David M. Driesen

Beyond Environmental Law: Policy Proposals for a Better Environmental Future

Introduction David M. Driesen and Alyson C. Flournoy Part I. National Environmental Legacy Act: 1. The case for a national environmental legacy act Alyson C. Flournoy 2. The necessity of procedural reform Sidney Shapiro 3. Shifting baselines and backsliding benchmarks: the need for a national environmental legacy act to address the ecologies of restoration, resilience, and reconciliation Thomas T. Ankersen and Kevin E. Regan 4. Valuing nature: the challenge of a national environmental legacy act Mary Jane Angelo and Mark T. Brown 5. Citizen science and the next generation of environmental law Christine Overdevest and Brian Mayer 6. Creating NELA information: the double standard Walter A. Rosenbaum 7. The constitution and our debt to the future Rena Steinzor Part II. Environmental Competition Statute: 8. An environmental competition statute David M. Driesen 9. Climate change, federalism, and promoting technological change David E. Adelman 10. The iUtility Joseph P. Tomain 11. Environmental patriotism Christine A. Klein.

Design, Trading, and Innovation

This article questions the conventional theory purporting to establish that environmental benefit trading encourages innovation better than comparable traditional regulation. It argues that the induced innovation hypothesis, that high costs encourage innovation, suggests that trading would lessen incentives for innovation by lowering the cost of complying with conventional approaches. The conventional theory relies upon the incentive emissions trading creates for polluters to make additional reductions in order to sell credits. But emissions trading also creates incentives for half of the pollution sources (the credit buyers) to make less reductions than they would under a traditional regulation. By focusing analysis only upon the sellers of credits, the traditional theory systematically biases results. Tradings inferiority is especially apparent with respect to high-cost innovation. Even innovation that costs a lot now can prove economically and environmentally superior over the long run, because innovation can make costs of new techniques fall over time and some innovations provide very wide ranging environmental benefits. But trading encourages selection of the techniques with the cheapest current cost, not the cheapest long-term cost or the greatest long-term value. It also argues that design variables, such as the stringency of regulation and the quality of monitoring play an important role in encouraging (or failing to encourage) innovation. And it argues that neither traditional regulation nor environmental benefit trading stimulate innovation especially well, because government often regulates weakly. The article suggests an alternative economic incentive program that would maximize incentives for innovation and progress on environmental problems. This article forms part of a larger project arguing for an economic dynamic approach to environmental law and law and economics. The authors book, The Economic Dynamics of Environmental Law (MIT Press 2003), sets out the full theory.

Legal Theory Lessons from the Financial Crisis

This Article draws lessons about the theory of law and economics from the recent financial crisis. It argues that the financial crisis teaches us that allocative efficiency, the main goal of law and microeconomics, proves an unattainable and relatively unimportant goal for laws addressing complex systems. It shows that complexity and the institutional role of law make calculation of optimal rules impossible for complex systems like those addressed through financial regulation, intellectual property, antitrust law, environmental law, and national security law. Drawing primarily on the financial crisis, this Article identifies the features of complex systems that make mathematical calculation of costs and benefits impossible. Apparently recognizing that complexity defeats identification of optimal rules through cost-benefit analysis, law and economics scholars have used assumptions of rationality and perfect information as a substitute for quantitative analysis. The financial crisis teaches us that this CBA-substitute dangerously supports deregulatory ideology. Furthermore, the dynamic nature of complex systems renders any equilibrium between costs and benefits short-lived and therefore of relatively little value. This Article also shows law’s institutional function as providing a framework that can accommodate a variety of transactions makes prediction of efficient outcomes extremely unlikely. For this institutional role implies that law does not usually determine resource allocation. This Article addresses the question about what to do about law and microeconomics’ failure by proposing a more macroeconomic approach to law. This economic dynamic approach would treat law as an effort to countervail negative trends over time with a goal of avoiding systemic risks while keeping a reasonably robust set of economic opportunities open. It sketches a methodological approach to accomplishing these goals rooted in institutional economics and the best practices of law and economics scholars.

Environmental Protection, Free Trade, and Democracy

This article explores the links between international environmental law and the law of free trade. Democratic countries have tended to favor both environmental law and free trade more so than other countries. The more interesting question is whether the converse is true, that is, do environmental law and free trade aid democracy and the development of the rule of law? This article addresses that question.

Critiques of Law and Economics

This chapter summarizes leading critiques of law and economics. For the most part, we put aside objections to particular applications of law and economics to distinct fields of law. We focus on rather general criticisms that properly apply to widely shared core commitments within the field of law and economics. We have grouped these critiques into three categories. We first address concerns about the normative value of economic efficiency as a leading goal for law. We next address methodological criticisms, which often call into question the coherence of the allocative efficiency concept. Finally, we discuss the criticisms of law and microeconomics from the perspective of rhetoric and interpretation theory.

Traditional Regulation's Role in Greenhouse Gas Abatement

This book chapter addresses the use of traditional regulation to ameliorate climate disruption, revealing that traditional regulation has played a significant role. It defines traditional regulation as encompassing performance standards, work practice standards, and phase-outs of dangerous substances. It then shows that traditional regulation has encouraged greater energy efficiency, promoted renewable energy, addressed ancillary risks associated with climate-friendly technological change, and applied to non-carbon greenhouse gases. Finally, it explains that in spite of its cost ineffectiveness, factors such as monitoring difficulties, institutional capacity problems, the need for innovation, and demand to address risk/risk problems help explain the persistence of traditional regulation in an era enamored of “market-based mechanisms,” such as emissions trading.

Putting a Price on Carbon: The Metaphor

This Essay analyzes the characterization of both pollution taxes and so-called cap-and-trade programs addressing greenhouse gas emissions as policies that “put a price on carbon,” a characterization that has come to dominate both policy discussion and much modern scholarship on environmental instrument choice. It shows that the rationale for characterizing cap-and-trade — a quantitative rather than a pricing mechanism — as putting a price on carbon suggests that analysts should likewise treat traditional regulation as a mechanism putting a price on carbon. Treating “market-based mechanisms” as uniquely putting a price on carbon reflects and perpetuates a tendency to see markets and government as antonyms, with markets operating through price and governments operating through coercion, even though markets and governments are intimately intertwined and use a variety of tools. This Essay shows that an informed third generation debate about instrument design and instrument choice should focus on understanding prices’ limits as a coordinating tool, including appreciation of potential conflicts among the values price is thought to serve.

The Limits of Pricing Carbon

Many analysts agree that we need to put a price on carbon through either a carbon tax or a cap-and-trade program. And yet, some of the most dramatic successes in carbon abatement have come from policies that do not put a price on carbon. This article considers some of the limits to price as an effective mechanism for transformation of the fossil fuel economy.

The Sleeping Giant Awakes? US Actions to Mitigate Climate Disruption

This paper, prepared for the Hamburg Conference on International Environmental Law, reports on US progress in mitigating global climate disruption. It concludes that the US has begun to move forward on this issue, but has not fully awakened to the danger climate disruption poses. This paper compares US policies at the federal, state, and regional levels with similar programs in other countries. The most significant nationwide initiative to date, by far, turn out to be recently revised Corporate Average Fuel Economy Standards. Although these standards constitute something of a miracle politically and promise very significant emission reductions, both the EU and Japan have stricter standards on the books in terms of absolute levels if not in terms of total emission decreases. The US picture is consistent with trends elsewhere in that environmental benefit trading programs constitute the symbolic center of efforts, but in practice have achieved relatively little, because caps have been lax and problematic offsets have been available. The Regional Greenhouse Gas Initiative (RGGI) has realized significant emission reductions, primarily because of use of revenues raised through the sale of emission allowances to fund energy efficiency, even though the cap was overallocated. California’s trading program, which just came on line, is designed to achieve less emission reductions than a number of the California Air Resources Board’s sector specific programs. The RGGI states’ decision to auction off 100% of the allowances constitutes a significant policy advance, but the US programs, like other programs, have put about 50% of the achievements available through caps at risk through liberal offset policies. This paper also discusses the role the Clean Air Act will likely play in future nationwide efforts. It concludes that absent a comprehensive climate bill, which will not pass Congress absent major political change, progress will likely remain very slow, fragmented, and unsatisfactory, because of the difficulties involved in reliance on administrative actions to address climate disruption.

Contract Law's Inefficiency

Neoclassical economic theory seems to aptly characterize contract law’s essence. Contracts enable two parties to reach a mutually beneficial agreement, thereby facilitating economically efficient transactions. It would seem to follow that the achievement of economic efficiency serves as contract law’s major goal.This article, however, examines an alternative hypothesis, that contract law is about enforcing inefficient bargains in order to provide enough security to facilitate cooperation among economic actors over long periods of time. On this account, contract law manages change over time, rather than achieves static efficiency. While recognizing that parties execute contracts in order to realize an efficient exchange, this article argues that contract law exists largely to enforce bargains that have become inefficient over time. It argues that inefficient contract law performs important macroeconomic functions in stimulating economic growth. The analysis developing this tension between efficient contracting and inefficient contract law casts some doubt on a major rationale for making efficiency the dominant goal for contract law. It also adds an important dimension to the existing explanation of the scholarly literature’s many inconsistencies in conclusions about the efficiency of contract rules. Finally, it helps explains the major exceptions to the rule that courts enforce inefficient contracts found in doctrines of impossibility and impracticability. This article endorses an economic dynamic approach to contact law in light of the tension between efficient contracting and inefficient contract law and describes the components of an economic dynamic analysis rooted in institutional economics. It shows that some of our leading scholars have already tacitly employed this approach effectively to shed new light on contract law.