More than four years ago, BP’s Macondo well exploded, killing 11 men and spewing millions of barrels of oil into the Gulf of Mexico. The surrounding waterways and marine life still bear the scars of the explosion: brightly colored coral colonies have turned brown and dull, some species of fish have developed heart and other deformities, and more than 900 bottlenose dolphins have been found dead or stranded since the explosion.
Although the Gulf States currently lack sufficient resources to assess the extent of the environmental damage and to remedy it appropriately, two recent legal developments lay the groundwork for distributing long-awaited funds to the states.
First, earlier this month, the Treasury Department finalized rules governing a trust fund that will distribute money to the Gulf States for environmental and economic restoration. Certain state and local governments may now apply for grants to support the recovery of communities affected by the oil spill.
The fund, which Congress established in June 2012 as part of the RESTORE Act, will receive 80 percent of the administrative and civil penalties paid to the United States under the Clean Water Act (CWA) by the parties responsible for the oil spill. A portion of these penalties will be distributed among five Gulf States—Florida, Mississippi, Alabama, Louisiana, and Texas.
Although there is currently $653 million available in the trust fund (from the $1.4 billion in fines Transocean paid in an earlier settlement), significantly more funding likely will come from another source—the CWA civil fines that BP will have to pay for its contribution in causing the oil spill.
Second, U.S. District Judge Carl Barbier recently issued a decision that provides some indication of how much money BP will have to pay for violating the CWA and, therefore, how much money the Gulf States ultimately will receive from the fund.
Under the CWA, a polluter must pay civil penalties of $1,100 for each barrel of oil spilled. The CWA provides an enhancement penalty, which imposes fines that are nearly four times as much per barrel if the polluter was “grossly negligent” in causing the spill.
Last month Barbier found that BP’s conduct leading up to the oil spill constituted “gross negligence.” Barbier defined “gross negligence” as similar to recklessness—“an extreme departure from the care required under the circumstances or a failure to exercise even slight care”—and found that because deepwater drilling is such an inherently risky operation, BP employees fell below this standard in two ways. First, Barbier determined that two BP employees were “grossly negligent” when they ignored the results of a critical safety test and decided not to investigate or notify anyone of the clear indications that the well was not safe to drill. Second, Barbier also found that a series of eight actions, including BP’s decision to drill the final 100 feet of the well with little or no margin, cumulatively constituted “gross negligence.”
As a result of Barbier’s determination, BP may pay civil fines under the CWA for as much as $18 billion. Barbier will conduct proceedings to determine the exact amount in January 2015.
This money, though, likely will not become available to the Gulf States anytime soon. In part because the fine is so large, BP will try to challenge Barbier’s determination of gross negligence and the ultimate penalty assessment. BP initially set aside only $3.5 billion for its civil fines under the CWA—roughly one-fifth of what Barbier could impose. And such a substantial fine could significantly affect the company’s economic outlook. To put the fine in context, $18 billion in penalties would be $6 billion more than BP collected in profits in 2012.
Indeed, BP has already appealed Barbier’s decision, alleging his opinion improperly relied on expert evidence that was excluded at trial. BP is now asking Barbier either to revise his ruling to exclude that evidence or to hold a new trial to allow BP to support its position. And BP has stated that, when Barbier begins the penalty proceedings, it will try to show that its conduct merits a penalty less than the $18 billion maximum.
The finalization of rules for the trust fund and Barbier’s decision to expose BP to enhanced penalties under the CWA are important steps in channeling much-needed money to the Gulf States for environmental restoration. But these are merely first steps. As BP winds its way through the court system, it may be some time before the Gulf States know exactly how much money they will be allocated and when they will have access to such funds. In the meantime, the fate of the Gulf States’ waterways and marine life hang in the balance.
By Samantha Caravello -— October 14 at 12:11 p.m.
In June, EPA released a proposed rule for regulating greenhouse gas emissions from existing power plants pursuant to its authority under Section 111(d) of the Clean Air Act (“CAA”). The rule sets forth state-specific goals for emissions reductions but gives states flexibility as to how they will meet those targets. Ultimately, the rule will lead to a 30 percent cut in carbon dioxide emissions (from 2005 levels) by 2030. If implemented, the rule will be a critical component of President Obama’s environmental legacy and a chance to show the world that the United States is serious about climate action. Of course, with this great game-changing power comes great controversy – in fact, twelve states have already sued the EPA over these rules, claiming that the agency lacks authority to regulate greenhouse gases under the 111(d) provision.
This challenge and others will play out over the coming months as the comment period continues and a final rule is ultimately issued, but last week Jody Freeman and Richard Lazarus, professors at Harvard Law School and preeminent legal scholars, gave the Harvard University community a preview of the major arguments that will be made. The talk, “The President’s Efforts to Combat Climate Change Without Congress: What is EPA Proposing to Do and is it Legal?” was sponsored by the Harvard University Center for the Environment, and it was given to a standing-room-only crowd.
Professors Freeman and Lazarus gave an overview of the proposed 111(d) rule and of the Supreme Court’s recent history with the CAA and greenhouse gases. Last term, the Court issued two rulings that were largely favorable to EPA’s ability to exercise its authority to regulate global warming pollution under the CAA: EPA v. EME Homer City Generation and Utility Air Regulatory Group v. EPA (“UARG”). However, the UARG opinion contained what some consider to be “warning shots” to the EPA, signaling the Court’s potential unwillingness to accept the premise that Congress intended to grant the agency broad authority to regulate power plant greenhouse gas emissions, and by extension the nation’s energy sector, with one provision of the CAA, Section 111. After discussing other, threshold, complications with the new rule, Professors Lazarus and Freeman identified this question of EPA’s authority as likely to be the most significant and controversial issue. Section 111 of the CAA gives EPA the authority to create regulations under which states must submit plans that set standards of performance for power plants, with standard of performance defined as based on the best system of emission reduction. Where the potential for legal challenge comes in is that EPA defined “system” broadly, to include “anything” that reduces emissions from the power plants. This makes sense on its face, as a literal reading of the statute, but its practical implications give EPA extremely expansive authority. What will win these challenges, according to Professors Freeman and Lazarus, is really good lawyering—there are arguments on both sides, but it all comes down to convincing five justices, with Justice Kennedy likely providing the key swing vote.
The additional insights into the Supreme Court’s view of EPA’s regulatory authority imparted by Professors Lazarus and Freeman can’t be accurately captured in a short blog post, but Harvard Environmental Law Review readers will soon have the chance to hear their full thoughts on these issues: Both professors will be authoring pieces in ELR’s Fall 2014 issue as part of a series of essays exploring the implications of the UARG decision, including the potential impact on the legality of EPA’s new 111(d) rule. The story of EPA’s 111(d) regulations is just beginning, and ELR and the Harvard environmental law community are fortunate to have world-class environmental scholars Professors Lazarus and Freeman to offer their insights along the way.
Since 2011, the Pebble Limited Partnership (“PLP”) has been attempting to build a large-scale copper and gold mine in the Bristol Bay watershed in southwestern Alaska. The mine proposal includes an open pit mine, a tailings facility, a power generating station, a deepwater port, and substantial transportation infrastructure, and is slated to operate for at least 20–25 years. Though exact design specifications have not yet been determined, the mine is expected to be one of the largest open pit mines in the world. In light of recent developments, however – including a rare move by EPA to invoke its veto authority under § 404(c) of the Clean Water Act – the mine’s future is in serious doubt.
PLP maintains that the project can coexist with the surrounding environment. Many disagree with this contention. The Bristol Bay watershed is a delicate ecosystem, providing spawning grounds for all five species of Alaska salmon and habitat for over 40 species of mammal and 190 species of birds. Most notably, the watershed is home to the world’s largest sockeye salmon run. The watershed also supports subsistence activities for 25 communities of Alaska Natives ; the Native village of Newhalen, for example, averages a 700 pound per capita harvest each year.
With so much at stake, the mine has understandably attracted a great deal of controversy. Indeed, the opposition has expanded beyond the traditional environmental organizations to include celebrities like Robert Redford and jewelry giant Tiffany’s. Ultimately, petitions from several federally recognized tribes and concerned individuals led the U.S. Environmental Protection Agency (“EPA”) to conduct an assessment of the mine’s potential environmental impacts on the region.
In January 2014, EPA released its final assessment. Following that assessment, EPA issued a Proposed Determination in July 2014 to bar development of the Pebble mine, citing the “high ecological and economic value of the Bristol Bay watershed and the assessed unacceptable environmental effects that would result from such mining.” EPA provided a period for public comment on the proposal and held public hearings throughout Alaska. The author of this blog post attended the hearing in Anchorage on August 12, 2014.
EPA’s Proposed Determination rests on its authority under § 404 of the Clean Water Act (“CWA”). Although the mine would be located on state land, it is nonetheless subject to federal permitting requirements. Specifically, because the mine construction would require a significant amount of dredging, PLP must obtain a permit under § 404 of the CWA. These permits are issued by the U.S. Army Corps of Engineers. Under § 404(c), however, the EPA may prohibit or restrict fill activities if it determines that a project would have an “unacceptable adverse effect” on fishery habitat, including spawning and breeding areas. Though sparingly used – EPA has only taken advantage of this provision on 13 occasions – the D.C. Circuit recently upheld EPA’s “veto” authority in Mingo Logan Coal Company v. EPA.
Here, EPA’s use of the § 404(c) veto unleashed a new flurry of controversy and immediately sparked litigation – particularly because EPA’s actions occurred before PLP had applied for the § 404 permit. On May 22, 2014, for instance, PLP filed suit in federal court, arguing that EPA’s Proposed Determination was a “preemptive veto” and seeking an injunction to halt EPA’s process entirely. But on September 26, 2014, the District Court judge dismissed the suit. Because EPA’s Proposed Determination was not a final agency action, the court held, PLP’s suit was premature.
While PLP intends to challenge EPA’s final determination – which must be issued by February 4, 2015  – the future of the project has been thrown into doubt. A number of factors signal the project’s demise, including significant costs and delays, heated public outcry, a loss of investors, EPA opposition, and a tailings pond breach at a similar mine in British Columbia in August, 2014. Given the project’s “near-moribund state,” it may not be capable of surviving the slew of permit application and review processes it must undergo prior to construction. Such a result would be a significant win for EPA and might encourage more use of its veto authority under § 404(c).
 See U.S. E.P.A., Proposed Determination of the U.S. Environmental Protection Agency Region 10 Pursuant to Section 404(c) of the Clean Water Act, Pebble Deposit Area, Southwest Alaska, ES-2 (July 2014), available at http://www2.epa.gov/sites/production/files/2014-07/documents/pebble_es_pd_071714_final.pdf [hereinafter “Proposed Determination”].
 See Proposed Determination at ES-2.
 Proposed Determination at ES-2.
 U.S. E.P.A., An Assessment of Potential Mining Impacts on Salmon Ecosystems of Bristol Bay, Alaska: Executive Summary, 6 (January 2014), available at http://www.epa.gov/ncea/pdfs/bristolbay/bristol_bay_assessment_final_2014_ES.pdf [hereinafter “Final Assessment”].
 Proposed Determination at ES-1.
 Proposed Determination at ES-1.
 Proposed Determination at ES-1; 79 Fed. Reg. 42,314 (July 21, 2014).
 33 U.S.C. § 1344(c).
 714 F.3d 608, 609 (D.C. Cir. 2013), cert. denied, 134 S.Ct. 1540 (2014).
 Pebble Ltd. P’ship v. EPA, No. 3:14-cv-0097-HRH , slip op. at 15 (D. Alaska Sept. 26, 2014).
 Id. at 14–15.
 79 Fed .Reg. 56,365, 56,365 (Sept. 19, 2014).
A. Dan Tarlock is Distinguished Professor of Law and Director of the Program in Environmental and Energy Law at ITT Chicago-Kent College of Law. Debbie M. Chizewer is the former Assistant Director of the Program.
Six innovative, local flood management projects for the New York-New Jersey area recently received funding under the Rebuild by Design competition, designed to reduce flood risk after Hurricane Sandy. The Obama Administration’s design competition is a positive development, but overall the United States’ federal flood management framework remains inadequate in the face of rising sea levels and more frequent extreme weather events associated with climate change. Local governments should lead flood risk-reduction efforts because they are on the frontlines of flooding and best able to shape land use, a key strategy for reducing flood damage.
People are drawn to live by water and tend to discount the risks inherent in this choice. Existing laws have not helped people understand the true risks, but rather have encouraged individuals to engage in moral hazard behavior. A moral hazard is a socially undesirable, often inefficient, behavior encouraged by the expectation that it will not be punished and often will be rewarded. Reducing moral hazard behavior makes economic sense for flood management program costs: Why should a person be rewarded for engaging in high-risk behavior because he or she will not bear the full costs when the risk materializes?
The problem starts with federal flood management programs, which encourage moral hazard behavior by creating a false sense of security. First, the federal government has created an illusory expectation that it can provide maximum flood protection through hard structural solutions, such as levees and dams. Second, Congress distributes flood protection funds under periodic water resource development acts (WRDAs), which reflect pork-barrel politics rather than a rational risk-reduction process.
Third, the collection of other federal statutes that address flood management–including the Coastal Zone Management Act, the Coastal Barrier Resources Act, and the National Flood Insurance Act—-have not reduced risky behavior. These programs offer incentives for states and local governments to develop flood-prone areas with flood protection in mind but provide enough flexibility for local governments to favor development over flood risk reduction. For instance, the National Flood Insurance Program ties federal flood insurance eligibility to local government land use changes designed to reduce flood risk. The reality is that the required land use changes are minimal, and the flood insurance rates are heavily subsidized.
The United States should follow the example of the European Union’s Flood Directive and officially adopt integrated flood plain and coastal management. Flood plains and coastal areas must be managed through a combination of structural defenses, upstream storage, design modifications, and land use controls including both retreat from vulnerable areas and integrated flood plain management. Enabled by state and federal government laws, American cities still engage in an increasingly futile arms race with nature. The ineffective practices of building sea walls, supporting the rebuilding of flooded properties multiple times, and undertaking beach renourishment after storms must be rationalized and curtailed.
A key strategy is the prohibition of development in high-risk areas and a shift of the true cost of the risk to those who choose to live in known high-risk areas. Because the ability to avoid risks varies among individuals, policymakers should carefully tailor efforts to curb moral hazard behavior. Generally, the wealthy live near water by choice, while the poor do so because floodplains offer low cost housing. It will not be easy to reorient flood management policy. No government likes to assume the paternal role and tell its citizens what they cannot do.
Local governments can and should take the lead to shift policy. First, with limited exceptions, only local governments can control floodplain development. Second, local governments are already experiencing the impacts of climate change and thus must adapt. Local communities have a large toolbox to discourage moral hazard behavior. Tools include (1) state mandated coastal planning; (2) rolling set backs, especially those based on expected erosion rates; (3) the purchase or condemnation of high-risk properties, especially repeat loss properties; (4) rebuilding requirements that minimize future storm or flood damage; and (5) the use of Transferrable Development Rights to compensate land owners forbidden to rebuild in high risk areas.
Development of climate-change-ready flood management must be iterative. Federal projects, like Rebuild by Design, motivate local risk reduction. In turn, local innovation should inform federal reforms to flood management.
To read more on this topic, look for Mr. Carpenter-Gold’s student note in the upcoming Volume 39.1 of the Harvard Environmental Law Review.
Chinese environmental policy has been rapidly modernizing over the past few years, likely in response to highly visible pollution. Among these changes, the Environmental Protection Law (EPL) has been almost completely rewritten to greatly strengthen the country’s environmental law regime. One-off fines (criticized as being far less than the actual cost of compliance with the law) are out; daily penalties (Art. 59), confiscation of equipment (Art. 25), and even jail time for “the person directly in charge” of the polluting entity (Art. 63) are in. The groundwork has been laid for a comprehensive emissions permitting system (Art. 45). Regions which fail to meet environmental targets designated by the central government will face blanket suspensions of the right to undertake new construction projects (Art. 44). Finally, a number of new avenues for public participation have been opened up (Arts. 53–58). Significant among these is the right, for some organizations, to bring litigation in the public interest against polluters (Art. 58).
Many of these provisions will be familiar to students and practitioners of US environmental law. This is no accident—substantial effort, by NGOs and the US government alike, has gone into encouraging the Chinese government to adopt more Western environmental standards. These projects have run the gamut from regular visits by EPA’s general counsel, to experts’ reports, to study tours for academics and practitioners, and they have paid off in the new EPL, whose language equals or even exceeds that of US environmental legislation.
In addition to borrowing from international experience, China has used its own local governments to experiment with expanded standing provisions. Environmental public-interest litigation in China has, over the past decade, been slowly introduced in some counties and municipalities. Although cases under these regulations have been almost exclusively brought by government-organized NGOs, they seemed to have demonstrated the viability of a Chinese environmental public-interest litigation system.
The central government, apparently encouraged both by the international community and by the success of such provisions at the local level, amended the Civil Procedure Law (CPL) in 2012 to grant standing to “relevant organizations” that bring lawsuits to address environmental harms. This should have enabled a new wave of litigation from environmental NGOs. Indeed, high-powered organizations such as the All-China Environment Federation attempted to file a number of cases after the change. However, outside of the regions which already had provided for environmental public-interest litigation, the courts have universally refused to allow cases brought under the amended law, offering only thin excuses or none at all.
Why couldn’t this policy, which has been in use for years in some parts of China and for decades abroad (with no greater specificity), succeed at the national level? The answer lies in the particular structure of China’s judiciary: the local governments in China control the budget and personnel decisions of local courts. Where the local government does not wish to have the expanded regulatory oversight that public-interest litigation brings, it can easily pressure the courts into refusing the cases. Neither US nor local jurisdictions which had implemented expanded standing provisions had to cope with the divide between central and local governments: in the US this was not an issue because of American judicial independence, and the Chinese localities which allowed environmental public-interest litigation were presumably already supportive of environmental protection.
Regulatory decisions are always of uncertain impact, and a country can be forgiven for taking paths already trod rather than experimenting on their own people. But borrowing policies from other countries, or even from their own subunits, can only work to the extent that the borrower carefully evaluates the differences between the two systems. In amending the CPL, China seems to have overlooked the problem of local-government resistance, presumably because the cases which were used in developing the law did not have this problem.
The experience of the 2012 CPL suggests that the public interest litigation provisions of the Environmental Protection Law may be weaker in practice than they appear on paper. The new law asks a lot of local governments, and particularly local Environmental Protection Bureaus (EPBs), the local-level agencies in charge of enforcing most environmental regulations, which are beholden to the governments at their level to the same extent that the local courts are. However, the EPL takes some steps toward strengthening central control over EPBs by allowing EPBs at a higher governmental level to discipline EPBs within their jurisdiction (Art. 67, for example). There is also talk of increasing central control of the court system, which could remove some of the local governments’ influence. There is likely to remain a substantial gap between the law on paper and the law as enforced, but the overall trend is toward strengthening governance and the rule of law. That’s good news for China’s environment.
This article originally appeared in the September/October 2014 issue of The Environmental Forum. The Environmental Law Institute has graciously allowed the Harvard Environmental Law Review Blog to republish the piece.
The biggest environmental law news from the Supreme Court last term may well not have been the Court’s rulings in two high profile Clean Air Act cases. To be sure, both EPA v. EME Homer City Generation and Utility Air Regulatory Group v. EPA were true blockbusters. EME Homer, which upheld EPA’s ambitious rulemaking to combat interstate air pollution, was plainly a huge victory for the Environmental Protection Agency.
But, potentially more important, yet largely unnoticed and unreported, were the Court’s repeated denials last spring of a series of petitions filed by business interests seeking the Court’s review of a series of adverse appellate rulings. At one point the deluge of such petitions led one lawyer, who frequently represents environmental groups, to remark gamely, “It’s raining cert petitions!”
The reason for the onslaught is clear. The business community has in recent years enjoyed considerable success in persuading the justices to grant review in environmental cases that otherwise seemed to lack the obvious trappings of a cert-worthy case, lacking clear conflicts in the federal courts of appeals. Cases in which the potential for further agency action made unclear the actual, practical significance of the appellate court’s ruling. And even cases in which the solicitor general, after being invited by the High Court to express its views concerning whether review was warranted, recommended against.
In short, the Court often appeared to be operating on a hair trigger in considering business claims that the lower courts had endorsed overreaching of federal environmental laws. But this spring, the Court repeatedly said no, leaving industry lawyers a bit baffled by the Court’s sudden betrayal.
Four times business interests embraced what had heretofore been a winning strategy. They hired the best Supreme Court lawyers — the ones who know the Court best, and even more important, the ones the justices and their law clerks know the best and therefore might be more likely to give weight to their views. Former Solicitor General Paul Clement. Sidley & Austin’s Peter Keisler. And Stanford law professor and formal appellate judge Mike McConnell. The business petitioners recruited legions of amicus curiae to file briefs in support of the Court’s granting review. These briefs would invariably describe the “crippling,” “severe,” “intolerable,” “deleterious,” “crushing,” and “staggering” consequences to the nation’s economy if the Court left standing these adverse lower court rulings.
No one was better, however, than the Chamber of Commerce in describing the economic havoc and destruction that would occur absent the Court’s review. In each of the successive cases, the chamber’s predictions grew more dire.
Although candidly acknowledging that it would “difficult to overstate the importance” of the lower court’s ruling for business, the chamber did not shy away from doing its best to do just that. It described in one case how the “crippling uncertainty and costs” would “exacerbat[e]” existing energy shortages” because “power plants faced with a new onslaught of tort liability may choose to cease operations.” In another, the lower court’s ruling “will undermine the proper functioning of the nation’s integrated national market in transportation fuels.”
Not to be outdone by its competing predictions of economic cataclysm, the chamber contended in yet another case that a Second Circuit decision “would transform every public drinking water supply in this country — indeed every future supply — into a ready-made multi-million-dollar lawsuit.” It “would open the floodgates to claims against virtually every manner of human enterprise” and the “consequences could extend to all corners of our economy.”
Finally, the chamber described the “staggering” economic consequences of the D.C. Circuit’s upholding of EPA’s authority to override a Clean Water Act permit previously issued by the Army Corps of Engineers. That ruling placed at risk “over $220 billion of investment annually,” that in turn the chamber calculated generated $660 billion of downstream economic activity, or almost four percent of the nation’s Gross Domestic Product.
The Court nonetheless denied review all four times: first in Mingo Logan Coal Co. v. EPA in March; then Exxon v. City of New York in April, and twice in June, Gen-On Power Midwest v. Bell, at the beginning of the month, and finally in Rocky Mountain Farmers Union v. Corey, just before adjourning for the summer. No justice dissented.
There is, of course, a useful lesson here. Zealous advocacy is to be expected. But exaggerated advocacy is counterproductive, especially in the High Court when, by spring time, the justices’ law clerks are more seasoned and can more readily tell the difference between the two.
And, most happily, the chamber’s prophecies have not (yet) borne out. Whew!
Richard Lazarus is the Howard J. and Katherine W. Aibel Professor of Law at Harvard University.
August 12, 2014 at 1:30pm
America’s electricity industry is at the heart of some of the nation’s and world’s biggest environmental challenges, including climate change. Yet the Federal Energy Regulatory Commission (“FERC”), which has regulatory jurisdiction over wholesale sales and transmission of electricity in interstate commerce and is charged with ensuring that rates and other aspects of the industry are “just and reasonable,” has an official policy of excluding environmental considerations from its oversight of the industry.
In “Toward Greener FERC Regulation of the Power Industry,” in the forthcoming issue of the Harvard Environmental Law Review, Harvard Law School alumnus Christopher Bateman and Environmental Defense Fund senior counsel James T.B. Tripp trace the evolution of this policy and argue that it is time for a new and better approach—one that integrates economic and environmental regulation of the industry, and helps the United States achieve a clean energy future, especially with respect to greenhouse gas emissions.
Bateman and Tripp explore the possibility of such an approach under the Federal Power Act (“FPA”), which provides FERC’s mandate. In doing so, they address FERC’s reasoning for its current policy and find these reasons unpersuasive. Contrary to FERC’s position, they argue, it is plausible to view the FPA alongside other federal laws as being silent or ambiguous about FERC’s environmental authority, thus permitting an environmentally inclusive approach within reasonable constraints. This reading of the FPA is reinforced by a host of policy considerations: the urgent need to address the U.S. electricity industry’s significant contribution to climate change; the inadequacy of and continuing uncertainty surrounding existing regulatory efforts on this front; FERC’s expertise in aspects of the electricity industry important to effective design and implementation of regulatory solutions; the unique nature of greenhouse gas emissions as pollutants and the feasibility of FERC regulation of carbon emissions in particular; and the glaring problems with our schizophrenic approach to energy regulation, in which environmental regulation and traditional utility regulation often undermine each other, creating inefficiencies.
The article offers concrete examples of the types of progressive industry reforms that would be possible under an environmentally inclusive approach, while also acknowledging and exploring the limits and challenges of this approach. On balance, Bateman and Tripp conclude, the rewards seem to far outweigh the risks. FERC’s current policy causes it to regulate essentially in the dark as to environmental costs and benefits. By incorporating environmental considerations into its oversight of areas such as transmission planning and organized wholesale electricity markets, and by approaching environmental problems in a coordinated way with EPA and other regulators, the Commission would make better informed decisions and could potentially help the nation achieve significant, welfare-maximizing reductions in greenhouse gas emissions.
The question of whether FERC is doing enough to address climate change is one that scholars and policymakers are increasingly starting to raise. Recently, a pair of Berkeley scholars proposed a set of reforms–endorsed by United States Congressman Henry Waxman on the floor of the House–that FERC could undertake across its jurisdictional areas to do more. Focusing on FERC’s oversight of the electricity industry, Bateman and Tripp reach similar conclusions about the need for FERC to do more, and seek to provide the most sustained argument yet for a new approach to meet the defining energy and environmental challenges of our time.
By Rachel Proctor May — June 16, 2014 at 10:25am
In ELR Volume 38.1, published earlier this year, Cary Coglianese and Jennifer Nash examined the track record of Performance Track, EPA’s flagship voluntary program for companies to commit to environmental regulation outside the legal process. That article, Performance Track’s Postmortem: Lessons from the Rise and Fall of EPA’s “Flagship” Voluntary Program, is available here. ELR’s Rachel Proctor May sat down with the authors to discuss the article.
ELR: Does the demise of Performance Track indicate a shift away from voluntary programs in environmental regulation? To what extent are voluntary programs still a part of the regulatory landscape?
Coglianese & Nash: Wouldn’t it be great if government could protect the environment without imposing burdensome regulations on business? Imagine that, simply by recognizing and rewarding businesses for adopting positive environmental management practices, government could induce firms to make substantial progress protecting the air, water, and land. That’s the appeal of voluntary environmental programs, like the National Environmental Performance Track adopted by EPA in the 1990s. Performance Track, long considered EPA’s “flagship” voluntary program, offered positive publicity and modest regulatory relief to companies that the agency considered to be environmental leaders. At least in theory, voluntary programs like this have the potential to change the behavior of businesses without the need for passing legislation, promulgating regulations, and overseeing compliance – and without all the costs and conflicts associated with these traditional approaches to environmental policy. In this sense, voluntary programs are the regulatory equivalent of Brigadoon. They hold captivating appeal. As a result, even though EPA ended Performance Track in 2009, voluntary programs remain an important part of the regulatory landscape and policy entrepreneurs will continue to advocate for them as an attractive alternative to regulatory business as usual. Not surprisingly, voluntary programs proliferate throughout government at the federal and state levels. EPA runs dozens of voluntary programs, about fifteen of which seek to address energy and climate change alone. And interest in voluntary programs extends well beyond EPA. The Department of Energy runs programs very similar to Performance Track, as does OSHA and many states.
ELR: Based on your analysis of Performance Track, is there a place for voluntary programs in environmental regulation? Are there certain sectors/regulatory targets in which they are particularly likely to be effective or ineffective?
C&N: Perhaps some kinds of voluntary programs might have value within the broad portfolio of environmental policy, but our research on Performance Track suggests that EPA and other agencies need to recognize the severe limits to this kind of voluntary program. Voluntary programs cannot, despite the claims of some of Performance Track’s proponents, provide a basis for revolutionizing environmental regulation. Advocates of such programs need to calibrate expectations and avoid making the kind of grandiose claims that EPA continued to make about Performance Track throughout its history. EPA and states repeatedly made statements about the “top performance” of those who joined voluntary programs. Indeed, the very name “Performance Track” implies that the program attracts members that are better performers than their peers. But Performance Track never really tracked facilities based on performance, nor could EPA ever demonstrate that the facilities that joined Performance Track did better in terms of reducing environmental impacts than facilities that did not join. On the contrary, evidence suggests that some Performance Track facilities were not even better than the average facility in the same industrial sector. When we compared facilities that participated in Performance Track and similar facilities that did not, we did not find the joiners to be any more responsible than the non-joiners. Instead, we found that what most distinguished joiners were their distinct preferences for engaging in community outreach. The joiners were, in effect, extroverts – not necessarily performance leaders.
ELR: What are your recommendations for designing voluntary programs to make them as effective as possible?
C&N: Government should be circumspect about the role of voluntary programs. Whatever claims agencies make about benefits from these programs should be backed up with careful research. EPA continually said that Performance Track produced results in the form of reductions in pollution and natural resource consumption. But EPA never collected data on trends in emissions and natural resource consumption of non-members, so the agency lacked support for statements about what change Performance Track may have caused. To its credit, EPA did seek to study why businesses joined Performance Track – including by funding some of our research – but it could never demonstrate that Performance Track led to any environmental improvements that companies would not have made anyway for other reasons. If EPA and other agencies are interested in exploring the potential of voluntary approaches to supplement traditional regulation, they should design voluntary programs with empirical evaluation in mind so that they can demonstrate their value. Only in that way will policymakers ever be able to understand how to make voluntary programs as effective as possible.
This blog post contains the views of the author alone, and does not necessarily reflect the opinions of Professor Coleman or ELR staff.
“What difference do you think you can make? One man in all this madness?”
-First Sergeant Edward Welsh, The Thin Red Line
Scholars have come to recognize climate change as “the quintessential global-scale collective action problem”—so large that even superpowers cannot tackle it unilaterally. But after two decades of painfully slow multilateral negotiations, commentators have begun reexamining the potential for action by individual states. Among them is James Coleman, Assistant Professor at the University of Calgary’s Faculty of Law, whose article, “Unilateral Climate Regulation,” we had the privilege of publishing in the latest volume of the Harvard Environmental Law Review.
Unilateral action, Professor Coleman’s argument goes, can have a disproportionately large and positive impact in two ways. First, it can provide an effective model to states that might not have the wherewithal to design their own mitigation strategies. For example, if the United States designs a simple, transparent system for regulating greenhouse-gas emissions other countries can copy it, thereby lowering the costs of implementing their own climate policies.
Second, countries may implement policies contingent on other states’ mitigation efforts—a “matching contribution” approach familiar to anyone who has ever sat through an NPR pledge drive. In this scenario, the US might agree to implement policies to lower its carbon emission by, say, 1 billion units, provided that China do the same. This effectively doubles the benefit to China of reducing its greenhouse-gas emission: at the cost of 1 billion units in reductions, China would receive the benefit of a 2 billion-unit reduction in global emissions.
Perhaps the most striking example of unilateral climate action is the just-released EPA decision to regulate emissions from coal-fired power plants. Alongside the obvious benefit of eliminating a substantial source of CO2 emissions, the new rule may provide a model for other countries to limit their own coal pollution. This effect will likely be all the stronger because of the visibility and importance of the United States to other states.
But Professor Coleman’s point also applies to smaller-scale efforts to tackle climate change. One example of action stalling on the perennial question, “what can one actor do?” is the divestment effort at Harvard. As President Drew Faust put it in an open letter to the community last October, “Universities own a very small fraction of the market capitalization of fossil fuel companies. . . . Divestment is likely to have negligible financial impact on the affected companies.”
Professor Coleman’s arguments regarding unilateral state action suggest at least a partial alternative, where Harvard would use informational effects and matching commitments to give its investment decisions greater clout.
First, divestment could improve the information available to other institutions. As an example, imagine that the university decides to divest from any energy company with less than $3 billion invested in renewables and reinvest it sustainably: Harvard would first determine what counts as renewable energy investment, then compile a list of energy companies’ investment in renewables, then identify other, “greener” investments. By making this research publicly available, Harvard could spare other institutions also interested in divestment the cost of making a similar investigation. Ultimately, this would tend to increase the number of divestors, magnifying Harvard’s impact.
The second strategy that Professor Coleman’s article could suggest to divestors is to avoid collective-action problems by implementing matching commitments. This approach, termed “strategic matching” in economics, envisions a large group of institutions all agreeing to divest if each other institution does so as well—just as many treaties do not go into effect until a certain number of state parties ratify them. The advantage to this approach is that no institution would be required to take any action until the group formed, at which point the aggregate benefit (in terms of pressure on the industry) will be many times larger than for any individual divestment action.
It is interesting to note that these strategies are used by the two responsible-investment organizations to which Harvard has recently become a signatory: the Principles for Responsible Investment (PRI) and the Carbon Disclosure Project (CDP). (It should be noted that many faculty members disagree with this approach.)The PRI Association requires that signatories to the PRI complete a self-assessment on their consideration of environmental, social, and governance (ESG) factors in their investment policy and then publishes a compilation of the results, along with an annual report analyzing trends in and case studies of ESG-conscious investment. In other words, they allow institutions to increase the impact of their ESG-focused decisions by providing information which both signals their commitment to responsible investing and is useful to other investors.
The CDP, on the other hand, focuses on information about companies in which its signatories may be invested. It allows signatories to endorse surveys of corporations’ environmental policies, and then provides the resultant data only to those organizations which agreed to endorse (and thereby lend the CDP reputational force). By withholding information until an organization endorses, the CDP essentially implements an asymmetrical matching-commitment strategy: it increases its own impact by requiring its signatories to help gather information before they get the results.
The lesson here is that there’s no such thing as acting alone. Every forward step encourages others, and by taking advantage of this any actor—whether a country, a university, or a single person—can have a much greater impact than its limited resources would suggest.
When the new Farm Bill finally passed this February, two years behind schedule, many environmental groups breathed a sigh of relief–if not outright celebrated. In addition to other conservation provisions, the bill included a hard-fought requirement for farmers to adopt basic soil conservation measures to obtain crop insurance subsidies. Although the soil conservation requirements aren’t new, they had not been linked to crop insurance subsidies for many years and instead were a quid pro quo only for receiving direct subsidy payments. With the new Farm Bill’s emphasis on crop insurance subsidies in lieu of direct payments to support the agriculture sector, the environmental need to tie conservation measures to crop insurance became acute.
Commonly known as “conservation compliance,” these Farm Bill provisions are aimed at reducing soil erosion by requiring farmers to develop conservation plans for what are known as highly erodible lands. Conservation compliance has contributed to substantial reductions in soil erosion. According to USDA data, soil erosion declined by about forty percent annually from 1982 through 1997. But despite the track record of success, it took a multi-year, concerted campaign simply to apply conservation compliance to crop insurance subsidies. Environmental groups rightly see this addition to the new Farm Bill as a victory. As Steve Kline of the Theodore Roosevelt Conservation Partnership, which helped lead the campaign, told EE News: “We are certainly going to be celebrating this bill . . . . . I do think it’s the best we can get.”
At the same time, however, conservation compliance only partially addresses the environmental consequences of large-scale commodity crop production. Not only sediment pollution, but also nutrient and pesticide pollution resulting from commodity crop operations can have harmful effects both locally and downstream. Nutrient pollution, for example, has had wide‐ranging and costly impacts—from the dead zones that form in the Gulf of Mexico and other water bodies, to polluted streams, rivers, and lakes, to contaminated drinking water.
Agriculture is the only major industrial sector that is routinely exempted from baseline environmental safeguards. This is not to say that there are no requirements in environmental laws that apply to the agriculture industry, but environmental laws are more noteworthy for their exemptions for agriculture than for their coverage of it. And while many agricultural operations do implement some stewardship practices, pollution resulting from commodity crop production remains a significant national problem.
As a result, the costs associated with the environmental impacts are not accounted for by either the seller of commodity crops (the farmer) or the purchaser (such as grain‐trading companies, meatpackers, and feedlots). Instead, the externalized pollution costs attributable to large-scale agriculture are borne by the public.
In an HELR article last year, we made two proposals. First, to reduce the impacts of downstream pollution, we argued that large‐scale commodity crop operations that choose to accept federal subsidy payments should assume responsibility for implementing a baseline set of stewardship practices designed to minimize nutrient pollution. The aim is not to establish a significant new administrative program, but rather a workable, streamlined process for adoption of stewardship measures that can be integrated into existing subsidy program administration.
Second, to increase public access to information on the sources and quantities of nutrient pollution entering surface waters and groundwater, we recommended that large‐scale commodity crop operations publicly report on the quantity, type, and timing of fertilizers they apply.
Disclosure of fertilizer usage would increase public access to information on the sources and quantities of nutrient pollution entering surface waters and groundwater, while at the same time helping to discourage practices that result in overuse. Existing environmental disclosure programs (think Toxics Release Inventory) work in part because they cause the disclosing entity to focus on its chemicals use, which in turn can lead to opportunities for reductions – some of which can save money and increase efficiency. Reductions also occur in response to perceived public or market pressure. The goal is to generate an easy‐to‐understand dataset while minimizing the administrative burden on operators.
We proposed that these requirements be applied to large-scale commodity crop operations—farms that produce crops such as corn, wheat, and soybeans and gross $500,000 dollars or more in annual sales—because as a class they represent a large share of production, can generate substantial pollution, have the potential to afford conservation measures, and receive the most federal farm subsidies.
The 2014 Farm Bill took an important step toward enhanced environmental protection by linking conservation compliance to crop insurance. And yet, much more can reasonably be expected of large-scale commodity crop operations as a condition of federal support. If we settle for retention of current requirements, we risk setting the bar too low.