Perspectives on Environmental Governance

• Pages: 25-52
• Author: Michael P. Vandenbergh,Sarah E. Light,James Salzman

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Chapter 2

PERSPECTIVES ON

ENVIRONMENTAL GOVERNANCE

In seeking to solve environmental problems, all too often

decision makers (whether lawyers, regulators, or business people)

look first to the law or other governance approaches rather than to

the problem itself. To be sure, the law often creates the framework

within which environmental problems can be resolved. But one

cannot intelligently apply the law or design a private solution

without also understanding the forces that created the problem in

the first place.

Consider, for example, the seemingly different environmental

threats described in the introduction to Chapter 1—climate change,

crashing fisheries, toxics. All of these problems share a similar trait,

of course, since they directly relate to environmental protection. But

the similarities run far deeper. Regardless of whether the actor

trying to solve an environmental problem is government, business, or

an environmental group, the underlying drivers of the problems are

the same. Protecting the environment is hard for everyone. This

Chapter explains why.

We will explore the fundamental challenges of environmental

governance. What are the basic causes of environmental harms? Why

are environmental problems so difficult to manage? And what

conceptual frameworks can we use to shape our response?

It is no exaggeration to say that these core questions resonate

throughout the entire field of environmental protection, irrespective

of whether solutions are coming from the public or private sectors.

Just as Neo in the classic movie, The Matrix, comes to understand

that his world is composed of just 1’s and 0’s, so, too, must we come

to understand that there are just a few discrete drivers of

environmental harms. Understanding these key drivers provides the

critical first step in effective environmental protection.

I.Why Do We Have Environmental Problems?

Every major human settlement faces environmental challenges.

And it has been so throughout history. The ancient cities of Babylon

and Egypt, medieval cities of Paris and Beijing, and modern cities of

Sydney and Flint haveall confronted the challenge of water

pollution. Pollution seems an inescapable result of dense populations,

major industrial activity, or agricultural production, no matter the

historic era. But why has this always been the case, despite best

26

TOOLS AND CONCEPTS

Pt. I

intentions? The simple economics principles described below help

explain why.

Misaligned incentives underlie most environmental problems.

While protecting the environment often provides a net benefit to

society, the economic interests of the individual parties involved

often can encourage harmful activities. Thus a basic challenge for

environmental policy lies in understanding the reward structures of

the parties and then changing incentives so that environmental

protection reinforces rather than collides with the parties’ self-

interest. In the following examples, consider how costs and benefits

are allocated.

•In the case of toxics, a company may choose voluntarily

to reformulate its products in favor of more costly

organic or more sustainably sourced materials, but it

may end up raising its product prices and losing

market share to cheaper alternatives if its competitors

do not reformulate their products as well.

•A neighbor of a factory may be having constant sore

throats because of particulate emissions, but the

bother to her isn’t worth the cost of bringing a lawsuit.

•All of her neighbors may have sore throats, too, but

they can’t seem to come together to negotiate with or

sue the factory.

On its face, one might think that the market would

automatically promote environmental protection. The most basic

principle of economics, after all, is supply and demand. As the supply

of a valuable good becomes scarce, its price rises. No one doubts that

clean air and water are valuable. So shouldn’t we expect that as they

become scarcer their price should also rise, making it more expensive

to pollute?

Yet this clearly does not happen in real life. The market has

somehow failed, as it does when the company decides not to

reformulate its products and the factory’s neighbors can’t come

together to sue the factory. To correct these market failures and craft

an effective response, we first need to understand the distortions at

play.

A.Public Goods

Try to buy some clean air. Sure, you can buy real estate in the

wilds of Alaska where the air is clean, but you own the land there,

not the air. In fact, your neighbor can breathe it right after it blows

through. It turns out that many environmental amenities, such as

clean air and scenic vistas, are called public goods. Their benefits can