CHAPTER 17
Environmental Protection
Chapter Goals
Once again, the authors believe that the technical details of the law are less important to the student than
a general grasp of environmental law policy and its implications for the business community and the
population at large. Therefore, the authors suggest setting a foundation by building a clear picture of the
magnitude of the problem. Their opinion is that students generally have only a slim grasp of the actual
dimensions and effect of pollution. Further, they suggest a little time in encouraging students to renew the
book-long inquiry into the proper balance between the free market and governmental regulation. Finally,
the students probably need to be reminded of the practical, managerial problems that accompany the
environmental protection movement. That is, one might automatically favor cleanliness, but one must
remember that even cleanliness comes at a cost.
Chapter Learning Objectives
After completing this chapter, students will be able to:
1. Identify some of the ways market incentives can be used to prevent and correct environmental
problems.
2. Evaluate particular environmental problems using the concepts of causation and correlation,
cost-benefit analysis, future impacts, and identification of costs imposed.
3. Describe the National Environmental Policy Act (NEPA).
4. Identify duties of the Environmental Protection Agency (EPA).
5. Describe the uses of the Clean Air Act (CAA), including its application to greenhouse gas emissions.
6. Describe the uses of the Clean Water Act (CWA).
7. Describe the legal issue surrounding the reach of the CWA.
8. Identify some of the major federal laws that address land pollution.
9. Discuss the purpose and effect of the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 (CERCLA), commonly known as “the Superfund.”
10. Identify penalties and other enforcement mechanisms under federal and state regulations.
11. Describe some of the challenges to protecting a species under the Endangered Species Act.
12. Describe the primary common law remedies for environmental damage.
13. Evaluate both the strengths and weaknesses of a global process for addressing climate change.
14. Give concrete examples of environmental degradation in the U.S. and globally.
Chapter Outline
I. Introduction
From local decisions to colossal fears such as global climate change, environmental issues mark people’s
lives in a manner that was unimaginable a few decades ago. Each small decision made by the company
will have an impact on the physical world, so it is critical to understand the legal and ethical dimensions of
each such decision.
II. A Global View
Environmental issues are complex—one action can have variable impacts on the environment, the
consequences of action in one location may only manifest themselves at substantial distances, scientific
methodology requires time to establish causation with a sufficient coefficient of probability to offset
countervailing economic harm arguments, and so on. According to the World Health Organization, about
1.2 billion people or almost one-fifth of the world’s population live in areas where water is physically
scarce, and 10 percent consume food that has been irrigated with wastewater potentially contaminated
with chemicals and disease-causing organisms. In 2010, a report for the academic journal Science
analyzed the danger level for 25,000 species, classifying 13 percent of birds as threatened with extinction,
25 percent of mammals, and 41 percent of amphibians.
Practicing Ethics: Global Environmental Justice
The concept of environmental justice includes the expectation that environmental risks and hazards
should be equally distributed when measured against wealth or race. Studies in the United States have
shown that at least some risks, such as proximity to hazardous waste disposal sites, are not equally
distributed.
Part One—A Return to Fundamentals: The Market, Government Regulation, and
Self-Regulation
I. Market Failure?
Environmentalists claim the market has failed to protect people from pollution. Hence, rules are
necessary. The public and Congress have apparently agreed: A substantial number of environmental laws
have been enacted since the early 1970s—laws that address pollution of our air and waterways, that
regulate use, disposal, and cleanup of hazardous and toxic wastes, and that protect rare plant and animal
species. The bulk of the environmental laws and regulations were drafted to address compartmentalized
and discrete issues—clean air or clean water or hazardous waste; particular contaminants, point sources,
or individual species. They may be inadequate to address the interrelationships that characterize both our
environment and our social and political structures.
A. Market Incentives
One approach federal regulation has taken is to dictate standards with which businesses must comply.
Such legislation has led to steady, and at times even spectacular, strides forward in environmental
protection in the United States. But this progress has not dispelled the view, particularly among
economists and businesspeople, that standard-setting regulation may not be the best approach to
remedy environmental problems. They believe that pollution control is not so much a matter of law as
of economics.
Cap-and-Trade Programs
The concept behind cap-and-trade incentives is that a government sets a cap on the total
emissions of a particular pollutant, a cap lower than the existing level of emissions. It then issues
pollution credits to the most significant emitters of that pollutant. Credit recipients can either reduce
their discharges to within their credit limit or buy credits from other companies who have reduced
their emissions below their own credit amounts. Such programs, therefore, allow the most
cost-effective pollution reduction methods to be used to reach the desired environmental goals.
Valuing Ecosystem Services
The GHG cap-and-trade programs are more complex than the acid rain program in the United
States in that there are many, many different sources of GHG emissions and many varied ways to
reduce global GHG. Some ecologists and economists are working to establish an analytical
framework that would facilitate targeted conservation investments yielding the highest ecological
returns by systematically inventorying and valuing the services nature performs, such as carbon
absorption. Others, such as foresters, chemists, and accountants, are developing ways to verify
and audit such factors as the amount of carbon stored by a particular stand of trees. This approach
to control of GHG has raised ethical issues.
Tax Laws
Tax provisions can also affect behavior, either by encouraging particular behavior through tax
incentives or by discouraging other behavior through additional taxes. For example, there are or
have been credits against one’s federal income taxes for solar installations, production of power
from wind turbines, and purchasing certain new fuel-efficient cars, such as hybrids. Conversely,
many in the United States favor the imposition of a new federal tax on carbon, such as a specified
tax per ton of carbon dioxide emitted. The Congressional Budget Office has estimated that the
poorest 20 percent of Americans spend 21.4 percent of their income on gas and utilities, whereas
the richest 20 percent spend only 6.8 percent.
Other Incentives
Other targeted market incentives also have been employed to address environmental issues. Direct
subsidies in the nature of rebates were used in the 2009 federal Cash for Clunkers program.
Government agencies have also subsidized particular activities through guaranteed loan programs.
An Energy Department program created in 2005 to encourage application of new pollution-reducing
technologies helped fund the electric cars produced by Tesla Motors.
II. Ethical Business Decision Making
Managers may take a more environmentally responsible approach now because they think the future cost
of not doing so could be enormously larger—in negative publicity or in the cost of more stringent future
regulation—than the present actual cost of the action. Successful green growth examples are multiplying
—concrete illustrations that economic growth and environment protection are not mutually exclusive. [For
many examples of environmentally responsible actions of business, see
www.bsr.org/en/about/in-the-news.]
Part Two—Laws and Regulations
The United States has developed a wide variety of environmental protection laws and remedies, some of
which are covered in this section. In evaluating a particular regulation, it will be helpful to keep in mind the
following five concepts:
Cost-Benefit Analysis—how much as a society are people willing to pay? Do people want clean
air at any cost? The answers to these questions will necessarily be inexact and require subjective
judgments and the use of estimates.
Impact on Future Generations—when performing a cost–benefit analysis, how do people
evaluate the cost to future generations of their not taking action? How can people measure the
value to those generations if they do take action? In some cases, future generations will bear the
brunt of the decision, whatever choice people make.
Proving Causation—in the environmental area, issues of coincidence, correlation, and causation
may be extremely difficult to determine.
Who Pays?—if habitats of endangered species are to be preserved, current landowners may
simply lose all or a portion of their investment and workers employed on the land may lose their
jobs. Who should pay? Sometimes the issue is where a particular facility, such as a hazardous
waste disposal site, should be located. Not surprisingly, a common response of citizens near a
proposed location is, “yes, it’s necessary, but not in my backyard!” This response is so common,
that it is now referred to as NIMBY.
Politics—environmental protection in the United States is not just a matter of science, cost
assessment, and social policy; it is also a matter of politics. California, for example, has historically
received permission from the Environmental Protection Agency (EPA) to impose stricter vehicle
emission standards than federal law requires.
I. The Federal Role
As early as 1899, Congress enacted a law that required a permit to discharge refuse into
navigable waters. When it became apparent that private, state, and local environmental efforts were
not adequate to address the burgeoning problems, Congress began taking more aggressive legislative
steps in the early 1970s.
A. National Environmental Policy Act
The 1970 National Environmental Policy Act (NEPA) established a strong federal presence in the
promotion of a clean and healthy environment. NEPA represents a general commitment by the federal
government to “use all practical means” to conduct federal affairs in a fashion that both promotes “the
general welfare” and operates in “harmony” with the environment.
NEPA established the Council on Environmental Quality (CEQ), which serves as an adviser to the
president. NEPA’s primary influence, however, results from its environmental impact statement (EIS)
requirements. With few exceptions, “proposals for legislation and other major federal action
significantly affecting the quality of the human environment” must be accompanied by an EIS
explaining the impact on the environment and detailing reasonable alternatives.
B. Environmental Protection Agency
The Environmental Protection Agency (EPA) was created in 1970 to mount a coordinated attack on
environmental problems. EPA duties include the following, among other things:
Gathering information, particularly by surveying pollution problems
Conducting research on pollution problems
Assisting state and local pollution control efforts
Administering many of the federal laws directed to environmental concerns
A Cautionary Tale
Outside of federal action triggering the requirement of an EIS, there may be no forum for an activity
that may raise multiple issues to be evaluated based on its full environmental impact. Consider
hydraulic fracturing, commonly referred to as fracking, in which a mixture of sand, fluids, and chemical
additives are pumped under high pressure into wells to fracture shale rock, thereby releasing natural
gas for extraction. Substantial reserves of natural gas have been found in North America.
Approximately 13,000 new wells are being drilled each year in the United States. However, whether
GHG emissions are actually reduced or whether substantial other environmental issues are created by
the fracking process are questions worth considering.
II. Regulation of Air Pollution
Motor vehicles, industrial production, manufacturing, generation of electricity, and the combustion of fossil
fuels in homes and workplaces are also significant contributors to the dilemma of dirty air and greenhouse
gases.
A. Clean Air Act of 1990 (CAA)
Early clean air legislation in 1963 and 1965 afforded the government limited authority. The Clean Air
Act (CAA) amendments of 1970 and 1977 gave the EPA the power to set air quality standards and to
ensure that those standards are achieved according to a timetable prescribed by the agency. Politics
brought clean air to the fore in 1990 and the Clean Air Act of 1990 followed. It phased in new
standards over a period of years, generally required tougher auto emission controls, cleaner-burning
gasoline, and new equipment to capture industrial and business pollution, all of which worked toward
the general goal of reducing airborne pollutants by about 50 percent. In recent years, there has been
considerable high-profile litigation over clean air standards. The Supreme Court’s decision in
Massachusetts v. EPA has had the most profound effect.
Legal Briefcase: Massachusetts v. Environmental Protection Agency 127 S.Ct. 1438 (2007)
Greenhouse Gas Regulations
Although many have argued that no GHG regulation will be as effective as a federal climate bill
would be, Congress has thus far chosen not to act. The Obama Administration, however, has made
curbing GHG emissions a priority for his second term. The most far-reaching element in the plan
will restrict carbon dioxide emissions at power plants—both new plants and existing plants.
Non-GHG Air-Quality Regulations
In recent years, the EPA has issued stricter standards governing such pollutants as ozone, which is
a substantial contributor to smog; fine particulate matter, also known as soot, which can enter the
lungs and bloodstream and cause respiratory and heart ailments; and sulfur dioxide, which
contributes to acid rain and smog. Another persistent problem that the EPA has attempted to
address is air pollution traveling into downwind states and impairing their capacity to attain federally
mandated air standards.
Motor Vehicle Emission Standards
Accompanying the financial crisis, responding to higher gas prices and realizing benefit from
gradually increasing vehicle mileage, the total gallons of gas consumed has gradually decreased
since its peak in 2007. Continued improvement should result from the steady increase in average
fuel economy mandates—29 miles per gallon (MPG) in 2012 rising to 54.5 MPG for the 2025 model
year, standards that have been supported by most major auto manufacturers. The latest
regulations also incorporate for the first time express GHG emission standards.
III. Regulation of Water Pollution
BP’s oil spill in the Gulf of Mexico has done and will do untold damage, but the waters of the Gulf before
the spill were hardly pristine. Ninety percent of America’s offshore drilling occurs there. Since 1964, more
than 300 spills releasing over a half million barrels of oil have occurred, not to mention the thousands of
tons of “produced water”—a by-product of drilling that includes oil, grease, and heavy metals—that are
dumped annually. After World War II, the Gulf was even used by the government to dispose of surplus
mines, bombs, and ammunition. In both the Atlantic and Pacific oceans, “garbage patches” involving
millions of square miles exist.
A. Federal Policy
The 1972 Clean Water Act (CWA), designed to “restore and maintain the chemical, physical, and
biological integrity of the nation’s waters,” established the following two national goals:
Achieving water quality sufficient for the protection and propagation of fish, shellfish, and wildlife
and for recreation in and on the water
Eliminating the discharge of pollutants into navigable waters
The states have primary responsibility for enforcing the CWA, but the EPA is empowered to assume
enforcement authority if necessary. The National Pollutant Discharge Elimination System (NPDES)
requires all dischargers to secure a permit before pouring effluent into a navigable stream. To read the
articles in the series published by The New York Times presented an alarming picture of CWA
violations rising steadily across the nation go to www.nytimes.com/toxicwaters.]
How Did Your State Respond?
The New York Times website provides the data it received from responding states regarding CWA
permits, violations, and enforcement actions. The Times also provides information from each state on
staffing and budgets related to oversight of water pollution. See
http://projects.nytimes.com/toxic-waters/polluters/state-data.
B. Covered Waters
Decades after CWA enactment, it remains unclear exactly what waters are actually covered by the act
and therefore subject to EPA regulation. In the 2001 Northern Cook County case that follows, the
Supreme Court looked at what qualifies as “navigable waters” for purposes of the CWA.
Solid Waste Agency of Northern Cook County v. U.S. Army Corps of Engineers 531 U.S. 159
(2001)
IV. Regulation of Land Pollution
A. Toxic Substances Control Act
In 1976, Congress approved the Toxic Substances Control Act (TSCA) to toxic chemicals, asses their
risks, and control dangerous chemicals. Under the terms of TSCA, the EPA is empowered to review
and limit or stop the introduction of new chemicals. Companies must notify the EPA before
manufacturing or importing new industrial chemicals, but they need not provide any safety data unless
the data they have suggest the substance poses a “substantial risk.”
Pollution in the Movies
Toxic pollution has provided the central theme in two major Hollywood movies: Erin Brockovich and A
Civil Action. The basis of the latter was a book by the same name by Jonathan Harr, would make an
excellent basis for a student project. [See www.atsdr.cdc.gov/phs/phs.asp?id=171&tid=30.]
B. Resource Conservation and Recovery Act
By 1976, the dangers of hazardous substances were becoming apparent to all, and Congress
complemented the TSCA with the Resource Conservation and Recovery Act (RCRA). The act
addresses both nonhazardous and hazardous solid wastes. Subtitle C of the RCRA is designed to
ensure the safe movement and disposal of hazardous solid wastes. Along the cradle-to-grave path, all
those with responsibility for it must sign a manifest and safely store and transport the waste. A
preliminary requirement for cradle-to-grave tracking to apply is the statutory requirement that, to be
solid waste, the material must be “discarded.”
C. Household Recycling
The United States is the only industrialized country that has not ratified the Basel Convention, a treaty
prohibiting export or trafficking in toxic e-waste. The solution, of course, is to “reduce, reuse, recycle.”
Recycling turns materials that would otherwise become waste into usable resources, which can
reduce dependence on new materials.
D. Superfund—Comprehensive Environmental Response, Compensation, and Liability Act of
1980
The Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA),
more commonly known as the Superfund, was enacted for the purpose of identifying and cleaning up
abandoned hazardous waste sites. The process involves the assessment and ranking of proposed
sites, followed by the development and implementation of cleanup plans for sites added to the
National Priorities List. Cleanup tends to be very expensive and generally requires considerable time
to accomplish.
How Does Your Community Compare?
Thirty-three years after the passage of CERCLA, some of the country’s most hazardous sites remain
toxic. Until the earthquake and tsunami in Japan, the biggest nuclear waste hazard in the Western
world was located in southeast Washington—the Hanford nuclear facility. To know about the pollution
in their communities, students could logging onto http://www.scorecard.org. The students could visit
the EPA’s site and discover any Superfund sites near them on its maps at
http://www.epa.gov/superfund/sites/npl/where.htm.
E. Small Business Liability Relief and Brownfields Revitalization Act
There has been considerable dissatisfaction over CERCLA for a number of reasons, including the
percentage of Superfund dollars that have gone to administration expenses and litigation, as well as
the slow remediation process at most sites. Worried about liability risks, developers were often
reluctant to buy and improve brownfield sites, but that problem was alleviated with the passage of the
2002 Small Business Liability Relief and Brownfields Revitalization Act (Brownfields Act). This law
provides liability protection for prospective purchasers and contiguous property owners and authorizes
increased funding for state and local programs that assess and clean up brownfields.
Practicing Ethics: Environmentally Aware Decision Making
Students are asked to imagine that they have just been hired as the business manager for a chain of
restaurants in their state. During the interview process they are told that part of their responsibilities
would be to develop more environmentally friendly practices to be implemented at all 10 locations,
while making sure that the changes overall either have a neutral or a positive impact on the business’s
bottom line. The students then have to answer a question.
Part Three—Penalties and Enforcement under Federal Law
A broad array of enforcement actions are available to both state and federal agencies. Often violators
initially are simply warned and a compliance schedule may be prescribed. If corrective action is not
forthcoming, sterner measures may follow, including an administrative order to comply. Alternatively, the
government may resort to litigation. Although many suits are brought, most are settled rather than
litigated. Settlement opens the possibility of somewhat more creative solutions, sometimes including
Supplemental Environmental Projects (SEPs). Such projects involve the violator undertaking some
environmental “good work” or community service project. [To find other examples of SEPs, explore the
database maintained by the EPA at www.epa-echo.gov/echo/about_sep.html.]
BP Gulf Oil Spill: A Case Study of Costs
The cost to BP as a result of the Gulf oil spill may well exceed the $40 billion that BP has publicly
expected. BP may, however, recoup some of the costs if it is successful in any of its suits against its
minority partners or the rig owner, Transocean Ltd. Sources: “Gulf of Mexico Oil spill (2010),” as of April
25, 2011 [http://www.nytimes.com]; Associated Press, “Tallying the spill’s cost,” Des Moines Register,
December 30, 2010, p. 8B.
A. Citizen Suits
Many environmental statutes allow citizen suits, in which individuals may challenge government
environmental decisions, such as the granting of a permit, and generally demand both governmental
and private-sector compliance with the law. Citizen suits have often been brought under the
Endangered Species Act (ESA), which provides a federal program for the protection of threatened and
endangered species and their habitats. Such suits may either seek greater protection for a species or
argue that proposed protections exceed that which is necessary.
Legal Briefcase: Cook Inlet Beluga Whale v. Daley 156 F.Supp.2d 16 (D.C.D.C. 2001)
Legal Briefcase: Arizona Cattle Growers’ Ass’n v. Salazar 606 F. 3d 1160 (9th Cir. 2010)
B. Endangered Species Act
The combination of the Cook Inlet Beluga Whale and Arizona Cattle Grower’s Ass’n decisions illustrate how
complicated and time-consuming the legal process is for the protection of species. The International Union for
the Conservation of Nature has 4,224 species listed as critically endangered. The U.N. Intergovernmental Panel
on Climate Change indicates temperature increases this century could put 20 to 30 percent of the world’s plants
and animals in danger of extinction. [For photos of some endangered or threatened species in the United
States see www.nytimes.com/interactive/2013/03/06/science/earth/endangered-species.html?
ref=earth#index.]
Part Four—Common Law Remedies
Long before federal or state governments became actively involved in environmental issues, courts were
grappling with the problem and fashioning common law remedies. Legal arguments have typically
revolved around the extent of a person’s right to use and enjoy private property if such usage causes
harm to a neighbor’s property or the use of public property. More recently, tort actions of negligence and
strict liability have been pursued by injured individuals.
Nuisance
A private nuisance is a substantial and unreasonable invasion of the private use and enjoyment
of one’s land; a public nuisance is an unreasonable interference with a right common to the
public. Harmful conduct may be both a public and private nuisance simultaneously; the case law
distinctions between the two are often blurred.
Trespass
A trespass occurs and liability is imposed on any intentional invasion of an individual’s right to
the exclusive use of his or her own property.
Negligence
Particularly troubling causation issues can and have arisen in negligence cases based on
environmental pollution, such as when a plaintiff claims injury from a toxic substance
manufactured or otherwise supplied by a defendant.
Strict Liability
Certain activities, such as the use of toxic chemicals, may be seen as so abnormally dangerous
as to give rise to a strict liability claim. In an environmental law context, strict liability has been
considered where crop dusting contaminated adjacent properties, toxic chemicals were
improperly disposed of, and oil contaminated a nearby water well.
Part Five—Global Climate Change
Global climate change has been described as “among the handful of most important public policy issues
of our time, “one of the greatest challenges the world faces,” and the “greatest market failure the world
has ever seen.” The fifth assessment report of the Intergovernmental Panel on Climate Change (IPCC)
will be complete in October 2014. The first part, on the physical science basis for climate change, states
that it is “extremely likely that human influence has been the dominant cause of the observed warming
since the mid-20th century” and that human influence “has been detected in warming of the atmosphere
and the ocean, in changes in the global water cycle, in reductions in snow and ice, in global mean sea
level rise, and in changes in some climate extremes.”
I. The Kyoto Protocol
In 1997 the governments of the world, realizing that global action would be required to have any
significant impact on overall emissions, adopted the Kyoto Protocol. Specifically, the protocol called for a
5 percent reduction from 1990 levels of greenhouse gas emissions to be achieved by 2012. The protocol
acknowledged that developed countries were principally responsible for the GHG levels at that time. In
achieving its fundamental objective, the protocol has been a complete failure. In 1990, approximately 31
million metric tons of carbon dioxide equivalents were emitted globally; by 2010 that number had risen to
roughly 50 million metric tons.
Practicing Ethics: Voluntarily Reduce Greenhouse Gas Emissions?
Although the United States has not been a party to the Kyoto Protocol, many U.S. multinationals will be
subject to its provisions because they do business in ratifying countries. Other U.S. businesses have
chosen to voluntarily adopt emission reduction strategies.