New York changes conservation enforcement to reflect marginal benefits

The New York State Department of Environmental Conservation has decreased the number of pollution tests for factories, power generators, sewage treatment plants, hazardous waste sites, and other producers by 25 percent over the past 3 years, according to a Wall Street Journal article. The DEC enforces regulations that seek to correct negative externalities in production. Certain businesses emit pollutants that harm consumers and the environment and do not have to internalize those costs.

Inspections, which cost money, may be thought of as a cost of regulation; according to our class model, government should seek to set the marginal benefit of additional enforcement (or additional reductions in pollution) equal to the marginal cost of additional enforcement. According to the article, a DEC spokesman “cited 97 a percent compliance rate with pollution discharge permits.” This means that the marginal benefits of additional enforcement have decreased, so - by cutting the number of inspections - New York’s DEC has decreased the marginal costs of enforcement as well.

Finally, environmental groups complained that the DEC was still missing significant amounts of pollution. They are, effectively, arguing that the DEC has underestimated the marginal benefit of additional enforcement, or additional reductions in pollution; presumably, the affected industries would argue that DEC is underestimating the costs of enforcement.