Transcript Slide 1

Chapter 14
Managing
Environmental
Quality
McGraw-Hill/Irwin
Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
The Commerce Railyards
o The city of Commerce, near Los Angeles, is a vibrant
jumble of factories, businesses, and residential
neighborhoods
o The city has four railyards and they saturate
Commerce with diesel exhaust
o The people in the neighborhoods near the railyards
have an estimated cancer risk elevation of up to 800
chances in a million
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The Commerce Railyards
o The EPA and California regulators have sought
emission-reduction measures
o The people of Commerce think that progress in
emission-reduction is too slow
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Regulating Environmental Risk
o The majority of the benefits and costs produced by
Federal regulation are derived from environmental
rules
o For every dollar spent on environmental regulation
the nation gets between $3.15 and $19.07 in benefits
o Environmental expenditures need to be focused on
the highest risks to human health and the natural
environment
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Figure 14.2 - Elements of Risk Assessment and
Risk Management and Their Sequence
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Risk Assessment
o In theory, risk assessment is a scientific process
leading to an objective, quantitative measure of the
risks posed by any substance
o The EPA and other agencies make a series of
precautionary assumptions based on the fear that
scientific data might understate risks to human health
o Risks are overstated to ensure that public health is
protected with a margin of safety
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Hazard Assessment
o Hazard assessment establishes a link between a
substance and human disease
o When a substance is thought to pose a risk, the two
basic methods of proving it dangerous are:
o Animal testing
o Epidemiological studies
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Dose-Response Assessment
o It is a quantitative estimate of how toxic a substance
is to humans or animals at varying exposure levels
o For most chemicals, regulators use extrapolation from
high doses to predict the effects on human
populations at much lower doses
o Linear-dose response rate
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Dose-Response Assessment
o The EPA makes the precautionary assumption that
risk estimates should be based on the linear curve
o Industry favors the use of sublinear and threshold
models that support less regulation
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Figure 14.3 – Alternative Assumptions
for Extrapolating the Effects of High Doses to Lower-Dose
Levels
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Exposure Assessment
o Exposure assessment: The study of how much of a
substance humans absorb through inhalation,
ingestion, or skin absorption
o To make exposure assessments, researchers measure
activities that bring individuals in contact with toxic
substances
o Regulators present their estimates as a distribution of
individual exposures
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Risk Characterization
o Risk characterization is an overall conclusion about
the dangers of a substance
o It is a detailed, written narrative describing the
scientific evidence, including areas of ambiguity
o Risk characterizations are built on scientific
calculations of toxicity, potency, and exposure
o The precision of risk characterizations are limited
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Risk Management
o Control options
o These are alternative methods for reducing most risks
o Legal considerations
o Many environmental laws are specific about risk
reduction required and methods of achieving it
o Economic and social factors
o Risk decisions cannot always be based solely on
scientific findings
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Cost-Benefit Analysis
o Cost-benefit analysis: Systematic calculation and
comparison of the costs and benefits of a proposed
action
o Cost calculations include factors as:
o Enforcement costs
o Capital and compliance costs to industry
o Potential job losses
o Higher consumer prices
o Reduced productivity
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Cost-Benefit Analysis
o Benefits can include:
o Ecological
o Health
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Advantages of Cost-Benefit Analysis
o It forces methodical consideration of each impact of a
policy on social welfare
o Injects rational calculation into emotional arguments
o Cost-benefit analysis that reveals marginal abatement
costs can help regulators find the most efficient levels
of regulation
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Criticisms of Cost-Benefit Analysis
o Fixing price values of costs and benefits is difficult
and controversial
o Contingent valuation is one method of measuring the
monetary value of ecosystem goods
o A second method is the value of a statistical life, the
willingness to pay for reducing risk of premature death
in a population exposed to a pollution hazard
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Criticisms of Cost-Benefit Analysis
o Cost-benefit approaches compromise ecosystems
deserving absolute, not conditional, protection
o Benefits and costs of a program often fall to separate
parties
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Figure 14.4 – Relationship Between Extent of Regulation,
Costs, and Benefits in Environmental Regulation
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Figure 14.5 - The Spectrum of Regulatory
Options
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Command-and-Control Regulation
o One cause of high pollution-abatement costs is heavy
reliance on command-and-control regulation
o Advantages
o It enforces predictable and uniform standards
o There is great equity in applying the same rules to all
firms in an industry
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Command-and-Control Regulation
o It produces abatements and it comforts the public to
know that the EPA is watching and regulating
o This approach can be inefficient and increase costs
without commensurate increases in benefits
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Market Incentive Regulation
o Gives polluters financial motives to control pollution
while giving them flexibility in how reductions are
achieved.
o Environmental taxes
o Emission trading (cap and trade)
o Carbon offsets
o Some environmentalists ridicule carbon offsets
o Information disclosure
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Figure 14.6 - How a Cap-and-Trade System
with Offsets Works
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Voluntary Regulation
o Voluntary regulation: Regulation without legal
compulsion or sanctions
o When a company signs up for a voluntary program,
there are reporting requirements, but no enforcement
actions are taken for failure to meet goals
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Voluntary Regulation
o Company motives for participating:
o Companies believe more regulation is imminent and want
to prepare control strategies now
o Nonregulatory pressures for companies to be
environmentally responsible
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Figure 14.7 - The Environmental Protection
Agency’s Climate Leaders Program
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Managing Environmental Quality
o Environmental management systems (EMS) have
been adopted by many firms
o The leading international model for EMSs is ISO
14001
o Actions to reduce environmental impacts
o Precautionary action
o Pollution prevention
o Product analysis
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Managing Environmental Quality
o Environmental marketing
o Environmental metrics
o Environmental management system (EMS)
o A set of methods and procedures for aligning
corporate strategies, policies, and operations with
principles that protect ecosystems
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Concluding Observations
o This chapter looked more deeply into the methods of
regulations
o New, more flexible, market-based approaches can be
used to achieve environment-preserving goals
o Much progress has been made in protecting both
ecosystems and human health
o The sum of regulatory activity and voluntary business
action has been inadequate to avert climate change
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