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Environmental Policy
• Until recently, environmentalists have
directed their efforts toward persuading
the public that there is in fact an
environmental crisis
• However, in the last two decades, the
deterioration of the environment has
moved from an issue of personal
inconvenience to a major issue on the
public policy agenda
• People have become aware that
population growth and the
accompanying growth of industry
and traffic congestion contribute to
environmental damage.
• Despite increasing awareness on
the part of the public, legislation to
address environmental issues since
the 1960s has been scattered
major pieces of legislation include:
– Clean Air Act 1963, amendments 1970, 1990
– National Environmental Protection Act 1970,
– The creation of the EPA by executive order of President
Nixon 1970
– Water pollution control Act 1972
– Endangered Species Act 1973
– Toxic Substances Control Act 1976
– Comprehensive Environmental Response Act of 1980which created a “Superfund” for cleaning up hazardous
waste sites if companies cannot afford to pay for the
clean up
•
Pollution is simply a cost of production
•
Pollution comes in a variety of forms—
air pollution, damage from acid rain,
deforestation and soil erosion, water
pollution, depletion of the ozone layer,
toxic waste and greenhouse effects
• From a policy standpoint we are
interested in how government responds
to environmental problems
• Although pollution is a cost of
production, business does not bear the
cost of polluting alone; to do so would
put many companies out of business
• We noted that externalities exist when a
producer or consumer does not bear the full
cost (negative externality) or the receive the
full benefit (positive) of a transaction
• Externalities result in costs for third parties;
externalities do not pass through the market
system
Pollution is a classic example of an
externality—pollution is the production of
wastes that we do not want such as
industrial wastes, smoke, smoke,
congestion or noise
Externalities exist for two reasons: 1) we do
not know how to produce some of these
goods without waste, 2) even if we did, the
consumption or production may be
prohibitively expensive
What is Global Warming?
• Recent scientific studies confirm that the
Earth is getting warmer due to the
environmental effects of greenhouse gas
(GHG) concentrations
• Greenhouse gases refer to those
atmospheric gases that are almost
transparent to incoming solar energy, but
trap infrared energy reflected from the
earths surface
• There are about 20 such “greenhouse” gases
but the focus has been on CO2
• CFC’s or chlorofluorocarbons are a man made
chemical that make up a smaller portion of GHG,
but have properties that give them a warming
potential several thousand times greater than
carbon dioxide
• In September 2006 U.S. climate scientist
reported that the world's temperature has
increased to levels not seen in at least 12,000
years
Policy Responses
The US and 30 other countries signed the
United Nations Framework Convention on
Climate Change, the first binding agreement
on climate change
Signed at the Earth Summit in Rio De Janero
in 1992, the agreement called for reducing
greenhouse gas emissions to 1990 levels by
the year 2000. Developing countries were
given more time to meet the target levels
In 1993, Clinton announced his Climate
Change Action Plan which included a
series of voluntary programs to persuade
companies to cooperate with federal
agencies to improve energy efficiency
and reduce GHGs
The goal was to have voluntary rather than
mandatory regulations, and there were
some positive steps taken, particularly by
the electric utility industry to reduce
GHGs, but soon it b/c apparent that
voluntary actions would not enable the
US to meet emissions goals
• Kyoto Protocol- in 1997, an amendment to
the Rio Treaty, the Kyoto Protocol was
negotiated under the United Nations
auspices.
• The landmark agreement, negotiated in
Japan's ancient capital of Kyoto in 1997
and ratified by 140 nations.
• Kyoto required that the US and other
signatories reduce emissions below 1990
levels by 2012
• This would entail a 40% reduction in fossil
fuel use, and although Clinton was
supportive, the Kyoto Protocol was
strongly opposed by US business interests
who lobbied members of Congress
intently.
• Clinton never sent the Kyoto Protocol to
the Senate where it would have been
defeated.
• The United States, the world's largest
emitter of such gases, has refused to ratify
the agreement, saying it would harm the
economy and is flawed by the lack of
restrictions on emissions by China and
India.
• Shortly after he took office in 2001,
however, President Bush withdrew U.S.
support for the Kyoto Protocol and refused
to submit it to Congress for ratification.