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Revitalizing Environmental Federalism REVITALIZING ENVIRONMENTAL FEDERALISM Daniel C. Esty* INTRODUCTION Politicians from Speaker Newt Gingrich to President Bill Clinton, cheered on by academics such as Richard Revesz, are eagerly seeking to return authorityover environmentalregulation to the states.' In the EuropeanUnion, localist opponents of environmentaldecisionmaking in Brussels rally under the banner of "subsidiarity."2And in debates over internationaltrade liberalization,demands abound for the protection of "nationalsovereignty"3 in environmentalregulation. All of these efforts presume that a decentralized approach to environmental policy will yield better results than more centralizedprograms. This presumptionis misguided. While the character of some environmentalconcerns warrants a preference for local control, a sweeping push for decentralizedregula- * Yale Law School and Yale School of Forestry and EnvironmentalStudies; for- merly Deputy Chief of Staff and Deputy Assistant Administratorfor Policy, Planning and Evaluationat the U.S. EnvironmentalProtection Agency. A.B. 1981, Harvard;M.A. 1983, Oxford; J.D. 1986, Yale. - Ed. Thanks to Bruce Ackerman, Akhil Amar, Rich- ard Andrews, Steve Chamovitz, Andrd Dua, Robert Ellickson, William Eskridge, Wil- liam Fischel, Damien Geradin, Michael Gerrard,Michael Graetz, Howard Kunreuther, Reid Lifset, RobertaRomano, Carol Rose, James Salzman, Josh Samoff, Peter Schuck, Peter Swire, and JonathanWiener for comments on earlier drafts. Thanks to Jamie Art, Georgie Boge, Katie Genslea, Karen Krub, Todd Millay, Shalini Ramanathan,and Will Wade-Geryfor researchassistance. 1. See, e.g., Bill Clinton, State of the Union Address (Jan. 24, 1995), in WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Jan. 30, 1995, at 99; CoNTRACT WITHAMERICA 133 (Ed Gillespie & Bob Schellhas eds., 1994); NEWTGINGRICH, TO RENEW AMERICA 9 (1995); Richard L. Revesz, Rehabilitating Interstate Competition: Rethinkingthe "Race to the Bottom" Rationalefor Federal EnvironmentalRegulation, 67 N.Y.U. L. REV. 1210 (1992); see also John H. Cushman,Jr., Senate Panel Votes to Cut E.P.A. Budget, N.Y. TIMES,Sept. 12, 1995, at A21; Jane Fritsch, Threat to Cut E.P.A.Budget Reflects a New Political Shift, N.Y. TIMES,Aug. 24, 1995, at Al. 2. See, e.g., Cliona J.M. Kimber, A Comparisonof EnvironmentalFederalism in the United States and the European Union, 54 MD. L. REV. 1658 (1995); Koen Lanaerts, The Principle of Subsidiarity and the Environmentin the European Union: Keeping the Balance of Federalism, 17 FORDHAMINTL. L.J. 846 (1994). 3. See Joel P. Trachtman,L'Etat C'est Nous: Sovereignty,Economic Integration and Subsidiarity,33 HARV.INTL. L.J. 459 (1992); Steve Chamovitz, Environmentalism ConfrontsGATT Rules, J. WORLDTRADE, Jan. 1993, at 37. 570 December 1996] Environmental Federalism 571 tion cannot be justified. Not only are some problems better dealt with on a national (or international)basis, but each environmentalissue also presents a set of subproblemsand diverse regulatory activities, some of which are best undertakencentrally. While the currentdecentralization rage represents thinking that has come full circle in the past thirty years,4 this article urges not another 180-degree turn but rathera break with unidirectionalconclusions about the proper governmentallevel for environmentalpolicymaking. In trying to stabilize the "environmental federalism" debate,5I argue that what is required is a multitier regula- tory structurethat tracks the complexity and diversity of environmental problems. Part I reviews how environmentalprotection efforts can go awry.6 It makes clear that under the environmentalrubric falls a diverse set of public health and ecological harms that range widely in scope, duration, severity, and ease of prevention or abatement. It also shows that each separateregulatory problem presents a unique set of technical and ana- lytic challenges, potential "structural"or jurisdictional mismatches en- compassing important"choice of public" questions, and public choice 4. From a presumptionthat environmentalproblems were largely a state or even a local matter,the pendulumswung in the 1960s and 1970s to a conclusion that many is- sues requiredcentralized policy responses. However, argumentsin favor of a more de- centralized regulatorystructure have been advanced since the enactmentof the first na- tional environmental regulatory programs in the United States. See, e.g., C. Boyden Gray, Regulation and Federalism, 1 YALE J. ON REG. 93 (1983); Wallace E. Oates & Robert M. Schwab, Economic CompetitionAmong Jurisdictions: Efficiency Enhancing or Distortion Inducing, 35 J. PUB. ECON.333 (1988); Revesz, supra note 1; Harry N. Scheiber, American Federalism and the Diffusion of Power: Historical and Contempo- rary Perspectives, 9 U. TOL.L. REV. 619 (1978). 5. The term "federalism" has been ascribed more than one meaning. In some uses, it implies a structureof shared power among national, state and local levels of government. See Morton Grodzins, Centralizationand Decentralization, in A NATION OF STATES1, 21 (R. Goldwin ed., 1963). But see Scheiber, supra note 4. In other con- texts, federalism (or more particularly"new federalism") is used to suggest a govern- mental structurewith power decentralizedaway from national authorities.For an intro- duction to environmentalfederalism, see Robert V. Percival, EnvironmentalFederalism: Historical Roots and ContemporaryModels, 54 MD. L. REV. 1141 (1995). Given the current sweeping supportfor environmentaldevolution, my argumentfor a balance be- tween centralizationand decentralization,of necessity, devotes considerable attentionto rebuttingthe claims of decentralizers.But this focus should not be mistaken for support of a presumptionin favor of centralizedregulation. 6. Environmentalpolicies often fall short of society's goals and expectations. But the argumentfor state-basedregulation cannot rest solely on the claim that federal envi- ronmental programs have functioned poorly. Instead, the policy flaws in federal envi- ronmental programs must be specified and the logic of state regulation identified. In- deed, to sharpenthe focus of this article, I stipulate at the outset to the need for better environmentalpolicy tools and strategies- especially more use of marketmechanisms. This article thus seeks to explain how and why we suffer regulatoryfailures and to ex- amine whether decentralizationwill amelioratethese problems. 572 Michigan Law Review [Vol. 95:570 concerns. Simplistic notions of regulatoryreform - including attempts to establish a single, appropriatelevel of governmentalintervention are doomed to fail. Grounded in the hard realities of environmental policymaking, Part I sets the stage for later argumentshighlighting the significant degree to which current decentralization theory assumes away the very issues that make regulatoryintervention necessary in the environmentaldomain. Part II describes the environmentalfederalism debate to date. It re- views the political argumentsmade in supportof national environmental laws in the late sixties and early seventies, including Professor Richard Stewart's influential 1977 articles7 advancing the theoretical case for federal regulation. It then turns to the abundant "second-generation" environmentalfederalism literaturethat questions many of the claims about the advantages of federal regulation that underlie "first- generation"thinking. Building on Charles Tiebout's seminal analysis of jurisdictional competition, it considers the work of William Fischel, Wallace Oates and Robert Schwab, and the recent work of Richard Revesz and many others who argue that decentralized environmental regulation offers significant social welfare advantages over more cen- tralized policymaking.8Some commentatorsgo so far as to argue that decentralized regulation should be considered "presumptively beneficial."9 7. See RichardB. Stewart, The Development of Administrativeand Quasiconstitu- tional Law in Judicial Review of EnvironmentalDecisionmaking: Lessons from the Clean Air Act, 62 IOWAL. REV. 713 (1977) [hereinafterStewart, Development]; Rich- ard B. Stewart,Pyramids of Sacrifice?: Problems of Federalism in Mandating State Im- plementation of National EnvironmentalPolicy, 86 YALE L.J. 1196, 1210-20 (1977) [hereinafter Stewart, Pyramids]; see also SUSAN ROSE-ACKERMAN,Pollution and Federalism, in CONTROLLINGENVIRONMENTAL POLICY: THE LIMITS OF PUBLIC LAWIN GERMANYAND THEUNITED STATES 37-54 (1995) (refining the case for reg- ulatory federalism). 8. See Charles M. Tiebout, A Pure Theory of Local Expenditures, 64 J. POL. ECON.416 (1956); William A. Fischel, Fiscal and EnvironmentalConsiderations in the Location of Firms in Suburban Communities, in FISCALZONING AND LAND USE CONTROLS119 (Edwin S. Mills & Wallace E. Oates eds., 1975); Oates & Schwab, supra note 4; Revesz, supra note 1; see also WILLIAMJ. BAUMOL& WALLACE E. OATES, THE THEORY OF ENVIRONMENTALPOLICY (2d ed. 1988); GINGRICH, supra note 1; Jagdish N. Bhagwati, Trade and the Environment,AM. ENTERPRISE,May/June 1993, at 42; James E. Krier & Mark Brownstein, On Integrated Pollution Control, 22 ENVTL.L. 119, 126-27 (1992); James E. Krier, The Irrational National Air Quality Standards:Macro- and MicroMistakes,22 UCLA L. REV. 323 (1974); John Cushman, Senator, in Fury, Advances RegulatoryBill, N.Y. TIMES,Apr. 28, 1995, at A16. 9. See Revesz, supra note 1, at 1253; see also GINGRICH,supra note 1, at 9. Even politically "moderate"groups, such as the Democratic LeadershipCouncil, have made a presumptionin favor of decentralizationa central
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