Regulating Air Quality through Litigation:

The Diesel Engine Episode

RS-02-3:  2002

By Bruce Yandle, Andrew P. Morriss,
and Lea-Rachel Kosnik

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About the Authors
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Summary

In recent years, a new form of regulation has emerged. Instead of issuing rules to control the behavior of firms and industries, government agencies, including the Environmental Protection Agency, have been filing lawsuits. Such litigation enables regulatory agencies to make an end-run around congressional safeguards designed to rein in overly zealous regulators. This “regulation by litigation” also offers agencies high-profile success stories—regardless of whether the stated goals are ultimately achieved.

One of the major applications of this new doctrine was the Environmental Protection Agency’s 1998 lawsuit against major diesel engine manufacturers. This paper provides a case study of that episode, examining it in the light of regulation theory and the regulatory framework established by Congress.

This report shows that EPA was caught between the regulatory rock and the hard place of legislative constraints. The agency discovered that, contrary to its own forecasts, environmental goals for reducing nitrogen oxide emissions were not being achieved and, by legislative mandate, major regions were threatened with costly sanctions. The EPA had to find a quick way to obtain large emission reductions. It chose to sue the builders of large diesel engines, demanding fast reduction in emissions. With EPA certification of the right to sell engines hanging in the balance, the agency obtained a settlement. Whether or not the desired emissions reductions will be achieved more quickly remains to be seen. Regulation by litigation replaced regulation by regulation.

About the Authors

Bruce Yandle is a senior associate at PERC, alumni distinguished professor of economics emeritus at Clemson University, and faculty member with George Mason University’s Capitol Hill Campus. Yandle received an A.B. from Mercer University and a Ph.D. from Georgia State University. He served as senior economist on the President’s Council on Wage and Price Stability and as executive director of the Federal Trade Commission. Yandle is author or editor of many books including The Political Limits of Environmental Regulation, Common Sense and Common Law for the Environment, and Land Rights: The 1990s’ Property Rights Rebellion. He is a member of the editorial board of the European Journal of Law & Economics.

Andrew P. Morriss is a senior associate at PERC, alumni distinguished professor of economics emeritus at Clemson University, and faculty member with George Mason University’s Capitol Hill Campus. Yandle received an A.B. from Mercer University and a Ph.D. from Georgia State University. He served as senior economist on the President’s Council on Wage and Price Stability and as executive director of the Federal Trade Commission. Yandle is author or editor of many books including The Political Limits of Environmental Regulation, Common Sense and Common Law for the Environment, and Land Rights: The 1990s’ Property Rights Rebellion. He is a member of the editorial board of the European Journal of Law & Economics.

Lea-Rachel Kosnik is a PERC research associate and adjunct professor at Montana State University. Kosnik received her B.A. from the University of Michigan and Ph.D. from the University of California, Los Angeles. She has spent time in Turkey as a Fulbright Scholar but now focuses her research efforts on natural resource and environmental issues in the United States.

About PERC Research Studies

PERC Research Studies, written by PERC fellows, associates, and colleagues, are designed to give scholars and policy analysts background for understanding today's environmental policy issues. These studies illustrate PERC's ongoing commitment to high-quality, policy-relevant research. PERC's Research Studies are edited by Jane S. Shaw and produced by Dianna Rienhart.

Andrew Morriss is the author or coauthor of more than 50 scholarly articles, books, and book chapters. He serves as a Research Fellow at the New York University Center for Labor and Employment Law, a Senior Fellow at the Property & Environment Research Center in Bozeman, Montana, and a Senior Scholar at the Mercatus Center at George Mason...
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 Bruce Yandle is Dean Emeritus of Clemson University's College of Business & Behavioral Science, Alumni Distinguished Professor of Economics Emeritus, Clemson University, Senior Fellow, PERC, Senior Fellow, Clemson's Thurmond Institute, and Distinguished Adjunct Professor of Economics, Mercatus Center at George Mason University.  Author of...
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