Hostname: page-component-7c8c6479df-5xszh Total loading time: 0 Render date: 2024-03-29T00:28:07.233Z Has data issue: false hasContentIssue false

Deflated Dreams: The EPA's Bubble Policy and the Politics of Uncertainty in Regulatory Reform

Published online by Cambridge University Press:  04 April 2019

Abstract

In the late 1970s, the Environmental Protection Agency (EPA) unveiled the bubble policy as a central part of Jimmy Carter's plan to reform environmental regulations that many believed had grown too proscriptive and too costly for American industry. Since the EPA's formation, regulators had dictated method and means for reducing air pollution. The bubble returned the prerogative to business. But despite bipartisan support, the bubble never took off. Drawing on EPA records and interviews, this article shows how skeptical regulators intentionally made the bubble unwieldy, driving away businesses wary of uncertainty. Though Ronald Reagan's election seemed to lift the bubble's fortunes, his undiscerning assault on the administrative state ironically deflated the EPA's development of a viable alternative to the proscriptive model.

Type
Research Article
Copyright
Copyright © The President and Fellows of Harvard College 2019 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

The author would like to thank Ann-Kristin Bergquist, Geoffrey Jones, and three anonymous reviewers for their insightful comments and advice on this article as well as Elizabeth Blackmar, Karl Jacoby, Paul Sabin, Richard John, Merlin Chowkwanyun, and Daniel Carpenter for their contributions to the dissertation on which this article is based. The author would also like to thank the former regulators interviewed for this research, especially Michael Levin, who sat for multiple interviews and opened up his personal records.

References

1 Michael Levin, interview with author, 7 May 2015; slides reproduced in U.S. Environmental Protection Agency (US EPA), “Controlled Trading: Putting the Profit Motive to Work for Pollution Control” (Washington, DC, 1980), box W, Papers in Personal Collection of Michael Levin (hereafter, MLP).

2 Coase, Ronald, “The Problem of Social Cost,” Journal of Law and Economics 3 (1960): 144CrossRefGoogle Scholar.

3 Sabin, Paul, “‘Everything Has a Price’: Jimmy Carter and the Struggle for Balance in Federal Regulatory Policy,” Journal of Policy History 28, no. 1 (2016): 147CrossRefGoogle Scholar.

4 Carpenter, Daniel, Reputation and Power: Organizational Image and Pharmaceutical Regulation at the FDA (Princeton, 2010)Google Scholar.

5 Lundqvist, Lennart, The Hare and the Tortoise: Clean Air Policies in the United States and Sweden (Ann Arbor, 1980)Google Scholar.

6 William Drayton, interview with author, 31 Mar. 2017.

7 Liroff, Richard, An Issue Report: Reforming Air Pollution Regulation: The Toil and Trouble of EPA's Bubble (Washington, DC, 1986)Google Scholar.

8 Charles Schultze to Stuart Eizenstat, Sept. 1980, folder “Steel [2],” box 58, Doug Costle Papers, Jimmy Carter Library, Atlanta, GA (hereafter, DCP).

9 The Sierra Club's challenge was consolidated in Asarco Incorporated v. Environmental Protection Agency, 578 F. 319 (2d Cir. 1978).

10 Sabin, Paul, “Environmental Law and the End of the New Deal Order,” Law and History Review 33, no. 4 (2015): 9651003CrossRefGoogle Scholar.

11 Asarco Incorporated, 578 F. at 319.

12 Bureau of National Affairs, “Steel Industry Seen Progressing in Improving Pollution Control,” Environment Reporter 8, no. 24 (14 Oct. 1977): 906–7Google Scholar.

13 Liroff, An Issue Report.

14 William Drayton to Jodie Bernstein, Marvin Durning, Thomas Jorling, David Hawkins, and Steven Jellinek, 5 May 1978, folder “Issue Memos Policies [2],” box 45, DCP.

15 John E. Barker to Roy Gamse, 4 May 1978, folder “Issue Memos Policies [2],” box 45, DCP; Bureau of National Affairs, “Offset Policy Revision Delayed as EPA Considers Industry Petition,” Environment Reporter 9, no. 28 (10 Nov. 1978): 1277Google Scholar.

16 Sabin, “‘Everything Has a Price.’”

17 Joan Bernstein to William Nordhaus, 20 June 1978, attached to Joan Bernstein to Bill Drayton, Dave Hawkins, Marvin Durning, and Chuck Warren, 20 June 1978, folder “Issue Memos Policies [2],” box 45, DCP.

18 Hawkins to Regional Administrator, Regions I-X, attached to Dave Hawkins to Doug Costle, 1 Sept. 1978, folder “Air & Waste (Jul.–Sept.),” box 26, EPA Intra-Agency Memos, Office of the Administrator, Records of the Environmental Protection Agency, RG 412, National Archives and Records Administration, College Park, MD (hereafter EPA Intra-Agency Memos).

19 Hawkins to the Administrator, 10 Oct. 1978, folder “Air & Waste (Oct.–Dec.),” box 28, EPA Intra-Agency Memos.

20 Hawkins to Administrator, Nov. 1978, folder “Issue Memos Policies [2],” box 45, DCP.

21 David Hawkins, interview with author, 18 Sept. 2015.

22 George Ferreri to Hawkins, 11 Dec. 1978, attached to Dave Hawkins to Bill Drayton, 14 Dec. 1978, folder “Air & Waste (Oct.–Dec.),” box 28, EPA Intra-Agency Memos.

23 J. Edward Roush to Drayton, 15 Dec. 1978, folder “Bubble Concept,” box 5, DCP.

24 Liroff, An Issue Report.

25 Bill Becker, interview with author, 1 May 2015.

26 John Wise, interview with author, 28 July 2015.

27 Becker, interview.

28 Liroff, An Issue Report.

29 Endorsements in folder “Orig. Bubble Policy – Press Conf. + Endorsements – Proposal,” box P, MLP.

30 US EPA, “Air Pollution Control; Recommendation for Alternative Emission Reduction Options within State Implementation Plans,” Federal Register 44, no. 13 (1979): 3740–44Google Scholar.

31 Bureau of National Affairs, “Industry Group Challenges Offset Rule in Petition Filed in D.C. Appeals Court,” Environment Reporter 9, no. 42 (1979): 1958Google Scholar; American Iron and Steel Institute (AISI) Position Paper, “The Bubble Concept,” attached to AISI – EPA Meeting, 28 Feb. 1979, folder “Steel [2],” box 58, DCP.

32 Drayton, interview.

33 Rick Tropp to Drayton, 12 Dec. 1979, folder, “Innovation – Carter Policies, OPE Work Group, etc. 1979–81,” box P, MLP.

34 See, for example, Drayton, William, “Beyond Effluent Fees,” in Approaches to Controlling Air Pollution, ed. Friedlaender, Ann F. (Cambridge, MA, 1978)Google Scholar; and William Drayton, “Speech to New York Environmental Planning Lobby,” Albany, NY, 18 Oct. 1980, folder “EPA Conference on Innovation on Environmental Technology, 11/15/80,” box 32, DCP.

35 Liroff, An Issue Report.

36 Liroff, An Issue Report.

37 Bureau of National Affairs, “Steel Companies Say Bubble Policy Not Beneficial, Impossible to Use,” Environment Reporter 10, no. 43 (1980): 2041Google Scholar.

38 Liroff, An Issue Report.

39 Walter Stahr to Mike Levin, 17 July 1980, folder “ET – Pre ’82 Additional Material,” box P, MLP.

40 Bubble Project Staff, “The Bubble Clearinghouse, Volume 1,” July 1980, folder “Bubble Issues – General Issues, Memos, Policies – Post Promulgation,” (hereafter, “Bubble Issues”) box 6, DCP.

41 “Talking Points for Meeting with the Environmental Coalition of the Council of Industrial Boiler Owners,” 17 June 1980, folder “Bubble Issues box 6, DCP.

42 Barbara Blum to the President, 29 Aug. 1980, folder “Bubble Issues,” box 6, DCP.

43 Gamse to Drayton, n.d., folder “Bubble Issues,” box 6, DCP.

44 Drayton to the Administrator, 28 July 1980, folder “Bubble Issues,” box 6, DCP.

45 Tropp to Frans Kok, Levin, and Gamse, 5 Aug. 1980, folder “Bubble Issues,” box 6, DCP.

46 Costle to Eizenstat, 29 July 1980, folder “2 EPA [3],” box 29, Charles L. Schultze's Subject Files, Staff Office – CEA, Jimmy Carter Presidential Library, Atlanta, GA.

47 Drayton to Assistant Administrators, n.d., folder “Reg. Reform Conf. – Original 9/80 – D.C.,” box P, MLP.

48 Liroff, An Issue Report.

49 Costle to Eizenstat, 3 Oct. 1980, folder “Bubble Concept,” box 5, DCP.

50 John Palmisano to Drayton, 16 Oct. 1980, folder “Bubble Issues,” box 6, DCP.

51 US EPA, “EPA Approves ‘Bubble’ for R.I. Power Plant,” 22 Oct. 1980, folder “Bubble Issues,” box 6, DCP.

52 US EPA, “EPA Plans to Approve Armco Steel ‘Bubble’ in Ohio,” 20 Oct. 1980, folder “Bubble Issues,” box 6, DCP.

53 Drayton to Dick Cavanaugh and Sandy Apgar, 12 Nov. 1980, folder “Bubble Issues,” box 6, DCP.

54 See, for example, M. T. Maloney and Bruce Yandle, “Bubbles and Efficiency: Cleaner Air at Lower Cost,” Regulation (May/June 1980): 49–52; Landau, Jack, “Economic Dream or Environmental Nightmare? The Legality of the ‘Bubble Concept’ in Air and Water Pollution Control,” Boston College Environmental Affairs Law Review 8, no. 4 (1980): 741–81Google Scholar; and Rhinelander, Laurens H., “The Bubble Concept: A Pragmatic Approach to Regulation under the Clean Air Act,” Virginia Journal of Natural Resources Law 1, no. 2 (1981): 177228Google Scholar.

55 See, for example, Douglas Costle, “Steel and the Clean Air Act,” Los Angeles, 1 Aug. 1980, folder “Steel,” box 57, DCP; Marlin Fitzwater to the Administrator, 3 July 1980, folder “Acid Rain [2],” box 1, DCP.

56 “Talking Points for Drayton Speech at Reg Reform Conference,” Nov. 1980, folder “EPA Conference on Innovation on Environmental Technology, 11/15/80,” box 32, DCP.

57 Drayton to Costle, 22 Dec. 1980, folder “Bubble,” box 5, DCP.

58 Hawkins to the Administrator, 18 Dec. 1980, folder “Bubble,” box 5, DCP.

59 David G. Doniger, “Remarks at the Annual Meeting of the South Atlantic Section of the Air Pollution Control Association,” 9 Jan. 1981, folder “ET – NRDC Comments 1982,” box CC, MLP.

60 Dan W. Lufkin and Henry Diamond to the President-Elect, n.d., folder “Environment – Reagan Task Force,” box 75, Danny J. Boggs Files, Ronald Reagan Presidential Library, Simi Valley, CA (hereafter, DBF).

61 Liroff, An Issue Report.

62 Robert Martinott, “How to Limit the Rising Costs of Stricter Regulation,” Chemical Week, 21 Jan. 1981.

63 Drayton, William, “Getting Smarter about Regulation,” Harvard Business Review 59, no. 4 (1981): 3853Google Scholar.

64 Office of the Press Secretary, “Fact Sheet: Memorandum to Executive Branch Agencies Ordering 60-Day Freeze on Regulations,” 29 Jan. 1981, folder ID: 92016-004, C. Boyden Gray Files, Vice Presidential Records, Counsellor's Office, George H. W. Bush Presidential Library, College Station, TX (hereafter, Gray VP Files).

65 Lash, Jonathan, Gillman, Katherine, and Sheridan, David, A Season of Spoils: The Reagan Administration's Attack on the Environment (New York, 1984), 28Google Scholar.

66 Chris DeMuth, “Memorandum for Members of the Presidential Task Force on Regulatory Relief,” 4 Nov. 1981, folder ID: 92020-008, Gray VP Files.

67 Bruce Ackerman, Richard Stewart, and Robert Rabin to General Counsel, 20 Jan. 1981; Steve Jellinek to Mike Farrell, 23 Jan. 1981; memo for Peter McPherson, 23 Jan. 1981, all in folder “Environmental Protection Agency – White House (2),” box 10, Fred Fielding Files, 1981–1986, Reagan Library, Simi Valley, CA (hereafter, Reagan Library).

68 Michael Levin to Walter Barber, 14 Apr. 1981, folder “OPM (APR–JUNE),” box 75, EPA Intra-Agency Memos.

69 US EPA, The Bubble and Its Use with Emissions Reduction Banking (Washington, DC, Apr. 1982)Google Scholar.

70 Levin, Michael, “Getting There: Implementing the ‘Bubble’ Policy,” in Social Regulation: Strategies for Reform, ed. Bardach, Eugene and Kagan, Robert (San Francisco, 1982)Google Scholar.

71 US EPA, Minnesota Mining and Manufacturing Co., and Citizens for a Better Environment, “Regulatory Reform at EPA: Cost Saving Approaches to Controlling Pollution,” 29 Apr. 1982, folder “Regulatory Reform at EPA,” box P, MLP. For 3M's reputation in this regard, see Andrew Winston, “3M's Sustainability Innovation Machine,” Harvard Business Review, 15 May 2012.

72 Levin, interview.

73 Kevin Hopkins to Martin Anderson, 8 Dec. 1981, folder “Regulation (1),” box 1, Kevin R. Hopkins Files, Reagan Library.

74 To take one example, Marvin Kosters and Jeffrey Eisenach, in “Is Regulatory Relief Enough?” (Regulation 6 [Mar./Apr. 1982]: 20–27), answered their title question with eight pages in the negative.

75 US EPA, “Emissions Trading Policy Statement,” Federal Register 47 (7 Apr. 1982): 15076Google Scholar.

76 “Managing Resources and the Environment,” 22 June 1982, folder “Environment – Smith Group,” box 75, DBF, Reagan Library.

77 Working Group on Alternatives to Federal Regulation, 5 Nov. 1982, folder “Working Group on Alternatives to Federal Regulation,” box 15, Robert B. Carleson Files, Reagan Library.

78 Working Group on Alternatives to Federal Regulation, 5 Nov. 1982, folder “Working Group on Alternatives to Federal Regulation [10/14/1982 Meeting] (1),” box 16, Robert B. Carleson Files, Reagan Library.

79 Michael Levin, “Proposal for Establishment of a Standing Committee on Emissions Trading,” 30 Sept. 1982, folder “ET Standing Committee ’82 Substantive Results,” box P, MLP.

80 “Court Overturns Rule on Pollution: Easing of Factory Standards by Environmental Agency Held Not Permissible,” New York Times, 19 Aug. 1982.

81 Nancy Maloley to Edwin Harper, 23 Aug. 1982, folder “Environment – Bubble Policy [Emissions Reduction Banking],” box 70, DBF, Reagan Library.

82 Christopher DeMuth to the Vice President and Director Stockman, 14 Sept. 1982, folder ID: 92048-006, Gray VP Files.

83 In Illinois, Kevin Greene to Gary Gulezian, 8 Mar. 1983, folder “ET – Steel Ract,” box CC, MLP; in Los Angeles, Bureau of National Affairs, “NRDC Blasts Proposed Sohio Bubble, Pushes Actual Emissions Baseline,” Environment Reporter, 24 Aug. 1984, copy in folder “ET – NRDC Comments 1982,” box CC, MLP.

84 Joseph Cannon to the Administrator, 25 Apr. 1983, folder “OPRM APR – JUNE,” box 106, EPA Intra-Agency Memos.

85 Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984).

86 William Ruckelshaus, interview with author, 13 May 2016.

87 Stephen Connolly et al., “Emissions Trading in Selected EPA Regions,” 30 Sept. 1984, folder “ET Evaluations,” box P, MLP.

88 Darryl Tyler to Levin, 1 Nov. 1985, folder “Final ET: AA Briefings – 1985,” box CC, MLP.

89 See, for example, “Working Agenda: Meeting of Standing Committee on Emissions Trading,” 19 Nov. 1982, folder “ET Standing Committee ’82 Substantive Results,” box P, MLP.

90 See, for example, Levin, Michael, “Statutes and Stopping Points: Building a Better Bubble at EPA,” Regulation 9 (Mar./Apr. 1985): 3342Google Scholar.

91 Ruckelshaus, interview.

92 Liroff, An Issue Report.

93 Hahn, Robert and Hester, Gordon, “Where Did All the Markets Go? An Analysis of EPA's Emissions Trading Program,” Yale Journal on Regulation 6, no. 109 (1989): 109–53Google Scholar.

94 US EPA, The United States Experience with Economic Incentives for Protecting the Environment, EPA-240-R-01-001 (Washington, DC, 2001)Google Scholar.

95 Goulder, Lawrence, “Markets for Pollution Allowances: What Are the (New) Lessons?Journal of Economic Perspectives 27, no. 1 (2013): 87102CrossRefGoogle Scholar.

96 Richard Schmalensee and Robert Stavins, “Lessons Learned from Three Decades of Experience with Cap-and-Trade” (MIT Center for Energy and Environmental Policy Research WP 2015-015).

97 Vogel, David, Fluctuating Fortunes: The Political Power of Business in America (New York, 1989)Google Scholar.

98 See, for example, Kolko, Gabriel, Railroads and Regulation, 1877–1916 (Princeton, 1965)CrossRefGoogle Scholar.

99 Bergquist, Ann-Kristin, Söderholm, Kristina, Kinneryd, Hanna, Lindmark, Magnus, and Söderholm, Patrik, “Command-and-Control Revisited: Environmental Compliance and Technological Change in Swedish Industry 1970–1990,” Ecological Economics 85 (Jan. 2013): 619CrossRefGoogle Scholar.

100 On this divergence, see Vogel, David, The Politics of Precaution: Regulating Health, Safety, and Environmental Risks in Europe and the United States (Princeton, 2012)Google Scholar.