The EPA and its Pollution Control Policies on Businesses

By Connor Touhey | October 21, 2021

It is no secret that companies and corporations pollute the environment. Whether it be carbon dioxide, contaminated wastewater, sulfur dioxide, or another pollutant, there’s always some sort of unsavory product being pumped out into nature. While some degree of pollution is a necessary byproduct of our consumer-based economy, I think most people can agree that less pollution is better than more pollution. Well that’s great, but what’s going to make companies change their methods of production when it’s more cost-efficient to pollute? The answer: the EPA and their regulatory policies. Through these policies, the EPA is able to significantly reduce the amount of pollution present in the environment, while at the same time not overly hindering the companies who are polluting. There are essentially two main ways the EPA controls these companies; the more traditional command-and-control policies, as well as market-based/incentive policies.

So what exactly do these different policies do? Command-and-control policies can be looked at as a basic regulatory approach. It is a hard-set limit on how much a certain entity is allowed to pollute; otherwise they are subject to punishments such as fines. The EPA may mandate a certain kind of technology to be used or just simply make the limit known and let companies figure out how to stay below the threshold themselves. While these straightforward policies can be effective at reducing pollutants, market-based policies are becoming more and more common today. The difference between a market-based approach and a traditional one is the potential for companies to gain something by reducing their polluting. Rather than simply setting a hard cap for emissions, market-based policies encourage companies to reduce their emissions as much as possible; the more they do, the more money they are able to receive. The best example of a market-based approach is the Capped Allowance Systems, otherwise known as the Cap-and-Trade system. This method sets an overall cap on total emissions in the country. However, rather than giving companies a set limit on how much they can pollute, they give companies allowances of how much they are allowed to pollute. The key difference here is that these allowances are tradeable. For example, let’s say company A has 10 of these allowances, but they are able to cut their emissions to be within eight allowances. They have two leftover allowances and can now sell those allowances to another company that wants them. It is for this reason that Cap-and-Trade policies are effective. Because there is an economic incentive to reduce pollution as much as possible, companies will do everything they can to reduce pollution as much as possible, rather than just reducing pollution to the cap. This policy helps many things. It helps companies who have the ability to efficiently reduce pollution to make extra money, it helps the environment which is subjected to less pollution, and it helps companies who are unable to efficiently reduce their pollution avoid paying fines because they are able to purchase extra allowances.

So given all this information, what can we conclude about these different EPA policies? There are clearly many upsides to the market-based approaches when compared to the standard command-and-control policies. However, that doesn’t mean that the market-based methods are flawless. A big issue with them is the problem of equity. Given that companies can buy extra pollution allowances and pollute more than they normally would, certain areas will be subjected to more pollution than others. The people living in these areas may end up being negatively affected by pollution more so than they would otherwise. Because of this, these policies have the potential to be unfair, with some people being helped and others being harmed. Is the sacrifice worth it? It’s hard to say. People have different opinions on the matter. I’m not here to say which is inherently better; rather, I’m just here to make the different policies known.

There are constant changes and modifications to the EPA and its environmental policies. Improvements in technology, research, and even ethics may bring about changes in how pollution is regulated in this country. Will changes in policy help the environment in the future? Will it help businesses? Only time will tell.

Source: Economic Incentives

Edited by Maggie Reddington