To those who have wearied of an environmental regulatory system that manages to combine sluggish bureaucracy with partisan rancor—and the list of the disenchanted appears to include just about everybody involved in the environmental field—contracts may seem to provide an attractive alternative. Because contracts are flexible, collaborative, and enforceable, they offer an opportunity to bypass litigation while addressing the failures of command-and-control regulation. Why, then, are they so little used?

Odd as it may seem in light of the vast quantity of environmental law that engulfs us, the answer may be that, with rare exceptions, the substance of environmental law has not evolved to the point at which contracts can be useful. The paradox of environmental contracts is that they depend for their existence upon the very institutions that they are intended to replace: statutes, regulation, and litigation, which provide the substantive and procedural framework in which contracts can operate effectively. Rather than reducing the need for black-letter law, contracts require explicit statutory authorization and a clearly stated legal purpose in order to function within our system. Standards and explicit authorization are rare, however, in a system built around balancing needs and taking into account the interests of all of the parties. Only to the extent that statutes, regulations, and case law establish clear policy preferences can contracts do what they are supposed to do: allow parties to make beneficial trades, taking into account the interests of all of the parties.