidies May Dry Up; Is the End Near for Cheap Federal Water?, SAN DIEGO UNION-TRIBUNE, May 3, 1991, at B8.
49In 1999, for example, the New England Fishery Management Council issued an “emergency request” to the Commerce Secretary asking that their own recently-adopted plan to address overfishing of Gulf of Maine cod by reducing catch be reversed after “listening to outraged fishermen scream at them for nearly seven hours.” Ed Wayward, Fishery Council Passes Buck on Cod Take Limits, THE BOSTON HERALD, May 31, 1999 at 38.
26 day. First, the assumption of roughly equal harm across users is often wrong. Some people use far more than their share of resources or emit far greater than average pollution. Those who consume a much smaller fraction of common resources and spill below average emissions onto others are disadvantaged by a presumed equality of impacts. Think, for instance, of the use of cars. Tailpipe controls under the Clean Air Act limit but do not eliminate the pollution from cars. But there has been no serious attempt to require compensation for the not-insubstantial residual vehicle emissions, perhaps because these harms are assumed to be more or less reciprocal to the extent that everyone in the United States drives a car.50 But if Amory drives a relatively fuel efficient car (and sometimes rides his bike to run errands) while Betty drives a gas-guzzling Sports Utility Vehicle – their contributions to local air pollution are by no means roughly equal. Betty’s emissions will certainly be two or three times greater than Amory’s and might be as much as ten times higher. Second, the assumption of rough reciprocity, which focuses our attention on the balance of emissions between consumers Amory and Betty, distracts us from the underlying allocative inefficiency. Specifically, the consumption by both Amory and Betty of the polluting good (cars) is subsidized relative to other goods (e.g., bicycles) when the harms are not fully priced. As a result, polluting goods and activities (driving cars) are over-consumed relative to non-polluting ones (riding bicycles).51 If both Amory and Betty were to face the full costs of driving, both of them might choose to drive less, make more efficient use of their cars, or create a demand for vehicles that generate less pollution. 4. Small Equals Zero Beyond disregarding presumed reciprocal harms, environmental decisionmakers often take an additional step and assume that certain harms are de minimus and have, in effect, zero impact. But this
50JAMES KRIER & E. URSIN, POLLUTION AND POLICY: A CASE ESSAY ON CALIFORNIA AND FEDERAL EXPERIENCE WITH MOTOR VEHICLE POLLUTION 1940-1975 (1977).
51WILLIAM J. BAUMOL & WALLACE E. OATES, ECONOMICS, ENVIRONMENTAL POLICY, AND THE QUALITY OF LIFE 71-79 (1993) (describing the limitations of free market pricing systems wherein the costs of environmental externalities are not reflected in the costs of consumer products).
27 presumption also collapses under scrutiny. In fact, we know that there are a large set of pollution sources that are individually so tiny that one might imagine that their modest contribution to the overall environmental quality could be ignored. When these individually small sources are aggregated the impact can be very big. Thus, if Betty’s car were the only one on the roads, it would not merit any attention. But alongside 160 million other vehicles on America’s highways and byways, the cumulative air pollution from vehicles that are individually insignificant looms very large.52 While pollution control efforts over the last 30 years have been quite successful in addressing major sources of emissions (e.g., factories), the policy structure has done little with regard to many smaller and less visible sources of harm.53 Today, the cumulative impact of small source emissions represents the bulk of the remaining pollution problem in many areas.54 Moreover, to the extent that disregard for small-scale emissions sidetracks efforts even to monitor and quantify the full spectrum of pollution harms and impacts, the “small equals zero” intellectual short-cut results in significant policy errors. 5. If We’ve Always Done it, How Bad Can it Be?
52In the month of June 2000, Americans cumulatively drove 237.1 billion vehicle-miles. Federal Highway Administration, Traffic Volume Trends (last visited Oct. 14, 2000) http://www.fhwa.gov/ohim/tvtw/tvtweb.pdf.
53Daniel C. Esty & Marian Chertow, Introduction, in THINKING ECOLOGICALLY (Marian Chertow & Daniel C. Esty, eds.) (1997).
54EPA, National Air Quality and Emissions Trends (1997) available at www.epa.gov/car/aqtrnd97/toc ; EPA, National Air Quality and Emissions Trends (1998) available at www.epa.gov/oar/aqtrends.html/toc.html; see also EPA, National Air Pollutant Emission Trends: 1900-1998 (March 2000) available at http://www.epa.gov/ttn/chief/trends/trends98/.
28
Another variation on this theme is the assumption that past practice must not be too harmful (perhaps since we are not dead yet). Why worry about run-off from fields polluting streams? Haven’t generations of farmers been doing things pretty much the same way? This presumption falls apart along several dimensions. First, practices change in small but important ways over time. Today’s farmer, for example, uses far more chemical fertilizer and pesticides than did his grandfather.55 His impact on nearby watercourses is therefore far more severe. Second, we know that many things once considered to be innocuous have proven, upon more careful analysis, to be quite harmful. Cigarette smoking was perceived as benign fifty years ago, but today we know that it represents a significant health risk. Because public perceptions often lag scientific advances, new norms may take decades to be inculcated into what constitutes “reasonable” behavior under the law. 6. Community Economic Gains One of the Industrial Era’s most powerful intellectual influences was the assumption that a certain degree of pollution is an inescapable byproduct of economic activity and that the benefits of economic growth justify any attendant harms. As industrialization took hold in the nineteenth century, courts, particularly in the United States, began to “balance” the potential gains to the community from continued economic activity against complaints about pollution harms, rejecting claims where the community gains exceeded the individual losses. Individuals and their claims against pollution spillovers began to be seen as an obstacle to broader community economic progress. Over time, the common law nuisance doctrine softened to the point that victims had to demonstrate an increasingly severe degree of harm to prevail in court.56 One study found that, by the late nineteenth century, private nuisance law was simply “not being applied in industrial towns.”57
55J.B. Ruhl, Farms, Their Environmental Harms, and Environmental Law, 27 ECOL. L. Q., 263, 282-85 (2000) (describing the use of chemicals in modern farming and the resultant harms to the environment).
56L. FRIEDMAN, THE HISTORY OF AMERICAN LAW (1973); N. HORWITZ, THE TRANSFORMATION OF AMERICAN LAW, 1780-1860 (1977). But see Schwartz, Tort Law and the Economy in Nineteenth- Century America: A Reinterpretation, 90 YALE L J. 1717 (1981).
57Joel Franklin Brenner, Nuisance Law and the Industrial Revolution, 3 J. LEGAL STUD. 403, 419 (1974).
29
This shift in relative rights appears vividly in the case of Smith v. Staso Milling Co.58 Judge Learned Hand declared that “the very right on which the injured party stands is a quantitative compromise between two conflicting interests . . . to award damages for the injury done, may become no better than a means of extortion if the result is absolutely to curtail the defendant’s enjoyment of his land.”59 The commitment to “balancing” did not entirely undermine the use of nuisance law to protect victims of pollution,60 but the emphasis on potential economic benefits and on ensuring that victims did not overplay their hand and in doing so obstruct industrial progress, subtly but steadily diminished the emphasis on protecting environmental rights.61 By the 20th Century, economic gains (measured at the community scale) almost always trumped environmental rights (gauged at the individual level). What is curious is not why value was placed on community benefits, but why the law has shifted so far in this direction to the point that the rights of pollutees are often ignored.62 The broad-based economic benefits of industrial activity should not be gainsayed. But taking community benefits seriously need not, perforce, mean individual losses must be dismissed. One might ask why part of the social gains that accrue from polluting activities should not be used to compensate those individuals whose environmental rights are, in effect, sacrificed for the community good. Perhaps the modern enthusiasm for economic efficiency has obscured a prior (and still extant) emphasis on justice and the protection of individual property rights. 7. Efficiency Above Other Values The “balancing” jurisprudence heralded a new commitment to efficient resource allocation as the central goal of legal intervention in the environmental domain.63 “Law and economics” theorists gave
5818 F. 2d 736 (2d Cir. 1927).
59Id..
60Indeed, in his Staso Milling decision, Judge Hand affirmed the decision that imposed an injunction on a slate processing mill that was polluting a stream.
61Brenner, supra note __, at 419-20.
62Carol Rose notes this shift in entitlements in Rethinking Environmental Controls, but does not explain the phenomenon. See Rose, Rethinking, supra note ___.
63WILLIAM LANDES & RICHARD POSNER, THE ECONOMIC STRUCTURE OF TORT LAW (1987).
30 this shift in entitlements further momentum with a body of scholarly analysis building on the idea that efficiency depends, in part, on the allocation of entitlements and thus that liability should fall on the party that is the cheapest cost avoider.64 But the push for efficiency, with its emphasis on collectivization of the harm “valuation” process had the (perhaps unintentional) side effect of diminishing the protection of individual environmental property rights.65 The logic builds on Calabresi’s insight, discussed earlier, that by shifting from a property rule, which leaves the valuation with the victims (and is therefore vulnerable to transaction costs imposed by holdouts and other inefficiencies arising from strategic bargaining) to a liability rule, which collectivizes the valuation process (in the form of a court judgment as to damages), efficiency gains could often be achieved.66 In the pollution context, this insight translates into Kaldor-Hicks-efficiency-inspired analysis that permits a polluter to carry on his activities if the economic value he places on operating exceeds the level of damages suffered by the neighbors.67 The same logic may lead to an allocation of the property rights to the polluting entity.68 In the
64Guido Calabresi, The Cost of Accidents: A Legal and Economic Analysis __ (1970) __; see also Frank Michaelman, Pollution as a Tort: A Non-Existential Perspective on Calabresi’s Costs, 80 YALE L.J. 647 (1971). In the intervening years since this debate began, a broad based literature on the structure of legal rules and their information impacts has emerged. See Louis Kaplow & Steven Shavell, Property Rules versus Liability Rules: An Economic Analysis, 109 HARV. L. REV. 713 (1996); Louis Kaplow & Steven Shavell, Do Liability Rules Facilitate Bargaining? A Reply to Ayres and Talley, 105 YALE L. J. 221 (1995); James E. Krier & Steven J. Schwab, Property Rules and Liability Rules: The Cathedral in Another Light, 70 N.Y. U. L. REV. 440 (1995).
65Calabresi recognized this point but is still better remembered for his efficiency thrust. Calabresi, Pointlessness, supra, note 12 at 1224-28 (noting that distributional analysis becomes inevitable and hence essential).
66Guido Calabresi & Douglas Melamed, Property Rules, Liability Rules, and Inalienability: One View of the Cathedral, 85 HARV. L. REV. 1089, 1125-1126 (1972); Guido Calabresi, Cost of Accidents, supra, note; Frank Michaelman, Pollution as a Tort: A Non-Existential Perspective on Calabresi’s Costs, 80 YALE L.J. 647 (1971).
67Guido Calabresi, Pointlessness, supra note ___.
68Of note, Kaldor-Hicks efficiency differs from Pareto Optimality insofar as not everyone need be better off to justify the activity in question. See Jules L. Coleman, Efficiency, Exchange, and Auction: Philosophic Aspects of the Economic Approach to Law, 68 CAL. L. REV. 22,259 (1980). (“A redistribution of resources is Kaldor-Hicks efficient if and only if under the redistribution the winners win enough so that they could compensate the losers. The notion of Kaldor-Hicks efficiency does not require that the winners actually compensate the losers.”).
31 widely discussed Del Ray case, the higher economic value residential development was given a legal right to demand the shutdown of the neighboring stockyard, but only after compensation was paid to the stockyard. While the assignment of property rights to the stockyard helped smoke out the true value of the competing enterprise, one might ask why, as a matter of justice, the residential development was forced to pay for its unpolluted air. Was there not an existing right inherent in the land the houses eventually occupied not to have the stockyard’s spillover of environmental harms in the form of odor and other externalities? Although the legal rules concerning “coming to the nuisance,” are well established, why shouldn’t we understand the circumstances in this case as involving dormant environmental property rights in the neighboring property that were activated when it was developed for residential use? A slight variation on Del Ray facts makes the dormant environmental rights line of argument stand out even more clearly. If, for example, the neighboring stockyard were not just emitting foul odors but had crossed over onto the land on which the residential development was to be built and run a waterpipe from a spring back to the feeding troughs of the cattle, this theft of a valuable resource would not be lightly dismissed. And when the houses finally occupied the land adjacent to the stockyard, the residents’ assertion of environmental property rights over the water would be taken seriously. When the stockyard deprives its neighbor of clean air, is the non-consensual taking of this environmental property right any less a theft than the taking of water, or for that matter, walking off with gold bars that happened to be stored on the adjoining site? The reallocation of the property rights that occurred in Del Ray, and which the law and economics literature endorses, needs to be understood as advancing efficiency, but not without a cost in terms of reduced justice. In some circumstances, the efficiency gains might be so great as to justify even fully tabulated justice losses. But, as Ayres, Balkin, Shavell, and others have demonstrated, strategic bargaining can be disciplined and efficiency gains promoted through means other than a shift from property rules to liability rules and the reallocation of entitlements away from least cost avoiders.69
69IAN AYRES & JOHN BRAITHWAITE, RESPONSIVE REGULATION: TRANSCENDING THE DEREGULATION DEBATE (OXFORD UNIVERSITY PRESS 1992); Ian Ayres & Eric Talley, Solomonic Bargaining: Dividing A Legal Entitlement To Facilitate Coasean Trade, 104 YALE L. J. 1027 (1995); Ian Ayres & Eric Talley, Distinguishing Between Consensual and Nonconsensual Advantages of Liability Rules, 105 YALE L. J. 235 (1995). Ayres and Talley as well as Kaplow and Shavell, for example, have demonstrated that where
32
Our legal system generally places a high premium on infringements of bodily integrity. Indeed, Calabresi rejects the use of property rules in such cases.70 And isn’t this how many pollution harms should be understood?71 Historically it seems so. One of the fundamental attractions of the Aldred case is the fact that not only must Benton pay for the harms he causes, but Aldred gets compensated for his injuries. Despite the unexplored nature of the tendency to trade justice off for efficiency,72 the recent Restatement of Nuisance appears to codify a realignment of rights away from pollutees.73 The diminished emphasis on justice in the environmental regulation context tracks the eagerness with which the law has embraced Kaldor-Hicks efficiency and its logic of social welfare optimization. The mere theoretical possibility of “winners” compensating “losers” often justifies a policy choice. Perhaps we should instead focus on “Calabresian efficiency,” which would permit Kaldor-Hicks- superior pollution-causing activities to go forward but only to the extent that “spillers” actually and adequately compensated “the spillees” for residual harms.74
information is asymmetric, property rules may not produce superior results from an efficiency perspective. Ayres and Balkin have demonstrated that an even more refined analysis distinguishing between higher-order liability rules and first-order liability principles might further enhance efficiency. See Ian Ayres & J. Balkin, Legal Entitlements as Auctions: Property Rules, Liability Rules, and Beyond, 106 YALE L. J. 703, 707 (1997). This literature has now been extended to suggest not only that the degree of information available should affect the legal regime that is employed, but also to note that the type of legal regime employed may have important effects on the degree of information that is produced and made available to decisionmakers. Kaplow and Shavell argue that liability rules may allow the government to harness information that a harm-causer (polluter) possesses. See Kaplow & Shavell, Economic Analysis, supra, note 67 at 725. But Ayres & Balkin observe that a first-order liability rule does not go far enough in harnessing the private party’s information. See Ayres & Balkin, Entitlements as Auctions, supra at 720. It makes sense to try to extract not only the information that is proprietary to the polluter, but also the information that is held by the pollutee.
70Calabresi, Property Rules, supra, note ___.
71Calabresi, Pointlessness, supra note ___.
72Ian Ayres & Paul M. Goldbart, Optimal Delegation and Decoupling in the Design of Liability Rules, Yale Law & Economics Research Paper No. 249 (demonstrating that allocative concerns can be separated from distributive issues).
73RESTATEMENT (SECOND) OF TORTS § 822 cmt.d (1979).
74Calabresi, Pointlessness, supra, note __ at 1222-23 (discussing the gap between Kaldor-Hicks and Pareto superiority and identifying the absence of actual compensation as critical); see also Ian Ayres, Protecting Property With Puts, 32 VAL. U. L. REV. 793 (1998) (explaining how the allocation of rights to initial entitlement holders may reduce the risk of under-compensation). 33
All of the “do-nothing” rationalizations just discussed share a common foundation: they represent policy optimization short cuts originally adopted (and now accepted without close examination) because the cost of getting full information was judged to be too high. But in a world of low-cost data, these implicit tradeoffs need not—and should not—be accepted. Where accurate information on pollution harms, especially from small sources, is cheap to gather and use, transaction costs are likely to fall, shifting the optimal specificity of regulation, and changing our “policy possibility frontier.” Thus, while much of the recent scholarly debate has focused on where on the frontier we should be, it is time to turn the dialogue to the issue of how best to shift the frontier outwards.
D. Market-Based Regulatory Regimes In response to the limitations of both property rights and command and control approaches to environmental protection, a new genre of regulation centered on economic incentives and other mechanisms designed to harness market forces to environmental goals emerged.75 As a “regulatory reform,” market mechanisms refine the environmental decision process in two critical regards. First, recognizing that the presumption of an omniscient government that underlies command and control regulation falls far short of reality, economic incentive structures try to take advantage of markets as a means for extracting dispersed information to improve the quality of decisionmaking.76 Second, insofar as the collectivization of data and analysis under command and control regimes leads to errors of policy generalization as discussed above, market mechanisms try, to a certain extent, to decentralize decisionmaking and permit the tailoring of environmental responses to the particular circumstances of each entity within the regulated community. In particular, economic-incentive based strategies give the regulated entities partial control over how to respond to pollution control requirements – giving them the choice over the “action” decision of how best to abate the regulated harms.
75Building on a longstanding base in the economics literature, Bruce Ackerman and Richard Stewart launched a legal focus on the potential for harnessing market forces for environmental regulation. See Bruce A. Ackerman & Richard B. Stewart, Reforming Environmental Law, 37 STAN. L. REV. 1333 (1985).
76The information-generating capacity of markets has been understood for many years. See, e.g., F.A. Hayek, The Use of Knowledge in Society, 35 AMER. ECON. REV. 519, 525 (1945).
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The acid rain trading provisions of the Clean Air Act of 1990 provide a good example of the
77 potential in this regard. By allocating permits for SO2 emissions to the existing sources but then permitting these sources to trade the permits, thereby reallocating the responsibility for reducing emissions to the lowest-cost reducers, a ten-million-ton reduction in SO2 emissions has been achieved over the last ten years at a fraction of the cost that was anticipated.78 While it would have taken an enormous investment of government resources to identify which power plants were best positioned to reduce sulfur emissions and by what means, the acid rain trading program motivated the companies themselves to generate this information. The market in SO2 permits that was created gave each power plant an incentive to determine whether it had low-cost options emissions reduction (new pollution control technologies, fuel switching possibilities, etc.) or whether its least-cost strategy was to purchase allowances for continued emissions above the authorized level. With no central control, a refined and cost-effective acid rain control regime emerged, which achieved the established emissions reduction goal at much lower overall social cost than would have in been possible with an across-the-board emissions reduction mandate based on average power plant emissions.79 Allowance trading regimes transform the information base on which control decisions are made. Notably, the market decollectivizes the “action” decision, permitting each electric generating station to optimize its pollution control position rather than requiring all power plants to take the same policy path.80 Most importantly, the emissions allowance trading approach relieves the government of the need to assemble or analyze data on each electric generating facility or to try to deduce the costs and benefits
7742 USC 7651 (1994).
78Byron Swift, Command Without Control: Why Cap-and-Trade Should Replace Rate Standards for Regional Pollutants, 31 ENVT’L. L. RPTR. 10330-32 (2001); see also Environmental Defense, From Obstacle to Opportunity: How Acid Rain Emissions Trading is Delivering Cleaner Air 2 (2000) (visited Nov. 3, 1000)
79 Douglas R. Bohi & Dallas Burtraw, SO2 Allowance Trading: How Experience and Expectations Measure Up 2 (1997) (visited Nov. 3, 2000)
80Not only has the shift of responsibility for the action decision to the regulated entity create incentives for new information to be brought to bear, it also reduces the moral force of claims that the action required is far too costly.
35 from various SO2 abatement strategies. Similarly, the U.S. phase out of chlorofluorocarbons (CFCs), as required by the Montreal Protocol, was achieved with an escalating tax on these ozone-layer-damaging chemicals. Thus, the efficiency and efficacy of economic-incentive-based programs has been clearly demonstrated. Economic-incentive-based regulation does not solve all of the difficulties inherent in pollution control and natural resource management. Policymakers must still set performance standards and determine appropriate rates of resource exploitation. They must also collect fees or provide a structure for allowance trading,81 and monitor compliance, and update programs in line with changing circumstances.. These roles require significant data collection and analysis—and the process remains vulnerable to technical deficiencies, administrative inefficiencies, strategic manipulation, and public choice distortions, as well as jurisdictional mismatches leading to regulatory failure. Despite these burdens, the potential of market mechanisms to deliver more refined and individually tailored regulation remains great since the reduced government role lessens the risk of action decision errors, chilled innovation, and bureaucratic inefficiency.
E. Social Context
To the extent that environmental goals track deeply-ingrained community norms and values, the legal structure required to ensure adherence to standards may be “lighter.”82 Community expectations and social norms may, in fact, induce self-imposed environmental standards that go beyond the demands of the law. Even in the midst of ongoing frustration about the inefficiencies and inadequacies of the existing environmental regime, the public commitment to pollution control has demonstrably strengthened in recent years. Societal values have consolidated around a powerful environmental
81Indeed, 24/7 __ gas emissions monitor were a sine qua non of the Acid Rain Regime.
82Robert Ellickson has chronicled a number of circumstances where a formal legal structure is not necessary and externalities are internalized on the basis of community norms. See Robert C. Ellickson, Law and Economics Discovers Social Norms, 27 J. LEG. STUD. 537 (1998) [hereinafter Ellickson, Social Norms] (“informal systems of external social control are far more important than law in many contexts.”); see also Eric L. Talley, Disclosure Norms, 149 PENN. L. REV. (forthcoming 2001) (arguing that extra-legal norms and legal rules are more than policy substitutes and that norms and laws can help to reinforce each other).
36 ethos.83 Even most business people now take seriously a commitment to environmental stewardship.84 A web of relationships and institutions outside the regulatory domain thus helps to reinforce the commitment to pollution control and sustainable natural resource management steering polluters and natural resource users away from externalizing costs and harms even when they might be able to do so. Social context is a particularly powerful tool for environmental programs because actions taken in response to community pressures are much less susceptible to footdragging based on technological shortcomings or policy errors stemming from institutional failures. The potential for decentralized information generation, tailoring of response strategies to individual circumstances and flexibility is particularly great when environmental initiatives are undertaken as a result of a sense of social obligation rather than law. 1. Market Demands The marketplace itself operates as a powerful structure for reinforcing a degree of environmental emphasis.85 To the extent that consumers want products that have environmental attributes, companies provide them. A number of mechanisms have been developed to strengthen market tendencies. Most obviously, media reports on business environmental shortcomings can dramatically reshape consumer attitudes. The collapse of the U.S. apple market in 1989 after reports of the presence of Alar, a potential carcinogen, in the skin of many apples provides just one example of the media’s “magnifying effect.”86 In many countries (although to a lesser degree in the United States), ecolabels have helped to spark interest in environmentally superior products, facilitating the growth of “green” demand.87 Some
83See Riley E. Dunlap & Rik Scarce, The Polls--Poll Trends: Environmental Problems and Protection, 55 PUBLIC OPINION QUARTERLY 651 (Winter, 1991).
84STEPHAN SCHMIDHEINY, CHANGING COURSE (1992); ANDREW HOFFMAN, FROM HERESY TO DOGMA: AN INSTITUTIONAL HISTORY OF CORPORATE ENVIRONMENTALISM (1997); (See especially Chapter 7 Progression of Environmentalism and Corporate Change).
85John M. Church, A Market Solution to Green Marketing: Some Lessons from the Economics of Information, 79 MINN. L. REV. 245, 276-77 (1994) (linking consumer preferences for environmental attributes to sharp increases in advertising emphasizing such attributes).
86See. Ravenswaay & Hoehn, supra, note __.
87JAMES SALZMAN, ENVIRONMENTAL LABELING IN OECD COUNTRIES (1991). 37 companies have found that strong environmental performance can help to create a product or corporate image that is attractive to customers — and thus becomes a point of competitive advantage.88 Environmental information is, moreover, increasingly fueling analysis and valuation in the financial markets.89 Environmental scorecards, ranking company performance on critical pollution control and natural resource management variables, have emerged in the last several years and are being taken more and more seriously by stock analysts and others who assess the future strengths and weaknesses of corporations and thereby determine the value of companies.90 Environmental performance is now seen as an indicator of management quality more generally and thus a useful basis for predicting superior profit performance. The Dow Jones Sustainability Index, for example, draws together a set of two hundred companies that have demonstrated top-tier environmental performance.91 This group has been measured as out-performing the stock market as a whole by a considerable degree.92 2. Community Pressure Companies also increasingly recognized that their existence depends on maintaining a “social license to operate.”93 Companies that are perceived as environmental “bad actors” will find themselves under community and political pressure that will, at the least, raise costs, and may threaten the viability
88MICHAEL PORTER, “GREEN COMPETITIVENESS” SCIENTIFIC AMERICAN (1992); see also FOREST L. REINHARDT, DOWN TO EARTH (2000) (highlighting ways companies can use environmental performance to competitive advantage).
89STEPHEN SCHMIDHEINY & FREDERICO ZORRAQUIN, FINANCING CHANGE: THE FINANCIAL COMMUNITY, ECO-EFFICIENCY AND SUSTAINABLE DEVELOPMENT(1996); PRIVATE CAPITAL FLOWS AND THE ENVIRONMENT (Bradford S. Gentry ed., 1998) [hereinafter GENTRY, PRIVATE CAPITAL FLOWS].
90U.S. Public Interest Research Group, Claim to Shame: Industry Scorecard on Pollution Prevention http://pirg.org/reports/envir/shame97/index.htm (last visited Nov. 5, 2000).
91See Dow Jones Sustainability Group Index Guide, version 2.0 (2000), available at http://www.sustainability-index.com/pdf/guidebook.pdf; Innovest Strategic Value Advisors at www.innovestgroup.com.
92Anne Papmehl, “Green Investing” Goes from Fed to Mainstream, TORONTO STAR, March 18, 2000 at S1.[need academic cites - see Koehler article]. Of course, the correlation does not mean causation. Superior environmental management may simply be a proxy for superior management in general.
93GENTRY, PRIVATE CAPITAL FLOWS, supra, note at 279-80.
38 of the enterprise.94 These pressures are particularly significant for multinational enterprises with high profiles that attract greater scrutiny.95 These same companies often have significant “goodwill” built into their brands and fear losing this valuable asset if their customers perceive them to have failed to maintain community standards.96 The cities and towns where companies operate have a particular interest in the environmental performance of the enterprises within their borders. Traditionally, communities relied on the media to hear about potential threats. But in recent years, a number of other information systems have emerged to support community oversight of corporations. For example, EPA’s Toxic Release Inventory (TRI) provides information on emissions from factories that is accessible to neighbors, civic groups, the media, and environmental organizations.97 Environmental Defense, a New York based environmental group, has used the TRI data to compile a county-by-county toxics “scorecard” that is available online for free.98 In the face of TRI disclosures, hundreds of companies have re-examined their production processes and pollution control strategies.99 Likewise, U.S. drinking water providers are now required to issue
94Alleged human rights and environmental violations served as a catalyst for NGOs and concerned citizens, whose efforts greatly complicated the overseas mining activities of Freeport-McMoRan & Gold, Inc. and were rumored to have contributed to a decision by the Overseas Private Investment Corp to cancel Freeport’s $100 million dollar insurance policy. Stewart Yerton, Activists Sway Agency Policy, Freeport Claims, TIMES-PICAYUNE, Jan. 31, 1996, at A4. See also RICHARD H.K. VIETOR, FREEPORT INDONESIA (2000).
95Daniel C. Esty & Bradford S. Gentry, Foreign Investment, Globalisation, and Environment, in GLOBALISATION AND ENVIRONMENT (Tom Jones, ed., 1997).
96These standards go beyond environmental performance to include human rights, child labor, and other “social” standards. For example, public concern over the overseas activities of Freeport- McMoRan included both environmental concerns about how mining operations were run and human rights concerns following reports that the Indonesian military, involved in the mines operation, had tortured and killed indigenous peoples during the course of their duties. Yerton, supra,.
97Manufacturers of 650 toxic chemicals are required to report the locations and quantities of these chemicals to the government. This data is then compiled and made publicly available through a national computerized database. Environmental Protection Agency, Envirofacts Toxic Releases at www.epa.gov/enviro/html/tris/tris_overview.html (last visited Nov. 5, 2000) .
98ENVIRONMENTAL DEFENSE FUND, SCORECARD at http://www.scorecard.org/ (last visited Nov. 5, 2000) .
99Bradley C. Karkkainen, Information as Environmental Regulation: TRI and Performance Benchmaking Precursor to a New Paradigm?, 89 GEO. L. J. 257 (2001)..
39
“consumer confidence reports.”100 These publicly available reports spell out the maximum contaminant levels (MCLs) in the water they supply and how these results compare with the EPA-established maximum contaminant level goals (MCLGs). The public thus has access to a vast amount of data and information that was previously unavailable. Living in Cheshire, Connecticut, I am able to learn, for instance, that the level of trichloroethylene (TCE), a well known carcinogen, detected in the Cheshire aquifer ranges up to 1.3 parts per billion.101 One can take solace from the fact that the MCL for TCE is 5ppb or become more worried by noting that no TCE has been found in the wellfields of the neighboring town of Hamden.102 By putting information in the hands of citizens, individuals and groups are given the capacity to understand and to challenge the performance of industrial facilities and government officials in ways that historically they have not been able to. In important respects, knowledge is power. But even more significantly, data makes problems “visable.” No one in Cheshire used to discuss the quality of the town’s water. Without information, they had nothing to talk about. Now water quality is a major topic of conversation.103 3. Peer Pressure Industry associations can also bring “community” influence to bear. For instance, the chemical industry’s Responsible Care Initiative, setting pollution control performance standards for its member facilities, has forced lagging companies to sharpen their environmental performance. Peer pressure from within one’s own industry may be effective both because colleagues know what the critical performance issues are and because esteem within one’s professional community may be an especially important
100Safe Drinking Water Act Amendments of 1996, Publ. L. No. 104-182, §114, 110 stat. 1613, 1639 (1996) (“[E]ach community water system . . . [is required to] mail to each customer of the system at least once annually a report on the level of contaminants in the drinking water purveyed by that system”).
101Regional Water Authority 1999 Consumer Confidence Report (2000) at 4 (on file with author).
102Id.
103CHESHIRE HERALD, 8 March 2001 at 1 (discussing toxic chemicals in the town water supply); Carole Bass, Toxictown, Connecticut, NEW HAVEN ADVOCATE, Jan. 13, 2000 (highlighting the public debate over Cheshire’s pollution problems).
40 behavioral driver. 4. NGO’s Environmental groups and other non-governmental organizations (NGOs) have emerged as another powerful point of leverage in creating a social context that promotes environmental care. Citizen groups can generate great pressure on companies through advocacy campaigns that highlight poor performance,104 recommend environmentally-preferred products,105 or even promote boycotts of companies that are perceived to have significantly deviated from appropriate environmental standards.106 5. Reflective Environmentalism As the environmental context in which businesses operate has become more demanding, many companies have become more “reflexive” in their approach to pollution control and natural resource management challenges.107 Corporate officers recognize the importance of good environmental performance as an element of the expectations they face not only from regulators and the communities in which they operate, but also from their employees. As a result, many companies have made significant commitments to formal environmental management systems and programs of continuous environmental improvement. These commitments quickly become self-reinforcing. As companies
104See Greenpeace’s pressure on Olympic sponsors such as Coke and Unilever to phase out the use of HCFCs in their refrigerators and freezers. See also Yerton, supra note 120.
105While the “dolphin-safe” tuna label may be the most famous example of this, numerous organizations have created environmental labeling schemes that evaluate the environmental performance of products across a number of factors. See, e.g., Green Seal, Green Seal of Approval and List of Standards (visited Nov. 5, 2000)
106The Guide to Ethical Consumerism maintains a website chronicling various ongoing and past consumer campaigns, including the Rainforest Action Network’s successful campaign against Burger King in 1987 which prompted the food chain to cancel $35 million in rainforest beef contracts. Guide to Ethical Consumerism, Consumer Campaign (visited Nov. 5, 2000)
107Eric Orts, Reflexive Environmental Law, 89 N.W. L. REV. 1227 (1995) [hereinafter Orts, Reflexive Environmental Law].
41 move to track environmental performance, they spot problems more quickly. They also find it easier to set goals for improvement and to hold managers accountable for environmental progress. As inter- facility and inter-company comparative data becomes available, benchmarks get established. Those whose performance lags against these standards find themselves under pressure from many sources (higher level executives, regulators, community leaders, and peers both within their own company and in the industry more generally) to do better. The push for firmer analytic foundations for corporate environmental decisionmaking rests on solid underpinnings within the business culture.108 Companies have long recognized that what is measured gets taken seriously.109 As a result, corporations commit significant resources to accounting and auditing functions. Recently, the tracking of environmental results has become a much higher priority. Regimes such as ISO 14000, the European Union’s Environmental Management and Auditing Scheme (EMAS), and a series of emerging environmental indicators programs such as CERES’s Global Reporting Initiative (GRI) and the World Business Council for Sustainable Development’s Environmental Reporting Project110 have given new rigor to environmental data collection at the company level. In many respects, the corporate sector is leading the charge toward a new, more data- driven approach to environmental protection. Social context represents a potentially low-cost path to better environmental performance. No governmental intervention is required beyond information provision. A broad spectrum of analytic
108Daniel C. Esty & Michael E. Porter, Measuring National Environmental Performance and Its Determinants, in GLOBAL COMPETITIVENESS REPORT 2000 (Michael Porter, Jeffrey Sachs, et al., eds., 2000).
109Daniel C. Esty, Toward Data-Driven Environmentalism, 31 ENVT’L. L. RPTR. (May 2001).
110These groups accumulate and assess environmental data on companies, as well as providing various formats for companies to analyze their own eco-performance. See ISO 14000 (visited Nov. 5, 2000)
42 burdens—problem identification, causality (tracing the fate and transport of pollution), impact evaluation, harm valuation, rights delineation, and option assessment—as well as the action decision process are shifted from the public to the private sector. In deciding how to improve their results, companies have the maximum degrees of freedom because they are not operating under regulatory mandates. To the extent that environmental externalities are internalized at relatively low cost, efficiency and justice goals are advanced. Of course, such an approach only works where environmental values are relatively strong — generating clear societal pressures.111 Building on the growing spirit of environmental consciousness in the business world, governments have found that “voluntary” environmental programs may generate better results than traditional regulatory controls. EPA’s “33/50" toxics reduction initiative, for example, induced hundreds of corporations to reduce their releases of hazardous chemicals in the early 1990s.112 Guided by a similar spirit, EPA launched in the mid 1990s “Project XL” designed to facilitate self-regulation among leading-edge companies.113 Both programs involve a high degree of decollectivization in environmental decisionmaking as individual companies decided on their own whether to respond to the challenge that had been posed. But the XL program proved to be much less successful, highlighting some of the limits of “voluntary regulation in particular and reliance on social context as a mode of environmental protection more generally. Although a definitive analysis of limited interest in XL remains to be done, it appears that many companies worried that EPA had exceeded its statutory authority and could not guarantee that companies would be protected if they took advantage of the flexibility Project XL offered.114 In fact, Project XL might better be understood as an attempt to shift
111Reliance on social context and a sense of corporate responsibility will never produce, of course, as clear results as the command of law. See DAVID VOGEL, THE ILLUSION OF CORPORATE RESPONSIBILITY (unpublished manuscript 2001).
112Under the 33/50 Program, companies were asked to participate in a voluntary program to achieve a 33% national reduction by 1992 and a 50% reduction by 1995 of 17 different toxic chemicals reported to the Toxics Release Inventory. ENVIRONMENTAL PROTECTION AGENCY, NATIONAL AND INTERNATIONAL TOXICS RELEASE INVENTORY PROGRAMS at http.//www.epa.gov/tri/national.htm.
113Dennis D. Hirsch, Bill and Al’s XL’ent Adventure: An Analysis of EPA’s Legal Authority to Implement the Clinton Administration’s Project XL, 1998 U. OF ILL. L. REV. 129, 130-46 (explaining Project XL).
114Id. 43 toward “contractual” regulation.115 Thus, the shortcomings have more to do with the limits of a property rights approach to environmental protection than they do with social context. In any case, social context provides little guide to behavior if expectations and norms are not clear. The incentives for good environmental care are strongest when a target audience—consumers, community leaders or groups, the media, employees, an industry peer group—has a clear picture of an entity’s environmental performance and an easy way of judging the adequacy of the results. Social context thus works as an environmental signal when impacts can be measured and benchmarks for comparison are available. The strength of social context incentives therefore depends on the availability of relevant information.
III. Beyond the Externalities Model The externalities-oriented approach to environmental thinking provides a useful starting point for understanding and addressing many pollution and natural resource management issues. But this “economic” vision is incomplete in important respects. First, as I will discuss in detail below, not all environmental problems fit within the “uninternalized externalities” rubric. In fact, a significant degree of pollution is better understood as “waste.” Second, some environmental “problems” really reflect disputes over values. In this context, cost internalization theory provides little traction. Third, as I discussed in briefly in Section II above, the focus on economic efficiency tends to distract scholars (and some policymakers) from other important social goals that should be pursued in parallel, especially the need to protect property rights and thus promote justice. A. Environmental Harm as Mistake
In the classic externality situation, B benefits from externalizing environmental costs onto A or the community-at-large. Benton is advantaged if he can ignore the pig odors that spillover onto Aldred, and other good citizens of Norfolk. There are, however, a set of environmental problems that arise from production or consumption inefficiencies or “mistakes.” In such cases, B has an incentive to fix the
115ERIC ORTS & KURT DEKETELAERRE, ECONOMIC CONTRACTS: COMPARATIVE APPROACHES TO REGULATORY INNOVATION IN THE UNITED STATES AND EUROPE (Comparative Law & Policy Series Volume 1) (2000); see also Jody Freeman & Laura I. Langbein, Regulatory Negotiation and the Legitimacy Benefit, 9 N.Y.U. ENVTL. L. J. 60 (2000).
44 problem regardless of the impacts on A or others. Think, for example, of cases where B’s factory’s equipment is outdated and thus highly polluting. The plant could be upgraded with benefits both to the factory’s bottom line and to those who are suffering from externalities as a result of the polluting production process. For example, if the facility uses old coal-burning boilers when it could derive power from modern natural gas turbines, energy is being wasted, which translates into higher production costs and harmful (and unnecessary) emissions. By switching to a cleaner fuel, B could reduce the dirt and pollution within the plant, cut energy consumption, and improve the company’s competitive position. This case differs from the usual externality circumstance because self-interest, at least over time, should drive B to correct the facility’s pollution “mistake” and adopt the environmentally preferable technology, product, or production process.116 Pressure from those suffering from B’s emissions, or government officials acting on their behalf, need not be brought to bear to motivate action.117 A great deal of attention has been paid in recent years to opportunities for such “win-win” environmental gains.118 A vigorous debate rages over how much environmental harm fits into the category of cases where the polluter would benefit from changing his own behavior. The truth, of course, is that some but by no means all of the pollution problems that exist in the United States fall into this category. Nonetheless, “waste” deserves particular attention in the context of the potential gains from the Information Age. As a number of recent studies have demonstrated, pollution based on the use of primitive technologies and poorly designed or badly managed production processes is widespread, especially in the developing world.119 The mistakes underlying this type of waste can almost always be
116Daniel C. Esty & Michael Porter, Industrial Ecology and Competitiveness: Strategic Implications for the Firm, 2 J. IND. ECOL. 35, 36-40 (1998) (discussing resource productivity opportunities available to companies).
117Of course, to ensure an optimal degree of investment in pollution control, B’s energy options calculus should be structured to reflect externalized pollution harms.
118AL GORE, EARTH IN THE BALANCE: ECOLOGY AND THE HUMAN SPIRIT (1992) (highlighting many win-win opportunities); Michael Porter & Claas Van der Linde, Green Competitiveness, 73 HARV. BUS. REV. 120 (1995) (discussing how environmental rigor can generate innovation benefits); but see Noah Walley & Bradley Whitehead, It’s Not Easy Being Green, HARVARD BUS. REV. vol. 72, no. 3 (May/June 1994) (suggesting that win-win gains are very limited in the real world). 45 traced, at least in part, to information failures. B. Values Disputes A second type of environmental problem that the externalities model does not address well arises from circumstances where harm-causer B denies that his activities are actually causing any harm. In the classic externalities case, if the positions of B (the polluter) and A (the victim) are reversed, B recognizes the harms coming from A and wants to have them internalized. In a case that is better understood as a values dispute, B, when put in A’s position, continues to see no problem. If, for instance, B finds the hum of his factory’s equipment to be a soothing background noise while neighbor A hears the same noise and considers it a major disturbance to the peace and quiet of the neighborhood, the issue must be understood as a values dispute. In this circumstance, a reversal of positions does not produce agreement on the presence of an externality. When B hears A’s engines humming, he finds no problem given his taste for a degree of background noise. This category of cases, where differences in values, presumptions, preferences, and assumptions result in a non-reciprocal view of the underlying issue, is important to see as a theoretically distinct dimension of the environmental domain for several reasons. First, value differences highlight one of the core environmental challenges: how to deal with diversity in circumstances and preferences. This type of problem arises constantly in the environmental realm at a variety of scales. At the individual scale, such as a college dorm, some students prefer loud music while others like to study in relative quiet. At the community-scale, disputes arise over priorities such as whether to preserve open space or permit development so as to have easier access to shopping and lower taxes. At the global scale, divergent assumptions about what really matters (in philosophical terms, what constitutes “the good”) can lead to breakdown in environmental decisionmaking on issues such as climate change. Alternatively, the majority may dictate its terms to the minority, sometimes in circumstances where divergent preferences might have been accommodated. Could, for example, the loud music crowd be induced to wear headphones or adopt new “audio spotlighting” technology?120 More troubling,
119WORLD ECONOMIC FORUM ENVIRONMENTAL SUSTAINABILITY INDEX (2001); Living Planet Report (last visited May 14, 2001) at www.panda.org/livingplanet/lproo/downloads/lpr_2000.
120“Audio Spotlight Creates a Personal Wall of Sound,” NY Times (15 May2001) at D4, F4.
46 there are a significant number of cases where there is no policymaking structure in place, and as a result, externalities go entirely unaddressed. In such circumstances, polluters or resource-users often can act preemptively. Absent a mechanism for determining whether an externality is present and what the boundaries of the spillover are, we fall back into a Hobbesian world where “might makes right” and environmental property rights go to those who seize them. Such “preemptive externalities” emerge with special force in the international domain where the lack of a functioning system of environmental governance is notable. Indeed, many countries see the unwillingness of the United States to take responsibility for its significant greenhouse gas emissions that threaten global climate change as a particularly irksome example of a significant spillover that goes undisciplined because of the power of the harm-causer and the lack of an agreed global-scale structure of environmental values and rules. On the other hand, some environmental decisions, such as whether to buy organic food, look more like a matter of personal choice (chocolate or vanilla?) than a matter of uninternalized externalities. In this context, collective environmental decisionmaking may unnecessarily ride roughshod over those with divergent values. Indeed, where the harm is internalized by the choice (i.e., the organic food buyers choose costs, risks and benefits that they themselves bear), trotting out the usual mechanisms of environmental policymaking does little good. But as I discuss in the next section, the Information Age promises to expand the environmental toolbox in ways that will permit much more complex and variegated policies and decision processes that better accommodate diversity and thus expand the scope of individual choice and liberty. Where values disputes arise in circumstances that do involve spillovers, the Information Age may still contribute to resolving the situation insofar as shared information and experience, which the Internet and other technologies facilitate, may narrow the differences in perspective. In addition to the prospect of values convergence over time as the “technical” uncertainty in environmental decisionmaking narrows, the Internet also creates the possibility of more transparent and responsive decisionmaking processes that may be perceived as more fair and appropriate. C. Justice One of the striking features of the shift away from an environmental regime that relies on property rights to the regulatory model is the loss of focus on whether the victims of pollution are made 47 whole.121 In the case of Aldred v. Benton, the result seems just not only because Benton is held accountable for the smell emanating from his pigs but also because Aldred’s environmental rights are restored. Whether he is made whole because Benton’s pigs are removed and thus the odor ceases or because Benton compensates him for the smell, the intervention produces not just an economical efficient outcome but one that takes environmental rights seriously. In contrast, the regulatory model tends to focus on economic efficiency but not justice, especially not at the scale of individual property rights. Attention centers on the harm caused by polluters —and only indirectly, and rarely fully, on the burdens borne by pollutees.122 Theoretically, regulatory intervention could make the victim whole by; (1) eliminating the spillover of harm; (2) requiring full compensation of the pollutee for the harm suffered; or (3) some combination of spillover mitigation and compensation for any residual harm. In almost all cases, however, the regulatory requirements— whether under a command and control approach or an economic incentives regime— result in a reduction in harm but not elimination of all pollution. To the extent that there is a charge of residual harm (as under pollution fee regimes), the funds are collected by the government. I know of no case where the bearer of residual pollution are compensated individually.123 Quite plainly, even after 30 years with a Clean Air Act and several rounds of amendments and refinements, we still have air pollution. Likewise, water pollution and land contamination still occur. Rarely, if ever, do regulatory mechanisms mandate compensation to pollutees for the residual harm they suffer. Indeed, the emphasis on cost-benefit analysis in the regulatory process has resulted in an approach to environmental protection that puts a high priority on achieving the “least social cost” policies even at the expense of full cost internalization and almost always at the expense of full compensation of the victims of pollution harms. The current policy approach achieves: (1) allocative
121damages in tort are to put plaintiffs in their rightful position. DAN B. DOBBS, LAW OF REMEDIES (2d ed.) (1993); or NUTSHELL ON REMEDIES (damages are to make the plaintiff “whole”).
122See RICHARD J. LAZARUS, FAIRNESS IN ENVIRONMENTAL LAW, 27ENVTL.L.70S, 72F27 (1997) (reviewing environmental justice issues).
123Theoretically, if all members of the community suffer equal increments of harm, fee collecting the government and concomitant reduced taxation would compensate each victim. But, pollution harms are almost never spread so evenly. 48 efficiency (fully internalizing externalities), (2) subject to a “least social cost” constraint. I believe, however, that a true policy optimization would take more seriously (3) a “justice condition” and the need to ensure that victim A is not left worse off than he or she would have been in a world without polluter B. Greater focus on the justice condition would ensure that the efficiency emphasis does not come at the expense of compensation of pollution victims. Because the current structure of environmental law involves a vast array of standards, rules, and requirements aimed solely at achieving goals (1) and (2) enumerated above, the “full compensation” goal may be simply aspirational for some period of time. Nevertheless, the recent rise of interest in “environmental justice” reflects in part the fact that the legal structure that has emerged in the environmental domain pays so little attention to who bears the harms from residual pollution.124 Historically, the prospect of compensating victims for their individualized harms has seemed administratively too difficult. The optimal specificity calculation required us to sacrifice implicitly if not explicitly a commitment to justice and the protection of individual environmental property rights. Simply put, the challenge of identifying harm-causers and holding them accountable has seemed like a big enough task. But the emergent technologies that dramatically expand our capacity to trace emissions harms and to identify specific harm-causers as well as to pinpoint “receptors” and to assess with increased accuracy their damages, we may be able to move toward a world of full compensation as well as full cost internalization. A principle of “full” compensation would create some risk of “inefficiency” due to the fact that victims might place a value on the harms they are suffering that is greater than an objective or collective evaluation. They may also engage in extortionate tactics or otherwise generate transaction costs through strategic behavior. Mechanisms would therefore need to be developed to limit problems of moral hazard and to provide an appropriate scale of compensation.125 Nonetheless, simply establishing the principle
124Richard J. Lazarus, Pursuing “Environmental Justice”: The Distributional Effects of Environmental Protection, 87 N.W. U. L. REV. 787 (1993) (reviewing the limited focus on distribution effects of environmental regulation); see also Vicki Been, "Exit" as a Constraint on Land Use Exactions: Rethinking the Unconstitutional Conditions Doctrine, 91 COLUM. L. REV. 473 (1991) (exploring environmental justice issues).
125Just as a significant legal literature has emerged focused on the relative advantages of property and
49 that victims should be compensated for the harms they suffer would mark a watershed in the environmental realm. From a policy perspective, cost internalization at the community scale covers only half the environmental problem. It is making Benton pay without compensating Aldred. Moreover, too often in practice, incomplete abatement is not accompanied by compensation for residual harms. Benton is forced to build a wall but does not pay for the smell (albeit reduced) that continues to drift across the property lines. In the Digital Era, we can, at increasingly low cost, get Benton both to build a wall and pay Aldred for the unabated harm. While the advances of the Digital Age to not eliminate trade-offs among policy goals, there is at least the promise of a shift in the policy possibility frontier. A greater degree of justice and more complete protection of environmental property rights can be obtained alongside allocative efficiency and reduced administrative costs. In what proportion the gains are extracted across the goals of cost internalization, least-social-cost policymaking, and justice is a matter for political debate. But the issue deserves a full and explicit discussion and not an answer derived from inertia.
IV. Information Age-Driven Environmental Advances In this Part, I highlight the specific Information Age breakthroughs that may lead to changed environmental circumstances.126 I then spell out how these developments may help us tackle both technical and institutional challenges—and thereby create a potential for greater internalization of environmental externalities through a revitalized market in environmental rights, improved regulation (under both “command and control” and economic incentives approaches), and an intensified social context of environmental concern. I also review how these advances could help to (1) eliminate waste, (2) ease the difficulty of divergent environmental values, and (3) facilitate an approach to environmental
liability rules, some of the same logic could be applied to the question of how to determine how much compensation should be paid—balancing the same questions of efficiency and adequacy of compensation. See notes ___ (Calabresi, Ayres, Balkin) supra.
126In this Part, I review the “positive” aspects of Information Age environmentalism. There are also potential downsides. The New Economy may mean, for example, vast new wealth, which could translate into more consumption and thus negative environmental results as a function of “scale” effects. Similarly, information flows could facilitate disinformation. These issues are taken up in Part V.
50 protection that takes the demands of justice more seriously. A. Elements of the Information Age with Potential Environmental Impacts Several Information Age breakthroughs promise to transform the environmental problem set and to reconfigure our portfolio of response strategies to address pollution control and natural resource management challenges. At the heart of this new era lies the computer, with its extraordinary processing and storage capacity. The Digital Revolution makes the job of sorting, calculating, and analyzing data much faster, easier, and cheaper.127 The computer makes it possible to hold and access vast quantities of information. The combination of low-cost information storage and retrieval and increased processing capacity makes complexity much easier to manage. Historically, the environmental challenge was defined by the need to simplify the problems presented and to overcome omnipresent uncertainties. Without eliminating all of the uncertainties, computers make it possible to keep track of a vast number of variables, to fill data gaps in a more sophisticated manner, and to solve problems that involve attention to a number of issues simultaneously. In brief, computers drive down the cost of specificity and customization and allow us to see diversity as a virtue rather than an administrative burden. The second critical aspect of the Information Age emerges from recent communications breakthroughs. From cell phones to palm-sized personal digital assistants to global positioning system devices, a set of new technologies has emerged that portend not only the “end of distance” but also the “collapse of time.”128 Connection speeds are increasing at a dramatic pace while the cost of communications is falling rapidly.129 Links to anyone on the planet or to data sets anywhere in the
127NICHOLAS NEGROPONTE, BEING DIGITAL (1996) (reviewing Digital Age breakthroughs).
128New information technologies, whether mail, telephone, or television, have historically reduced distance. In his book E-TOPIA, WILLIAM MITCHELL employs a quote by John Dewey in 1946 to express this point and suggest the capacity of digital technology to reduce distance: “Our modern state- unity is due to the consequences of technology employed so as to facilitate the rapid and easy circulation of opinions and information , and so as to generate constant and intricate interaction far beyond the limits of face-to-face communities. . . . The elimination of distance, at the base of which are physical agencies, has called into being the new form of political association.” JOHN DEWEY, THE PUBLIC AND ITS PROBLEMS: AN ESSAY IN POLITICAL INQUIRY (Chicago: Gateway Books, 1946) pp. 114-115 quoted in MITCHELL, E-TOPIA supra, note 5. DOUGLAS F. ALDRICH, MASTERING THE DIGITAL MARKET PLACE 31 (1999) (highlighting time impacts of digital breakthroughs).
129FIRST 2000 TRENDS IN TELEPHONE SERVICE REPORTS 14-4 (March, 2000) (charting, among other variables, the changes in the prices of directly dialed five-minute long distance calls).
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world at any time at very low cost will soon be available and, to a great extent, already are.130 This hyper-connectivity promises to change the technical baseline of environmental decisionmaking and, perhaps more importantly, reshape the institutional constraints to advanced pollution control and natural resource management. At the intersection of the computer and the communications revolution lies the Internet. It provides a systematic method for connecting people and information, again at very low cost.131 The Internet provides access to vast quantities of information that would previously have been unsearchable in a cost-effective manner. It provides for much faster diffusion of good ideas (and bad ones).132 As a result, the pace of innovation is likely to pick up considerably as ever increasing numbers of individuals are able to operate at the cutting-edge of knowledge. Beyond the Internet, implanting semiconductors and computing power into a variety of other technologies will extend the ripples of the Information Age. With regard to environmental issues, breakthroughs in sensor technologies stand out as an important application.133 Remote sensing from satellites in space will soon provide the capacity to see and understand on-the-ground conditions from anywhere at any time at increasingly low cost.134 Where the quantity of data might once have
130BILL GATES, THE ROAD AHEAD 18(1995); STAN DAVIS & CHRISTOPHER MEYER, BLUR: THE SPEED OF CHANGE IN THE CONNECTED ECONOMY (1998) (discussing the emerging hyper-connectivity).
131William Mitchell argues that an “economy of presence” is emerging with and demonstrated the time, space, transportation, and coordination efficiencies from digital networks. Supra n. 126 at 138.
132Witness the spread of the “I love you” computer virus across the world, which affected 45 million computer users and is estimated to have caused losses of $2.6 billion. Love, The Costliest Bug, SEATTLE POST-INTELLIGENCER, March 16, 2001, at D1.
133The scientific literature is rich with examples of breakthrough in sensors and monitoring technologies. See, e.g., E.J. Hinsta et al., SPADE H2O Measurements and the Seasonal Cycle of Stratospheric Water Vapor, 21 GEOPHYSICAL RESEARCH LETTERS 2559 (1994); C.R. Webster et al., Quantum Cascade Laser Measurements of Stratospheric Methane (CH4) and Nitrous Oxide (N2O), APPLIED OPTICS (2001).
134Anthony Vodacek, Environmental Applications of Remote Sensing, INFORMATIQUE 4, Aug. 2000, at 21. See also Fred Hansen, Three Emerging Issues, Three Needed Changes, ENVTL. F., May/June 2000, at 46 (noting that remote satellite sensing will enable “identification with pinpoint accuracy of all emission discharges”); Paul F. Uhlir, Applications of Remote Sensing Information in Law: An Overview, in EARTH OBSERVATION SYSTEMS: LEGAL CONSIDERATIONS FOR THE ‘90S 8, 16-17 (1990) (describing how remote sensing systems will lead to better ecological understanding and management).
52 overwhelmed analysts, computers permit the sifting of raw information in very efficient and high speed ways that allow usable data to be extracted even under conditions that present very high noise-to-signal ratios. Simultaneously, breakthroughs in laser technologies, ion beam analysis, and other small-scale sensors have provided a vastly improved capacity to detect and measure emissions or contaminants at the micro level.135 In the not very distant future, virtually all pollutants will be susceptible to tagging, tracking, and measurement at relatively low cost. Of course, whether and how we choose to use this capacity remains an open question susceptible to significant institutional constraints and pressures.136 Not only costs are falling, but so are the sizes of sensors. Breakthroughs in “nano-technologies” have made it possible to place sensors with powerful capacities to collect and relay information almost anywhere. Every car could soon have a tailpipe emissions tracking device.137 And it is therefore not hard to imagine the day when humans might be outfitted with a “digital skin” that would allow a quite precise record of pollution impacts to be generated.138 Information Age breakthroughs are, moreover, fueling a broader knowledge revolution. The use of advanced computer chips and communications devices across a range of fields and applications portends new developments and potential environmental gains in a wide spectrum of everyday activities.139 Smart cars, smart appliances, and smart systems appear each month promising reduced fuel use and other efficiency gains for both the home and office setting.140
135Janet Pelley, Genomics Technology Revolutionizes Environmental Monitoring, ENV. SCIENCE & TECH., April 2000, at 164 A (discussing the use of glass chips annealed with gene sequences to monitor bacterial communities in areas polluted with petroleum products).
136A. Scott Matthews, The Environmental Implications of the Growth of the Information and Technology Sector (unpublished manuscript presented 16 March 2001 at OECD Environment Directorate Workshop, Paris).
137A number of car manufacturers have already installed sensors and communications equipment in their vehicles that alert the dealership whenever the engine has a problem or is out of tune. STAN DAVIS & CHRISTOPHER MYER, BLUR (1999).
138Matthews supra note __ at 34.
139 MITCHELL, E-TOPIA, supra note 5 at 115-16 (reporting that some smart logging trucks “now link their onboard computers, via satellite, to geographic information systems and weather information systems and dynamically adjust tire pressures to current conditions.”).
140See, e.g., The Smarter House: GADGETS DO THE WORK, THE WALL STREET JOURNAL EUROPE
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The number-crunching capacity of super computers also dramatically improves the human ability to model critical systems and to forecast results — with applications from weather prediction to urban design.141 In the environmental domain, analysts can now track the dispersion of pollutants with much greater precision than ever before. Similar gains in statistical methods (including advanced regression and “neural net” analysis), econometric modeling, epidemiological analysis, costs-benefit forecasting, and risk analysis all promise to dramatically improve the quality of the underlying information base on which environmental policy decisions are made.142 Knowledge gains in other fields are also likely to have important spillovers into the environmental realm. Advances in metallurgy and polymers are transforming the types of materials available for products ranging from cars to soft drink containers.143 Lighter, stronger, and more durable materials augur well for the dematerialization of our society, making it easier to achieve the
(May 18-19 2001) at 30 (reviewing digital and household technologies. Invensys Corporation’s Smart Module microcircuit system to control household appliances, set room temperatures, turn lighting on and off, etc. See [email protected]. ENVIROCOM from Energy Control Technologies that has launched a product that provides the capacity for central monitoring of HVAC equipment from a single location across a company’s entire set of facilities anywhere in the country at http://www.energycontrol.com/enviro32.html (“ENVIROCOM is an Energy Management and Control System designed to manage energy costs; environmental control for multi-site facilities. The System replaces conventional, programmable thermostats. . . with an integrated, centrally controlled system using a PC front-end program. . . .”); See also MITCHELL, E-TOPIA, supra note 5 at 55-68.
141A. Voinov & R. Lostanza, Watershed Management and the Web, 56 J. ENVTL. MGMT. 231-245 (1999) (discussing how Internet technology can advance and improve watershed management); Dan Taylor, Environment and Infrastructure. How We Can Use It to Avert Another Tragedy of the Commons, INFORMATION IMPACTS MAGAZINE, Oct. 1999 at http://www.cisp.org/imp/October_99/10_99taylor-insight.htm (proposing an Internet based management monitoring system for the Great Lakes).
142A growing body of scholarship demonstrates that better decisions are made based on data and statistical prediction than expert judgment. See, e.g., ROBYN M. DAWES, EVERYDAY IRRATIONALLY (2001).
143See, e.g., Business Overview, Hypercor Inc. (at www.hypercor.com) (discussing Amory Lovin’s new vehicle design using a range of advanced materials to reduce weight and improve efficiency); David S. Hotter, Plastics Still Popping Up Under the Hood, MACHINE DESIGN, March 10, 1998, 226; K.S. Narasimhan, Recent Advances in Ferrous Powder Metallurgy, ADVANCED PERFORMANCE MATERIALS, Jan. 1996, 7; Riccardo Pó et. al., New Polymeric Materials for Containers Manufacture Based on PET/PEN Copolyesters and Blends, 7 POLYMERS FOR ADVANCED TECHNOLOGIES 365 (1996). 54 functionality desired in day-to-day products with less of a pollution impact. Similarly, advances in biotechnology promise to transform both food production and medicine in very significant ways.144 Simultaneously, the mapping of the human genome and other progress in genomics will make it possible to understand and track human health strengths and weaknesses, including susceptibility to various pollution harms, on a much more refined and individualized basis.145 B. Improved Internalization of Externalities In a variety of ways, the advances of the Information Age make it easier to control environmental spillovers. Refinements are thus possible across the spectrum of current approaches to pollution control and natural resource management. 1. Revitalizing the Environmental Property Rights Market For more than a century, the property rights approach to environmental protection has been in decline. The digital era may reverse this trend. One of the most striking features of the Internet is its capacity to expand the reach and lower the cost of commercial information exchange — and thus to bring buyers and sellers together who might otherwise not have found each other. Along with “making” new markets and improving the efficiency of market exchanges generally, e-commerce promises to improve the efficiency of the environmental rights marketplace. Specifically, improved environmental data and the capacity to transform this information into usable knowledge may allow us to: (1) overcome information failures that have made environmental exchanges difficult; (2) relax the “small numbers” requirement for efficient Coasean bargaining; and (3) facilitate the demarcation of environmental property rights. These changes could lead to broader and deeper environmental markets and an expanded role for market-based pollution control and natural resource management programs. a. Problem Identification, Causality, and Impact Measurement Enormous strides are being made in detecting environmental threats and tracing pollution
144Robert Lenzner & Bruce Upbin, Monsanto v. Malthus, FORBES (10 March 1997) et 58.
145MATT RIDLEY, GENOME: THE AUTOBIOGRAPHY OF A SPECIES IN 23 CHAPTERS (1999) (spelling out great potential advances from genomics). 55 sources. The field of environmental sensors and other measurement devices is booming.146 While historically environmental data bases have been patchy and unreliable, significant strides are being made in the realm of environmental indicators, metrics, and measurement.147 These advances provide a basis for seeing environmental trends as they emerge over time. They also provide a data foundation for identifying “invisible” problems which are observable only through patterns of harm. Air emissions are already capable of being “tagged” and then tracked downwind.148 Advanced meteorological models have further strengthened our ability to understand the range and sources of air pollution harm. Similar gains are being made in tracking pollutants as they flow through watersheds and hydrological systems. As the application of computer power to the environmental domain grows and the pace of progress quickens, it may not be all that many years before emissions sources will be nearly completely mapped and understood.149 As a leading environmental health expert observes:
Admittedly, there are a large number of factors to consider when estimating
146Infrared light, from satellites or stationary sources, can now be used to remotely measure exhaust from a vehicles tailpipe, thereby creating the potential to replace annual emissions tests. Todd Hartman, Plan Aims to End Emissions Test: Remote Screening Would Target Polluters, But Clean Vehicles Would Get Pass in Mail, ROCKY MTN. NEWS, Aug. 31. 2000 at 4A; NASA Satellite Technology to Monitor Motor Vehicle Pollution, U.S. DEPT. OF AIR FORCE, Aug. 18, 2000; Alto Technology Resources Expands Global Reach With New South American Joint Venture; The Leader in Hyperspectral Remote Sensing Technology Targets International Oil & Gas, Mining, Environmental, Agricultural & Forestry Industries, PR NEWSWIRE, June 27, 2000 (Describing growth in the use of an airborne sensing system — hyperspectral remote sensing imaging — for environmental and other uses); J.J. Stambaugh, Superfund Site Equipped with Warning System, KNOXVILLE NEWS SENTINEL, June 18, 2000 at A4 (Describing EPA installation of environmental sensors at the Rock Hill laboratories site that “can ‘sniff out’ the presence of any leaks or spills, calculate how much of the chemical is in the air and estimate its speed and direction of travel based on weather information.”).
147MATHIS WACKERNAGEL & WILLIAM REES, OUR ECOLOGICAL FOOTPRINT (1996); OECD, TOWARDS SUSTAINABLE DEVELOPMENT: ENVIRONMENTAL INDICATORS (1998); Global Study on State of the World’s Ecosystems Launched to Mark World Environment Day, UNEP PRESS RELEASE 1/76 (Jun 5, 2001). See also World Economic Forum, 2001 Environmental Sustainability Index (2001) (available at www.yale.edu/envirocenter/esi).
148EPA has developed a variety of new technologies to track air emissions. Darla Carter, New Wind Sensor Gets Test Run, COURIER JOURNAL, June 24, 2000 at 1B.
149Dennis J. Paustenbach, The Practice of Exposure Assessment: A State-of-the-Art Review,” 3 J. OF TOXICOLOGY & ENVT’L. HEALTH 179 (2000) (chronicling extraordinary recent gains in understanding environmental risk exposures) [hereinafter Paustenbach, Exposure Assessment].
56 exposure, and it is a complicated procedure to understand the transport and distribution of a chemical that has been released into the environment. Nonetheless, the available data indicate that scientists can do an adequate job of quantifying the concentration of the chemicals in the various media and the resulting uptake by exposed persons. . . 150
Similar strides are being made in improving our understanding of environmental public health effects and the ecological impacts of various types of pollution. In combination with the extraordinary advances in understanding the sensitivity of the human body to various kinds of chemical exposures, we stand on the verge of much more scientifically defensible answers to questions about how much harm certain pollutants cause to particular individuals.151 Quite clearly, the sweeping potential for reduced causal uncertainty derives not only from new environmental technologies but also the knowledge revolution within other fields including medicine, public health, epidemiology, and risk-benefit analysis.152 Within several decades, people may have the capacity to detect virtually all pollution intrusions into their bodies and onto their property on a fine-grained basis and at relatively low cost. As the band of uncertainty around problem identification narrows, the pressure to improve our capacity for harm evaluation and damage valuation will intensify. Better information on the fate and transport of emissions and improved epidemiological and ecological analyses seems likely to remove a major obstacle to the “pricing” of pollution externalities and thus the functioning of environmental property rights markets.
150Id. at 264.
151Jennifer Brown, Pediatric Environmental Health Hazards and the Role of Government in Adopting Standards to Protect Children, 16 PACE ENVTL. L. REV. 189, 197-202 (1998) (describing new national initiatives and research into the effects of pediatric exposure to pollutants); Carl B. Meyer, The Environmental Fate of Toxic Wastes, The Certainty of Harm, Toxic Torts, and Toxic Regulation, 19 ENVTL. L. 321, 322-324 (1998) (citing advances in detecting toxic exposure: “Toxic wastes can be fingerprinted; emission sources can be tracked with the toxic residues found in the bodies of environmental injury victims; the extent of accumulation of toxics in the environment can be predicted; and the body burden of toxic exposure victims can be measured with a high degree of scientific certainty.” (Citations omitted).
152Researchers at the Harvard School of Public Health, for example, are using advanced computer modeling to better assess the health impacts of air pollution. Study Details Impact of Pollution on Public Health from Nine Older Fossil Fuel Power Plants in Illinois, ASCRIBE NEWSWIRE, Jan. 3, 2001. Advances in genetic understanding and technology. (Need new cite)
57
b. Demarcation of Boundaries One of the most significant obstacles to market-based environmental protection emerges from disputes over who holds the relevant property rights. Disagreements, also arise over whether there has been an intrusion of harm across property lines. Modern information management systems can address these issues and radically reduce the costs of delineating (and thus protecting) environmental rights.153 For example, Geographic Information Systems (GIS) systems make physical demarcation of property boundaries faster, easier, and cheaper.154 Property lines can also be fixed and observed through Global Positioning Systems (GPSs) and other satellite-based technologies. Improved sensors and the advances in human health and ecological sciences noted above promise to make the detection of pollution intrusions ever easier. In narrowing the range of dispute over property rights and thus reducing a major element of persistent transaction costs, information technologies promise to greatly facilitate institutional arrangements that build on market exchanges of environmental rights. The Information Age offers particular potential with regard to the allocation and management of various commons. Open access natural resources, such as the fish in the ocean, have long been a vexing problem from the perspective of optimal rates of resource exploitation.155 The fact that some shared resources are difficult or impossible to police creates a potential for a prisoners’ dilemma dynamic and suboptimal results as each individual maximizes his or her own consumption at the expense of the community as a whole. But information technologies can be deployed as “virtual barbed wire,” permitting the fencing off of shares in common resources that might have been seen as ineluctably “open
153This potential has been recognized for some time. GARY LIBECAP, CONTRACTING FOR PROPERTY RIGHTS 17 (1989) (“New technology, which lowers the costs of delimiting individual claims, detecting rule violations, arbitrating disputes, and punishing violators, provides for further gains from applying a more specific assignment of property rights to reduce common pool losses.”). A host of new technologies are currently being developed and applied, including remote sensing of individual car emissions. Hartman, supra, note ___.
154[need cite on GIS]
155Frederick W. Bell, Technological Externalities and Common-Property Resources: An Empirical Study of the U.S. Northern Lobster Fishery, JOURNAL OF POL. ECON. Jan.-Feb. 1972, at 148-58 (documenting overexploitation of a commons system fishery), cited in Donald R. Leal, Homesteading the Oceans: The Case for Property Rights in U.S. Fisheries, PERL POLICY SERIES #P@-19 (Aug. 2000), at 3.
58 access” even a few years ago. For example, fish quotas can be allocated and enforced using satellite tracking to observe and even measure the number of fish being taken by particular vessels. And while the prospect of keeping track of hundreds or even thousands of fishing boats might have seen daunting a few years ago, today’s computers can manage the task with relative ease.156 In fact, New Zealand’s fisheries have recently been revived under a tradable quote regime.157 Our view of what constitutes an inherently collective resource, may well shrink dramatically.158 Allocation of shares, even in the atmosphere, will become possible.159 Moreover, where resources are, by choice, managed as a public resource,(e.g., parks) the capacity to enforce limits on exploitation of the resource by individual actors will be greatly enhanced. From electronic sign-up sheets for the tennis courts in a city park to the tracking of greenhouse gas emissions released into the earth’s atmosphere, the costs of establishing and policing property rights, even those held in common, appear likely to drop precipitously in the coming decades. Information advances may also ease the strain that often exists where resources are shared between individual property owners and the community. Mechanisms are coming on-line to reduce disputes, for example, over the protection of endangered species or wetlands on private property. Computer-aided mapping and data storage in high-resolution geographic information systems have, in
156Satellite tracking of fishing fleets is now both well-developed and cheap enough that it is marketed directly to private corporations in the marine industry for individual fleet communication and observation. SASCO, Economical Satellite Communications and tracking for the Marine Industry (visited Nov. 7, 2000)
157Michael De Alessi, Fishing for Solutions, 11 IEA STUDIES ON THE ENVIRONMENT, Feb. 1998, at 40- 43.
158A diminished set of commons may be critical as increasing population density tends to increase the pressure on shared spaces. See Garrett Hardin, The Tragedy of the Commons, SCIENCE 13 Dec. 1968 at 1248. See also JOANNA BURGER, ELINOR OSTROM ET AL., PROTECTING THE COMMONS (2001) (highlighting population pressures as a stress leading to the breakdown of self-organization of shared resources).
159See David Victor - need cite for new book [cites needed on tradable permits in the climate change context].
59 the last few years, created a much clearer picture of where endangered species or wetlands exist. With this information readily at hand, perhaps on computer data bases accessible in every county land records office or over the Internet, the chances that a purchaser of a parcel will face a “surprise” will be greatly reduced.160 Tensions between property rights and responsibilities should therefore shrink. Simultaneously, the extent of “positive externalities” generated by private parcels of land will be much easier to gauge, facilitating compensation or credit for those who protect community resources.161 c. Easier Valuation Even if we know with a reasonable degree of precision the sources and impacts of emissions and who holds the relevant property rights, significant questions (and the potential for disputes) will remain over how much value to place on various harms. Important dimensions of the evaluation problem may, however, be amenable to Information Age advances. To the extent that modern Information Age technologies permit much greater quantities of data to be assembled and analyzed, cost-benefit analysis should become more sophisticated, providing firmer data foundations on which to build valuations. Risk analysis is also likely to improve as analysts are better able to track various risks over time and to understand more clearly the probabilities of harm and the magnitude of ill effects likely to emerge.162 Already, environmental decisionmaking is becoming much more data driven.163 The capacity to collect
160To the extent that the Supreme Court’s jurisprudence in this arena turns on “reasonable investment- backed expectations,” the increased information and concomitant reduction in surprises should reduce, over time, the number of ESA takings cases arising and wetlands disputes to near zero. See Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1017 (1992) (“[As] we have acknowledged time and again, ‘the economic impact of the regulation on the claimant and . . . the extent to which the regulation has interfered with distinct investment-backed expectations’ are keenly relevant to takings analysis generally.” (Quoting Penn Central Transportation Co. v. New York City, §38 U.S. 104, 124 (1978)).
161Carol Rose, Property Rights and Responsibilities, in THINKING ECOLOGICALLY, supra, note 99 at 56- 7 (arguing for compensation to property owners affected by new regulations).
162James K. Hammit, Data, Risk, and Science, in THINKING ECOLOGICALLY, supra note ___.
163Daniel C. Esty, Toward Data-Driven Environmentalism: The Environmental Sustainabiity Index, 31 ELR10603 (2001). See also Michael H. Jones, Ecology, Information Technology, and Environmental Policy: An Ecologist’s Perspective on Values and Value Added, INFORMATION IMPACTS MAGAZINE, Oct. 1999, at http://www.cisp.org/imp/october-99/10-99hunt-jones.htm (discussing how on-line databases assist in environmental policymaking and identifying numerous on-line environmental data bases, including electronic sites for the Ecological Society of America, the US Global Change Research Program, and the National Snow and Ice Data Center).
60 information on pollution harms and damages is expanding very rapidly. A broad data base reduces the guesswork in plotting the likely trajectory of ecological and epidemiological impacts and costs. 164 Value judgments will, of course, still have to be made.165 The price to be placed on particular kinds of harms, such as loss of a life, an increased risk of cancer, or a diminished view are not obvious. These questions are not so much technical as they are philosophical and political.166 But, even so, a more information-rich decisionmaking process can reduce the scope for dispute and ameliorate the institutional challenges posed. For example, the assumptions on which valuations are based can be spelled out, made public, opened to review, and debated. Likewise, data on valuations under comparable circumstances will be available. Under a more transparent policymaking process with Internet-facilitated access to data on comparable cases, anomalous valuations will stand out more sharply. 2. Enhanced Market Structures A number of other obstacles to a functioning market for pollution control and natural resources will be removed, at least in part, in the coming years. A number of specific changes are foreseeable: a. Contracting Beyond Small Numbers The prospect of appropriate environmental outcomes being negotiated, where harm-causers compensate those whose rights have been infringed (or where pollutees pay polluters to reduce the harms), has long been understood to diminish beyond the realm of small numbers.167 Negotiations among multiple parties become much more difficult, driving up the transaction costs of environmental
164In important respects, environmental analysis is simply catching up with other social sciences, such as economics and even political science, where data-driven studies have become the norm in recent decades.
165Howard Latin, Good Science, Bad Regulation and Toxic Risk Assessment, 5YALE J. ON REG 89, 90 (1988) (dismissing the possibility of purely scientific or rational environmental decision making.) But see PETER HUBER, GALILEO’S REVENGE: JUNK SCIENCE IN THE COURTROOM 221 (1991)(arguing a much more pessimistic line).
166Mark Sagoff, We Have Met the Enemy, and He is Us or Conflict and Contradiction in Environmental Law, 12 ENVTL. L. 283, 286-97(1982) (arguing that valuations inevitably turn on value judgments).
167Coase, Social Cost, supra, note __ 61 contracts.168 The end result, particularly in combination with the difficulties inherent in organizing the diffuse victims of pollution harms, is a breakdown in the market for environmental rights. But the Internet and the growing network of other Information Age mechanisms for linking people together including email and low-cost telecommunications promises to transform the transaction cost calculus.169 Environmental rights holders may thus be able to organize at much lower cost in the future than historically.170 In some number of additional cases they will be able to band together in defense of their rights and to insist upon compensation from those who are externalizing environmental harms. b. Reduced Information Failures In addition to lowering “organizational” costs, Internet access to data (on the presence of harms, the risks they pose, and other critical issues) increases the prospect of an adequate foundation of information for a market to function. The more information-rich world that lies ahead makes it more likely that individuals will be reasonably well-informed about the pollution spillovers they face and thus able to negotiate rationally and effectively.171 While serious practical obstacles will remain to a pure free market in environmental protection, the broadening, deepening, and cheapening of the readily-accessible environmental data base moves us closer to a Coasean world of low-transaction-cost exchanges and thus
168Williamson, Transaction Costs, supra, note 30, at ____.
169John Hagel III and Marc Singer argue one of the greatest values of the Internet is its capacity to connect people in a relevant and timely fashion.” JOHN HAGEL III & MARC SINGER, NET WORTH at xii (1999).
170E.g., Paul M. Schwartz, Privacy and Democracy in Cyberspace, 52 VAND. L. REV. 1609, 1647-1650 (1999) (noting that “cyberspace has the potential to emerge as an essential focal point for communal activities and political participation.”); Jocelyn C. Adkins, Environmental Database Review: The Internet: A Critical Technology for the State of Environmental Law, 8 VILL. ENVTL. L. J. 34 (1997) (describing the broad availability of environmental information on the Internet and the E-line initiative, a database created to aid in the worldwide dissemination of environmental legal information).
171The EPA provides results of its annual Toxic Release Inventory online in very user-friendly formats, including state fact sheets, data release reports, state date files, and searchable databases. TOXIC RELEASE INVENTORY: COMMUNITY RIGHT-TO-KNOW, EPA (visited Nov. 7, 2000) 172For an example of how the internet can be used to gather plaintiffs in mass tort cases, see Mark Pruner, The Internet and the Practice of Law, 19 PACE L. REV. 69, 76 (1998); Hagens Berman Attorneys at Law at http://www.hagens-berman.com (last visited June 5, 2001). But see Millett v. Atlantic Richfield, Maine Superior Court, Cumberland Country (No. CV-98-555, March 2, 2000) app. Den’d, Cam-00-175, 2000 ME LEXIS (refusing to certify as a class property owners with wells contaminated by MTBE arguing that particularized issues predominate over common ones). 173While the implications of the tobacco litigation for toxic tort cases are not yet clear, the defense bar has already manifested concern about the potential for increasing corporate vulnerability to mass tort claims. Don Evans, The Changing Face of Tort Litigation: What You Can Do to Meet the Threat, METROPOLITAN CORPORATE COUNSEL, at 37 (raising fears about future mass tort suits). 174Arrow & Debreu, Existence of an Equilibrium for a Competitive Economy, 22 ECONOMETRICA vol. 22, (1954). See also BRUCE ACKERMAN, ECONOMIC FOUNDATIONS OF PROPERTY LAW (1975). 63 fledged market in environmental rights provide the promise of short-term improvements in regulatory approaches, notably broader use of market mechanisms as the centerpiece of our regulatory system. Even if pollution victims are not able to identify all of the harms they face, understand with a reasonable degree of particularity the impacts of these harms, and thus how much compensation should be sought from those causing the emissions, Information Age regulatory systems will enable governments to regulate with greater specificity. Where collectivized pollution control approaches continue to be employed, they may be undertaken with more individualized data and calculations, thereby permitting more refined policy interventions that internalize environmental externalities with greater precision. Economic-incentive-based regulation represents, in effect, a way-point between the heavy information requirements required for a fully functioning property rights regime and the collectivized decisionmaking of command and control regulation. In the last decade, market forces have been harnessed to environmental objectives in a number of critical issue arenas. The United States phased out the use of ozone-layer-damaging CFCs with an escalating tax that created incentives for companies to develop substitute products and processes.175 As noted in Part II D above, sulfur dioxide emissions are being controlled through a system of tradable emissions allowances. This acid rain reduction scheme is made possible by sophisticated emissions monitors in the smokestacks of power plants.176 The same model of emissions tracking and trading (or charging) should be available much more broadly over the coming decades.177(#8). Specifically, with more precise information about pollution levels and improving information about the ecological and epidemiological impacts of these emissions, governments will be able to expand allowance trading regimes and to employ more direct-cost-internalization environmental strategies (e.g., environmental taxes). Environmental sensors that allow emissions to be tracked on a real time basis (twenty-four hours 175[need cite on CFC phaseout + US CFC tax under 1990 CAA]. 176Clean Air Act Amendments §403, 42 U.S.C. 7651b (1990). (Authorizing that “[a]llowances allocated under this title may be transferred”). 177 In the closing days of his Administration, President Clinton called for CO2 and mercury emissions controls through new tradable permit regimes. See GREENWIRE, 14 November 2000 64 a day, seven days a week) and to have this information downloaded at the regulatory agency represent an extraordinary addition to the regulatory tool box. From factory emissions to vehicle exhaust, most pollution today is addressed (somewhat crudely) through technology mandates.178 With new sensors and monitoring equipment, these emissions soon may be controllable through precise charges for each unit of harm released. The technologies that make such precision possible are emerging quickly. Laser beams, which can measure from a distance the exhaust gas mixture coming out of the tailpipe of a car, are now coming on to the market.179 As these technologies are refined and married to computer tracking programs, it will soon be possible to determine the environmental impact of each vehicle on the road.180 This data will make cost internalization of automobile emissions on a quite refined basis possible. Although institutional obstacles undoubtedly stand in the way, as a technical matter, we are not very far away from being able to send, alongside one’s monthly electric bill, a record of vehicle pollution charges based on actual emissions. The leading edge of this trend can already be seen in places like Singapore, where commuters pay differential tolls depending on how far into the urban center they penetrate and at what time of day.181 The Singapore experience suggests that pollution charges can be set to reflect not only the precise amount of pollution coming out of the tailpipe of a particular vehicle but also varied according to the time of day as well as the geographic locale in which one is driving — both factors which affect the level of harm inflicted and thus the appropriate charge 178New Source Performance Standards under the Clean Air Act, for example, reflect the level of emissions that could be attained employing “the best system of emission reduction which . . .has been adequately demonstrated. 42 U.S.C. 7&11(a)(1) (1994). Similarly, qualification for permits for point source emissions under the Clean Water Act is driven primarily by technology mandate approaches. See John P.C. Fogarty, A Short History of Federal Water Pollution Control Law, in CLEAN WATER DESKBOOK 5, 6 (2d. ed. 1991). 179[need article cites; see Ion Optics website at www.ionoptics.com (highlighting some of the emerging laser beam based technologies). 180See Hartman/NASA, supra, note 139. 181Since 1975, Singapore has enforced a congestion-pricing program in its downtown area. The program has been expanded to regulate both morning and evening rush hour traffic, and an Area License Scheme has also been added to manage vehicle flow into a specified downtown zone. Felicia B. Young & John T. Berg, Value Pricing Helps Reduce Congestion, PUBLIC ROAD, no. 5, vol. 62 at 47 (March 1, 1999). 65 under an economically-optimal marginal cost pricing scheme.182 At some point, multiple-variable fees might become confusing to the paying public, but the chance to tailor incentives with considerable precision represents a major policy opportunity. Information technologies, especially data tracking and reporting capacities, also promise to facilitate quicker calibration of the prices or allowance quantities needed to “clear” environmental markets. Certain market approaches to environmental protection, notably emissions allowance trading regimes, have traditionally been seen as vulnerable to the possibility that either the wrong number of permits would be issued to achieve the desired level of control or that the price of the permits would fluctuate wildly.183 Similarly, when environmental taxes are employed as a pollution control measure, there is no guarantee that they will be set at the level required to achieve the desired degree of emissions control. In both circumstances, digital technologies now provide a capacity to monitor market behavior on a real time basis, including the changes induced by economic incentives, thereby providing the potential for tighter feedback loops. By tracking the existing patterns of activity that are occurring, regulators will be able to quickly adjust tax levels or allowance numbers and thereby bring the markets they have established into quicker equilibrium at desired levels. b. More Refined Command and Control Regulation In some cases, improved information may not get us the full distance we need to go to make economic-incentive based regulatory approaches work. But better data and a stronger knowledge base may allow us to implement traditional regulatory strategies more effectively and at lower cost. Four core categories of “regulatory failures” undermine current approaches to environmental protection: (a) technical deficiencies; (b) administrative inefficiencies; (c) structural (or jurisdictional) mismatches; and 182Driving during peak emissions times (rush hour) or in areas that already have high ambient levels of contamination (denser zones at the urban core) generates higher degrees of harm. U.S. ENVIRONMENTAL PROTECTION AGENCY, CONSUMER INFORMATION CONGESTION PRICING 2 (December 1997) (noting that driving during rush hours leads to increased idling, which is known to significantly increase air pollution). 183 See TOM TIETENBERG, ENVIRONMENTAL ECONOMICS & POLICY 278 (2001); B.S. Fisher et. al., An Economic Assessment of Policy Instruments for Combating Climate Change, in CLIMATE CHANGE 1995: ECONOMIC AND SOCIAL DIMENSIONS OF CLIMATE CHANGE 397, 403 (Bruce et. al., eds., 1996) (discussing the possibility of implementing a tradable-permit system in combination with an international carbon tax and the potential for under- or over-abatement). 66 (d) public choice failures.184 Improved environmental information about harms, causes of environmental injuries, pollution effects, how to value the burdens created, the range of policy options available, and who is influencing the decisionmaking process, all promise to mitigate these shortcomings. 1. technical deficiencies Information Age technologies from computers to sensors to a greater capacity for advanced statistical analysis made possible by increased computing power have sharpened the capacity of regulators to spot issues, identify problems, analyze the fate and transport of chemicals,185 measure environmental harms, undertake risk assessments, carry out cost-benefit analyses, understand interactive effects including both cumulative pollution exposure impacts and problem-reducing synergies, track the time lags before effects emerge, sharpen evaluation techniques, and generally manage complexity.186 These gains make much more refined, particularized, and accurate regulation possible. As noted above, computer-supported advances in number-crunching and progress in mathematics and statistics have dramatically improved the modeling of the fate and transport of pollutants. Gaussian plume analysis now permits regulators to plot the drift of air pollutants with a degree of accuracy, unheard of just a few years ago.187 To the extent that regulatory mistakes can be traced to incomplete or inaccurate information—and especially shortcuts taken to reduce administrative costs—the sweep of scientific advances that have emerged (and are emerging) ensures that the number and magnitude of technical errors will diminish over time. Moreover, as the cost of precision falls, reliance on gross-average data can be diminished. 184Esty, Revitalizing, supra, note 34 at 585-599. For a discussion of how public choice failures may lead decisionmakers astray see JAMES BUCHANAN & GORDON TULLOCK, THE CALCULUS OF CONSENT (1962); Roger G. Noll, Economic Perspectives on the Politics of Regulation, in HANDBOOK OF INDUSTRIAL ORGANIZATION 1265 (Richard Schmalensee & Robert D. Willig, eds., 1989); JERRY MASHAW, GREED, CHAOS, AND GOVERNANCE: USING PUBLIC CHOICE TO IMPROVE PUBLIC LAW 10-29 (1997); Peter H. Schuck, The Politics of Regulation, 90 YALE L. J. 702 (1981 (book review); McCubbins et. al., Structure and Process, supra, note _. 185Paustenbach, Exposure Assessment, supra, note _. 186[need cites, especially on “managing complexity”]. 187Such modeling has transformed the debate over the sources of air pollution in the Northeastern United States. For an example of ozone modeling, see the final report and technical supporting document produced by the Ozone Transport Assessment Group, at http://www.epa.gov/ttn/lto/otag/finalrpt/.(last visited Apr. 5, 2001). 67 Because many of the gains in technical capacity are cumulative and transferable, it will be increasingly possible for regulators at smaller scales to manage the challenges they face in a sophisticated manner. This diffusion of regulatory capacity promises to further transform the “optimal specificity” of regulation. Thus, while historically the significant scale economies in environmental analysis provided a logic for federal environmental law, in the future, more responsibilities can be transferred to state and municipal decisionmakers who will have access to the requisite scientific, technical, and analytic underpinnings for regulation — and have greater capacity to understand localized needs and particularized facts that allow interventions to be fine-tuned to meet specific conditions.188 The decentralization of policy implementation offers an opportunity to reduce the reliance on uniform standards, which should translate into lower user costs as well as fewer and smaller errors in both under- and over-regulation. As the cost of information falls, and as the improved analytic capacity of regulators at decentralized levels of authority permits local facts and circumstances to be factored in to the regulatory calculus in ways that could never cost effectively be considered by more centralized authorities (e.g., in Washington), we can anticipate a much more granular regulatory world with differentiated standards and other policy interventions being matched to quite precise, perhaps even individual, circumstances. 2. Administrative Inefficiency Improved information of the types identified above also seems likely to reduce the administrative costs of managing environmental harms as answers to regulatory dilemmas are generated more easily and cheaply.189 Moreover, the Digital Era’s powerful dissemination tools — Internet, email, “list servs” — will make it possible for regulators to identify and adopt “best practices,” including successful policies, technologies, and regulatory approaches, from across the country and around the world. Clearer information about environmental results, including both corporate and governmental regulatory performance, will also facilitate “regulatory competition” and may help to reduce the 188Esty, Optimal, supra note ___ at 1574 (discussing education in the optimal division of labor in environmental governance). 189Williamson, Transaction Cost, supra, note 27 at 234. 68 inefficiency of our extant regulatory regimes.190 The proliferation of environmental indicators, measurement initiatives, and data sets ensures that the benchmarking of governmental performance will become much easier and more widespread.191 Comparative data on who is doing relatively well and who is doing poorly is likely to have a salutatory effect on overall results. Laggards will recognize the potential to do better and feel competitive pressures to improve their performance. The same dynamic will also drive companies, communities, and even individuals to gauge their relative environmental performance against relevant peer groups. Executives in corporations where emissions per unit of output lag industry averages will find themselves under pressure to do better. Likewise, mayors will seek to move their communities to the top of the “Recycling League Table.” Even individuals may feel pressure to ensure that their car, house, or personal consumption habits do not set them apart as environmental miscreants.192 The information-induced pressures on governments for better environmental performance will come not only from “regulatory competition” with other similarly situated governments (e.g., California’s innovations being copied by Oregon, cutting-edge U.S. strategies being emulated by the European Union), but also from competition (and cooperation) between levels of government. With easier access to comparative data, policy successes at the state level (or international level) will serve as a stimulus for improved federal environmental regulations. Likewise, the potential alternative of regulation at a local or federal scale will keep state environmental decisionmakers on their toes. The same principles of co-opetition193, fostered by greater access to information and broadened capacity for 190For a review of regulatory competition theory, see Richard Revesz, Federalism and Regulation: Some Generalizations, in (Daniel C. Esty & Damien Geradin, eds.) REGULATORY COMPETITION AND ECONOMIC INTEGRATION: COMPARATIVE PERSPECTIVES (2001); see also Charles M. Tiebout, A Pure Theory of Legal Expenditures, 64 J. POL. ECON. (1956). 191Initial efforts to rank governments based on their environmental performance have begun to emerge. See World Economic Forum Pilot Environmental Sustainability Index (2000); Esty & Porter, Measuring National Environmental Performance, supra, note 132, at 60-75. 192First steps toward such a comparative performance world are already being taken. In Finland, for example, electric bills come with data not only on the prior month’s and last year’s consumption, but also with benchmarks on how one’s energy use compares to others. 193Daniel C. Esty & Damien Geradin, Regulatory Co-opetition, 3 J. INTL, ECON. L. 235 (2000)(discussing the value of bot competition and cooperation). 69 leading-edge analytic work will create the potential for a welfare-enhancing mix of competition and cooperation between governments and non-governmental organizations, including environmental groups and the business community.194 In an information-rich environment, the number of actors who will be in a position to second-guess governmental choices expands exponentially.195 Although there is some risk of cacophony or information overload (discussed in part VI below), input from multiple perspectives generally facilitates problem solving. The value of competing data, analysis, and policy options is especially significant under condition of uncertainty, such as those that plague the environmental policy realm. 3. Structural mismatches The potential for more refined governance at a variety of levels should help to reduce welfare losses from structural failures where governmental regulation is undertaken at the wrong scale or level of jurisdiction. Digital Era tools make it easier to match the scope of authority of a regulating entity with the scale of the problems that it undertakes, both in theory and practice.196 We know that environmental problems exist at an enormous diversity of geographic scales.197 To the extent that the “matching principle”198—a core element of public goods theory and therefore optimal environmental governance— argues for regulatory intervention at the same scale as the problem, we face the prospect 194MARK BLAUG, THE ECONOMIES OF EDUCATION AND THE EDUCATION OF AN ECONOMIST (1987) at 41- 2 (stressing that the essence of science and modern knowledge development lies in intellectual competition); Daniel C. Esty & Damien Geradin, Regulatory Co-opetition, JOURNAL OF INTERNATIONAL ECONOMIC LAW 1 (2000) (explaining the virtues of inter-, intra-, and extra- governmental competition on both horizontal and vertical axes). 195For an example of this kind of competition in action, see the Environmental Defense Fund’s “Scorecard”. ENVIRONMENTAL DEFENSE, supra, note __. 196Butler & Macey, Matching Principle, supra, note __ (explaining the “matching principle”). 197See PRESIDENT’S COUNCIL ON SUSTAINABLE DEVELOPMENT, SUSTAINABLE AMERICA: A NEW CONSENSUS FOR PROSPERITY, OPPORTUNITY, AND A HEALTHY ENVIRONMENT FOR THE FUTURE vi, 11- 23, 83-107 (1996), available at http://clinton4.nara.gov/PCSD/Publications/TF_Reports/amer-top.html (discussing the need to address environmental problems at community, national, and international levels). A discussion of PCSD’s attention to a range of geographic scales is found in J.B. Ruhl, Sustainable Development: A Five-Dimensional Algorithm for Environmental Law, 18 STAN. ENVTL. L.J. 31, 41 (1999). 198Mancur Olson; Butler & Macey, Matching Principle, supra, note ____. 70 of a nearly infinite number of “optimal environmental areas.”199 While the administrative costs of having regulating authorities available at every such scale would be exorbitant, the relative burden of a multi-tier environmental governance structure goes down as information costs fall, making a more refined structure, that more closely matches the scale of problems, more affordable. As a matter of theory, structural failures in regulation arise when environmental problems are dealt with at either too centralized a level, given a localized problem or at too decentralized a scale, given an issue that spans the boundaries of multiple political jurisdictions. Improved information technologies and the ability to map more precisely the geographic extent of environmental concerns will facilitate a more precise matching of environmental harms to the appropriate regulatory authority, reducing both externalities and internalities.200 4. Public Choice Distortions Ultimately, technical advances in environmental analysis cannot succeed without parallel institutional reforms. The capacity for more refined internalization of externalities must be matched with the political will to do so. While a more information-rich regulatory regime cannot put a stop to special interest manipulation of the policymaking process or bad political judgments, it can expose the results of the choices made and thereby help to reinforce pressures for better performance. The information flow and greater connectivity of the Digital Age promises to create a world of greater transparency, which will tend to highlight errors or distortions in regulatory decisionmaking. In a world where comparative data is hard to find, anomalous policy judgments may go unchallenged for long periods. Where information is plentiful, analytic mistakes or policy choices that deviate from established best practices are likely to stand out much more quickly. For example, Belgium’s low rank in the World Economic Forum’s Environmental Sustainability Index (79th, just behind Albania) generated a great deal of commentary. Environmental groups, the media, and opposition politicians all pressed the government to explain why the nation’s pollution control performance was so poor.201 In 199ANDRÉ DUA & DANIEL C. ESTY, SUSTAINING THE ASIA PACIFIC MIRACLE: ENVIRONMENTAL PROTECTION AND ECONOMIC INTEGRATION. Washington, Institute for International Economics (1997) at 123-131 (developing the concept of “optimal environmental areas”). 200 OLSON, supra, note __. 201Contacts, press reports, and website “hits” on file with CIESIN, one of the groups involved in 71 effect, more data makes the “intellectual marketplace” surrounding the regulatory process operate more efficiently.202 Comparative information permits citizens and NGOs to question political leaders and to push them to justify their policy choices. In a similar fashion, easy access to information on who is participating in the decisionmaking process can throw a spotlight on special-interest manipulation of the regulatory process.203 With reports on who is lobbying, for instance, the media and non-governmental organizations, acting on behalf of the public, can more easily identify and draw attention to instances of regulatory “capture” where disproportionate influence is being wielded by certain groups or individuals. Similarly, in jurisdictions where lavish campaign contributions or even outright corruption has tainted decisionmaking, Information Age technologies can facilitate disclosure of undue influence, making under-handed decisionmaking much harder to sustain. The Information Age may indeed have its greatest impact in the realm of administrative law. Public (and media) access to campaign contribution reports and financial disclosure statements makes it much easier to spot improper attempts to influence policy outcomes. The Internet furthermore opens up regulatory proceedings such as the Notice and Comment process required by the Administrative Procedure Act to a much broader range of participants. Now anyone with a computer can track critical policy debates as they unfold in the public docket. Anyone with email can register a comment. Distance from the physical locus of policymaking becomes much less important. Expanded access could significantly democratize the regulatory process and give people with good ideas — even those who never get to Washington (or wherever the regulators are located) — a chance to shape policy outcomes. More generally, a world with more information offers the prospect of a better informed citizenry, richer public debate, and thus better performing public decision processes. Even if the world of generating the ESI rankings. 202 Daniel C. Esty, NGOs at the World Trade Organization: Cooperation, Competition, or Exclusion, 1 J. INT. ECON. L. (explaining the value of competitive pressures in the environmental policymaking process). 203The Common Cause website, for example, allows users to access campaign contribution profiles of individual politicians, as well as search a database of special interest soft money contributions to the major political parties. See www.commoncause.org (last visited June 1, 2001). 72 thoughtful environmental action by an engaged local citizenry anticipated by observers such as Sabel, Fung, and Karkkainen204 does not emerge, a shift toward better informed environmental debates seems likely, if only among an elite tier of government officials, the business community, and NGOs. Obviously, a more open decisionmaking process does not guarantee better policy outcomes. Special interests and other rent seekers will still attempt to manipulate the regulatory process. And those who benefit from the more closed processes of the status quo will likely seek to obstruct movement toward a world of greater transparency. But the long-term trajectory toward openness and greater democracy seems strong.205 This trend bodes well for the environment as there is a growing scholarly literature that connects good environmental results with the strength of a jurisdiction’s political freedom and democratic institutions.206 By permitting a wider array of participants to generate useful information and to transmit it into the environmental decisionmaking process, new technologies will almost certainly broaden the foundations on which regulatory decisions are built. Not only are competing data, options, and information likely to expose public choice failures, but the alternative perspectives will often facilitate the process of “triangulation” on better regulatory outcomes, if not some more overarching “truth.”207 At the very least, the ease with which information can flow to and from regulators will support a broader set of relationships — both cooperative and competitive — between government decisionmakers and non- governmental officials.208 To the extent that policy choices have gone off track due to information gaps, 204CHARLES SABEL, ARCHON FUNG, & BRADLEY KARKKAINEN, BEYOND BACKYARD ENVIRONMENTALISM (2000) (discussing the prospect of a new grass roots environmental democracy). 205Marcus W. Brauchli, Poll Vaults: More Nations Embrace Democracy – and Find it Often Can Be Messy – Voters Eagerly Throw Out Old Regimes, Wind Up With Gridlock, Instability – Elections in 117 Countries, WALL STREET JOURNAL, June 25, 1996, at A1. 206 Scott Barrett & Kathryn Graddy, Freedom, Growth and the Environment, 5 ENVIRONMENT AND DEV. ECON. 433-456 (2000) (demonstrating the impact of civil and political freedoms on environmental quality); Esty & Porter, Measuring National Environmental Performance, supra, note 132 (showing empirical correlation between legal and political institutions and environmental results). 207 Shelby Hunt, Truth in Marketing Theory and Research, JOURNAL OF MARKETING, July 1990, at 1, 8-13 (discussing the philosophy of “scientific realism” and its implications in science and marketing); Peter Schuck, Multi-Culturalism Redux: Science, Law and Politics, 11 YALE L. & POL’Y. REV. 1, 15- 16 (1993) (suggesting that science is inevitably “contingent” and “socially constructed”). 73 these developments will put more data and analysis within the reach of decisionmakers. Perhaps the greatest element of progress in overcoming public choice failures, where governmental outcomes deviate from the will of the peoples, is the opportunity created by information technologies to eliminate “policymaking” with its susceptibility to capture altogether in favor of individual environmental decisionmaking. Such a shift in focus makes sense where the impacts are internalized at the individual or household level, where tastes and values vary, and where individuals are capable of making informed choices. Under such an approach, data on the relevant environmental options is presented and individuals decide for themselves how to weigh the competing risk factors. Food safety, for instance, stands out as a realm where a number of choices reflect individual preferences more than absolute environmental virtues. The decision to buy food derived from genetically modified organisms or to purchase GMO-free products may be better left to individuals than decided by regulators.209 The extraordinary array of things that we would like to know in order to make good environmental decisions, the probability that choices will deviate from individual needs because of the reliance on over-generalized data or because of public choice failures, and, most importantly, the diversity of human tastes and preferences, all argue for much greater reliance on “information” regulation. There are, of course, limits to how much environmental information individuals can process. Some expert analysis will be required to frame choices that are intelligible at the individual scale. More significantly, there may be real limits to how much environmental choice individuals want. In a world with endless distractions, many people may choose not to spend time on environmental decisionmaking. Some default structure of regulation will therefore have to be in place. 4. Social Context Gains The deepening of support for environmental protection as a societal norm predates the emergence of today’s information technologies. A commitment to environmental stewardship has been 208 Esty & Geradin, Co-opetition, supra, note 223. 209 John Charles Kunich, Mother Frankenstein, Doctor Nature, and the Environmental Law of Genetic Engineering, 74 S. CAL. L. REV. 807 (2001) (explaining why GMO regulation should have an information focus). 74 growing steadily for more than three decades.210 But technological advances have reinforced the inculcation of environmental values and may have helped to speed up the norm development process.211 One of the most striking features of the environmental scene today is how many businesses are committed to “environmental stewardship.”212 Almost every company recognizes that it exists within a web of relationships and institutions that help to shape and define how it operates, including the incentives it faces for environmental care. As noted in Part II E, the “social context” of environmental pressures emerges from: (1) the marketplace; (2) communities; and (3) NGOs; and (4) a “reflexive” approach to environmental protection on the part of many companies. a. The Environmental Social Context of the Market Companies are often criticized for their narrow focus on profits and building shareholder value. The implied suggestion is that economic success comes at the expense of the environment. But recent studies suggest that profitability and competitiveness often coincide with good environmental performance.213 While the empirical evidence is strong the causal connection is not clear. It may be that environmental results are a proxy for good management generally. But it may also be true that clever companies are finding strategic advantage in how they position themselves environmentally.214 To the extent that a company’s customer base has a commitment to environmental protection, the “green” image of a company or its products may shape consumer attitudes. From Volvo’s pitching CFC-free cars to Melita’s highlighting of its brown (chlorine-free) coffee filters, companies increasingly seek to 210RICHARD N.L. ANDREWS, MANAGING THE ENVIRONMENT, MANAGING OURSELVES: A HISTORY OF AMERICAN ENVIRONMENTAL POLICY (1999); PHILIP SHABECOFF, EARTH RISING: AMERICAN ENVIRONMENTALISM IN THE 21ST CENTURY (2001); [need - polling or survey data on environmental interest and support.] 211 E. Donald Elliott, Law and Biology: The New Synthesis, 41 ST. LOUIS U. L. REV. 595, 602 (1997) (explaining how law provides a process of “copying and transmission” of cultural norms). 212ANDREW HOFFMAN, FROM HERESY TO DOGMA: AN INSTITUTIONAL HISTORY OF CORPORATE ENVIRONMENTALISM (1997). For an example of the reach of the business environmental commitment see the work of the World Business Council for Sustainable Development at www.wbcsd.ch. 213[Liz Prowse cites. Contact Dinah Koehler for cites.] 214 FOREST REINHARDT, DOWN TO EARTH: APPLYING BUSINESS PRINCIPLES TO ENVIRONMENTAL MANAGEMENT (2001) (spelling out how environmental management can lead to strategic advantage). 75 differentiate their products based on environmental qualities.215 The Information Age promises to greatly facilitate this process of differentiation. The modest degree of success that has been achieved by existing eco-claims and eco-labels provides an indication of the potential for green marketing.216 One could say that the modest degree of success through green marketing to date shows the limits of this dimension of social context.217 But it may also be the case that people would like to factor environmental variables into their purchasing decisions but currently find it too difficult and thus too expensive to do so. As individual consumers learn how to get environmental information off of the Internet or through other electronic media, this calculus may change. With cheap eco-data available, green marketing may well take off.218 Surveys suggest that many people care some (but not a lot) about the environmental attributes of their purchases.219 This means that they are willing to pay some (but not much) premium for and make some effort (but not much) to identify environmentally superior products. But the information age seems likely to close the gap, at least to some extent. As the cost — both in money and time — of factoring environmental characteristics into a purchasing decision falls, the number of buyers who will find it worthwhile to factor environmental criteria their decision process will grow.220 Within the last year, a number of websites have emerged 215 Forest Reinhardt, Environmental Product Differentiation, 40 CALIF. MANAGEMENT REV. (1998). 216 James Salzman, Informing the Green Consumer: The Debate Over the Use and Abuse of Environmental Labels, 1 J. INDUSTRIAL ECOLOGY 11(1997); Udo de Haes, Slow Progress in Ecolabling: Technical or Institutional Impediments? 1 J. INDUSTRIAL ECOLOGY 4 (1997). 217Lynn Scarlett [need cite] (arguing there is a gap between the public’s professed attitudes toward the environment and people’s actions as consumers). 218New technologies seem likely to increase dramatically consumer influence over corporate behavior. Hagel & Singer have noted that where a clear “‘collective will’ of the consumer” exists, an‘infomediary’ can make consumers preferences known in a way that enforces the desired outcomes. Hagel & Singer, supra, note 198, at 250-51. [check quotes]. 219Many consumers express support for environmental issues and some willingness to seek out green products. U.S. Environmental Protection Agency, Assessing the Environmental Consumer Market A-4 (1991) (citing a Gallup survey showing that 54% of consumers are interested in buying products in recycled packaging). But many consumers fail to purchase green products where costs, either monetary or informational, are high. Green Groceries: Consumers, Product Labels and the Environment, Reason Foundation Public Policy Institute, Policy Study No. 217 (March 1996) [need another]. 220See Ecos Technology at 76 with the express purpose of facilitating green consumer purchasing and of broadening the base of green buyers.221 The same process is emerging in the capital markets. Environmentally-conscious investment funds have been in existence for a number of years, providing investors with environmental preferences an opportunity to put their social values into action in the market.222 Of even greater significance, however, are a series of recent studies that suggest that companies with superior environmental records may also generate above-average economic returns.223 As a result, investor advisory services are increasingly looking for ways to factor a green “screen” into their stock picking models.224 In addition, there is growing pressure on the Securities and Exchange Commission (SEC), the Federal Accounting Standards Board (FASB), and others who set standards for financial reporting and accounting to take more seriously the need to highlight environmental risks and liabilities on balance sheets, proxy statements, and corporate annual reports.225 The labor market also creates pressures to take environmental stewardship very seriously. Highly skilled workers (a prized commodity in our “knowledge economy”) have many employment choices and much looser institutional allegiances than in the past.226 They want to feel good about the corporations for which they work, including the company’s environment record. The environmental reputation of a company can thus have a dramatic impact on recruitment. Companies are thus increasingly finding that information infrastructure for the networked economy.” 221See, e.g., Natural Logic at 222See, e.g., Storebrand Scudder Environmental Value Fund. For a description of the fund and contact information, see Janet Ranganathan, Sustainability Rulers: Measuring Corporate Environmental & Social Performance, SUSTAINABLE ENTERPRISE PERSPECTIVES, May 1998, at http://www.igc.apc.org/wri/wri/meb/pdf/janet.pdf (last visited April 5, 2001). 223Supra note __. 224See Innovest, supra, note __. 225Stephen L. Kass & Jean M. McCarroll, Environmental Disclosure in Securities & Exchange Commission Filings, 39 ENVIRONMENT, (April, 1997 at4) (Reviewing disclosure requirements and suggesting that environmental liability reporting needs to be more strongly enforced). 226[need cite on new, more fluid labor mkt] 77 they cannot attract or retain top-notch workers and executives without a strong environmental effort.227 b. Communities 227Author’s interview with Richard Aylard of Bursan Marsteller in London whose public relations practice focuses on corporate environmental reputation (16 November 2000). 78 Most companies and their executives recognize that corporations exist within and alongside various communities and that their success over the long term depends on having good relations with these communities. In the wake of disasters such as Union Carbide’s Bhopal chemical explosion228 and Freeport McMoran’s high visibility pollution problems at its Indonesian gold mines229, corporations understand at a very basic level that their “social license to operate” depends, in part, on being seen as good citizens of the geographic locales in which they have facilities and operations.230 Whether in the developed world or developing nations, business leaders understand that poor environmental performance will likely lead to a backlash that could well affect relations with regulators and thus profitability. The era in which people and their political leaders were so grateful for jobs that they willingly overlooked pollution problems has largely passed. Even the poor today complain about the environmental byproducts of industrial activity.231 In today’s information-rich era, citizens, community groups, environmental advocacy organizations, and the media have a much broader data set on which to make judgments about the performance of corporate entities within their communities. As a result of the EPA’s Toxic Release 228On December 3, 1989, a gas leak at a Union Carbide pesticide plant in Bhopal, India killed over 2,000 people. John Elliot, Industrial Safety Now a Major Issue, FINANCIAL TIMES (London), Dec. 18, 1989, at 3. 229Yerton, supra, note 120. 230BRAD GENTRY, PRIVATE CAPITAL FLOWS 279-80 (1998). 231Joshua Hammer, Nigeria Crude, HARPER’S MAGAZINE June 1996 at 58-66 (detailing the environmental conditions at Shell’s Niger River Delta operations in Nigeria and the complaints of the nearby Ogoni people). See the complaints of the poor communities living in the shadow of chemical plants in the Baton Rouge-New Orleans corridor. See Gregory Roberts, Environmental Justice and Community Empowerment: Learning from the Civil Rights Movement, 98 A. U.L. Rev. 229, 230-32 (1998) (recounting the battle against the siting of a polyvinyl-chloride plant in St. James parish, Louisiana and noting that, “Since 1982, communities like St. James have begun fighting back, giving rise to the environmental justice movement.”). 79 Inventory (TRI)232, the Environmental Defense Fund’s “Scorecard,”233 and a number of other information services that have emerged in recent years, companies face real pressure when their environmental performance, even if within regulatory bounds, appears to inflict harms on a community. As the number of people with access to these data sources increases and the user-friendliness of the websites improves, even more pressure is likely to be brought to bear on perceived environmental “bad actors.” Companies further recognize themselves to be part of the “business community.” In recent years, a number of industry associations have concluded that they need to establish industry-wide environmental standards and to police their membership to ensure that “bad apples” do not tarnish the image of the industry generally or otherwise drag down those who are taking environmental stewardship seriously.234 In other industries, more informal mechanisms are employed, such as the collection and release of environmental performance data, which allows companies to benchmark their own results and practices.235 Within the business community more generally, one finds a broad spectrum of environmental attitudes. At one end, a series of companies have decided that they can benefit by being seen as environmentally responsible. John Browne, CEO of BP, has declared, for instance, that his company will be “part of the solution, not the problem” when it comes to climate change — a striking position for 232EPA, Envirofacts, supra, note __. 233ENVIRONMENTAL DEFENSE, supra, note __. 234Daniel J. Fiorino, Rethinking Environmental Regulation: Perspectives on Law and Governance, 23 Harv. Envtl. L. Rev. 441, 454-455 (noting that programs like the Chemical Manufacturing Association Responsible Care “constitute efforts to improve the behavior of firms in different sector and commit associations and their members to a more public responsibility for the environment.”) For an overview of Responsible Care principles and requirements, visit the Responsible Care Practitioners Site at xchange.americanchemistry.com/rc.nsf10/a5df77344a25fa8c852567f900498915?opendocument (last visited Apr. 8, 2001) [need cleaner web address]. 235See, e.g., Water UK, Towards Environmental Sustainability: Indicators for the UK Water Industry (2000), available at http://www.water.org.uk/magazine/bulletins/waterinfo/22.html. 80 an energy company.236 To drive home this message about the repositioning of BP as an energy services provider rather than an “oil company,” the company has been running ads declaring that BP now stands for “beyond petroleum.” Acknowledging the seriousness of climate change as an issue (a posture that would have been unthinkable for an energy company just a few years ago), Browne has committed BP to meeting the Kyoto Protocol emissions reductions targets and has established an intra-company emissions trading regime to meet this goal.237 All of this is being done without any government mandate. Clearly, Browne sees profound effects on the long-term future of his company arising from environmental variables — and public attitudes toward corporate environmental performance. C. NGOs and Civil Society Perhaps no subset of society has taken more advantage of the opportunities presented by the Digital Era than NGOS. The story of a small band of environmental (and other) activists brought the 1999 World Trade Organization Ministerial meeting in Seattle to a crashing halt is now legend238. But the NGO community’s success in using “information arbitrage” to move information and ideas from one jurisdiction to another through sophisticated internet field networking has been growing for years. Progressively stronger links arising from advancing communications technologies (fax to email listservs to the internet) has enabled groups to spot a problem with one country, community, or company and quickly alert their compatriots in other places to look for similar problems. Shell’s attempt to dispose of its Brent Spar oil platform by sticking it in the North Sea drew environmentalist ire, leading to scrutiny of its operations more broadly and new criticisms about its performance in Nigeria and elsewhere. And the United States climate change policies face a drumbeat of criticism from NGOs around the world. 236Sir John Brown, Business and Government: Clashing Interests in a Precarious World?, Discussion at the Yale School of Management’s Annual Global Conference (Sept. 30, 1999) . . .[find where published or transcribed.] 237Efforts to End Global Warming: Hearing on Reduction in Greenhouse Gases Before the Senate Commerce, Science, and Transportation Committee, 106th Cong. (2000) (testimony of Jeff Morgheim, Climate Change Manager, BP). 238[cite needed on Seattle protests and use of internet] 81 And, as noted earlier, environmental groups are playing a growing role as information provides to communities and the broader public. Indeed, many environmental organizations focus at least part of their effort on public education,239 and some of the most successful groups operating today have built their reputations by building environmental awareness and strengthening environmental values.240 d. Reflexive Corporate Environmentalism Many companies have developed sophisticated environmental management systems that allow them to track their own environmental performance and to carry out programs of self-driven continuous improvement in pollution control and resource productivity.241 Fueled by the ongoing Information Revolution, a number of “green accounting” tools and environmental management structures, including ISO 14000242, the European Union’s Eco-Management and Auditing Scheme (EMAS)243, and the Global Reporting Initiative (GRI) developed by the Boston-based group, CERES244, provide analytic frameworks which permit environmental management to become ever more sophisticated and effective.245 These tools facilitate corporate environmental benchmarking and a more “reflexive” approach to environmental protection through which companies progressively tighten their own internal environmental standards.246 While companies vary significantly in the degree to which they take such 239[need cites] 240[cites needed] 241 MARC EPSTEIN, MEASURING CORPORATE ENVIRONMENTAL PERFORMANCE (1996); Leslie Carothers, Integrating EMS into Manufacturing, ENVIRONMENTAL FORUM (1999). 242C. Sheldon (ed.) ISO 14000 AND BEYOND (1998 ?). 243 A. Spencer-Cooke, From EMAS to SMAS: Charting the Course from Environmental Management to Sustainability, in C. Sheldan (ed.) ISO 14000 AND BEYOND, supra. 244See www.ceres.org and www.globalreporting.com. 245D. DITZ ET AL (eds.), GREEN LEDGERS: CASE STUDIES IN CORPORATE ENVIRONMENTAL ACCOUNTING (1995). 246Orts, Reflexive Environmental Law, supra, note 131 (spelling out the logic of “reflexive” environmental approach.) 82 environmental signals to heart, it is clear that a large number of companies now recognize environmental performance as one of the elements by which they will be judged in both public and political circles as well as the market place.247 As a result, they are investing in environmental accounting, management systems and other initiatives that go beyond what is required by law. Corporate reflexiveness derives in large part from the inculcation of environmental values into society generally. People care about the reputations of the places they work — and managers know this. Top executives themselves often have real environmental interests. Companies still face trade offs, where doing the right thing environmentally entails a cost and thus the decision to go forward may depend on regulatory dictates or the strength of other environmental pressures. But a good bit of corporate environmentalism today is internally driven, which means that it is undertaken on a decollectivized basis matching a company’s own circumstances, culture, and resources. The pressure may be intensified by performance comparisons across facilities or against peer companies or industry averages. As noted earlier, the focus on environmental stewardship tends to be powerfully self- reinforcing as companies, once paying attention to the environment, continue to ratchet up their own expectations and performance goals. 5. Waste Reduction Conceptually, a more information-rich society should be able to reduce waste and pollute less, as information can often be substituted for scarce resources or harmful materials. Thus, independently of improved pollution control strategies and regulatory models, significant environmental gains should be possible in the Digital Age. I have identified five core theoretical categories through which efficiencies might be obtained, resource productivity enhanced, and pollution-producing mistakes eliminated.248 247 Douglas J. Lober, Evaluating the Environmental Performance of Corporations, 8 J. OF MANAGERIAL ISSUES 184 (1996). Many corporations now issue environmental or sustainability reports. See, e.g., Total Fina ELF (??), “The Paths to Sustainable Development” (2001); Hitachi, “For Planet Earth” (2000); ABB Sustainability Report (2001). 248For a definition and discussion of resource productivity see Daniel C. Esty & Michael Porter, Industrial Ecology and Competitiveness, 2 J. OF IND. ECOL. 35, 36 (1998)[hereinafter Esty & Porter, Industrial Ecology]. 83 1. Substitution In many cases, pollution arises from the incomplete use of materials in manufacturing or the employment of suboptimal production processes or technologies. Additional waste occurs as a result of consumption or distribution practices with avoidable inefficiencies. By changing inputs of raw materials or developing more refined production processes, companies often can squeeze out inefficiencies, reducing pollution and improving profits at the same time. a. Production In many circumstances, information and knowledge can be substituted for scarce or polluting inputs in a production process. The potential gains from energy conservation have long been recognized.249 For example, fluorescent lights consume about 20 percent of the electricity of an equivalent incandescent bulb.250 Facilities that switch lighting modes therefore reduce their electricity consumption and the attendant pollution.251 Recent experiences with motors and machines suggest a similar broad potential for reduced fuel consumption and therefore lower emissions.252 Advances in biotechnology represent one of the areas of greatest potential with regard to “substitution” gains. While biotech companies are today under attack253, the potential for seeds that will 249[cites needed- Amory Lovins FOREIGN AFFAIRS SOFT ENERGY PATH] 250[cite needed]. 251EPA’s “Green Lights”Energy Star Program spurred such a lighting revolution by providing companies free technical information and support services. The EPA believes that U.S. companies can save $130 billion by 2010 by taking steps to improve energy efficiency. EPA, Energy Star Building and Green Lights Partnership 252INTERNATIONAL CHAMBER OF COMMERCE & WORLD BUSINESS COUNCIL FOR SUSTAINABLE DEVELOPMENT, BUSINESS AND CLIMATE CHANGE: CASE STUDIES IN GREENHOUSE GAS REDUCTION (1997) (presenting case studies showing progress toward energy efficiency, including the Tokyo Electric Power Company’s reuse of waste heat and Volkswagen’s development of a fuel efficient TD1 engine). 253Jean Marc Biais & Gilbert Charles, Fant-il avoir peur des OGM (“should we fear Genetically Modified Organisms”) L’EXPRESS (16 November 2000) at 109; Peter Huber, Ecological Eugenics, WALL ST. J. (21 Dec. 1999) at 12; Alex Lightman, Monsanto: Reversal of Fortune RED HERRING (1 84 not need fertilizer or pesticides and may be able to grow with dramatically less water offers real hope for improved environmental results from the agricultural sector,254 which remains a source of tremendous pollution and a realm in which there have been very limited advances made over recent decades.255 Similar gains undergird the new field of “industrial ecology” with its emphasis on “closing loops” and otherwise redesigning production processes to reduce environmental effects.256 Advanced chemical analysis and materials flow studies permitted Dow Chemical, for instance, to redesign the company’s process for scrubbing the hydrochloric acid used to make chlorinated organic compounds. The refined production technique allowed Dow to recapture part of the former waste stream for reuse as inputs in other production processes and to eliminate the need for certain wastewater evaporation ponds. Dow’s redesigned procedures reduced its caustic waste by six thousand tons per year, cut its acid waste by eighty tons, and generated savings of $2.4 million on an investment of $250,000.257 Dutch flower producers achieved similar results through a shift to a “closed loop” system for growing flowers in rock wool and water. “Design for the environment” inspired shifts in production practices reduced the need for pesticides and fertilizers (which could be recirculated in the water), eliminated significant chemical discharges, lowered the risk of disease, and narrowed the variations in Mar. 2000). Michael Specter, The Pharmageddon Riddle, NEW YORKER, Apr. 10, 2000. There may be risks associated with the use of genetically modified organisms, but they arise largely from ecological spillovers, not food safety issues. Gordon Conway, Biotechnology: Consequences for Agriculture, Commerce, the Environment, and Society, in The Convergence of U.S. National Security and the Global Environment, Fourth Conference (Feb. 18-22, 200), at 17 (describing risks of genetic engineering, including the escape of trangenses from controlled crops to the wild). 254 Hendrik A. Verfaillie, President and CEO, Monsanto Company, “ A New Pledge for a New Company” Farm Journal Conference 27 Nov. 2000 (available at www.monsanto.com) (documenting pesticide reductions from biotech seeds). 255Ford Runge, Environmental Protection From Farm to Market, in THINKING ECOLOGICALLY, supra, note 99. 256 THOMAS E. GRAEDEL & BRADEN R. ALLENBY, INDUSTRIAL ECOLOGY (1995). 257M.H. DORFMAN, ET AL, ENVIRONMENTAL DIVIDENDS: CUTTING MORE CHEMICAL WASTE (1992). 85 growing conditions. The new process translated not only into environmental gains, but also into better product consistency and quality, lower production costs, greater customer satisfaction, enhanced resource productivity, increased profitability, and improved competitiveness.258 Advanced systems modeling and production analysis creates significant new scope for expanded industrial ecology progress. The marriage of semiconductors to a wide range of production technologies promises further advances in efficiency. For example, high-efficiency computer-controlled engines can reduce fuel use in combination with other technological advances in construction’s engineering by 7-10 percent.259 Similarly, the installation of microprocessor-based controllers can cut energy use by boilers and hot water heaters by over 25 percent.260 b. Consumption Many household products seem likely to become more information-intensive in the next few years—and potentially less polluting. 261 Amory Lovins “hyper-cars,” described as more similar to a computer with wheels than to a car with chips, highlights the potential for combining advances in materials (new composites and polymers), design (ultra-low drag), and product reconceptualization (computer aided and digitally networked controls) into new, less-polluting goods.262 258 Michael E. Porter & Claas van der Linde, Green and Competitive: Ending the Stalemate, 73 HARV. BUS. REV. 120, 130 (1995). 259In its 1999 report Annual Energy Outlook 2000, the Energy Information Administration cited three advances in fuel-saving technologies that could produce a 7 to 10 percent higher fuel economy, including sophisticated variable valve timing in engines. Energy Information Administration, Annual Energy Outlook 2000 with projection to 2020, at 60 (Dec. 1999) at http:www.eia.doe.gov/oiaf/archive/aeo001/pdf/0383(2000).pdf (last visited April 8, 2001. 260Joseph Romm, The Internet Economy and Global Warming (Dec. 1999) at www.cool- compandes.org. 261For some examples see the website of Environment Support Solution at www.environ.com. See also MITCHELL, E-TOPIA, supra, note 5 at 55-56 (anticipating “programmable control systems in kitchen and laundry appliances.”). 262Hypercar, Inc., “Business Overview,” (available at www.hypercar.com). 86 Smart appliances, such as refrigerators, televisions, and washing machines with advanced computer controls, offer the promise of significantly reducing energy demands while maintaining their functionality.263 Energy Smart (a company devoted to “products for a greener earth”) has already introduced its “power planner,” a digital microprocessor that senses the electricity needs of a refrigerator, freezer, or other appliance and automatically increases or decreases the power as required.264 Similarly, computerized thermostats can be programmed to reduce heating or air conditioning when people are out of the house.265 In the not too distant future, further advances in thermostat technology promise additional energy conservation through the use of sensors to detect when people are present and in need of heating or air conditioning as well as “trainable” thermostats that through artificial intelligence will learn the patterns of a particular household and when heating and air conditioning are required.266 The Information Age advances may not only improve the products that we use but also transform what we want. Wealthier people may want (and have the capacity to buy) more of everything, which could have negative “scale effects” on the environment.267 In many cases, however, the effect may be 263Romm, supra note ___ (noting specifically energy efficiency gains for lighting and motors). See also WILLIAM J. MITCHELL, E-TOPIA 55-63 (1999) (creating (??) opportunities for advancing “appliance intelligence” and “buildings with nervous systems”). 264 BROOKSTONE, HARD TO FIND TOOLS CATALOG (Winter 2000) at 11. 265See, e.g., www.honeywell.com/yourhome. 266See, e.g., Honeywell Offers Consumers Tips on Managing Home Energy Use This Winter to Help Offset Rising Energy Costs, PR NEWSWIRE, Sep. 29, 2000 (“Honeywell innovations in thermostat technology make it easy for homeowners to realize significant cost savings. A programmable thermostat can automatically adjust to the recommended setting, depending on a homeowner’s routine and schedule.” See also, The Learning Home, THE ECONOMIST, May 22, 1999; MITCHELL, E-TOPIA, supra, note 5, at 61 (anticipating smart buildings that “will be programmed to adapt themselves not just to variations in internal demands and external climatic conditions, but also to ongoing changes in the prices of various utilities”). 267The question of the pollution intensity of consumption of the society-wide scale is taken up in Part V. As a theoretical matter, the issue can be seen as a question of whether rising demand fueled by wealth (“scale effects”) outstrips “composition effects” that involve a shift toward cleaner goods. See 87 one of dematerialization and reduced environmental impacts as consumption focuses on more knowledge-intensive products. Over the last several decades, cars have slimmed down by about 400 pounds as advances in polymers and materials engineering have produced a new generation of metals, plastics, and carbon fiber composites that are stronger, lighter, and more durable.268 Similarly, soft drink containers are today significantly lighter than in the past, reducing transportation-based pollution.269 More dramatically, the Digital Era permits the substitution of bytes for atoms in a number of applications.270 Although it faces intellectual property challenges, Napster should be given an environmental award for having convinced a generation of young people to stop buying CDs and to download their music in a non-physical form off the Internet. Every displaced trip to the music shop reduces air pollution and cuts down on greenhouse gas emissions. As chart A below indicates, Napster has reduced air pollution by hundreds of thousands of tons. Gene M. Grossman & Alan B. Krueger, Economic Growth and the Environment, Q. J. OF ECON. 353 (1995) [need volume and page]. From a social welfare perspective, the risk of scale effects dominating falls as environmental cost internalization become more strict—and cannot predominate if externalities are fully internalized. See also, ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT, SCOPING STUDY ON THE ENVIRONMENTAL IMPLICATIONS OF THE GROWTH OF THE INFORMATION AND COMMUNICATIONS TECHNOLOGY SECTOR (revising the concern that growth in information and communications technologies may increase the rate of economic activity and generate negative scale effects for the natural environment). 268The switch from the use primarily of steel to the use of plastic and other materials, such as aluminum, reduced car weight by an average 400 lbs. Tamera Fillinger, The Anatomy of Protectionism: The Voluntary Restraint Agreements on Steel Imports, 35 UCLA L. REV. 953, 961 (1988). Of course, the shift from cars to trucks and sport utility vehicles (SUVs) has driven pollution trends in the opposite direction: while in 1980 light trucks, including SUVs, composed 19.9% of the US automobile market, that figure increased to 47.5% by 1998. Brent D. Yacobucci, Sport Utility Vehicles, MiniVans and Light Trucks: An Overview of Fuel Economy and Emissions Standards, CONGRESSIONAL RESEARCH SERVICE ISSUE BRIEF RS20298 (2000). 269See Canadian Soft Drink Association, Reduce: Soft Drink Packaging Reduction Facts (2000) at http://www.softdrink.ca/psreduen.htm. 270MITCHELL, E-TOPIA, supra note 5, at 102, 148 (noting that the electronic transfer of information may be used to distribute journals, photographic libraries, audio recordings, videotapes, and software and remarking on the dematerialization effect of electronic home banking systems and the replacement of large products with “miniaturized equivalents.”). 88 Chart A: Quarterly Automobile Pollution Savings at Top 40 Wired Colleges due to Napster271 700,000 600,000 Estimated pollution 500,000 400,000 Actual pollution 300,000CD sales Pollution = 200,000 area of the circle expressed in lbs. Pollution savings due 100,000 to Napster 0 1996 1997 1998 1999 2000 2001 Year 271This example is illustrative—and builds on a rough-cut life cycle analysis. Actual SoundScan data for CD sales for Q1 1997 and Q1 2000 was available. To derive the estimated sales for Q1 2000, I assumed sales at the Top 40 Wired Colleges would increase at the same rate as national sales (18 percent). EPA data on average passenger car per-mile emissions of hydrocarbons, carbon monoxide, nitrogen oxides, and carbon dioxide were combined. For the purposes of this demonstration I estimated that on average people buy two CDs per trip to the record store and drive 4 miles roundtrip. 89 One can imagine that there will be a variety of other opportunities for consumption transformation and dematerialization over the coming years.272 Indeed, following Napster’s example, the displacement of the video tape by downloaded movies off the Internet for home viewing does not seem far behind.273 c. Distribution The potential impact of e-commerce on the environment is extremely hard to forecast.274 But real gains in supply-chain efficiency are emerging as companies shift to electronically monitored inventories and tighter customer- supplier relationships, enabled by digital technologies.275 These advances reduce warehousing (and the attendant energy costs), improve the efficiency of deliveries (cutting transportation-related pollution), and cut spoilage and waste (sparing land fills). The public’s buying habits may well change significantly over the coming years with important pollution consequences. Instead of going to the mall to shop, Americans are increasingly making purchases on line. Of course, online purchases still have to be delivered, resulting in a certain degree of emissions.276 The pollution results of e-commerce versus traditional buying habits depend heavily on the assumptions one makes about whether a purchase is an “add-on” to an existing shopping expedition or an independent vehicle trip. Nevertheless, the advanced logistics of companies like Federal Express, using sophisticated 272See, e.g., the website of Natural Logic at www.natlogic.com. for some examples. 273The Napster knock-offs are already emerging. See the activities of Scour, Freenet, and Gnutella among others. The extension of this model of distribution to other realms is rapidly emerging. DivX, for example, has begun to make movies available over the Internet. 274 Bruce Guile & Jared Cohon, Sorting Out a Service-Based Economy, in THINKING ECOLOGICALLY, supra, note __; see also H. Scott Matthews et. al., How Much Did Harry Potter Cost?, 224 OECD OBSERVER, January 2001, at 92, available at www.oecdobserver.org (suggesting that e-commerce may not reduce pollution). 275Seven-Eleven has been a leader in this regard. See Over the Counter e-commerce, THE ECONOMIST 26 May 2001 at 87-8. [need cite on GE’s internet purchases]. 276Scott Matthews, C. Hendrickson & Lester Lave, How much did Harry Potter Cost? 224 OECD OBSERVER (2000) [need full names and cite] (arguing e-commerce can result in higher distribution costs). 90 systems dynamics and modeling, offers a significant potential for a more efficient distribution system than can be achieved with individuals driving from store to store in a relatively unplanned fashion.277 Chart B below highlights the theoretical gains. Chart B: Potential Distribution Gains From E-Commerce The range of activities that may become digitized, moreover, resulting in reduced pollution effects is vast.278 A growing number of people for instance have adopted on-line banking and electronic bill paying,279 reducing vehicular travel.280 2. Diffusion Sone of the most profound impacts of the Information Age are the increased speed and lower Shopbcd178910 tobe likely S 277Indeed, digital technology has already increased the efficiency of the entire trucking and mass delivery system through “sophisticated digital routing, communication, tracking, and diagnostic functionality.” ALDRICH, supra, note 136, at 47. 278Nevin Cohen cites the potential for a wide range of eco-friendly advances, including mass customization, dematerialization, marketing through pixels as opposed to packages, de-malling [check], green consumerism, and materials reuse through on-line auctions. Nevin Cohen, Greening the Internet: Ten Ways E-Commerce Could Affect the Environment, ENVTL. QUALITY MGMT., Autumn, 1999, at 1-16. Joseph Romm, supra note ___, discusses the potential for business-to-business e-commerce and telecommuting to reduce energy consumption. William Mitchell, supra note __, presents digitization as a force that will radically change all parts of our daily lives – from where we live, to how we conceive of community. 279Need data and cites] 280Of course, the promise that the digital age would eliminate paper has not yet been realized. In fact, there seems to be a growth in the volume of paper being used to date. THE BOSTON CONSULTING GROUP, PAPER AND THE ELECTRONIC MEDIA: CREATING VALUE FROM UNCERTAINTY (2000). 91 costs of disseminating information. One dimension of this information flow centers on efficiency- enhancing “best practices” in resource management and pollution control. Within governments, communities, and companies advances in environmental management can bed shared quickly and easily. Additional dissemination occurs across companies through industry associations and professional networks. A growing emphasis on tracking of environmental performance and benchmarking against best practices has produced a further spur to environmental laggards to improve their performance.281 As discussed earlier, “information arbitrage” — the movement of ideas, data, best practices, and information from where they are to where they are needed and can be employed to advantage — means that efficiency gains can often be more rapidly adopted throughout a company, industry, community, country, and even worldwide.282 The innovation diffusion process is, moreover, self-accelerating. As best practices get implemented, a greater number of companies, groups, and individuals are positioned at the leading edge and are thus able to contribute to future gains. Specifically, to the extent that faster and cheaper information dissemination gives more people access to the frontier of knowledge, the field of potential innovators expands, increasing the pace of discovery and new technology development (which will have environmental benefits insofar as it advances efficiency.) 3. Interconnection Purchasers, be they individuals or companies, who wish to take environmental factors into account in their buying decisions will be much better positioned to do so in the Digital Future. Currently, the “search costs” for data on the environmental dimensions of most products are very high. So most purchasers ignore environmental factors and make their purchasing decisions based on other variables such as price, quality, and durability. But if relevant environmental information were readily 281 Paul Scott, The Rise of Reporting, ENVIRONMENTAL DISCLOSURE [copied excerpt pages from Professor Esty, can’t figure out original source] (documenting significant increases in environmental reporting by many industry sectors). New efforts are also being made to standardize reporting methods using standard guidelines. See, e.g., Global Reporting Initiative, www.globalreporting.org. 282 Daniel C. Esty, Toward Data Driven Environmentalism: The Environmental Sustainability Index, 31 ENVT’L. L. REP. 10603, 10610 (2001). 92 accessible and cheap (the hallmark of the Internet), many more buyers would factor environmental considerations into their choices. Already, a number of entities are on-line seeking to fill this environmental information market niche.283 Information technologies can contribute significantly to individuals and companies better understanding the “eco-systems” or, in business terminology, the “value chains” of which they are a part, creating a potential for greater efficiency and lower pollution impact.284 The identification of and capitalization on opportunities for systemic efficiency gains represents a central focus of the emerging field of industrial ecology. Corporations have begun to realize that in many cases they can work more closely with their suppliers and their customers to reduce “upstream” and “downstream” pollution.285 As the Internet and other information technologies reduce the cost of managing these relationships, improved efficiency and lower emissions become achievable.286 The tightening of the value chain from suppliers of raw materials through producers and on to customers provides a new avenue for shifting responsibilities for pollution control onto “least cost avoiders.”287 Supermarkets once disposed of 283The Pennsylvania Resources Council, for example, maintains an extensive “Buyer’s Guide to Recycled Products” site which lists products by brand name, company, recycled materials used, total percent of recycled content, and percent post consumer content, as well as providing information on where green consumers can buy the product. PENNSYLVANIA RESOURCES COUNCIL, 1998 BUYER’S GUIDE TO RECYCLED PRODUCTS (visited Nov. 5, 2000) 284 MITCHELL, E-TOPIA, supra, note 5, at 62 (“In general, smart devices and intelligent environments will be programmed to forage intelligently for the supplies and conditions they need to operate. This allows creation of more sophisticated markets, leading to more efficient use of scarce resources.”). 285 Esty & Porter, Industrial Ecology, supra, note __. 286Search and selection costs for a consumer to purchase a hard cover book, for example, have been projected to be lowered by 23 percent using a web enabled search and selection process. Bob Bechek & Chris Zook, The Jenga Phenomenon, produced for Bain & Company (on file with author), at 3. For historical literature on search costs see J. G. MARCH & H. SIMON, ORGANIZATIONS (1958); R. NELSON & S. WINTER, AN EVOLUTIONARY THEORY OF ECONOMIC CHANGE (1982). 287This tightening of the value chain has been referred to as a “digital value chain” representing “integration of individual companies, each with its own links to supplier’s customers and other value- 93 thousands of wooden pallets on which their products were delivered from wholesalers each week. But better communications between retailers and wholesalers have resulted in an increasing number of “take back” relationships through which the supermarket alerts its supplier that pallets have been unloaded and are ready for pickup and reuse.288 More dramatically, lower search costs creates the possibility of new systemic connections. Imagine Company Gamma that generates product X with a by-product or waste of Y. While Y might be of value to some other company Delta somewhere in the country, traditionally, the cost to Gamma of finding Delta with which it might establish a synergistic relationship with regard to Y has been extremely high. Over time, Gamma might accidentally find Delta and develop a partnership for the disposal of its Y. But more often these marginal commercial pathways do not emerge because of the high cost of making the match. With the Internet, however, matchmaking costs go down dramatically. In fact, Internet-driven reuse/recycling relationships are multiplying at a very rapid pace.289 The most dramatic potential for waste-reducing synergies arise not just within the value chain but where opportunities for “industrial symbiosis” with multiple relationships among unrelated companies have been identified. In the best documented case involving the eco-industrial park at Kalundborg, Denmark, a power plant, a pharmaceutical facility, a gypsum wallboard factory, and an oil refinery are exchanging inputs and outputs in a highly synergistic fashion, reducing waste and costs adding business partners.” Aldridge, supra, note __, at 82. 288D. Tweede, Less Waste on the Loading Dock: Competitive Strategy and the Reduction of Logistical Packaging Waste (1995) [need full cite from Reid Lifset]. 289See, e.g., 290 John Ehrenfield & N. Gertler, Industrial Ecology in Practice: The Evolution of Interdependence at Calenbourg, 1 J. IND. ECOL. 51-66 (1997). 291 MITCHELL, E-TOPIA, supra, note 5, at 71, 151 (noting that the “digital telecommunications infrastructure” will “facilitat[e] new, flexible, and efficient systems of production, storage, and distribution” and suggesting the possibility of mass personal customization in the form of products such as a personalized newspaper system.) 292 MITCHELL, E-TOPIA, supra, note 5, at 52 (“Thanks to the availability of inexpensive machine intelligence and ubiquitous telecommunications, we no longer have to choose continually between the unappealing alternatives of either standardizing and wasting resources or customizing and making production impossibly difficult.”) 293T.R. de Rocher et. al., ROTATION: A Computer Program for Calculating Stand Rotations based on Volume Yield and Economic Criteria, 1 J. SUSTAINABLE FORESTRY, 1994, at 65. 95 Moreover, advanced lumberyards, with computer-assisted saws can extract much more usable wood from a log than traditional lumber production practices of just a few years ago.294 The capacity to make more sophisticated sustainable yield calculations reflects a refined ability to understand short-term versus long-term resource use implications. The capacity to track the productivity of particular parcels of land and to understand the environmental implications of short term over-exploitation facilitates better management of a resource over time. With real-world, real-time data on the experience of others, farmers who might have overused their land may be convinced, for example, that productivity will fall in the out-years and that a degree of conservation is prudent. Similarly, individuals will increasingly be able to see and understand the short-term versus long-term tradeoffs that they make, for instance in the purchase of high-efficiency (but higher initial cost) appliances. 5. “Realization” Effects Some of the most important gaps between environmental potential and actual performance arise from the limits of the human mind to see and understand pollution problems and possible points of environmental progress. Such “everyday irrationality” is hard to overcome, but it can be mitigated with good data and sophisticated information displays.295 In fact, data has the capacity to unveil hidden problems and to make the invisible apparent.296 One of the reasons that companies have traditionally paid little attention to environmental concerns and have therefore wasted resources is that there was little effort put into tracking materials flows and pollution impacts. With the advent of advanced information 294George Hager, Sawmill illustrates the buzz about productivity, ‘old economy’ industries run with new efficiency USA TODAY, Mar. 21, 2000, at 1B (describing how “lasers scan incoming logs and feed their shapes into a computer that takes milliseconds to compute the most efficient way to cut the logs.”). 295 ROBYN DAWES, EVERYDAY IRRATIONALITY (2001) (providing numerous examples of how decisions are made on professional judgment rather than driven by data, which will systematically generate better results); EDWARD R. TUFTE, THE VISUAL DISPLAY OF QUANTITATIVE INFORMATION (1983). 296See Daniel C. Esty, Toward Data Driven Environmentalism: The Environmental Sustainability Index, 31 ELR 10605, 10609 (2001) (giving examples such “onmasking”). 96 systems and increasingly sophisticated environmental management protocols, companies are now able to see much more readily the environmental impacts of their production choices and to identify potential interventions to reduce harms and improve efficiency. EPA’s Toxic Release Inventory (TRI) offers a dramatic example of how information can motivate action. Adopted as something of an afterthought as part of the 1986 Superfund Amendments and Reauthorization Act, TRI requires companies to report on their releases to the air, water, and land of a list of set of several hundred chemicals. There is no requirement that these emissions be reduced; the law simply mandates that best estimates be made of how much pollution each facility is releasing. Nevertheless, in the wake of TRI filings, companies realized that vast quantities of relatively valuable chemicals were being lost through production practices that generated unnecessary waste.297 As the recent TRI data in recent years documents, such waste has been dramatically reduced.298 In our data-rich world, environment resources are increasingly quantifiable and quantified in ways that highlight their value. Simply put, the Information Age makes it possible to track at relatively low cost a great deal of information about the use of resources and pollution releases, creating the data foundations for much more finegrained environmental analysis and decisionmaking. It is a business maxim that what matters gets measured.299 The principle can now be applied broadly in the environmental realm with comparative data providing a basis for environmental opportunities to be discovered at the national, state, community, company, facility, household, and individual scales. Imagine, for example, the potential motivation for action if electric bills and usage records were to come with comparisons not just against last month’s or last year’s consumption but with data showing what 297Bradley C. Karkkainen, Information as Environmental Regulation: TRI and Performance Benchmarking, Precursor to a New Paradigm?, 89 GEO. L.J. 257, 297-305 (analyzing the success of TRI as an informational regulatory strategy and, specifically, how companies use TRI data as a benchmark and business variable. 298See EPA, Envirofacts Toxic Releases, at http://www.epa.gov/enviro/html/tris/tris_overview.html (last visited Nov. 5, 2000). 299 Esty & Porter, Measuring National Environmental Performance, supra, note 132. 97 others in comparable circumstances are using and what those who have adopted “best practices” are able to achieve. 6. Values Disputes Values disputes can seem intractable. If A wants a shopping center and B wants open space, both cannot win. But in some cases, their interdependence is more limited, and we need not be forced to a single answer to a hard environmental question. Historically, we have undertaken certain types of regulation because individuals were judged not to be capable of making an informed choice or because the complexity of multiple outcomes based on varying individual judgments seemed overwhelming. The Information Age raises our tolerance for complexity. And complexity is the handmaiden of diversity. An enhanced capacity to keep track of and to make sense of many variables simultaneously, which is the central feature of the computer, allows us to manage and even cherish divergent values and other differences rather than sweeping individuality under the carpet due to the administrative cost burdens of particularized outcomes. The hallmark of certain environmental problems is the fact that the values (and thus the underlying assumptions) on which a policy is based are not shared by some subset of the community involved. While stringent federal drinking water standards might be a noble aspiration, should we insist on a single answer across the diverse circumstances of a nation as big as the United States? Wouldn’t it be better to allow communities with inevitably limited resources to decide whether to pay for advanced filtration—or use the money for a public health clinic or better schools? Where an issue entails spillovers, collective judgments about the scope of the harm and what to do about it are inescapable. Upstream river polluters cannot be allowed to make judgments for downstream river users. And minority perspectives cannot always be accommodated. Thus, the small number of people who are still not convinced that CFCs cause harm to the ozone layer cannot be allowed to use these chemicals in violation of the general rule banning them. Where, however, a harm is not externalized beyond the decisionmaking entity or the consumer himself, there is much less of an excuse for a collectivized policy decision. So long as communities or individuals can make informed 98 judgments about how much risk they want to accept, why not let them make their own decisions? As I noted earlier, to the extent that the harm from genetically modified organisms (GMOs) in food is borne by those who choose to eat the food, there is not much reason to have a broad-scale ban on such products. Individuals are reasonably well positioned to make the risk-cost trade-off that is required.300 Some people will choose cheaper corn and will be willing to bear the “GMO risk” in return; others will want “unadulterated” corn and will pay for their risk aversion.301 In such cases, information disclosure makes sense as the core environmental regulatory strategy. The same logic applies more generally. States and communities have access to much more environmental analysis than a generation ago. Their capacity to make informed choices, even ones that disagree with “higher level” regulators, has thus advanced dramatically. Similarly, the Internet, bar code scanners, and other devices that can put critical environmental information at a consumer’s fingertips make individualized decisions viable today in a way that they might not have been even a few years ago. V. Driving Environmental Information into the Decisionmaking Realm Given the centrality of information to good environmental problem solving, more attention needs to be paid to strategies for luring or driving data and accompanying analysis into the environmental rights marketplace, the regulatory process and the hands of consumers.302 300GMOs may also entail ecological questions about cross-species fertilization (i.e., creation of “super” weeds), which would be a spillover issue that must be handled on a collective basis. For more on the GMO issue, see, generally Conway, supra note __, at 17-19; see also ALAN MCHUGHEN, PANDORA’S PICNIC BASKET 161-169 (2000). 301Economic circumstances, make the choices of some people not fully free . Thus governments should continue to establish baseline levels of safety. 302 Ironically, the recent trend has been to disinvest in data production. The Congress abolished its own Office of Technology Assessment in 1995. Legislative Branch Appropriations Act 1996, Pub. L. No. 104-53 §112, 109 Stat. 468, 526 (1995). The Congress has also refused to fully fund the National Biological Survey. Charles Oliver, A New Push on the Environment?, INVESTOR’S BUSINESS DAILY, Dec. 5, 1996, at A1 (noting the Clinton Administration’s efforts to use administrative regulations to continue attempts to catalogue plant and animal species in the U.S. in light of Congress’ refusal to fund the National Biological Survey). The National 99 In developing incentives for information production, it is useful to understand why the requisite information is not now available. In this regard, the thinking to date has been dominated by an economics perspective that sees such information in terms of whether it is a public good or a private one and whether it is rival in consumption or not.303 But these dichotomies are of limited analytic value in the environmental domain. Chichilnisky’s assertion, for instance, that knowledge is a privately produced public good that is “non-rival” in consumption304overlooks the fact that significant amounts of environmental data and information are publicly generated. The dozens of reports put out each year by the U.S. Environmental Protection Agency and other government agencies attest to this fact. A great deal of generic knowledge is also produced in public research centers (think of the National Institutes of Health) or publicly funded academic institutions. In addition, non-commercial private research centers and universities generate significant data, information, and learning (often with a degree of public funding). It is therefore a significant over-simplification to see knowledge as privately produced. A good bit of privately generated knowledge is, furthermore, not shared publicly but rather guarded for commercial advantage. Consider, in this regard, the software developed by Microsoft and other computer companies, the drugs developed by pharmaceutical firms, or the cutting-edge products developed by biotechnology companies. These “knowledge” products are not “rival” in consumption the same way that an apple can only be eaten by one person. But neither are they non-rivalrous in the strong sense of traditional public goods like national defense, which is not only non-rival but also “non- excludable.” Access to knowledge is often limited and controlled by those who hold it for economic Biological Survey (later renamed the National Biological Service) was terminated in a 1996 spending bill and transferred in part to the Geological Survey. Balanced Budget Downpayment Act I, Pub. L. No. 104-99, §123, 110 Stat. 26, 33 (1996). 303Graciela Chichilnisky, The Knowledge Revolution, 7 J. OF INT’L TRADE & DEV. 39, 41 (1998); ADAM BRANDENBURGER & BARRY NALEBUFF, COOPETITION (1996)(explaining the dynamics of information generation and use). 304 Chichilnisky, supra, at 42 (suggesting that knowledge is a privately produced public good). 100 advantage. Thus, environmental data, information, and knowledge need to be understood in a more rounded form and not as pure public goods that are available for consumption by all. In trying to understand how to optimize knowledge generation, especially in the context of environmental protection, it makes sense to move beyond its attributes as a public good. A more useful analytic taxonomy focuses on: (1) whether the data, information, and analysis needed for a functioning market or sound policymaking exist and (2) whether this knowledge is viewed as a strategic asset. A further distinction can be drawn between information that is held close to keep in out of the hands of the government versus that which is not shared because of its value to competitors. 1. Critical Environmental Information Does Not Exist In some cases, data and information that would improve environmental decisionmaking exist but are not accessible to decisionmakers. But in many other cases, critical knowledge is simply not available. These gaps can be traced to (a) technical and analytic limitations, which translate into cost barriers; (b) market failures; and (c) institutional shortcomings. a. Technical and Cost Barriers As discussed earlier, the optimal specificity of regulation is a fundamental issue in the environmental realm. Sometimes we know what data we would like to have to make a policy decision, but we choose not to obtain the information because the acquisition process would be too expensive. Simply put, the cost of getting the information exceeds the anticipated benefits. It would be technologically feasible, for example, to stop each car on the road and measure its particulate emissions. But the cost of undertaking such a detailed monitoring program (in both money and time) has been seen as prohibitively expensive, at least in comparison to the policy advantages that would flow from having this information. Likewise, there are cases where we can specify the information needed for an optimal environmental policy process. Yet we do not have it because there exists an analytic backlog. For example, we know that to set appropriate food safety standards requires data and analysis on a cumulative basis of pesticide residues across the spectrum of fruits, vegetables, and other products 101 consumed. We also know, within a reasonable degree of scientific certainty, how to test for chemical exposure risks. But the precise level of food safety has not yet been established because generating the requisite data takes time and money, and the analysis to date has largely centered on single active ingredients on single crops rather than on a more cumulative basis across a person’s total dietary exposure. The critical issue becomes one of the speed at which the knowledge required is accumulated, which is, in turn, a function of the incentives in place for data generation.305 Other environmental issues present a degree of technical complexity that we do not yet know how to overcome. For example, we really do not know how to pin down the risks from a build-up of greenhouse gases in the atmosphere. In this case, we are not even sure that the models we have to make forecasts are adequately (never mind fully) specified. A great deal more money and effort would likely reduce the zone of uncertainty, but will probably not reduce it to anything like a de minimus level for decades to come.306 To some extent the environmental knowledge gap will be self correcting. Although the world is dynamic and new challenges are constantly emerging, knowledge is cumulative.307 Thus, ongoing investments in environmental data and analysis constantly broaden the information base for future decisionmaking. Moreover, advances in allied fields (statistics, biology, chemistry, epidemiology, meteorology, etc.) constantly strengthen the decisionmaking foundation available to environmental regulators. As the world community’s knowledge pool expands generally, the potential for and cost of advanced analysis in the environmental domain falls. The infusion of new information makes 305[need cites on pesticide regulation] 306[need cites on complexity of climate change science] 307 Of course, in some cases, theories unravel over time as we determine that they were based on faulty analysis. But more often, knowledge is refined as more precise data and thinking becomes available. Thus, the technical gap trends downward over time. See, e.g., Robert Wright, Mr. Order Meets Mr. Chaos, FOREIGN POLICY 50 May-June 2001 at [page#] (history has a “direction”). But see THOMAS HOMER-DIXON, THE INGENUITY GAP (2000) (arguing that the world is getting more complex and thus that the difficulty of having a sufficient information foundation for decisionmaking is worsening rather than improving). 102 previously untenable approaches to environmental protection feasible. Thus, technical, scientific, and analytic constraints naturally tend to soften over time. But where the costs of obtaining information currently exceed the benefits, the pace at which new data and relevant knowledge is generated can be affected by the choice of regulatory strategies. Specifically, incentives can be developed to lower the costs of information gathering and analysis or to increase the benefits that can be obtained from the data and knowledge to be generated. In some instances, scale economies can be achieved by centralizing the analytic process. In this regard, some observers have called for an environmental “super study” to fill critical data gaps.308 Sometimes, however, more knowledge generation (and thus better underpinnings for the environmental rights market or regulatory decisionmaking) will be produced by competition and decentralization of the data gathering, information generation, and analytic processes.309 The government-versus-private-sector battle to map the human genome demonstrates this potential.310 To ensure that the opportunities for improved information generation are systematically explored in the regulatory context, some effort must be devoted to identifying the “least cost” generator of data and analysis and to structuring the rules to deliver an optimal degree of relevant information to decisionmakers at the lowest possible cost. A number of proposals might be considered in this regard. One idea would be to fold a required “information gap analysis” into the existing regulatory process. This could be done by Executive Order, as a supplement to the existing requirements for regulatory impact and cost-benefit analyses.311 Thus, for example, in promulgating new regulations under the Clean Air Act, EPA would be required to factor into its rulemaking process some overt consideration of (1) what information is needed to make sound 308Linden, supra note ___ at 1839-42. 309Daniel C. Esty, Revitalizing supra note ___at 605-45 (assessing the benefits of regulatory centralization versus decentralization more generally) 310 Frederic Golden et. Al., The Race is Over, TIME, July 3, 2000, at 18. 311See draft reference to Executive Order 12291. 103 air pollution policy decisions going forward, (2) what data and analysis is missing or incomplete, (3) who is best positioned to generate this information, and (4) what incentives could be adopted to ensure that the requisite data and information gets collected and analyzed. The Office of Information and Regulatory Affairs (OIRA) in the White House Office of Management and Budget (OMB) might be asked to take the lead in reviewing the information analyses produced by the regulatory agencies and in identifying opportunities to drive or lure data and information into the decisionmaking process. OIRA might also be charged with developing a broad- gauge study of persistent information gaps and strategies for filling them. A further refinement might entail amendment of the Administrative Procedure Act so that consideration is explicitly given to information gaps and how to fill them. Making the analytic foundation for decisionmaking part of the Notice and Comment process, for example, would engage a broader set of actors in thinking through the knowledge generation questions that are part of any regulatory action. b. Market Failures In other cases, the benefits of creating environmental information exceed the costs, but the distribution of these benefits and costs means that the data and analysis that would be useful does not get generated. For instance, while society would benefit from a better understanding of the range of endangered species, the landowners on whose property these species reside might well bear costs that exceed any benefits that they could anticipate from this knowledge. Specifically, to the extent that the presence of endangered species may translate into land use restrictions, property holders have little incentive to survey the species present on their land or even to cooperate with a governmental mapping exercise. Such asymmetries between who bears the costs and who obtains the benefits of environmental information generation lead to chronic under-investment in relevant data and analysis.312 The risk of such market failures emerge especially sharply when the harms from inaction are 312 [need cites on limited environmental data budgets] 104 spatially or temporally diffuse (making problems hard to spot), whereas the costs of action are concentrated. The solution may again be to systematize the information gathering dimension of the regulatory process. In this vein, Graham and Wiener have called for a more holistic public health and environmental regulatory process based on better data and analysis and centered on a structured evaluation of risk tradeoffs.313 Quite clearly, if regulators were required to spell out the full spectrum of cost-bearers and beneficiaries of their rulemaking, at least some of the asymmetries that now lead to “information failures” might be identified and addressed. The underlying market failure could also be corrected by subsidizing information generation. As with any public good, investment in environmental information will be sub-optimal absent intervention from an overarching perspective. An express budget commitment to data generation and analysis should therefore be seen as a priority for the Environmental Protection Agency, Fish and Wildlife Service, and other pollution control and resource management agencies. To optimize results, similar investments in environmental information should be made at the local, state, regional, and global scale. It might also be useful to restructure the incentives faced by private landowners with regard to environmental information initiatives. To gain support for wetlands mapping or endangered species tracking, it makes sense to consider a commitment to subsidizing property owners whose land is identified as containing resources that generate community benefits.314 In brief, subsidizing positive externalities represents an important parallel to the principle that those who cause environmental harm to public resources should be taxed, regulated, or penalized. Carol 313 See WIENER & GRAHAM, RISK VS. RISK, supra note ___ (advocating “risk tradeoff analyses”). 314Andrew G. Frank, Note: Reforming the Endangered Species Act: Voluntary Conservation Agreements, Government Compensation and Incentives for Private Action, 22 COLUM. J. ENVTL. L. 137, 145-46 (1997) (noting that current ESA regulations give landowners an incentive to destroy or hide species on their land or develop land before ESA regulations are in place). 105 Rose has suggested a variety of incentives to induce environmental cooperation from private property owners.315 Many of these tools, such as tax breaks, would be available to facilitate environmental information generation. c. Institutional Failures Some laws actively reward ignorance. For instance, U.S. pesticide laws and regulations (notably, the Federal Fungicide, Insecticide, and Rodenticide Act or FIFRA316) allow companies to keep their products on the market until the government proves them to be harmful. Companies have no affirmative duty to demonstrate the safety of their products and thus little incentive to do detailed risk analyses until the government raises a question about a particular product.317 Beyond FIFRA, the Resource Conservation and Recovery Act (RCRA), the Comprehensive Environmental Response, Liability, and Cleanup Act (CERCLA) or “Superfund” and a number of other laws are structured so that, in some circumstances, potential harm causers find that it is in their own interest not to know about a problem or not to explore the full extent of a potential harm. Such disincentives for information generation represent a critical form of regulatory failure. Companies, moreover, have no incentive to look for harms where there are no regulations. Thus, many areas of potential risk, such as indoor air pollution, go largely unattended. The problem again can be traced to the structure of environmental laws – particularly the limited coverage of the current patchwork of statutes. Much more careful attention needs to be paid to the information dimensions of regulatory programs. A number of strategies exist for reversing the incentives for ignorance. First, a number of 315 Carol M. Rose, Property Rights and Responsibilities, in THINKING ECOLOGICALLY: THE NEXT GENERATION OF ENVIRONMENTAL POLICY (1997) at 56. 3167 U.S.C. §136a (2000) (requiring pesticide manufacturers to present “a full description of the tests made and the results thereof” to register a pesticide). 317[need cites on this process] 106 laws, such as FIFRA, would benefit from a “burden shifting” strategy. California’s “Proposition 65” shows the potential in this regard.318 Under the California toxics statute, the burden of proving safety shifts from the government to the producers of products that may be carcinogenic or expose the public to reproductive hazards. Rather than allowing manufacturers to sell their wares until the government proves they are unsafe, Proposition 65 puts the burden on the company to prove that their products are safe.319 This shift, backed by the threat of significant legal penalties for any product that goes into the market without warnings that later is found to create a greater than 10-6 additional risk of harm, transforms the incentives for data generation.320 By placing the burden on industry to prove the safety of its products, the California law has generated a vast quantity of information about chemical risks.321 From “White Out” correction fluid to the lead solder in tuna fish cans, dozens of products have been taken off the market or reformulated to reduce their public health risks.322 As Roe points out, because of the California statute, risk-based numerical standards for 282 chemicals were identified in five years; the federal regulatory regime lags considerable with only a few dozen chemicals analyzed over the same period.323 318The Safe Drinking Water and Toxic Enforcement Act of 1986, Cal. Health & Safety Code (CH & SC) ch. 6.6, Secs. 25249.5 et seq, (West 1986). 319 David Roe, An Incentive-Conscious Approach to Toxic Chemical Controls, 3 ECON. DEV. Q. 179, 179-182 (1989). 320The Safe Drinking Water and Toxic Enforcement Act of 1986, Cal. Health & Safety Code §§25249.6-25249.10 (Deering 2001). 321David Roe, Future Environmental Policy: Three Unsettling Facts 7-11 (unpublished paper prepared for EPA at 30: Evaluating the Environmental Protection Agency” conference at Duke Law School, Dec. 7-8, 2000) (on file with author). 322PERCIVAL ET AL., ENVIRONMENTAL REGULATION LAW, SCIENCE, AND POLICY 525 (3d. ed. 2000) (noting the removal of a carcinogenic chemical from kiwi water-proofing spray, and lead solder from cans containing food products). 323 David Roe, An Incentive-Conscious Approach to Toxic Chemical Controls, 3 ECONOMIC DEVELOPMENT QUARTERLY [pages?] (1989). 107 A related approach involves the careful structuring of “default rules” and legal presumptions. The theory is simple: uncertainties are dealt with by establishing a presumption against the party in the best position to produce relevant data that would resolve the uncertainty. While the current legal structure often rewards ignorance or doubt, an alternative set of default rules could change the incentives and lead to a great deal more information being brought forward. For example, the existing rules governing pesticides permit the marketing of new products unless the government is able to demonstrate a safety problem.324 Creating a “duty to test” or a presumption that any new product must have its safety demonstrated before being allowed into the marketplace would create incentives for producers to generate data and thereby reduce uncertainty. Applied more broadly, such presumption and default rules might generate significant new investments in environmental data development, as well as testing protocols and equipment. All of this information would permit a much more refined and careful process of environmental standard setting. Fundamentally, if uncertainty were to carry a clear price tag, data on environmental risks would be generated as companies seek to reduce their cost burdens. Accounting rules may also discourage information production. Under current FASB standards, for example, environmental liabilities, such as potential responsibility for Superfund cleanups, which are contingent and unquantified can be reported on in passing in audit statements.325 In contrast, more well-documented liabilities require fuller explanations and the setting aside of reserves. Similarly, SEC disclosure rules sometimes discourage companies from knowing the full extent of their environmental liabilities because more complete information triggers broader disclosure 3247 U.S.C. §136a (2000). 325Financial Accounting Standard No. 5 requires tabulation of a contingent liability if it is probably to occur and the amount of loss can be reasonably estimated. Although there have been recent efforts to clarify how this standard applies to environmental liabilities, (including specific guidance outlined in Staff Accounting Bulletin No. 92, companies are allowed to make their own determination of whether an environmental liability must be reported under this standard with very little oversight. Susan Millington Campbell & Carol E. Remy, Disclosure Requirements and Securities Laws, VOL. ? NEW YORK LAW JOURNAL 54, (1997). 108 requirements.326 In other cases, information on environmental harms and mitigation options is available in raw form but is not systematically collected, analyzed, or converted into a form that supports sound decisionmaking. Gaps of this sort often persist as a result of neglect more than intent. For example, a good bit of corporate information on environmental conditions, risks, control technologies, and other variables is not publicly available because companies do not see much reason to collate it or share it. Some companies, as part of their outreach to local communities and NGOs have begun to issue environmental or “sustainability” reports that present aggregate data on their pollution control and resource management performance. But much of the most useful information – especially on factory or facility level results -- is buried in such reports. In particular, data on performance at this level would help to identify “best practices” or technologies, which could be replicated at other facilities within the company or across the industry more generally. In addition, such data, if tracked more aggressively by regulators would help to highlight which policy approaches are succeeding and which are not. If companies had incentives for more data-driven environmental management, they might invest in processing the environmental information available to them. One approach that might restructure corporate incentives would be a shift from a command and control regulatory strategy to a “command and covenant” model, which puts the burden on corporations to measure and report on the public health or ecological harms they are causing and to then negotiate reduction targets.327 As Don Elliott suggests, this restructuring of incentives can be accomplished through “risk 326 [Need cite in SEC rules on disclosure of enviro liabilities – CHECK FACTS] 327E. Donald Elliott, Toward Ecological Law and Policy, in THINKING ECOLOGICALLY, supra, note ___. See also KURT DEKETELAERE & ERIC ORTS, ENVIRONMENTAL CONTRACTS: COMPARATIVE APPROACHES TO REGULATORY INNOVATION IN THE UNITED STATES AND EUROPE (2000) 109 bubbles” and other regulatory tools that take a broader look at environmental risks as a way to maximize company-scale flexibility and responsibility for pollution control.328 Those wishing to take advantage of the cost savings made possible by regulatory flexibility must commit to a comprehensive program of data production and disclosure.329 Additional administrative failures may arise because the entity best positioned to undertake environmental decisionmaking is not the same entity that is best positioned to do environmental data gathering or processing. As noted earlier, a number of environmental choices currently made by federal or state regulators might better be devolved to local communities or individual consumers. Where externalities do not extend beyond a relatively small jurisdiction, local or state decisionmakers may be better positioned than distant federal regulators to understand all of the relevant circumstances and make appropriate tradeoffs. But good decisionmaking at the community scale depends on local and state officials having sufficient “capacity” and access to the requisite data on risks and options to make sound choices.330 The Internet provides an efficient mechanism for delivering information to decentralized decisionmakers, but the generation of Internet “content” – in this case, the data and analysis necessary to undergird sound policymaking -- must still be undertaken by someone. Given the scale economies in some dimensions of environmental information generation, a prerequisite to successful devolution of environmental decisionmaking might well be the creation of a National Institute for the Environment which would do the requisite background data collection and analysis.331 328 E. Donald Elliott & Gail Charney, Toward Bigger Bubbles: Why Interpollutant and Interrisk Trading are Good Ideas and How We Get There from Here, F. APPLIED RES. & PUB. POL’Y. 48 (Winter 1998) (rejecting the criticism that it is impossible to measure and compare different environmental risk reductions where regulatory bubbles are employed). 329KURT DEKETELAERE & ERIC ORTS, ENVIRONMENTAL CONTRACTS, supra note __. 330 ENVIRONMENTAL PROTECTION AGENCY, REPORT OF THE TASK FORCE TO ENHANCE STATE CAPACITY (1993) (spelling out needs, including information needs, of state regulators). 331[need cite] 110 Similarly, where individuals rather than regulators are best positioned to make environmental choices (e.g., where impacts are fully internalized at the individual level), decisionmaking should be shifted away from collective processes altogether as discussed above. But for individual choice to be meaningful, the decisionmaker must have adequate environmental information foundation. Thus, the success of strategies to shift environmental decisionmaking toward individuals depend crucially on having a more complete set of environmental “facts” accessible. In this regard, expanded use of ecolabels would be helpful.332 Other environmental information dissemination initiatives that position such as eco-websites would also be useful. Perhaps the market will generate such information, enabling each consumer to make informed choices on the basis of a full set of environmental facts that can be analyzed alongside his or her own particularized risk, cost, and value preferences. But the private market will require, at the very least, an active Federal Trade Commission to police environmental claims. Broader support for environmental information dissemination may also be required given the public goods nature of environmental data and analysis. 2. Information Withheld In some cases, environmental information exists, but those who have it (often companies) choose not to share it. Companies may choose not to be forthcoming with environmental information if they see themselves in an adversarial relationship with regulators. And where businesses see economic opportunities in their superior environmental data, analysis, or technologies, this knowledge becomes a strategic asset and a potential source of competitive advantage. a. Antagonism toward Government As Ayres and Braithwaite have argued, if our regulatory approach were less contentious, companies would be much more likely to bring forward the information they have about their polluting activities and opportunities for the control of emissions. Elliott’s call for a shift in regulatory focus from 332James Salzman, Informing the Green Consumer: The Debate Over the Use and Abuse of Environmental Labels, 1 J. IND. ECOL. 11 (1997). 111 “command and control” to “command and covenant”333 emanates from the same spirit334. As noted above, one way around the strategic withholding of information is through environmental “contracting.”335 If entities within the regulated community are allowed to propose ways that they will reduce environmental risks, outside of what is required by law (so long as the overall outcome is superior to what would have occurred under the legal mandates), they have an incentive to generate and share data. The idea of environmental contracting as a way to generate greater protection at lower cost has been the centerpiece of the environmental protection program of the Netherlands.336 Similar approaches have been tried in the United States on a very modest scale. In particular, EPA’s XL initiative offered the promise of a degree of regulatory flexibility for companies that committed to “beyond compliance” performance.337 But the limited success of this effort highlights the need for careful program design and clear statutory authority. A number of other long-established policy practices exacerbate the tension between regulators and the regulated community leading to a stifling of information availability. Notably, the threat of prosecution for shortcomings identified in company environmental audits has chilled interest in many corporations in getting to the bottom of the environmental problems they face.338 A “safe harbor” needs 333E. Donald Elliott, Toward Ecological Law and Policy, supra, note __ 334AYRES & BRAITHWAITE, RESPONSIVE REGULATION, supra note __ at 45. 335KURT DEKETELAERE & ERIC ORTS, ENVIRONMENTAL CONTRACTS, supra note __. 336Richard B. Stewart, Environmental Regulation and International Competitiveness, 102 YALE L. J. 2039, 2090-91 (noting that in the Netherlands, “[e]ach industry is allocated a designated share of the required reductions and improvements. The responsible government authorities and a number of industry groups . . . have signed or are currently negotiating contracts in which the industry agrees to achieve the overall targets assigned to it. In return, the government agrees to substitute the contractual arrangements for the pollutant-by-pollutant regulations otherwise applicable”). 337Dennis Hirsch, Bill and Al’s XLent Adventure: An Analysis of EPA’s Legal Authority to Implement the Clinton Administration’s Project XL, U. ILL. L. REV. (1998) ; see also Jody Freeman, Collaborative Governance in the Administrative State, 45 UCLA L. REV. 1 (1997). 338Forest REINHARDT, DOWN TO EARTH (2000) (spelling out the risk that corporate environmental audits could aid prosecutors); Frank Friedman, Is This Job Worth It?, 8 ENVT’L. FORUM 23 (May-June 112 to be created so that companies have a clear incentive to undertake rigorous environmental self- evaluations.339 Perhaps a “no harm, no foul” rule on self-identified and reported environmental violations would promote more reflexive environmental management among corporations. Likewise, companies may also fear that sharing environmental data will cause them to run afoul of antitrust laws and other rules against collaboration among competitors. To the extent that this is a problem, specific antitrust exemptions for environmental data exchange might need to be adopted to ensure an optimal degree of inter-company cooperation in aggregating and comparing pollution control and natural resource management data. b. Competitive Positioning Where information is held back not because a business sees itself in an adversarial position vis-a- vis the government, but rather because it sees strategic advantage in withholding the information from competitors, a different tack must be taken. Properly harnessed, market forces can promote a degree of environmental information sharing, particularly by those with successful pollution control procedures or equipment. To the extent that environmental knowledge can be monetized, companies with superior emissions control strategies or technologies will have an incentive to sell their solutions to all parties in the marketplace. Likewise, where a company develops an environmentally superior product, it is likely to make that information known to its potential customers, even though competitors will hear about the 1991) (raising the spector that audits which identify problems that are not fixed could create legal exposure); Susan J. Spicer, Turning Environmental Litigation on its E.A.R.: The Effects of Recent State Initiatives Encouraging Environmental Audits, 8 VILL. ENVTL. L.J. 1, 4 (1997). 339 The EPA Final Policy explicitly prohibits its regulators from employing direct incentives, including reduced enforcement responses, to encourage companies to pursue internal environmental audits. See Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violation, 60 Fed. Reg. 66,706 (1995) at III B (1). However, many states have adopted laws or policies that encourage environmental audits by limiting penalties associated with infractions discovered during such audits or offering other forms of regulatory relief. For an overview of these EPA and state policies, see Paulette L. Stenzel, Can the ISO 14000 Series Environmental Management Standards Provide a Viable Alternative to Government Regulation?, 37 AM. BUS. L.J. 237, 267 (2000). 113 product and may try to copy it. More generally, “green” product attributes may contribute to growth in market share or greater profitability, especially among the environmentally-conscious segment of the buying public. There is growing evidence, moreover, that a small number of informed “comparison shoppers” can shape the product offerings, including the standard environmental qualities of goods in the marketplace.340 Thus, an environmental “blessing” (perhaps from environmental groups or others who take up the opportunity to act as “screeners”) or a strong score from environmental rating agencies may prove decisive in the market space of the e-commerce networked economy that lies ahead.341 At the same time, environmental disinformation needs to be disciplined. Governments need to be vigilant about policing environmental claims.342 If false promises of biodegradability, recycled content, recyclability, etc. are not prosecuted, consumer confidence in environmental claims will falter and ultimately interest in environmental qualities will wane.343 In the United States, for example, the Federal Trade Commission has mandate to police environmental claims. But the review process may need to be strengthened if a serious shift toward information regulation proceeds. More generally, procedures will need to be put in place to screen out information overloads or disinformation designed to confuse the policy process.344 Ultimately, the e-commerce marketplace may produce a set of companies 340See Lyndon at 1831-32. 341Historically, the Underwriters Laboratory stamp of approval or the Good Housekeeping Seal of Approval provided powerful market signals of quality. Similar product “screeners” are emerging in the e-commerce setting, some with environmental overtones. See, e.g., www.ecotech.com etc. 342Without government regulation, misleading or false claims of environmental product attributes are likely to proliferate, rendering environmental labeling meaningless. In 1991, for example, the State of Washington reached a settlement with Mobil Chemical Company regarding advertising claims made by Hefty Trash Bags. The Hefty Trash Bag packaging, which termed the bags “degradable” and featured a picture of a sun, seemed to improperly promote the product at environmentally-sensitive, and biodegradable although the bags were actually unlikely to decompose in land fills where there is no sun exposure. June Camille Bush Raines, The Green Giant: Environmental Marketing Claims, 45 OKLA . L. REV. 689, 699 (1992). 343See REINHARDT, DOWN TO EARTH, supra, note ___ at 39-43 (2000). 344Over time, those who say inaccurate or foolish things tend to lose their audience. But it may be useful to improve the workings of the intellectual marketplace by facilitating efforts to squeeze out 114 whose role it is to act as information filters and content evaluators. But as this new domain of electronic commerce is still in its infancy, some interim support for the integrity of this emerging market may be needed. VI. Limitations and Obstacles to a Full Information World Some environmental problems cannot be resolved by the generation of more and better information. And additional information and the technologies of the Digital Age may aggravate some of the existing difficulties in environmental decisionmaking. A. Values Some gaps in our environmental knowledge base derive from differences in values — and thus in the assumptions that get built into policy analyses. Divergent views over how much money to spend to protect a beautiful vista or a human life will persist. There are, nevertheless, ways to limit the scope of the inescapable political questions that must be addressed in a process of setting environmental policies.345 Efforts to be explicit about what part of a problem is amenable to “scientific” analysis and what part is “political” is an important starting point.346 Detailing assumptions, and then using “sensitivity analysis” to determine the extent to which particular value judgments drive the outcome represents a way to make policymaking more systematic. This methodology increases the complexity of the decision process, but it is in this domain of more complicated calculations that computers are extraordinarily helpful. B. Transparency purveyors of environmental misinformation. 345For a discussion of the “political core” of environmental policymaking, see Mark Sagoff, We Have Met the Enemy and He is Us or Conflict and Contradiction in Environmental Law, 12 ENV’L. L. 283, 286-97 (1982); SHEILA JASAROFF, THE FIFTH BRANCH: SCIENCE ADVISORS AS POLICYMAKERS (1990); but see PETER HUBER, GELILEO’S REVENGE: JUNK SCIENCE IN THE COURT ROOM 221 (1991). 346Howard Latin, Good Science, Bad Regulation and Toxic Risk Assessment, 6 YALE J. ON REG. 89, 90 (1988). 115 As decisions are made, options should be fully explored and openly debated. An open regulatory process that encourages a range of viewpoints and a careful sifting of facts and arguments will move over time toward better answers. In this regard, the existing structure of less-than-fully transparent policymaking processes represents a serious obstacle to better results and to optimal use of the opportunities made available by an information-rich world. Stronger disclosure requirements about who is participating in the regulatory process and the backing (financial and otherwise) that various interest groups receive would allow for better judgments about how much weight to give particular viewpoints.347 C. Cyberdemocracy More debate does not guarantee better policymaking. In fact, cyberdemocracy with its exposure to misinformation and dialogue among the uninformed could translate into a loss of deliberation and a step back for environmental decisionmaking.348 More opinions being heard may lead to chaos and breakdown rather than higher quality decisions.349 Hyper-connectivity— with a multitude of options for how to spend time only a click away—much less interest in policymaking. Even if some participants in the policy process stay focused, the flood of information they have available could lead to a focus on narrower (albeit deeper) information with less of a focus on the broader context of a policy choice.350 D. Does Information Become Knowledge? 347The disclosure obligations—particularly on financial backing—should apply to all lobbyists, including NGOs as well as business entities. 348Dennis Thompson, James Madison on Cyberdemocracy, in DEMOCRACY.COM: GOVERNANCE IN A NETWORKED WORLD (Elaine C. Kamarck & Joseph S. Nye, Jr., eds.) (1999) at 36-40 (noting that “directness” may be advised at the expense of deliberation). 349Joseph S. Nye, Jr. Technology.gov: Information technology and Democratic Governance, in DEMOCRACY.COM supra at 10-14 (reviewing opportunities and challenges of information Age democracy). 350This crisis of civic republicanism, which depends on deliberative decisionmaking by an engaged and well-informed citizenry, goes well beyond the environmental realm. 116 While the Information Age promises to make data more plentiful and less expensive, it does not guarantee that raw information will be translated into usable knowledge. Simply put, data and information represent raw materials. Knowledge is the final product. To move from the medium of data to real content requires additional effort. Success in this regard demands a rigorous scientific process of developing and testing hypotheses with careful quality controls. To ensure the technical information that is developed is applied appropriately, investments must be made in improving the capacity of environmental decisionmakers to use data and the policymaking tools it supports. A commitment to systematizing the process of information and technology transfer from those who develop environmental knowledge to those who need to employ it, often at a decentralized state or local level is needed. Information could flood and overwhelm environmental decisionmaking processes.351 Likewise, information-dependent systems are vulnerable to concerted disinformation campaigns.352 One of the most critical challenges that lies ahead as computers and other new technologies are deployed in a wider range of arenas is to ensure that the information that emerges is meaningful. The Internet, in particular, provides a tool for accessing a vast array of information at very low cost. But it also creates a risk of information overload, spamming, and the dissemination of misinformation. Mechanisms to ensure accountability in cyberspace have not yet been fully developed.353 As the flow of environmental data on the Internet increases, judgment will be required to 351Douglas Aldrich has three requirements for the effective use of information: “the ability to access it, the ability to assimilate and analyze it, and the ability to act on it.” Aldrich, supra, note 136, at 224. Thus, digital literacy must accompany information availability for real benefits to accrue. 352David Roe, Starting Blocks (unpublished Environmental Defense Strategy Paper, 2000), at notes 21, 24 (available at www.edf.org/wip/startingblocks) (highlighting disinformation effects). 353Efforts to regulate internet user anonymity and information content have run afoul of first amendment protections. Reno v. ACLU, 521 U.S. 844 (1997) (finding provisions of the Communications Decency Act of 1996 regulating indecent material on the Internet unconstitutional). See also ACLU v. Miller No. 1:96-CV-2475-MHS, 1997 U.S. dist. LEXIS 14972 (N.O. GA Aug. 7, 1997) (granting a permanent injunction barring enforcement of a Georgia law regulating anonymity on the Internet). 117 separate the wheat from the chaff.354 To some extent the Internet represents an intellectual marketplace and will generate its own disciplines on those who advance information that is wrong or misleading. Services may emerge that “rate” information sources or provide some degree of quality assurance. But it may well be that protocols will need to be developed to regulate and discipline the flow of information into the decisionmaking realm. E. Intellectual Property Rights and Strategic Positioning Disrespect for intellectual property rights seems to be a hallmark of the Internet.355 This tendency has both positive and negative aspects. To the extent that environmental knowledge has characteristics of a public good, rapid information dissemination across the Worldwide Web can be seen as a good thing. Best practices and technologies will be able to move more quickly to the full range of places that they can be productively employed. To the extent, however, that there will be less of an incentive to generate environmental technologies and information if the intellectual property contained in them cannot be protected and charged for, there is a risk that the increased connectivity made possible by the Internet and other Information Age technologies could result in a disincentive for knowledge generation. As noted above, to the extent that information about environmental circumstances is viewed as strategic, there will remain incentives for those who hold it not to share their data or knowledge. Perhaps, in some industries, a judgment will be made that environmental variables should not be treated as a point of competition.356 In this spirit, companies might share their best practices in response to 354Significant efforts are being made by Microsoft and others to facilitate such sifting and sorting. See Microsoft’s new “Hailstorm” product. 355MITCHELL, E-TOPIA, supra note __, at 63 (noting that digital information has created a “collapse of the ‘intellectual property’ approach” and suggesting as an alternative a dynamic pricing approach). 356Nial FitzGerald, Tomorrow’s Wash: Challenges and Opportunities for the Detergents Industry in the 21st Century (speech delivered on 5 October 1998 by the Chairman of Unilever PLC and available on the Unilever website at www.unilever.com (casting doubt on whether environmental advances should “remain proprietary, thus limiting the potential benefits to society”). 118 environmental challenges and agree to compete on other product dimensions.357 In other cases, environmental factors may be so central to a product’s attractiveness that there will be ongoing competition, which should induce innovation. F. Network Effects and Chilled Innovation As with any system, there exists a risk that “network effects” will lock in sub-optimal standards and approaches. In the environmental area, the problem of existing technologies becoming de facto standards that deter innovation has long been understood. Governments can combat this tendency by ensuring that all environmental regulations take the form of performance standards (not technology mandates) and by quickly testing and certifying new methods of meeting requirements. It appears, moreover, that the speed of change brought about by the Information Age may reduce the risk of network effects and encourage people to move in new directions whenever and wherever there are opportunities for advancement. G. Equity Issues of fairness will also persist and may grow more intense. If greater emphasis is placed on market exchanges of environmental property rights, the question of whether the initial allocation of rights is equitable comes into sharp relief. How one addresses important issues of environmental equity also remains a critical question, albeit one that goes beyond the scope of this Article and even the domain of environmental policymaking. Finding ways to mitigate the unfairness that might otherwise be perceived from environmental advancement, requires a significant policy focus. H. Advantages of Ignorance While, in general, there are real benefits to having a more full information set as a way of 357The Federal Trade Commission (FTC) recently closed an investigation into whether COVISINT, a business-to-business information network being developed to connect automakers, violated antitrust laws. The FTC described COVISINT as “a proposed joint venture that plans to operate an internet- based business-to-business exchange providing services for firms in the automotive supply chain” including “services to assist in product design, supply chain management and procurement functions”). Federal Trade Commission, FTC Terminates HSR Waiting Period for COVISINT B2B Venture (Press Release) (Sep. 11, 2000) available at 119 improving decisionmaking, the presumption that more complete information yields better results will not always hold true. In some circumstances, a “Rawlsian veil of ignorance” may actually facilitate agreement on an appropriate policy. For example, climate change negotiators might well find it easier to agree on a strategy for reducing greenhouse gas emissions if they do so in general terms before knowing the precise costs and benefits of emissions reductions on their own countries. 358 VI. Conclusion Pollution control and natural resource policymaking demand a great deal of information. To the extent that baseline data on harms, effects, and property rights are available, environmental rights can be exchanged in the marketplace, yielding results that are generally efficient and just under some conditions. To the extent that critical information is missing or transaction costs are otherwise too high, a range of other strategies for internalizing externalities and preventing market failures must be pursued. Collective decisionmaking through regulation has served as the central information gap-filling strategy and as a core approach to information “triage” in the environmental context. But this collectivization of environmental decisionmaking entails real costs, especially in terms of getting policies to fit individual circumstances and needs. The advances of the Information Age offer significant promise in moving us toward a world of more full information. Better environmental data and analysis is likely to transform the optimal specificity of regulation and mix of approaches to environmental problems, giving us more space to harness the market and to use economic-incentive based regulation, both of which permit more tailored (thus more effective and efficient) outcomes. The Information Age seems likely to deliver real gains in the reduction of waste as enterprises and individuals find a multitude of ways to ground environmental choices on firmer data foundations and thus to improve resource productivity and to identify and adopt “best practices” in both production and consumption. Information technologies also promise to facilitate cost internalization as modern 358See Roger Fisher & William Ury, GETTING TO YES: NEGOTIATING AGREEMENT WITHOUT GIVING IN (1981) (describing advantages of negotiating about principles instead of positions). [check] 120 information technologies — computers, the Internet, advanced communications devices, sensors, and other innovations — move us toward a world where the Polluter Pays Principle can be implemented more easily and cheaply. Over time, as our data sets broaden and become more refined and our capacity to bring knowledge to bear on environmental challenges grows, the zone of “values disputes” may also shrink. More significantly, information strategies such as eco-labels will permit a shift in regulatory focus toward individual choice on issues where externalities are not an issue. Fundamentally, the Information Age promises to create a world of greater allocative and administrative efficiency, less waste and more justice—where market approaches work more of the time. While we can never expect to return to the simple world of Aldred and Benton, we can anticipate an approach to environmental protection that is more refined, granular, individualized, and better able to cope with the complex reality of pollution control and natural resource management challenges..