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Volume [field_article_intvolume_value], Issue [field_article_intissue_value] — July 2003


The Enron Story and Environmental Policy

by Victor B. Flatt

There are many aspects of the Enron saga that would give pause to someone who thinks about the environment and its problems. One of the most obvious is the concern that allowing unregulated trading of energy might not account for the costs of environmental externalities that are concurrent with energy production and usage.1 Another worry is that reducing the cost of energy may increase consumption and accelerate environmental degradation. However, these are concerns with the concept of energy trading itself, and would be problematic even if (and especially if) Enron had been a well-run and managed company that traded and delivered energy exactly as promised. As such, these are policy questions that exist aside from the demise of Enron and present important issues that are still to be examined in any and all aspects of energy deregulation.

Instead of concerns about energy trading in general, the demise of Enron presents a more fundamental question about the ability of government regulators to curb harmful or illegal behaviors in the face of structural incentives to commit them. More pointedly, can the regulated ever police themselves, and if so, under what circumstances? This question is germane to environmental protection because two strands of environmental regulatory theory may depend on it—the possibility of potential polluters controlling their own pollutants and complying with laws on a voluntary basis, and the dependence on this compliance mechanism in market-based pollutant trading regimes that involve the elimination of command-and-control regimes.

In order to understand the lesson that Enron teaches about the practicalities of environmental compliance and enforcement, this Article will review the collapse of Enron and its relation to problems inherent in a regulatory scheme that purposefully relies on self-policing for compliance. Then, this Article will examine why Enron engaged in certain policies in the newly deregulated California energy market in 2000, and why complex trading schemes are difficult to monitor. And last, this Article will examine what these occurrences suggest about the future of using environmental policies that depend on complex trading regimes and purposefully rely or (because of the complexity of the trading regime or elimination of command-and-control equipment) must rely on self-policing for compliance.

The Stakeholder Convergence: Enhanced Public Participation and Sustainable Business Practices

by Ira Feldman

People's right to know about and participate in decisions that could affect their quality of life is increasingly recognized as a critical element of sustainable development.1 In this context, the environmental matters have been a "wedge issue," allowing advocates to open up government processes and make them more accountable.2 Natural resources and the environment play a fundamental role in ensuring a safe, healthy, and productive life, thus people are more likely to demand opportunities to be involved in decisions that affect these natural resources.3

Why is opening up government processes important to business? What is the business value of stakeholder engagement? Public and consumer pressure play an important role in providing market incentives to motivate and reward corporate change. The assumption has been that improving public participation in environmental decisionmaking could provide benefits to business in terms of increased public acceptance, and there has been grudging acceptance that better solutions and outcomes are possible through multi-stakeholder dialogues. However, active engagement with stakeholders and documented good performance can protect licenses to operate, drive product and service innovation, reduce legal liabilities, and improve business strategy:

Environmental Labeling and Certification Schemes: A Modern Way to Green the World or GATT/WTO-Illegal Trade Barrier?

by Matthias Vogt

The debate between free traders and environmentalists has increasingly been drawing global attention throughout the last decade. It centers, generally speaking, around the question of how best to resolve the often conflicting goals of international trade liberalization on the one hand, and an increasing need for global environmental protection on the other. Measures to protect the environment often affect trade between different states, while at the same time trade measures might affect environmental conditions. For example, a country may use trade-restrictive measures, such as tariffs, quotas, or taxes, to protect its own natural resources and environment. It may even go further and use similar measures to protect the global commons or strengthen another state's less efficient environmental controls. The growing recognition of the need to link international trade and environmental issues on a global scale is evidenced by the fact that, for the first time in the history of the General Agreement on Tariffs and Trade (GATT), Uruguay Round participants agreed to include sustainable environmental development as one of the objectives when establishing the World Trade Organization (WTO) in 1994.1

The political awakening and increasing public concern over the state of our environment has led to a growing number of legal instruments on both national and international levels designed to limit the harm to the environment from human activity. Traditional measures concentrated mainly on end-of-pipe solutions, i.e., they tried to set emission standards and to reduce the amount of pollutants emanating from particular production plants. Many measures adopted in recent years have sought to take a holistic approach and to identify and arrest environmental problems before they actually occur. States started exploring various possibilities of creating economic incentives for specific industries to produce more environmentally friendly products rather than imposing the will of the state on manufacturers. Germany was the first country in the world to put forward the concept of eco-labels in its national environmental plan of 1971.2 The so-called Blue Angel program, named after the label showing a blue angel spreading its wings, was finally launched in 1978 and has served as a model for all other efforts of similar character of other countries.3 Since then, eco-labeling programs, i.e., the idea of applying labels to products to inform consumers of their environmentally friendly or damaging character, has become increasingly popular. Their main objective can be described as being "to harness market forces and channel them towards promoting more environmentally friendly patterns of production."4 An easily recognizable label informs consumers that a credible board of experts has certified and assessed a certain product's characteristics. By helping the consumer to make an informed purchasing decision and mobilizing the so-called green consumer, manufacturers should be encouraged to change their entire product development process into a more environmentally friendly direction.

Walkerton: Its Impact on Groundwater Protection Law in Canada

by Juli Abouchar

In May 2000, the unthinkable happened; individuals living in Canada became ill, some fatally, from drinking tap water contaminated with a toxic strain of Escherichia coli (e-coli). Walkerton, a small rural town in Ontario, Canada, was thrust into the spotlight as Canadians tried to understand how this could have happened. A public inquiry was struck to investigate the causes of the tragedy and make recommendations to ensure that it would not happen again. As a result, governments across Canada are taking a close look at how drinking water supplies are protected and managed.

This Article reviews the following questions: (1) what happened in Walkerton in May 2000?; (2) what caused the contamination?; and (3) what are its implications for groundwater protection law? In doing so, it focuses on the Walkerton Inquiry Report's source protection recommendations for Ontario and on the groundwater protection reforms of two provinces, British Columbia and New Brunswick.

Successful Community Strategies to Protect Open Space

by John R. Nolon

The preservation of open space has captured the public's imagination. Taxpayers are lining up to vote in favor of referenda authorizing their local or state governments to borrow funds to purchase open land or its development rights. Environmental groups are forming coalitions to support public acquisition of open space and the adoption of laws regulating development in and around open lands. Opponents of urban sprawl target the loss of open space as one of the major impacts of runaway development. The loss of open space is associated with the general degradation of the quality of community life. What is happening to open space is what is happening to the local environment, in the broadest sense of the word.

"Open space" is not easily defined. It includes parks, ball fields, pastures and meadows, scenic vistas, and fragile environmental areas, such as wetlands, ridgelines, and habitats. Some open lands—farms or fisheries, for example—are working spaces. Others are critical to the community's environment, while still others are simply undeveloped. One town defines open space legislatively as "land left in its natural state for conservation purposes or devoted to recreation or used for the preservation of distinctive, architectural, historic, geologic and botanical sites."