Okay, so over the years policymakers have formulated several different approaches to the problem of industrial, energy, and transportation pollution (to name a few). We can choose just rote government regulation or Market Based Instruments (MBIs). Of course, there is much contention as to which method of reducing and controlling pollution is more effective. Obviously neither one is ideal, but they are the best solutions policymakers have devised in our imperfect world at this time.
Before we can even begin to talk about different policy instruments of regulating pollution, we must first determine if "The Government" has the right to do so. I personally believe the government does have the right to regulate pollution legally and as a matter of convenience and congruence.
I believe that most of the burden should fall on the shoulders of the federal government because pollution is a trans-boundary problem. Ordinarily, the federal government invokes the Commerce Clause of the Constitution when it wishes to regulate the goings-on of the states. **Interesting side note: According to Reuters, Texas is suing the federal government for attempting to regulate greenhouse gasses. This court case could radically impact federal environmental regulation.** This portion of the Constitution grants the federal government the right to regulate commerce between states. Over the years, the courts have expanded the Commerce Clause to include regulation of pollution.
If environmental regulation is left to the federal government, then all states will be treated equally. If the states have different and unequal policies concerning pollution, an unfair economic advantage may be created in one state. Also, many states could possibly free ride on the states that take pollution problems seriously. If the federal government enacts legislation to control pollution, then all the states must comply. I do believe, however, that the States should be responsible for regulating point-source pollution. Point-source (the source of a contaminant can be traced back to a single location) pollution is less of a trans-boundary problem and should therefore be left to the individual states to regulate.
Regulation has its benefits and its drawbacks. On one hand, regulation is theoretically easy to enforce. Ideally, there are a given set of rules and restrictions. Polluters are made aware of these rules and restrictions. If polluters do not comply with the rules and restrictions, they must suffer the consequences. Regulation is fair because all polluters must abide by the same set of rules and face the same consequences for disobeying the rules.
On the other hand, regulation is incredibly difficult to enforce. Regulators develop relationships with the companies they regulate and begin to sympathize. While the budget of EPA is in the billions of dollars, it is not nearly adequate to regulate and ensure the compliance of each industry. Many polluters continue to pollute without consequence.
Market Based Instruments, or rather those who favor them, place their faith in the markets to innovate technologies and thus reduce pollution. There are several different forms of MBIs. The two most popular are Cap and Trade and Ecotaxes. MBIs have benefits and drawbacks also. Most Americans hold a strong preference for free market solutions to potential dilemmas. We generally prefer to see our markets regulate themselves and solve problems internally. Many Americans see government intervention into industry affairs as an unnecessary hindrance to market growth. Therefore, MBIs have appeal to the general public because they appear to be a free-market solution to pollution.
MBIs appear to be a preferable solution to pollution reduction, but there is really only prima facie evidence that suggests these tools work. MBIs have several serious and subversive impacts on the reduction of pollution. For instance, MBIs don't allow for the greatest reduction in pollution because the government sets pollution limits too high, which in turn allows polluters to continue polluting at a relatively comfortable level. In effect, pollution is reduced, but only minimally. Cap and Trade does very little to reduce pollution. A wealthy corporation can simply buy up a large number of carbon permits instead of investing in new technologies to reduce pollution. This tool promotes inequity in the market. Smaller businesses do not have the same purchasing power as larger businesses, and are thus put at a disadvantage when buying carbon permits.
Because the American government functions (supposedly, at least) for the people, I tend to put my faith in public officials and government systems to make the common good its number one priority. Therefore, I would much rather the government regulate polluters than allow polluters to self-regulate using MBIs. There are countless citations of businesses being ripped asunder by environmental regulation, but in all reality, at least according to Stephen M. Meyer of the Massachusetts Institute of Technology, there is virtually no evidence of a negative effect of environmental regulation on businesses. "Focusing on a number of different industries, using a variety of economic indicators, and covering different time periods [...] studies find that neither national nor state economic performance have been significantly or systematically affected by environmental regulation." (This was a very interesting essay. It can be found in its entirety here.) I think this evidence alone is enough to make someone consider the benefits of regulation over MBIs.
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