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Environmental Policy

Last Updated: 2006

“Environmental policy” is a term that describes a broad set of public policies including, but not restricted to, goals ranging from the protection of human health and safety from air and water pollution to the preservation of culturally important natural landmarks. The responsibility for and authority of environmental policy is most commonly shared among federal, state, and local governments.

The majority of federal statutes considered to be the founding cornerstone of U.S. environmental policy were first enacted in the 1970’s. Prior to this time, the issues associated with the natural environment were considered to be the exclusive domain of the state and local governments. A growing understanding of the impact of pollution and environmental quality on human health, combined with the tendency of these impacts to affect individuals across state borders, led to a change toward a more comprehensive and centralized approach to environmental protection.

Federal environmental statutes have developed as a form of cooperative federalism, where the authority for environmental decision making is divided between the federal and state government. Many of the federal environmental statutes expressly reserve the right for the states to develop more stringent regulatory controls than those imposed by the federal Environmental Protection Agency (EPA). That action by Congress allows the federal government and the states to fashion the necessary working relationships without constant conflict over the appropriate approach to the vast array of environmental problems facing the country. For example, the Clean Air Act (42 USC §7401 et seq.) establishes the ambient air quality standards for over 27,000 of the major stationary sources of air pollutants. The federal government sets primary standards for each of the regulated pollutants, which are based on human health protection. It is also responsible for setting secondary standards to protect other types of concerns, such as aesthetic values, private property values, and the negative impacts of pollution on vegetation. The individual states are in charge of ensuring that minimum quality standards are being met through the development of state implementation plans that determine, among other things, how, why, when, and where the air emissions will be tested. Similarly, division of responsibility arrangements can also be found in other federal environmental statutes such as the Clean Water Act (33 U.S.C. §1251 et seq.) and the Resource Conservation and Recovery Act (42 U.S.C. §6901 et seq.). Although the state and federal government must work together for a common goal, the struggle for control over environmental policy continues to exist within the framework of cooperative federalism.

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The federal authority to regulate environmental issues is derived from the U.S. Constitution. The constitutional authority for federal environmental policy has been grounded, primarily, in what is known as the Commerce Clause. To a lesser extent, the treaty, property, and spending powers have also been used as a basis for federal control.

The Commerce Clause provides the federal government with the power to regulate commerce among the states. Beginning in the 1930’s, the courts began an expansion of the exercise of federal powers permitted under the Commerce Clause. Congress has used this broad interpretation to justify a wide array of environmental statutes, including some that have very weak connections to interstate commerce. In 1995, the Supreme Court began to signal a change in the interpretation of the Commerce Clause. In the case of United States v. Lopez (514 U.S. 549 [1995]), the Court suggested several limitations to the interpretation of federal authority. In particular, the Court emphasized the need to find an enforceable limit to the application of the Commerce Clause in terms of defining activities that both directly and substantially affected interstate commerce. Even with this interpretation, the Commerce Clause still gives Congress extensive authority to regulate a wide array of environmental issues. For example, pollution control under the Clean Air Act and the Clean Water Act regulates commercial activities that clearly fall under the umbrella of interstate commerce. However, the constitutionality of federal environmental laws that regulate private land use, such as the Endangered Species Act, are more open to question.

The treaty powers of the federal government supersede state laws, and the treaty power has been used to establish federal control over environmental issues that otherwise would belong to the individual states. In 1913, the U.S. Congress passed the Migratory Bird Act, which placed specific hunting limitations on many species of migratory birds. Arrests for violations under the act were argued in court, where it was decided that the law was unconstitutional as the federal statute encroached on state authority. Common law had always held that the power to regulate the taking of wildlife belonged to the states. In 1916, the United States and Great Britain, on behalf of Canada, adopted the Migratory Bird Treaty, and soon thereafter Congress passed the Migratory Bird Treaty Act (16 U.S.C. 703–12) to implement the provisions of the treaty. Challenges to this new Act were upheld on the basis of the federal treaty power. The environmental protection of federal lands as well as private areas surrounding the lands has been successfully defended under the Property Clause. Finally, the spending powers of the federal government have been linked with environmental policy and used in various ways. For example, federal highway funds have been tied to the statewide attainment of ambient air standards, and government subsidy programs have provided funds to private firms for the voluntary adoption of pollution reduction technologies.


The Tenth Amendment of the U.S. Constitution provides each state with all of the powers not specifically delegated to the federal government. This provides the states with broader statutory powers over environmental issues as compared to the federal government. The states have priority of jurisdiction in regard to the regulation of private and public property, with the exception of federal lands. This includes conservation, protection, and land use. Most states, however, typically devolve land-use decisions to the local governments. The states retain police power and the control of fish and wildlife within their own borders. One question that arises is as follows: if the states possess such broad authority over environmental issues, why do we see so much environmental legislation emanating from Congress?


Federal authority over environmental policy is often justified solely on the basis of it being best suited to deal with the unique features associated with environmental problems. Of these unique features, three of them tend to be most commonly discussed: (1) the interaction of economic activity and environmental protection, (2) externalities, and (3) the scientific complexity associated with environmental policy. Each of these features is discussed in more detail in the following section.

“Race to the Bottom”

The sources of a majority of the pollution and environmental degradation regulated through environmental policy are engaged in what can be called “socially valuable economic activities.” For example, some water pollution is a by-product of food production, and some of the air pollution produced is a by-product of the manufacturing of pharmaceuticals. In addition, there is often some habitat disruption as a by-product of the production of lumber for homes. As a result, environmental policy both affects, and is affected by, many aspects of the economy. Many proponents of centralized environmental policy argue that it will prevent state and local governments from pursuing economic gain to the detriment of the environment. Environmental regulation imposes costs on economic activities. Therefore, an acceptable balance between economic development and environmental protection must be found.

If authority over environmental policy were to rest solely with the states, the potential exists for interstate competition to result in what has been referred to as a “race to the bottom.” States seek to entice economic development away from other states by lowering the cost of doing business within their borders. This can be accomplished by reducing regulatory compliance costs through lower environmental standards. Interstate competition for economic development provides an incentive for all other states to follow suit. In the end, each state will have equally poor environmental standards, as well as the inability to entice new economic development through further compliance cost reductions. The race to the bottom is a form of the “prisoner’s dilemma” and is a result of noncooperative behavior among states. Although it is in each state’s best interest to collectively maintain appropriate environmental standards, individual competition results in each state pursuing an agenda that makes it worse off in terms of being unable to entice new businesses through reduced compliance costs, as well as providing its citizenry with reduced environmental amenities. Federal regulation of environmental policy can avoid this problem by mandating each state to meet a set of minimal environmental standards, removing the potential for using reduced environmental standards as a means of enticing new businesses.

Although the “race to the bottom” argument has commonly been used to justify much of our federal environmental policy, its validity is questionable. Research has yet to show that the requisite incentives for the “race to the bottom” actually exist. However, given the opportunity, very few states have adopted environmental standards more stringent than the federal minimum standards, and perhaps this signals that the potential does exist. Arguments against the “race to the bottom” justification contend that, if the problem does in fact exist, the reliance on federally set minimum standards does not fix it. Instead, it shifts the race to some other area such as worker safety or tax rates.


It is obvious that pollution does not respect political boundaries. The problem of acid rain is a classic example. Acid rain damage to lakes and forests in the Adirondack region of New York is the product of sulfur dioxide and nitrogen oxides emitted primarily from coal-fired electric power generators in the Midwest and Mid-Atlantic states. The presence of pollution spillovers means that states with pollution sources will not take all costs into account when formulating their environmental policies. The affected states bear the costs of pollution coming across their borders, but with little or no legislative recourse for addressing the problem. However, federal standards can address spillover effects, requiring the pollution-generating states to bear their own costs of pollution control.

State environmental regulations can also impose externalities on other states in terms of imposing financial costs on out-of-state producers. California’s automobile emissions control standards are an example of this. The state implementing the regulation will tend to ignore the compliance costs imposed on manufacturers outside of the state, and the manufacturers pass the increased costs back to the consumers in all of the states. Federal regulations can be justified when state environmental policies impose sizable costs on interstate business.

Scientific Complexity

Environmental policy requires a high level of scientific data collection and analysis. This includes standard setting, but also extends to the monitoring and enforcement of standards. The expenditures for many of the technical aspects of environmental regulation are quite large. Concentrating the processing of these recurrent and technically difficult tasks at the federal level can create cost savings when compared with the costs of having each state perform these tasks individually. For example, the federal government has the resources to effectively perform research linking environmental standards to human health risks in setting policy, and can then apply these finding across all states.


The benefits of federal control of environmental policy come with corresponding costs. When these costs are substantial, the justification of federal authority over environmental policy is questionable. Utilizing a centralized approach has implications in terms of the impact of reliance on uniform standards, as well as the loss of local public participation.

As we have seen, the use of national uniform standards is justified on the grounds of avoiding the “race to the bottom” and interstate externalities, as well as reducing the costs associated with the scientific complexity of environmental regulation. However, these uniform national standards do not reflect the unique costs and benefits of each state. While the federal government can achieve some cost savings by taking advantage of centralized data collection and analysis, each individual state has greater knowledge of the unique attributes of the local community and environment. Each state is also familiar with local preferences, as well as the distinct costs associated with meeting any given standard. This information is important in setting environmental standards that balance the needs of the local community, and therefore must be taken into account. Uniform national standards are unable to incorporate this local information and therefore are likely to be inefficient and poorly representative of the true preferences of the citizens.

Although the potential for a “race to the bottom” is an often-cited justification for federal authority over environmental regulation, the most apparent justification is the presence of interstate externalities and spillover effects. While this justifies a crucial role for federal government oversight in environmental regulation, it does not require any particular form of policy response. Flexibility in terms of the assignment of responsibility among different levels of government, and between the public and private sector, as well as in terms of the type of policy instrument are at the heart of environmental policy success. Cooperative federalism allows for this flexibility in design.

SEE ALSO: Great Society


Kirsten Engle and Susan Rose-Ackerman, “Environmental Federalism in the United States: The Risks of Devolution,” in Regulatory Competition and Economic Integration: Comparative Perspectives, ed. Daniel Esty and Damien Geradin (Oxford: Oxford University Press, 2001); Richard L. Revesz, “Rehabilitating Interstate Competition: Rethinking the ‘Race-to-the-Bottom’ Rationale for Federal Environmental Regulation,” New York University Law Review 67 (1992): 1210; Denise Scheberle, Federalism and Environmental Policy: Trust and the Politics of Implementation (WashEqualington, DC: Georgetown University Press, 1997); and Richard B. Stewart, “Pyramids of Sacrifice? Problems of Federalism in Mandating State Implementation of National Environmental Policy,” Yale Law Journal 86 (1977): 1196–272.