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