Innovation in Environmental Policy.

Marcis, John G.

This book contains a collection of essays from a conference held at Woods Hole Oceanographic Institution. Funding for the conference and the book was provided by the Marine Policy Center at Woods Hole Oceanographic Institution and Resources for the Future, Inc. The essays in this book explore two areas of environmental policy: the enforcement of environmental laws and the expansion of liability law claims.

Tom Tietenberg provides a brief Introduction and Overview of the book in which he stresses that environmental policy has been shaped in an evolutionary manner. As new environmental problems are identified, new approaches designed to resolve the problem are implemented. Recent innovations in environmental policy have enlarged the menu of policy instruments and transformed the roles of various institutions responsible for implementing and enforcing this expanded menu.

The first section of this book contains four essays on environmental enforcement. The enforcement of environmental laws has undergone some dramatic changes in the last decade. In the first essay, Cheryl Wasserman, division head at the Environmental Protection Agency's (EPA) Office of Enforcement, provides an insider's perspective of the federal enforcement and compliance process. Wasserman reviews the basic theories on compliance and discusses various strategies used by the EPA to promote compliance. She takes the view that although economics has made significant contributions to the study of monetary penalties in promoting environmental compliance it has added little to the study of the economics of enforcement.

In the second essay, Kathleen Segerson and Tom Tietenberg describe the three different responses for the EPA after a violation of federal environmental law is detected. These three strategies (an administrative proceeding, a civil judicial proceeding and a criminal proceeding) involve different burdens for the agency and involve different remedies. Most of the essay is devoted to the design of efficient fines. The authors contend that if both the firm and the worker can influence damages then an efficient penalty structure should involve both the firm and the worker. The form of the penalty structure is influenced by the degree of substitutability between corporate and individual penalties. Segerson and Tietenberg contend that when such penalties are not perfect substitutes. more innovative penalties, including incarceration, may be justified.

The third essay, by Mark Cohen, serves two purposes. First, Cohen reviews the criminal penalty provisions of environmental statutes and compares the views of traditional economic and legal theories on the purpose of criminal sanctions. Second, Cohen provides anecdotal evidence of criminal sanctions on a number of environmental cases and then tests empirically some of the implications of the Segerson and Tietenberg analysis. An unexpected finding of the empirical analysis is that courts treat individual and corporate liability for large firms as complements and not substitutes. Cohen speculates that this may reflect judges and juries charging more to "deep pockets." In the final essay on enforcement, Wendy Naysnerski and Tom Tietenberg discuss the expanding role of non-governmental organizations in enforcing environmental statutes. Amendments to the Clean Air Act authorized private citizens to seek injunctions against firms violating environmental standards. The authors construct a database containing information on 1,205 citizen suit cases for the 1978-1987 period and use it to analyze the pattern of citizen litigation activity. The analysis suggests that private enforcers could complement public enforcers and when private enforcers are entitled to attorney fee reimbursement, the financial burden of enforcement is shifted to those who create the need for it.

The second section of this book contains three essays on environmental liability law. While regulation has been the more dominant tool used to promote environmental protection historically, the last few years have seen liability (tort) laws emerge as a possible environmental tool. For example, The Comprehensive Environmental Response, Compensation and Liability Law of 1980 (CERCLA), also known as "Superfund", allowed cleanup costs and damages to be imposed on responsible parties.

The essay by Donald Dewees examines the rules of common law as they apply to pollution. Dewees argues that significant barriers exist that inhibit the initiation of liability claims. The author takes the view that the cost of the tort system precludes its use in redressing environmental damage claims except in cases where a single polluter has been identified who has discharged large amounts of pollutants in a small area. He contends that regulation has generally succeeded where liability law has failed.

The essay by Richard Dunford traces the evolution of environmental damage liability for oil spills. Prior to the Clean Water Act of 1977 (CWA), environmental damages resulting from oil spills were not recoverable. The CWA instructed governmental agencies to recover compensatory damages for injuries to natural resources and to use the recovered damages to restore, rehabilitate, replace or purchase the damaged natural resource. Dunford notes that although subsequent legislation and court decisions increased the significance of such actions in theory, the limitations placed on cleanup costs and damages reduce the practical significance of such actions.

Kathleen Segerson reports on provisions within CERCLA that assign the liability for cleaning up contaminated sites to "potentially responsible parties" and how recent court decisions expanded the definition of such parties to include lending institutions which foreclose on a piece of contaminated property. Since lending institutions tend to have "deep pockets", they are particularly attractive targets for financing that cleanup. Segerson discusses the advantages and disadvantages of extending such liability to lending institutions. The author concludes that efficiency provides no general justification for absolving lenders from such cases.

The last two essays in the collection are relatively short and assess the state of environmental policy by reviewing the papers presented at the conference and by providing insight into future research. Clifford Russell devotes most of his review to environmental enforcement and emphasizes the role of private enforcement. Susan Rose-Ackerman compares and contrasts environmental regulation and liability law. She comments on possible incentive-based reforms that may require a reformulation of the relationship between environmental liability law and environmental enforcement.

The book contains a fifteen page collection of references as well as a complete index of statutes, authors and court cases. It is of interest to note the role of economics and economic methodology in shaping environmental legislation. John G. Marcis Francis Marion University