Pollution Prevention: Public and Private Roles
Los Angeles, CA
Public and private decision-making institutions always interrelate in complex
synergies--seldom are decisions shaped through purely public rules or private
choices. So it is with decisions about materials use, pollution prevention,
and waste. Changing public rules will affect private choices; but so, too,
do dynamic market decisions constrain the prospects that different public
rules will achieve intended outcomes.
Understanding past market dynamics, therefore, helps us to better define
the "problem" toward which proposed public actions might be directed.
A glimpse at the past also helps us understand the opportunities and challenges
that proposed new public rules and actions might face.
The Industrial Era in Three Stages
Over the past 200 years, industrialized market economies have moved through
what might be characterized as three phases.
First was the era of mechanics in which the primary focus was on making
large numbers of consumer goods available at very low cost through mass-production
using machinery and inanimate energy. Waste was prodigious, as speed, volume,
and low-cost preoccupied the minds of inventors.
Second was the era of chemistry in which the focus began to turn toward
new products, product refinement and production efficiency, and product
quality. Through chemistry and physics came lightweight, efficient plastics,
new pharmaceuticals, contact lenses, CD-roms, and much of the information
age. Materials-use reduction and pollution prevention were inadvertant,
unintended (and often unnoticed) by-products of this pursuit of quality,
comfort, and convenience. Material use per unit of output dropped 1/3 just
in the twenty years from 1970 to the early 1990s. Household appliances "went
on a diet", requiring less and less material per appliance. Engines
became more efficient; fuel-switching to achieve efficiencies occurred as
we moved from wood to coal to oil to natural gas as an ever-larger portion
of total energy consumption. With the switches came huge, and well-documented
reductions in air emissions, even predating the advent of 1970s regulations.
Material substitutions resulted in substantial source reduction, for which
the unintended byproduct was also less pollution and waste. A fiber optic
cable made from 65 kilos of sand carries 40-fold more messages over its
length than a cable made from a ton of copper, with all its mining tailings
and corresponding production sludges. But much waste went unnoticed and
Now we arrive at the era of biology in which industrial ecology and deliberate
focus on pollution prevention and residuals recycling is coming of age--driven
by consumer and societal demands, a growing conservation ethic, and the
competitive search for new ways to reduce costs and add value in an evolving
marketplace in which environmental, aesthetic, health, and spiritual values
The Forces Behind Environmental Progress
Market forces played a large role in this progression from the era of mechanics
to the era of physics to the era of biology. Market institutions combine
three elements that compel dynamism and a search for ways to use materials
more efficiently, through source reduction (materials conservation), pollution
prevention, and residuals recycling:
- The first is institutionalized competition which
creates incentives to search for "better mousetraps"--ways to
accomplish goals with fewer resources, better quality, etc.
- Second is resource ownership, which defines
boundaries, links choices with responsibility for outcomes, limits externalities,
and allows for trade and exchange.
- These conditions, in turn, allow for the emergence
of resource "prices", which embody information about the relative
scarcities of available resources given infinite and competing demands
for those resources.
These three market institutions played (and continue to play) a critical
role in the drive toward resource conservation and innovations that permit
us to do more with less. But, of course, no set of institutions is perfect;
indeed, the market itself is no particular set of institutions but a continual
discovery process regarding new arrangements that might better allocate
resources while meeting consumer desires. And new technologies make possible
new market arrangements--the advent of electronic tagging is just now allowing
development of "ownership" rights in some fisheries, for example.
But market challenges remain. Some resources--air basins, for example--are
fundamentally "collective"; they are not divisible into separate
spheres of ownership. They invite, therefore, the classic "commons
problem" in which unfettered access leads to despoilation and pollution.
Public rules in the form of pollution regulations have been established
to partly remedy this problem. Creation of emission charges has been proposed
as another way to incorporate information about pollution effects into
market decisions--and may be a component of further, deliberate pollution-prevention
efforts in the future, though setting such charges by political fiat is
an important constraint.
Other challenges also persist. Intra-firm organizational arrangements can
impede information flows about pollution-prevention opportunities. Experimentation
with environmental management systems is beginning to address these intra-firm
challenges. This process should remain voluntary and fluid, to permit broad
experimentation with institutional form. But establishing public-sector
fee rebates for good performance may nurture this organizational discovery
process. Privately, some insurers have already begun to offer lower rates
for good environmental performance. Experimentation with producer-consumer
contractual relationships may also play a role in pollution-prevention.
Where wastes are highly toxic, product stewardship arrangements are emerging
to ensure proper waste-handling and recycling: in some cases, such arrangements
are driving the search for pollution-prevention opportunities.
The Public-Private Verdict
But reality is tricky. Institutional arrangements that make sense for one
set of products may not make sense for another. Hence, public mandates
should be viewed with caution. Pollution-prevention in its most robust
sense requires experimentation with organizational form and with production
Public rules will always shape private actions. Contract law, liability
rules, and regulations that constrain use of "collective, open-access"
resources all shape private decisions and can encourage pollution prevention.
Public procurement practices, especially where capital and operating decisions
are separate, can adversely affect pollution-prevention opportunities.
Quasi-public rules--as in the case of accepted accounting practices and
product standards--also influence production and consumption decisions.
Where information is a constraint--as is especially true for small businesses
that pollute--information and technical assistance through public and private
actions can be critical to environmental progress.
But framers of these public rules must be cautious that they not prescribe
specific technologies or particular practices; such prescriptions are essentially
static and run afoul of the innovation imperative that lies at the root
of environmental progress. Such prescriptions also run afoul of the inevitable
complexity of resource-use decisions in which trade-offs abound, and what
makes sense in one instance may not make sense in another.
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