The Pollution Solution: Save the Environment, One Property Right at a Time
By far the most common response to providing environmental quality or to conserving natural resources has been command-and-control regulations where the government decides what actions shall be taken by individuals and organizations to meet an environmental objective and enforces them with its police powers. As one would expect, there are numerous problems with this approach; let’s focus on air pollution control and fisheries to illustrate them.
One problem is that regulators do not have the information required to set a cap on the right amount of air pollution or total fishing. They typically rely upon the assessments of agency experts that may or may not coincide with what actual users believe. Indeed, the relationship between users and regulators is often understandably antagonistic with little trust or cooperation. And in other cases, influential parties use regulatory rules to advance their position relative to their competitors. In either case, the “wrong” regulation is likely to be put into place—at least for meeting the objective of improving the environment or protecting a resource in a cost-effective manner.
Another related problem is that because regulators do not have the correct information, they typically mandateuniform technologies or performance standards for all parties. Those regulations do not account for the differences across firms in their abatement costs. In the case of electricity utilities, for example, the Environmental Protection Agency (EPA) under the Clean Air Act required that all utilities install flue gas scrubbers to remove sulfur dioxide even if some emitted little sulfur dioxide because they used natural gas or low-sulfur coal in their power plants.