The Market's Response to Environmental Inequity: We Have the Solution; What's the Problem?
By Seth D. Jaffe
INTRODUCTION
The issue of environmental justice is something like the game show Jeopardy: the market may know the answer, but the problem remains unclear. Environmental justice advocates see the problem as a racist and classist society allocating a disproportionate share of locally undesirable land uses (LULUs) to communities of color and/or poor communities. Others see no environmental justice problem at all. To the extent that the location of LULUs is correlated with racial composition and/or income, some argue that the correlation reflects the operation of market forces rather than racist or classist causation.
Although market forces may distribute LULUs efficiently, they may not necessarily produce fair outcomes. Environmental justice advocates argue that allocation of a disproportionate number of LULUs to communities of color is a priori unfair. In recent years, several bills have been introduced that would effectively cap the number of hazardous waste facilities located in areas which already bear a substantial share. However, it is difficult to defend statutory or regulatory interference with efficient market outcomes if host communities in fact want these projects for their significant employment and/or tax revenue benefits.
Nonetheless, market efficiency may be questionable in some siting decisions. If poor communities and communities of color are ill-equipped to bargain effectively with developers, two problems result. First, some LULUs may be sited improperly because host communities are unable to effectively force developers to internalize the social costs of their projects. Second, even when it may be reasonable to site a facility in such a community, host communities would bear significant costs without an opportunity to negotiate for compensatory benefits. These market shortcomings point towards a limited role for the private sector in addressing environmental justice issues.
Fairness cannot be defined as an even distribution of LULUs across all communities. For the purposes of this article, “fair” is defined as the set of outcomes whereby locally undesirable projects with net societal benefits are located in the least-cost manner, and host communities are able to bargain fairly and achieve the maximum reasonable share of the projects' net societal benefits.
Using this conception of fairness, the private sector can help solve the problem of environmental injustice by ensuring that low-income communities and communities of color have the representation and resources necessary to participate on a level playing field. This role may be significant, but it is also significantly limited. In a free-market economy, the private sector cannot be asked to solve environmental inequities by altering the geographic distribution of environmentally sensitive facilities or by using criteria other than profit-maximization in decision making.
In Massachusetts, the private sector has addressed the environmental justice problem by establishing the Massachusetts Environmental Justice Network (MEJN). The MEJN is a referral network that matches environmental attorneys, public health professionals, and technical experts willing to provide pro bono services to communities in need of such services. The MEJN currently has a roster of close to 100 attorneys and other professionals who have volunteered to provide their services. A number of community groups have already sought MEJN's assistance, and the organization has begun to refer cases to the volunteers.
As indicated, the MEJN will not necessarily alter the geographic distribution of LULUs. However, it will primarily help local community groups bargain effectively with potential developers, thus helping to prevent those communities from bearing an unfair share of the costs of development.
The issue of environmental justice is something like the game show Jeopardy: the market may know the answer, but the problem remains unclear. Environmental justice advocates see the problem as a racist and classist society allocating a disproportionate share of locally undesirable land uses (LULUs) to communities of color and/or poor communities. Others see no environmental justice problem at all. To the extent that the location of LULUs is correlated with racial composition and/or income, some argue that the correlation reflects the operation of market forces rather than racist or classist causation.
Although market forces may distribute LULUs efficiently, they may not necessarily produce fair outcomes. Environmental justice advocates argue that allocation of a disproportionate number of LULUs to communities of color is a priori unfair. In recent years, several bills have been introduced that would effectively cap the number of hazardous waste facilities located in areas which already bear a substantial share. However, it is difficult to defend statutory or regulatory interference with efficient market outcomes if host communities in fact want these projects for their significant employment and/or tax revenue benefits.
Nonetheless, market efficiency may be questionable in some siting decisions. If poor communities and communities of color are ill-equipped to bargain effectively with developers, two problems result. First, some LULUs may be sited improperly because host communities are unable to effectively force developers to internalize the social costs of their projects. Second, even when it may be reasonable to site a facility in such a community, host communities would bear significant costs without an opportunity to negotiate for compensatory benefits. These market shortcomings point towards a limited role for the private sector in addressing environmental justice issues.
Fairness cannot be defined as an even distribution of LULUs across all communities. For the purposes of this article, “fair” is defined as the set of outcomes whereby locally undesirable projects with net societal benefits are located in the least-cost manner, and host communities are able to bargain fairly and achieve the maximum reasonable share of the projects' net societal benefits.
Using this conception of fairness, the private sector can help solve the problem of environmental injustice by ensuring that low-income communities and communities of color have the representation and resources necessary to participate on a level playing field. This role may be significant, but it is also significantly limited. In a free-market economy, the private sector cannot be asked to solve environmental inequities by altering the geographic distribution of environmentally sensitive facilities or by using criteria other than profit-maximization in decision making.
In Massachusetts, the private sector has addressed the environmental justice problem by establishing the Massachusetts Environmental Justice Network (MEJN). The MEJN is a referral network that matches environmental attorneys, public health professionals, and technical experts willing to provide pro bono services to communities in need of such services. The MEJN currently has a roster of close to 100 attorneys and other professionals who have volunteered to provide their services. A number of community groups have already sought MEJN's assistance, and the organization has begun to refer cases to the volunteers.
As indicated, the MEJN will not necessarily alter the geographic distribution of LULUs. However, it will primarily help local community groups bargain effectively with potential developers, thus helping to prevent those communities from bearing an unfair share of the costs of development.