Flexible Environmental Regulation

Abstract

“Flexible regulation” might sound like an oxymoron but it has become a widely accepted catch phrase for a pragmatic approach to regulation that promises the achievement of important public policy objectives at relatively low cost. Given the growing interest in flexible regulation in recent decades, we consider in this paper what can be learned from the U.S. experience with flexible environmental regulation. We assess four types of flexible regulation: (1) flexible commands, such as performance standards, information disclosure rules, and management-based regulations; (2) flexible targets, such as offsets, bubbles, and trading; (3) flexible consequences, such as voluntary programs and agreements; and (4) flexible regulators, such as systems of self-regulation and self-policing. Researchers have demonstrated that many flexible approaches can sometimes work, to some degree; but just as flexible policies can vary in form, we find that they also vary in results. What remains, we argue, is to determine whether the marginal and at times only potential gains from flexible forms of regulation are enough to justify their increased use.

Keywords: Environmental law and policy, environmental economics, empirical legal studies, public policy analysis, regulatory design, instrument choice, regulatory flexibility, market-based instruments, emissions trading, management-based regulation, performance-based, paperwork burdens, voluntary programs

JEL Classification: D78, K23, K32, L51, Q58