*This is the third post on a symposium on Cynthia Giles’ “Next Generation Compliance: Environmental Regulation for the Modern Era.” For other posts in the series, click here.
No one disputes the central role that enforcement plays in any regulatory regime. In its latest Strategic Plan, the federal Environmental Protection Agency states that “A robust compliance monitoring and enforcement program is necessary to ensure communities get the environmental and human health benefits intended by environmental statutes and the Environmental Protection Agency (EPA)]’s regulations.” I once quoted former Connecticut Senator Joe Lieberman, who said that without effective enforcement, “most of the rest of environmental protection lacks meaning, lacks truth, lacks reality.”
EPA and its environmental regulatory state partners have engaged in many important successful efforts during the modern environmental law era that began in 1970 to foster compliance with regulatory obligations through enforcement actions and otherwise. But in her new book, Next Generation Compliance: Environmental Regulation in the Modern Era, Cynthia Giles documents widespread and significant noncompliance with these obligations. Giles is in a good position to know – she headed EPA’s Office of Enforcement and Compliance Assurance (OECA) for eight years under the Obama Administration. She surely knows where the bodies are buried, but she also provides ample substantiation in her book of this disturbing reality.
For decades, environmental law scholars and public officials have pondered how best to bolster compliance. Some solutions seem obvious, such as throwing more money at the problem in the form of increasing agency budgets so that they can hire more enforcement personnel. But that kind of fix does not seem to have moved the needle on the noncompliance register. Giles’ solution is different—designing environmental regulations “so that compliance is the default.” (Page 3). Giles first publicly advanced this idea about a decade ago, when she published a short piece on Next Generation Compliance. “Next Gen” was an approach to fostering greater compliance that she spearheaded during her tenure as the head of OECA. She described in that early publication several elements that have the potential to revolutionize the ways in which agencies like EPA can go about the business of reducing noncompliance. She posited that “We can get a bigger bang for the buck by working hard to make sure we design rules that will work in the real world — rules with compliance built in.” The other key elements of Next Gen included advanced monitoring, electronic reporting, transparency, and innovative enforcement strategies.
That menu of enforcement enhancements seemed at the time to be a promising approach to tackling persistent and unacceptably high levels of noncompliance. In her new book, Giles elaborates on the Next Gen model she sketched out (and began to implement) when she headed OECA, while adding new enforcement-enhancing approaches, such as shifting the burden of proof, incorporating advanced data analytics, and relying on automatic data substitution provisions. The book analyzes how the various pieces of Next Gen Compliance fit together into an integrated approach whose most important component occurs much earlier in the regulatory process than reacting to noncompliance after it has occurred. That has been the traditional focus of the enforcement process. Giles makes an ironclad case that “by far the most important drive of compliance results is the structure of the rule itself,” and that compliance “results from careful design up front.” (Pages 1-2). For that that insight to bear fruit, enforcement personnel need to be involved in drafting regulations to ensure that they are enforceable on the ground and that as many roads to noncompliance are blocked as possible.
Of the many invaluable parts of Giles’ book is a chapter that provides revealing explanations of regulatory success stories and abject failures. We have been told for decades that the Clean Air Act’s acid rain control program, which included a cap-and-trade component, succeeded in achieving near universal compliance at costs lower than initially predicted. Now we know why. It took a combination of Next Gen features that included continuous emissions monitoring requirements, centralized electronic reporting, electronic audits, and automatic penalties for noncompliance that stung.
Conversely, we have known for years that the Clean Air Act’s New Source Review (NSR) program has been a disaster for enforcement officials. Now we know why. NSR’s applicability turns on case-by-case determinations that are “very complicated and deeply fact-intensive.” (Page 37) There is plenty of room for facilities to falsely claim exemptions under the program’s amorphous standards, and “company decisions about NSR were invisible to government; only extensive investigations could reveal a violation.” (Page 38) Enforcement actions were extremely costly and time-consuming. If the acid rain program provided a model for how Next Gen regulatory design can generate enormous compliance benefits, NSR was a “compliance disaster,” an anti-Next Gen nightmare. Relatedly, Giles does a masterful job exploring why existing EPA policies, such as its guidance documents for writing rules and preparing cost-benefit analyses (which include a mandatory assumption that the rule will generate 100% compliance for benefit calculation purposes), inadvertently cement in place some of the worst anti-Next Gen methodologies.
In touting the benefits of incorporating compliance-related provisions into the adoption of regulations, Giles provides important insights into several core environmental policy debates, challenging conventional wisdom in the process. One such debate concerns the appropriate roles of the federal and state governments. She pinpoints an important source of ongoing tension between federal and state regulators—state failures to provide data to EPA about the compliance status of regulated entities, even when they are required to do so. She also suggests a relatively simple way to address this intractable problem. She recommends requiring regulated entities to provide through electronic means to both EPA and state environmental agencies the information needed to assess compliance and identify violations, instead of depending on the states, who often have incentives not to be forthcoming, to share the information they have accumulated with EPA.
Giles also devotes attention to whether market-based approaches are preferable to the oft-demonized “command-and-control” regulatory approach and whether individualized standards are superior to uniform pollution controls. The debate over the relative merits of these strategies is an old, and sometimes tedious one. Early on, it was encapsulated in a pair of law review articles published in the Stanford Law Review. Bruce Ackerman and Richard Stewart favored market-based approaches and avoidance of inefficient uniform standards, while Howard Latin defended traditional regulatory approaches that included setting industry-wide standards.
Giles rightfully chastises Ackerman and Stewart’s pejorative characterization of traditional regulatory methods as akin to “Soviet-style central planning.” She asserts that EPA’s rulemaking process looks nothing like the caricature that some critics of traditional regulation depict, and she points out that the “innovative rational actor of economic theory” is infrequently encountered during investigations into noncompliance. (Pages 160-61) She also takes issue with those who uncritically accept claims of the superiority of market mechanisms over traditional regulation despite the absence of empirical support. She argues (as Professor Latin did) that individualized determinations present significant compliance challenges for regulators, even if they have the potential to reduce the costs imposed on regulated entities. Her bottom line point, however, is that the choice of regulatory design needs to be contextual, making generalizations about the superiority of certain approaches over others unhelpful. The most useful Next Gen techniques are those that position compliance as the default, and the techniques that accomplish that result when an agency addresses one problem may not be the same as when it addresses another. The choice of regulatory design, Giles urges, should be based on pragmatic, not ideological concerns.
Cynthia Giles’ book on Next Generation Compliance provides a refreshingly novel take on the challenges and opportunities presented by widespread noncompliance with environmental regulations. It ought to be required reading for agency officials charged with not only enforcing regulatory standards, but also for those responsible for adopting them. The lessons provided, moreover, are relevant well beyond the context of environmental regulation. Somehow, this book needs to get into the hands of regulators of all stripes who strive to avoid the pitfalls of noncompliance that frustrates regulatory policy objectives.
Robert L. Glicksman is J.B. & Maurice C. Shapiro Professor of Environmental Law at the George Washington University Law School.