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

September 2009

Background

The Issue

What is the proper method for determining the appropriate level of controls to impose on activities that discharge pollution and generate other effects harmful to public safety, health, and the environment?

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Several federal laws seek to protect public health and safety, and the environment, from the harmful side effects of industrial activity. The Clean Air Act, for example, sets a goal of protecting and enhancing the quality of the nation’s air resources so as to promote the public health and welfare and the nation’s productivity. Likewise, the Clean Water Act seeks 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 American public continues to support these goals strongly, conservative critics have objected to the manner in which agencies such as the Environmental Protection Agency (EPA) determine the level of protection needed to protect 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 eliminate all risk, but it is often impractical or impossible to eliminate all risks produced by industrial and developmental activity. Even when it is technically possible, it may be undesirable to eliminate all risk because to do so would require the banning of useful substances or the elimination of activities that provide significant benefits to society. Policymakers therefore must strike a balance between the desire to reduce risks and the desire to sustain economically and socially productive activity.

Decisions about the appropriate level of regulatory stringency may be made in different ways. One approach is to mandate that an agency adopt whatever level of regulation is needed 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. Alternatively, the law could require a rigorous cost-benefit balancing process, so that the agency could not regulate beyond the point at which the costs of regulation equal regulatory benefits. Congress often directs regulators to use a third option however, which requires agencies such as EPA to take cost into account without identifying the anticipated regulatory benefits, quantifying those benefits, and demonstrating that regulatory benefits will exceed cost. Rather, statutes that rely on this option require agencies to set the level of regulation by determining what kinds of controls are technologically and economically achievable for a particular regulated industry and then fixing the standard at the most protective level that is technologically and economically feasible. These are often referred to as technology-based standards. (For further discussion of how cost-benefit analysis compares with feasibility-based, or technology-based regulation, see the CPR Perspective on The Feasibility Principle.)

For example, the Clean Water Act relies heavily on the technology-based approach. Under the terms of the statute, EPA must set limits on the permissible amount of pollution discharge for some industrial point sources (identified 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 pollution reduction. However, in writing the statute, Congress deliberately declined to require precise identification and comparison of the cost and benefits of a particular regulation. Some Clean Air Act programs also take a technology-based approach to environmental regulation. EPA must set emission standards for hazardous air pollutants and for major new stationary sources of air pollution, like power plants and oil refineries, which require the maximum degree of emission reduction achievable, taking costs into consideration.

Congress has adopted a complicated array of health, safety, and environmental laws during the past 40 years. In most cases, it has refused either to require agencies such as EPA to ignore costs or to force it to monetize regulatory benefits so that it can compare them with the costs of compliance. Most laws rely instead on a technology-based approach to regulation that makes cost a relevant consideration without requiring cost-benefit analysis. This consistent congressional refusal to require that agencies rely on cost-benefit analysis in setting regulatory standards has generated some of the most vigorous criticism of the health, safety, and environmental laws.

What People are Fighting About

What’s At Stake?

The ability of agencies responsible for protecting health, safety, and the environment to

– provide adequate levels of protection without imposing paralyzing analytical and evidentiary burdens on regulatory agencies

– set standards to control harmful activities despite uncertainty about the relationship between the resulting costs and benefits

– set standards in a way that is respectful of the value of human life and of the environment

Many critics of environmental laws charge that they are economically inefficient and irrational. They contend that laws that do not require agencies to conduct cost-benefit analyses result in regulations that produce benefits that could have been achieved at lower cost. Such regulations are wasteful, they maintain, because the money unnecessarily spent protecting people and the environment could have been used to reduce other environmental risks or been channeled into income-producing investments. Even worse, the critics claim, 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 are also attacked for requiring all entities within a particular industry to achieve equivalent levels of control, even though some entities can control at lower cost than others. The critics of existing regulatory programs therefore often argue that regulation is perversely oblivious to cost.

Although few would quarrel with the notion that regulation should consider costs, costs can be relevant to standard-setting without requiring cost-benefit analysis. Indeed, there are compelling reasons not to rely on cost-benefit analysis, and Congress’s 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.

A Progressive Perspective

Congress has rarely relied on a cost-oblivious approach, for the simple reason that such an approach to regulation can generate unacceptable adverse economic impacts. In addition, a cost-oblivious approach can create problems if it requires identification of the degree of pollution reduction needed to achieve a given level of environmental protection. It is sometimes difficult to identify precise cause-and-effect linkages between discharges and adverse impacts or to determine the point at which exposure to a pollutant first creates health risks, especially when the pollutant is one for which there is no established safe threshold level of exposure (such as many cancer-causing chemicals). For this reason, Congress in 1990 abandoned the risk-based approach to regulating hazardous air pollutants under the Clean Air Act, replacing it with technology-based controls. Congress followed the same path for toxic water pollution under the Clean Water Act, replacing its initial risk-based approach to toxics in water with a technology-based approach.

An approach that requires regulatory agencies to establish standards using cost-benefit analysis is even more problematic. Cost-benefit analysis requires monetization of the benefits of protecting health and the environment. The process of reducing life, health, and the natural world to monetary values, however, is inherently flawed. 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 allowed to describe regulatory benefits qualitatively, there is a tendency to downgrade the importance of these “soft variables” in favor of the more easily quantified cost data. Thus, cost-benefit analysis tends to be skewed in the direction of high costs and low benefits, and to 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 exacerbates this problem. Finally, even if cost-benefit analysis were capable of generating regulations that are “efficient” in the economists’ sense, those regulations may be inequitable if they concentrate risks in particular areas or impose disproportionate risks on disadvantaged segments of society. Cost-benefit analysis ignores these considerations. (For more on CPR Member Scholars’ objections to the use of cost-benefit analysis, see the CPR Perspective on Cost-Benefit Analysis.)

For several reasons technology-based standards generally are preferable to standards that either are cost-oblivious or based on cost-benefit analysis. Unlike ambient quality-based or risk-based approaches to regulation that establish standards designed to produce “acceptable” levels of pollution, 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. Typically, technology-based standards cause only the least efficient individual plants to close down. They have not destroyed or even significantly disrupted any industrial sector, and have certainly not caused the cataclysmic adverse economic impacts predicted by opponents of regulation. Indeed, retrospective studies of some regulations have shown show that compliance costs have turned out to be lower 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, it provides regulated sources with continuing incentives to comply with control requirements as efficiently as 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 environmental quality-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 usually 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 needed to avoid that impact. It is also much easier to identify available and effective control technologies than to monetize the costs and benefits of regulation 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.

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 reasonably can to protect health, safety, and the environment. In some cases, it is desirable to push industry beyond its current capabilities. In those instances, agencies can 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 environmental track records to develop new, more effective risk-reducing technologies. For these reasons, technology-based and technology-forcing approaches are more consistent than cost-benefit analysis with the recognition and protection of the nonmarket values 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 in 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 thatsources 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 to achieve dramatic levels of pollution reduction in surface water pollution and other areas. Critics have claimed 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 and intransigent remaining problems. Technology-based standards have not outlived their usefulness, however. 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.