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Statutory Design

The Advantages of Technology-Based Standards in Protecting Health, Safety, and the Environment

Background

Federal law seeks to protect public health and safety, and the environment from the harmful side effects of industrial activity and land development. The Clean Air Act, for example, declares as its goal the protection and enhancement of the quality of the nation’s air resources so as to promote the public health and welfare and the nation’s productivity. Likewise, the goal of the Clean Water Act is to restore and maintain the integrity of the nation’s waters through the achievement of water quality suitable for fish and wildlife and recreational use.

Although the goals of these laws continue to be widely supported, conservative critics have objected to the manner in which agencies determine the appropriate level of regulation. The essential task is to decide the level of protection needed to protect public health, safety, and the environment. That question is sometimes referred to as the “how safe is safe” or “how clean is clean” question. Ideally, regulation would result in the elimination of all risk, but it is often impractical or impossible to eliminate all risks produced by industrial and developmental activity. It may be undesirable to eliminate all risk, for example, because trying to do so would require the elimination of activities that provide significant benefits to society. We must therefore strike a balance between the desire to reduce risks and the desire to sustain economically and socially productive activity.

The decision about the appropriate level of stringency of regulation may be made in a variety of ways. At one extreme, the law could mandate that an agency adopt whatever level of regulation is necessary to achieve a desired level of protection (such as air clean enough to breathe without creating a risk of pulmonary illness), regardless of the costs it would take to achieve that goal. On the other extreme, the law could require that agencies determine the appropriate levels of regulation through a rigorous cost-benefit balancing process, so that the agency may not regulate at all unless it can show that regulation will yield regulatory benefits that exceed the costs of compliance. Congress, however, often uses a third, intermediate option which requires agencies such as the Environmental Protection Agency (EPA) to take cost into account without depending on the outcome of a cost-benefit analysis. Under statutes that rely on this third option, Congress requires agencies to set the level of regulation by determining what kinds of controls are technologically and economically achievable for a particular regulated industry. These are often referred to as technology-based standards.

The Clean Water Act is an obvious example of a statute that relies heavily on the technology-based approach. EPA must set effluent limitations for existing point sources of pollution by determining the level of control that could be achieved through the use of the “best available technology economically achievable.” The statute specifies that in determining that level, EPA consider “the cost of achieving such effluent reduction.” Nevertheless, the Clean Water Act pointedly fails to require any kind of cost-benefit analysis. New point sources are set through a similarly cost-sensitive process that abjures reliance on cost-benefit analysis. These sources are subject to controls based on the “best available demonstrated control technology,” taking into consideration the cost of achieving effluent reduction as well as other factors such as non-water quality environmental impact. Still other examples of a technology-based approach to environmental regulation are found in the Clean Air Act. EPA must establish emission standards for hazardous air pollutants that require the maximum degree of emission reduction achievable, taking costs into consideration. The agency must also set standards for major new stationary sources of air pollution, like power plants and oil refineries, in the same basic way.

Congress has adopted a complicated array of health, safety and environmental laws during the past 30 years. In most of those instances, it has avoided relying on either of the extreme options concerning the role of cost that are described above. Many of these laws instead rely on a technology-based approach to regulation that makes cost a relevant consideration without requiring that agencies perform a cost-benefit analysis. It is this consistent congressional refusal to require that agencies rely on cost-benefit analysis in setting regulatory standards that has generated some of the most consistent and vigorous criticism of the health, safety and environmental laws.

What People are Fighting About

Many critics charge that current environmental laws is economically inefficient and irrational. They contend that laws that do not require agencies to conduct cost-benefit analyses can result in regulations that produce benefits that could have been achieved at lower cost. Such regulations are wasteful, in the critics’ view, in that the money that is unnecessarily spent in protecting people and the environment could instead have been spent reducing other environmental risks or could have been channeled into income-producing investments. Even worse, according to the critics, an approach not tied to cost-benefit analysis can produce counterproductive regulation if the costs of complying with regulation exceed resulting regulatory benefits. Technology-based standards have become a particular target of criticism on the ground, among others, that they require all entities within a particular industry to achieve equivalent levels of control, even though some entities are capable of controlling at lower cost than others. In short, the critics of current forms of regulation often contend that the current system reflects an approach that is perversely oblivious to the cost of regulation.

Few would quarrel with the notion that regulation should take costs into account. Agreement with that proposition, however, does not necessarily support adoption of the extreme cost-benefit based approach to regulation favored by critics of regulation. Indeed, environmental and other public interest groups contend that there are compelling reasons not to rely on such an approach, and that Congress’ consistent refusal to replace technology-based approaches with a cost-benefit standard indicates that it has by and large found those arguments to be persuasive.

CPR's Perspective

Neither of the two extreme methods of determining the appropriate level of regulation is desirable. A system of regulation that completely excludes cost considerations is undesirable because of the adverse economic impact it is capable of generating and the difficulty of identifying cause-and-effect linkages between discharges and adverse environmental impacts. Congress has rarely relied on a cost-oblivious approach, even when it has endorsed the use of health- or risk-based regulation. As the Supreme Court recently recognized, the Clean Air Act requires that EPA set national ambient air quality standards without taking cost into consideration. But the establishment of the standards is only the first step of the process. The second step involves the development of implementation plans by the states. At that step of the process, the states are authorized to consider a variety of factors, including the economic impact of reducing emissions. Even under this two-step approach, however, agencies can become embroiled in difficult line-drawing inquiries. The Clean Air Act requires that EPA set the national ambient air quality standards at the level that is requisite to protect the public health, allowing an adequate margin of safety. Given the difficulty of accumulating the evidence necessary to establish a dose-response curve, it is often hard to determine the point at which exposure to a pollutant first creates health risks. When the pollutant involved is a non-threshold pollutant—that is, one for which there is no established safe threshold level of exposure, such as a cancer-causing chemical, the exercise becomes virtually impossible. If a pollutant causes some risk to health at all levels of exposure other than zero, the mandate to establish a level that is requisite to protect the public health, no less that the level provides a sufficient margin of safety, seems nonsensical. It is for that reason that EPA made almost no headway during the first 20 years after the adoption of the Clean Air Act in establishing national emission standards for hazardous air pollutants, most of which were carcinogens for which safe threshold levels had not been established. In light of this experience, Congress abandoned the risk-based approach to the regulation of hazardous air pollutants in 1990, replacing it with a set of technology-based controls. Congress followed the same path with respect to toxic water pollution under the Clean Water Act, replacing its initial risk-based approach to toxics in water with a technology-based approach.

CPR is even more strongly opposed to the opposite extreme, which requires that EPA and other agencies establish standards to protect health, safety, and the environment through the use of cost-benefit analysis. Proponents of cost-benefit analysis argue that it leads to a more efficient allocation of society’s resources, but CPR believes that cost-benefit analysis is incapable of living up to this promise. Cost-benefit analysis requires monetization of the benefits of protecting human health and the environment. The process of reducing life, health, and the natural world to monetary values, however, is inherently flawed. It is typically much easier for agencies such as EPA to quantify compliance costs than it is for them to quantify the benefits of environmental regulation. An approach that requires justification in cost-benefit terms is therefore likely to delay the issuance of protective regulations until the agency can provide the missing information. In addition, benefit quantification requires establishing monetary values for things like clean air or water, avoided illnesses, and, ultimately, human life itself. Such an effort to “commodify” incommensurable values is morally repugnant and inconsistent with the extraordinary value that our society places on human life and a clean environment. Even if agencies are authorized to describe the benefits of regulation qualitatively rather than quantitatively, there is a tendency to downgrade the importance of these “soft variables” in favor of the more easily quantified cost data. Thus, it is likely that cost-benefit analysis, by skewing cost-benefit relationships in the direction of high costs and low benefits, will inevitably produce less costly but also less protective levels of regulation. The practice of discounting the future benefits of regulation that typically accompanies cost-benefit analysis simply exacerbates this problem. Finally, even if an approach based on cost-benefit analysis generates regulations that are “efficient” in the economists’ sense of that term, those regulations may be inequitable in the sense that they concentrate risks in particular areas or impose disproportionate risks on disadvantaged segments of society. For more on CPR’s objections to the use of cost-benefit analysis, (see CPR’s Perspective on Cost-benefit Analysis).

Technology-based standards are preferable to either of the extreme versions of standard-setting for several reasons. Unlike ambient quality-based or risk-based approaches to regulation, technology-based regulation is not oblivious to cost. Agencies operating under technology-based statutes are limited to setting standards that are achievable by industry using technology that is already available or will be available within the foreseeable future. The conservative critics of technology-based standards often claim that these standards cause unnecessary and harmfully disruptive economic impacts. There is little or no evidence to back up this charge. Technology-based standards have caused few individual plants to close down, have not destroyed or even significantly disrupted any industrial sector, and have not caused cataclysmic adverse economic impacts. Few retrospective studies have been performed to measure the economic impact of the application of technology-based regulation, but those that have been done typically show that compliance costs have turned out to be less than predicted because, for example, industries developed more efficient and effective technologies in response to regulation. Because technology-based regulation usually dictates the level of control but not the method of achieving it, that kind of regulation provides regulated sources with continuing incentives to develop means of achieving the designated levels of emissions reduction in the most efficient way possible. Conservative critics also charge that technology-based controls often require the expenditure of millions, and in some cases, billions of dollars to save even one life. The methodologies used to support this charge, however, have been definitively refuted.

Unlike either health-based controls or cost-benefit analysis, technology-based regulation does not impose crushing analytical burdens on agencies charged with protecting health, safety, or the environment. It is typically easier for an agency to determine what level of control industry is capable of achieving using current technology than it is to determine the impact that a particular source or group of sources will have on the environment in order to determine the level of control necessary to avoid that impact. It is also much easier to determine what level of control industry is capable of achieving using currently available technology than to monetize the costs and benefits of regulation in order to determine the level of regulation that will yield the optimal cost-benefit relationship. Agencies are therefore likely to generate technology-based regulation more quickly than regulation based on risk or on cost-benefit analysis, and they are likely to have an easier time defending that regulation if it is attacked in court. For similar reasons, technology-based standards are typically easy for both agencies and private citizens to enforce when they are translated into specific emission limits contained in permits issued to individual sources.

A technology-based approach to regulation also avoids the moral problem inherent in cost-benefit analysis because it does not require that regulatory agencies translate the benefits of regulation into monetary terms. Instead, agencies governed by a technology-based mandate determine the level of control that available technology is capable of achieving, taking cost into account, thereby committing industry to doing the best that it can to operate in a way that is protective of health, safety, and the environment. In some cases, it is desirable to push industry beyond its current capabilities. In those instances, agencies can build on technology-based controls to develop technology-forcing approaches to regulation. Technology-forcing regulation is aspirational in this sense: it sets regulatory standards at a level that requires industries with relatively poor track records on pollution control to develop new, more effective risk-reducing technologies. For these reasons, technology-based and technology-forcing regulation are more consistent than cost-benefit analysis with fostering of the nonmarket significance of human life and the natural environment.

Technology-based regulation is even-handed in that all members of the same industry are treated equally. Because technology-based standards set minimal levels of control with which all states must comply, these standards take away incentives that industry might have to relocate to states with less severe environmental problems or to states with less stringent standards.

Technology-based regulation is flexible. It is relatively easy to engraft a market-based approach like emissions trading onto a technology-based system of controls. The technology-based controls set individual source emission limits, which sources are free to meet by controlling themselves or by purchasing emission credits from other sources that have overcontrolled. The combination of technology-based controls with carefully monitored emissions trading will induce regulated entities to meet their emission limits in the most efficient manner possible.

Finally, practical experience demonstrates that technology-based regulation has worked. Before the adoption of the Clean Water Act in 1972, for example, many of the nation’s surface water bodies were little more than waste receptacles. Rivers like the Cuyahoga even caught on fire. In the last 30 years, dramatic progress has been made through the application of the statute’s technology-based controls in reducing the levels of pollution discharged into these waters and in restoring some of them to fishable-swimmable status. Conservative critics sometimes claim that technology-based standards were a suitable means of eliminating the most flagrant pollution problems, but that they have become a blunt instrument to attack the more subtle remaining problems, which tend to be more costly to control. CPR believes, however, that technology-based standards have not outlived their usefulness. Agricultural practices that generate nonpoint source water pollution, for example, have yet to be subject to meaningful controls, and technology-based regulation is capable of generating significant reductions in the levels of health and safety risks experienced in the workplace.

In sum, CPR opposes the replacement of the technology-based approach to health, safety, and environmental regulation with either a risk-based approach or one based on formal cost-benefit analysis. It supports instead continued reliance on technology-based controls because:

• they are not cost oblivious;

• they do not require agencies to justify regulation through application of a cost-benefit measure, particularly one that seeks to reduce all relevant values to dollars-and-cents terms, thereby avoiding the monetization of incommensurable values such as human life and a clean environment;

• they are easy for agencies and the public to enforce;

• they allow agencies to take steps to protect health, safety, and the environment even in the absence of certainty concerning the precise amounts of harm attributable to industrial and developmental activity and concerning the costs necessary to avoid that harm;

• they have proven to be affordable, even-handed, flexible, and effective.

For further analysis supportive of technology-based approaches to regulation, see Wendy E. Wagner, The Triumph of Technology-Based Standards, 2000 U. Ill. L. Rev. 83; Howard Latin, Ideal versus Real Regulatory Efficiency: Implementation of Uniform Standards and “Fine Tuning” Regulatory Reforms, 37 Stan. L. Rev. 1267 (1985); Thomas O. McGarity, Media-Quality, Technology and Cost-Benefit Balancing Strategies for Health and Environmental Regulation, 46 Law & Contemp. Probs. 159 (1983); Sidney A. Shapiro & Robert L. Glicksman, Risk Regulation at Risk: Restoring A Pragmatic Approach (2003).