Reversing the Environmental Deficit

Christine Klein

Oct. 21, 2009

As the recession grinds on, financial news continues to grab front-page headlines. The national deficit is a central flashpoint for controversy, triggering debate on the appropriate balance between spending today and increasing our children’s growing mountain of debt. In the midst of this battle, it is easy to overlook another looming problem: the growth of the environmental deficit. Overall, we are spending down the planet’s “natural capital” at unsustainable rates. As the nation’s most thoughtful minds address our economic woes, their wisdom provides three important lessons for environmental sustainability. The moment is particularly ripe for such analysis as the international community struggles with the overwhelming issue of climate change, certainly a key to achieving any sort of sustainable environmental future.

Re-regulation to promote responsibility: Even as taxpayers bailed out financial institutions deemed too big to fail, executives received huge bonuses. Growing outrage has prompted a call for increased governmental oversight, reversing the nearly three-decade deregulatory agenda initiated by Ronald Reagan, who mocked durable federal agencies and programs as “the nearest thing to eternal life we’ll ever see on this earth.” Even Alan Greenspan, former chairman of the Federal Reserve and a staunch supporter of deregulation, admitted in 2008 that his “whole intellectual edifice” had collapsed and that he was in “shocked disbelief” to discover that his faith in the unregulated free market had been woefully misplaced.

In the environmental realm, this deregulatory frenzy most recently manifested itself through a spate of “midnight regulations” promulgated by the Bush administration during its final months. These agency rules—largely invisible to the general public—dismantled numerous important environmental safeguards. For example, in the name of “streamlining” the permitting process for coal mines, one new rule would have allowed over 1,000 miles of Appalachian streams to be filled with the debris from so-called “mountaintop removal” mining, as entire peaks are blasted off to expose underlying coal deposits. A second late-term rule, ostensibly enacted to “clarify” existing requirements and to produce a process that is “less time-consuming and a more effective use of our resources,” would have allowed federal agencies to conduct activities that may harm threatened or endangered species without even consulting federal wildlife experts. In all, the Bush administration rushed through dozens of such regulations.

Learning from our financial mistakes, federal environmental agencies must promote a culture of responsibility, supported by vigorous federal oversight to protect the public interest. Fortunately, the Obama administration has begun to reverse some of the de-regulatory efforts of previous administrations in areas including mountaintop removal mining, endangered species consultations, and oil and gas development on environmentally sensitive federal lands. But those efforts must continue. Of particular concern is the powerful White House OMB Office of Information and Regulatory Affairs (OIRA). Its new director, Cass Sunstein, must be vigorously encouraged to reverse OIRA’s tilt toward industry.

Acknowledging risk: The financial crash was triggered in part by an irresponsible trivialization of risk. As Chairman Greenspan acknowledged, he had depended upon a deeply flawed risk-management paradigm because “the data inputted into the risk-management models generally covered only the past two decades, a period of euphoria.” With brutal honesty, one loan analyst summed up the problem: “A bond could be structured by cows and we would rate it favorably.” Faulty risk assessment has been used—in many cases deliberately—to thwart environmental protection. For example, a 2008 report by the Inspector General found that Bush administration officials, without scientific or economic training, had edited technical reports to promote political ends. As a result, risks to endangered species were deliberately downplayed, preventing protection of vulnerable species in at least a dozen cases. Likewise, the risks of climate change were intentionally trivialized by non-scientists in the Bush White House hundreds of times to advance their political agenda.

Applying lessons from the financial sector, environmental risk analysis must be improved. Often, as critics note, the cost-benefit methodology is applied indiscriminately as a “one-size-fits-all technique for policy problems as varied as regulating mercury emissions from power plants to the roof strength standard for new automobiles.” Moreover, over-use of the methodology is prone to abuse by OIRA. As critics have observed, the OIRA review “has served mainly to suppress regulation thought to be excessive” on political, rather than technical, grounds. Reform should begin with two critical steps. First, we must acknowledge that cost-benefit analysis is often inappropriate for environmental issues. Second, cost-benefit analysis must develop techniques to provide an accurate monetization of environmental benefits, realizing that they are not mere market commodities.

Consuming sustainably: Until recently, the prevailing economic wisdom encouraged a frenzy of borrowing and lending. In the environmental realm, similar frenetic behavior has encouraged the present generation to spend down the planet’s “natural capital” by consuming environmental resources at an unsustainable pace. The World Wildlife Fund’s Living Planet Report 2008 concluded that environmental consumption is so excessive that “if our demands on the planet continue at the same rate, by the mid-2030s we will need the equivalent of two planets to provide the resources to maintain our lifestyles.” Reversing this trend of unsustainable consumption will require both legal and cultural change at profound levels. For more than 30 years, Congress has imposed sustainability mandates upon numerous federal agencies, a responsibility often ignored. Now we must breathe new life into the commitment to sustainability, recognizing that our very lives may depend upon the success of that effort.

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