Tuesday, September 30, 2014

Get Smart: Environmental Policy Selection

Policy selection in regards to environmental issues is a complex, multi-faceted process which requires an interdisciplinary approach that mirrors the issue itself. Environmental problems often manifest themselves across social, economic, and political boundaries and the criteria selection must reflect this in order to truly begin to solve an issue. The major categories of selection criteria widely reflect the costs and burden, environmental goals reached, and the social and scientific change generated by said policy. While these criteria are contained in one of Kingdon’s streams, the process itself is a microcosm of the trident metaphor of his streams of selection. 

In today’s policy arena, the discussion of an environmental issue begins and ends with the bottom line. Efficiency, especially in regards to costs and benefits, is a major criterion for policy selection because polluters want to create a good or service in a profitable manner and policymakers do not want regulatory agencies to hamstring the economy to the point of angering their voting constituency. The Kaldor-Hicks criterion states a policy is effective if the benefits of a policy outweigh the costs. The benefit-cost analysis (BCA) is a tool grown out of the Kaldor-Hicks criterion that is used to measure how effective a policy is. An ideal policy would maximize benefits to society and polluters while minimizing costs. Often this requires an approach that combines command and control and market-based instruments. Command and control instruments seek to directly regulate a source of emissions either by the use of technology or product bans. Market-based instruments use an economic approach to incentivize pollution abatement. When implemented correctly, the distributional equity of a BCA creates a system that allows polluters to profit, reduced emissions, and less strain on regulatory agencies because of universal compliance. 

When considering environmental policy, the most successful policies are those that protect human health and the environment. In fact, some argue this should be the only measure of a successful policy. It is this argument between environmental results and distributional equity that drives a majority of the candor in the discussion of policy selection. The criterion emphasizing environmental protection use strict command and control instruments to tightly regulate polluters and prevent pollution. This selection criterion puts a major strain on industry to stay in compliance and regulatory agencies to police polluters. For this reason, environmental protection is not used as a pure selection criterion but can be very effective when used in concert with BCA to regulate highly polluted areas. Environmental protection advocates also promote the idea of environmental justice as part of this criterion as it should ideally take into account the true social impact of a policy decision and not a socioeconomic impact as highlighted by a BCA. 

In the end, an environmental policy should generate a palpable change in those who create, implement, enforce, and evaluate that decision. Thus this factor of change is used as a selection criterion in the policy selection process. Change is the hardest of the major criterion to quantify, simply because the effects of a decision can never be predicted at the beginning of the process. Ideally, a policy will generate new, innovative ways to abate pollution while maintaining profitability and be easy to duplicate and spread throughout an industry.  The true measure of change as a criterion is not in immediate returns but in how an industry responds to a policy decision and how attuned it is to making changes and continuing to innovate, even if it of their own volition. 

Efficiency is a key criterion in policy formulation because it touches all criteria needed in order to create an effective policy. In a regulatory climate mired in bureaucracy, an efficient policy decision appeals to those who want an economically feasible policy, one which maximizes benefits over costs, and produces a wave of innovation amongst polluters. An efficient policy is also a politically feasible policy. While no policy is perfect outside of a vacuum, an efficient policy has the best chance of succeeding the tests of a real world, real market situation. 

Policy is perfect in a vacuum. When applied in a simulator, any given decision can look like the right one. Unfortunately, a perfect problem does not exist. As this is such, a perfect policy will never exist. This is why economically effective criteria should be considered more heavily in the formulation of a policy. Market inefficiencies drive the need to weigh benefits and costs. By targeting these inefficiencies with tools like the BCA, policymakers have a better real world understanding of how a policy will affect those impacted. Selection criterion should be used on a sliding scale: every problem faced is different and each decision will be made separately of each other. For example, one problem may lean heavily toward environmental justice related issues while another deals with strict command and control instruments. However, in a market-based economy the policies made must be created with a heavy emphasis on the social and economic benefits and costs associated with each decision. 

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