The Safety Standard

Introduction

The safety standard: fairness rather than efficiency Rejects a benefit-cost approach to

decisions about the “correct” amount of pollution

People have a right to protection from unsolicited, significant harm to their immediate environment

An Efficiency Argument for a Safety Standard? Many important benefits of protection from

pollution are often left out of benefit-cost analyses because they cannot be measured

If material growth in our society feeds conspicuous consumption, fueling a rat race, then no one is better off

If the costs of protection are overstated by this rat race, while the benefits are understated, then safe regulation may in reality meet a benefit-cost test

Defining “Safety”

In practice, The U.S. EPA considers risk below 1 in 1 million for large populations to be “safe”

Risks greater than 1 in 10,000 are considered “unsafe”

Risks that fall in between are regulated based on an informal benefit-cost analysis and statutory requirements

Defining Safety

Determining the exact risk amount for things such as cancer can only be done with substantial margins of error, and “safety” is thus often determined through the give and take of politics

Policy and the Safety Standard A safety standard remains the stated goal

of much environmental policy: laws covering air, water, and land pollution require cleanup to “safe” levels, period

There is no mention of a benefit-cost test in the legislation

Ultimately, however, clean-up costs often play a role in the political determination of “safe” pollution levels

Is Accepting Some Risk the same as an Efficiency Approach?

Declaring a safety standard and then adopting it to economic feasibility in certain cases is different from, and will generally result in less pollution than, an efficiency standard

Can safety be sold?

One study asked residents of a Nevada community about their willingness to accept annual tax credits of $1,000, $3,000, and $5,000 per person in exchange for the siting of a potentially dangerous hazardous waste facility nearby

The numbers of people considering accepting the compensation did not increase as the level of compensation increased

Instead, respondents who perceived the risk to be too high viewed the rebates not as inadequate, but as inappropriate

The Safety StandardSocial Welfare Function

Recall Tyler and Brittany wrangling over smoking in the office:

SW = UTyler(#CigsT, $T) = UBrit(w * #CigsT, $B)

Smoking is a bad to Brittany and a good to Tyler.

If the weight given to w were large enough, it might justify banning smoking altogether

Smoking in Public Places

Should smoking be banned in public places? This is an issue for voters and courts to

decide What the safety standard maintains is that in

the absence of a “compelling” argument to the contrary, damage to human health from pollution ought to be minimal

The Safety Standard:Objections

Inefficient? Often Not Cost-Effective? Often Regressive? Maybe

The Safety Standard:Inefficient

The safety standard is, by definition, inefficient

Efficiency advocates claim that enshrining environmental health as a “right” involves committing “too many” of our overall social resources to environmental protection

Air toxics regulation

The 1990 amendments to the Clean Air Act were designed to control the emissions of hazardous air pollutants

The law required firms to impose control technology that would reduce risks to below the 1 in 10,000 level

Total costs were estimated at $6 to $10 billion per year, with benefits less than $4 billion per year

Air toxics regulation

Polls indicated that 80% of Americans supported the act despite this benefit-cost disparityDoes this indicates that American voters view

environmental health as a “rights” issue?

Landfill Policy

The EPA’s regulation for landfills to protect people who depend on contaminated groundwater were only predicted to reduce cancer cases by only two or three over the next 300 years

Potential benefits not quantified includeIncreased ease of siting landfillsReduced damage to surface waterFairness to future generationsOverall reduction in waste generation and related

“upstream” pollution The regulations would cost about $5.8 billion or

nearly $2 billion per cancer case reduced

Inefficient Regulations

Regulations that protect small groups of people from risk will almost always be inefficient, since even relatively high risks will not generate many casualties

Air toxics and the EPA’s landfill regulations are classic situations in which efficiency and fairness conflict

The Safety Standard:Not Cost Effective? The second criticism leveled at the

safety standard is its lack of cost-effectiveness--achieving a goal at the lowest possible cost

If “safety” is the goal, then extreme measures may be taken to attack “minimal” risk situations instead of high risk situations

Superfund and Asbestos Tens of millions of dollars have been spent

trying to purify seldom used groundwater at toxic spill sites under the Superfund legislationCritics have argued that redirecting the funds

would be a better use of resources, for example:Children have about a 5 in 1 million chance of

contracting lung cancer from attending a school built with asbestos

Redirecting funds from superfund clean-up to asbestos removal could save more lives

A Safety Proponent’s Response The limits to dealing with these problems

are not limited resources, but a lack of political will

Funds freed up from “overcontrol” in the pollution arena are more likely to be devoted to affluent consumption than to environmental protection

Risk-Benefit Analysis

Authorities use risk-benefit studies to compare the cost-effectiveness of different regulatory options

The common measure used in this approach is lives saved per dollar spent

This helps avoid devoting resources to an intractable problem, but it does not mean backing away from safety as a goal

The Safety Standard: Regressive?

Safety standards will generally be more restrictive than efficiency standards; as a result, they lead to greater sacrifice of other goods and services

Some are concerned that a people will fall below a decent standard of living as a result of overregulation

Suppose we switched from a safety standard to an efficiency-based standard. Would the poor be made better off?

The Safety Standard: Regressive? Because much pollution is generated in the

production of necessities, the cost of environmental regulation is borne unevenly

Pollution control generally has a regressive impact on income distribution, meaning that the higher prices of consumer goods induced by regulation take a bigger percentage bite of the incomes of poor people than of wealthier individuals

Costs of Pollution Control

Global warming (CO2) tax of $70 per ton: control:Energy expenses up $215 per year, or 11%

for the poorest 10% of US householdsEnergy expenses up $1,475, or 5% for the

richest 10% of US households.

Environmental Racism

The racial inequity in siting of hazardous facilities is called environmental racism

Environmental racism has sparked a political movement called the environmental justice movement

The Effect of Pollution Control on Low Income Communities

Poor, working-class, and minority people pay more, relative to their income, for pollution control. They also receive more benefits

Hard to determine whether pollution control results in net benefits or net costs on the lower half of the income distribution

For important issues such as a carbon tax to slow global warming, distributional issues need to be weighed carefully

Safety versus Efficiency:The Summers Memo

In an internal memorandum to his staff, then chief economist at the World Bank, Lawrence Summers wrote: “Just between you and me, shouldn’t the World

Bank be encouraging more migration of the dirty industries to the [less-developed countries]?…I think the economic logic behind dumping a load of waste in the lowest-wage country is impeccable and we should face up to that.”

Yikes!!

We have defined this “narrow” view as the efficiency view. Is it is morally defensible?

Possibly, if toxic trade in fact makes all parties better off…

Siting Hazardous Waste Facilities: Safety Versus Efficiency

“Locally unwanted land uses” or LULUs refer to sites for the disposal of waste--hazardous, radioactive, or just non-hazardous municipal waste

LULUs impose negative externalities on their neighbors from potential hazards of exposure to decreased land values

By definition, communities do not want LULUs, and the wealthier the community, the higher the level of safety the community will demand

Compensation for LULUs Society as a whole benefits greatly from

having toxic facilities One solution to the problem of LULUs

would then be to monetarily compensate communities with LULUs

This compensation could then pay for schools, hospitals, libraries, etc.

Poorer communities would accept lower compensation levels than wealthier communities

This could lead to a “trade” in LULUs

Efficiency and Toxic Trade

Efficiency and Toxic Trade Due to lower incomes, a poor country has a marginal

benefit of cleanup schedule lying below that of a rich country

Because current pollution levels are relatively low in the poor country, the marginal benefits of cleanup are also low relative to a rich country

Transferring 10% of the waste from a rich country to a poor country reduces monetary damages in the rich country more than it increases damages in the poor country

The poor country would then be compensated for its damages and overall monetary damages from the pollution will have been reduced by trade

Winners and Losers Winners: Those in wealthy countries no

longer exposed to waste, those around the world who can buy cheaper products, firm managers and stock holders, those in poor countries working at dump sites

Losers: poor country individuals, alive and yet unborn, who contract cancer and other diseases, and those who rely on natural resources that may be damaged in the transport and disposal process

Everybody Wins? Because dumping toxics is indeed efficient,

the total monetary gains to the winners outweigh the total monetary loss to the losers

In theory, the winners could compensate the losers, and everyone would be made better off

In practice, complete compensation is unlikely

Problems With Toxic Trade The majority of benefits from the dumping will flow

to the relatively wealthy while the poor will bear the burden of costs

The political structure in many developing countries is far from democratic, and highly susceptible to corruption.

Few poor countries have the resources for effective regulation.

Stiff regulation or high taxes will increase the rate of illegal dumping; unrestricted trade in waste may thus lower the welfare of the recipient country

Safety Standard and the Siting of LULUs

A politically acceptable definition of “safety” cannot be worked out, since a small group bears the burden of any risk: Nobody wants a LULU in his or her backyard

Compensation thus plays role in the siting of hazardous facilities

Firms and governments will seek out poorer communities with lower compensation packages

For the Benefit of a Majority To ensure a majority of people benefit

from the siting of LULUs:Government must be capable of providing

effective regulationAn open political process combined with

well-informed, democratic decision making is needed in the siting process

Safety Versus Efficiency The safety standard relies on a liberty

argument, putting heavy weights on the welfare reduction from pollution

As a result, a stricter pollution standard is called for than is implied by the efficiency standard

Efficiency advocates attack the “fairness” argument of safety advocates by arguing that the safety standard is regressive--although this is difficult to prove or refute in general

Costs, Benefits, Efficiency, and Safety