State of Regulation

When the Environmental Protection Agency (EPA) was created in 1970, it arrived amid a roiling public movement protesting the ill effects of air pollution and toxic-waste disposal into the nation’s waterways. Tens of thousands of Americans, in an enthusiastic show of stewardship, flooded the nascent organization with résumés.

The EPA got its regulatory teeth shortly thereafter, when Congress passed two landmark pieces of legislation: the Clean Air Act of 1970, which targeted pollutants contributing to acid rain and smog, and the Clean Water Act of 1972, responsible for slashing the amount of polluted runoff in rivers, lakes, and streams.

“The policies were overwhelmingly popular,” says Joe Shapiro, an associate professor in the Department of Agricultural and Resource Economics (ARE). “It was vastly different than the more partisan environmental politics of today.”

Over the past 50 years, policy makers have extended and built on the Clean Air and Clean Water Acts as well as other environmental regulations of the 1970s, including the Safe Drinking Water Act and the National Environmental Policy Act. Half a century after those foundational laws were passed, Shapiro and other Berkeley researchers are taking stock of the United States’ environmental regulatory past and generating groundbreaking research that could help plot the country’s economic, social, and political future.

How much is too much regulation?

The Clean Air Act and the Clean Water Act are roundly regarded as important successes, and their impacts are remarkable. Since the Clean Air Act went into effect, ambient concentrations of air pollutants, such as soot, have fallen by more than 90 percent, resulting in vast public health benefits including greatly reduced rates of respiratory illness, heart disease, and premature birth. The Clean Water Act, meanwhile, is credited with significantly reducing pollution runoff from factories and wastewater treatment plants.

But Shapiro warns against complacency. “It’s easy to take what we’ve done for granted and pat ourselves on the back for such incredible decreases in pollution over the years,” he says. “We must continue to use evidence and research to determine where additional policy is valuable.”

His research is surfacing new evidence that suggests that even more regulations would benefit society. In a working paper published last December, Shapiro and Reed Walker, an associate professor of business and public policy, present a novel approach to measuring the costs of additional regulation under the Clean Air Act for industrial air pollution sources.

The social costs of producing goods for society include both the private costs incurred by manufacturers—for things like labor and materials—and the external costs that are passed on to society, such as health impacts from pollution, the destruction of wildlife habitat, the reduction of recreational areas, and so on.

Economists generally agree that environmental policy should continue to reduce pollution until the costs of additional pollution reductions exceed the benefits to society, and that cleaning up pollution usually becomes more expensive with each additional unit of pollution reduction. “Over the last half century, there’s been much debate about the magnitude of the costs and benefits of additional air pollution regulation,” says Shapiro. “Our recent paper speaks to this debate.”

In the study, he and Walker asked whether, given past progress, regulations adopted since the Clean Air Act’s enactment have pushed too far or not far enough.

Their study focused on what are known as offset markets, a Clean Air Act provision that allows industrial polluters to buy and sell rights to emit air pollution. After analyzing data on offset transactions from 16 states that collectively represent 60 percent of economic activity in all U.S. air pollution offset markets, Shapiro and Walker concluded that though additional air pollution regulation would have large economic costs, it would create even greater economic and social benefits—about 10 times larger on average.

“Our research suggests, from the standpoint of economic theory, that regulation is too lenient and that society could benefit tremendously from tightening the standards even further,” says Walker.

What is true of air quality regulation also applies to federal drinking water rules. In a study published in the Journal of Economic Perspectives  in 2019, Shapiro and co-author David A. Kaiser assessed the history, effectiveness, and efficiency of the Clean Water Act and the Safe Drinking Water Act. They found that overall investments in providing clean drinking water under those laws—while not cheap, at about 0.8 percent of the annual U.S. gross domestic product—create “substantial health benefits that exceed their estimated costs.”

By providing nuanced considerations of the real costs and benefits of air and water policy, these studies can guide policy makers seeking to improve regulations by maximizing societal benefits. “The challenge now is to address environmental problems not addressed or skipped by environmental policies in the last half century,” Shapiro says.

Policy for equity

For its part, California is attempting to build on federal successes while also making up for shortfalls. In addition to establishing trailblazing policies to tackle local air pollution and global greenhouse gas emissions, the state is addressing state and federal legislative deficiencies related to issues of environmental justice.

A working paper Walker co-authored in October with ARE associate professor Meredith Fowlie and Goldman School of Public Policy visiting professor David Wooley explores the linkages between U.S. and California climate policy, environmental justice, and local air pollution. “The goals of making air regulations cost-effective and equitable are often in tension with one another,” says Walker.

In 2006, California passed the Global Warming Solutions Act (Assembly Bill 32), which at the time was the most significant climate change law in the country. One challenge with the legislation, says Fowlie, is that it targeted “two fundamentally different problems”—climate change and local air pollution—under the same regulatory framework.

Fowlie says that dealing with local air pollution can indeed play an important role in building support for domestic action on climate change, since greenhouse gas emissions are often co-emitted with other pollutants that affect local air quality. But there’s no guarantee that policies designed to efficiently reduce greenhouse gas emissions will deliver local air pollution improvements to communities living in proximity to pollution sources like refineries, congested highways, and hazardous-waste sites.

California has been working to address these and other important environmental concerns with policies that explicitly target these issues. One important example is the Community Air Protection Program (AB 617), which was signed into law in 2017. In short, it requires the California Air Resources Board and regional air districts to create additional emissions reporting, monitoring, and reduction plans in communities most affected by local air pollutants.

To work to improve air quality for the most polluted communities, says Fowlie, the state must first be able to accurately pinpoint where those communities are. Until recently, it has been difficult to measure disparities in pollution exposure, owing to a lack of regulatory-grade devices for monitoring airborne particulates. Fortunately, Fowlie says, advances in low-cost air quality monitors and remote sensing—such as the use of satellite imagery—are making it easier to understand such disparities across the country and in real time.

Another benefit of AB 617 is that it leverages community input to address the inequities that local pollution creates. The policy provides “unprecedented levels of support for public engagement in the development of comprehensive, community-level emission reduction plans,” write Fowlie, Walker, and Wooley.

“The jury is still out on whether AB 617 is having the desired impact,” Fowlie comments. “I have high hopes because it recognizes the importance of empowering communities and bringing them into a political process that they feel marginalized from. I think that is exactly what we should be trying to do.”

The challenge ahead

Predicting the future of environmental policy is no sure thing. Legislation is often born of “a confluence of social awareness,” says Ted Grantham, a Cooperative Extension specialist in the Department of Environmental Science, Policy, and Management who studies state and federal waterway policies.

“There were events in the ’60s, like the fire on the Cuyahoga River in Cleveland, where people really became aware of the environmental damage that was occurring around them,” he says. “It takes a remarkable alignment of social and political forces to pass legislation. It’s difficult to imagine passing a law like the Clean Air Act now.”

During his term, former president Donald Trump withdrew the U.S. from the Paris Agreement and reversed, revoked, or rolled back nearly 100 environmental rules established by his predecessors. The rollbacks included canceling a requirement for oil and gas companies to report methane emissions and rescinding water pollution regulations for fracking on federal and Native American lands.

Still, there may be room for optimism. During his first weeks in office, President Joe Biden affirmed that environmental equity and fighting climate change are key priorities for his administration. He immediately signed a slate of environmental executive orders undoing most of Trump’s actions and renewing the country’s commitment to the Paris Agreement. The administration also quickly reversed the expansion of offshore oil drilling—criticized for releasing toxins into the air and water—and halted construction of the Keystone XL Pipeline, a proposed 2,600-mile oil pipeline that is said to threaten adjacent waterways and animal habitats.

As the nation and the world continue to battle the effects of environmental degradation and climate change, Shapiro expresses guarded optimism.

“Environmental policy will advance, but I’m uncertain how far and how quickly,” he says. “While the Clean Air Act was complex, it didn’t require the U.S., the E.U., China, India, Brazil, and other countries to negotiate what the law would look like. For climate policy, coordination across countries is important.”