The paper theorizes about alternative institutions for managing environmental resources. The traditional command and control approach to public environmental resource regulations uses the threat of sanctions to induce private enterprises to reduce the harm their activities do to other public resource users. By definition, this approach succeeds only when sanctions are credible and sufficiently severe that firms find it cheaper to comply with regulatory commands than pay the sanction for non-compliance. Command and control regimes are inherently limited, for as resource use increases in intensity and becomes increasingly decentralized with economic growth, command and control regimes effectively regulate a smaller and smaller proportion of activity. Even more importantly, the very success of command and control environmental regulation in improving the quality of publicly held natural resources creates a demand for further improvements, but these improvements are costly and cannot be funded without further development. Whereas traditional public resource regulation has focused on controlling existing private uses of public resources, the next generation of environmental and natural resource regulation will increasingly view the private development of public resources as an instrument for environmental restoration. This transformation has a number of important consequences.1 Inasmuch as it will ask the private sector to do more than ever before for the public environment, one such consequence is that the next generation of environmental and natural resource regulation will in a very sense represent a substantial privatization of traditionally public regulatory functions. The question for the future is how to realize the enormous potential efficiency gains from regulatory privatization while ensuring that privatization protects important remaining public values.
Jason S. Johnston, On the Market for Ecosystem Control, 21 Virginia Environmental Law Journal, 129–18 (2002).