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Environmental Law and Public Policy

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Author Info
Stavins, Robert
Revesz, Richard
Additional information is available for the following registered author(s):
• Robert Norman Stavins

This chapter provides an economic perspective of environmental law and policy with regard to
both normative and positive dimensions. It begins with an examination of the central problem in
environmental regulation: the tendency of pollution generators in an unconstrained market
economy to externalize some of the costs of their production, leading to an inefficiently large
amount of pollution. We examine the ends of environmental policy, that is, the setting of goals
and targets, beginning with normative issues, notably the Kaldor-Hicks criterion and the related
method of assessment known as benefit-cost analysis. We examine this analytical method in
detail, including its theoretical foundations and empirical methods of estimation of compliance
costs and environmental benefits. We include a review of critiques of benefit-cost analysis,
briefly examine alternative approaches to analyzing the goals of environmental policies, and
survey the efforts of the Federal governmental to employ these analytical methods. The chapter
also examines in detail the means of environmental policy, that is, the choice of specific policy
instruments, beginning with an examination of potential criteria for assessing alternative
instruments, with particular focus on cost-effectiveness. The theoretical foundations and
experiential highlights of individual instruments are reviewed, including conventional,
commandand- control mechanisms, economic incentive or market-based instruments, and
liability rules. In the economic-incentive category, we consider pollution charges, tradeable
permit systems, market friction reductions, and government subsidy reductions. Three cross-
cutting issues receive attention: implications of uncertainty for instrument choice; effects of
instrument choice on technological change; and distributional considerations. We identify a set
of normative lessons in regard to design, implementation, and the identification of new
applications, and we examine positive issues, including three phenomena: the historical
dominance of command-and-control; the prevalence in new proposals of tradeable permits
allocated without charge; and the relatively recent increase in attention given to market-based
instruments. Finally, the chapter turns to the question of how environmental responsibility is and
should be allocated among the various levels of government. We provide a positive review of the
responsibilities of Federal, state, and local levels of government in the environmental realm, plus
a normative assessment of this allocation of regulatory responsibility. We focus on three
arguments that have been made for Federal environmental regulation: competition among
political jurisdictions and the race to the bottom; transboundary environmental problems; and
public choice and systematic bias.
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Publisher Info
Paper provided by Resources For the Future in its series Discussion Papers with number dp-04-
Download reference. The following formats are available: HTML (with abstract), plain text
(with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Date of creation: 08 Jun 2004
Date of revision:
Handle: RePEc:rff:dpaper:dp-04-30-rev
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Web page: http://www.rff.org
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Related research
Keywords: environmental economics; environmental law; efficiency; cost-effectiveness; benefitcost analysis;
environmental federalism;
Find related papers by JEL classification:
K32 - Law and Economics - - Other Substantive Areas of Law - - - Environmental, Health, and Safety Law
Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable
Resources and Conservation - - - Government Policy
Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable
Resources and Conservation - - - Government Policy (includes OPEC Policy)
Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - -
Government Policy
This paper has been announced in the following NEP Reports:
• NEP-ALL-2006-01-24 (All new papers)
• NEP-ENV-2006-01-24 (Environmental Economics)
• NEP-LAW-2006-01-24 (Law & Economics)
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