INTRODUCTION

Centralized review of federal regulations has become a core institution in the contemporary administrative state. Presidents of both political parties have embraced it, with relatively few changes since President Reagan put in place the basic architecture in 1981. Although the institution of centralized review continues to receive criticism from some quarters, there is broad consensus that it is likely to remain a persistent feature of the administrative state for the foreseeable future.

Since its inception, centralized review has been closely linked with theories of agency capture. Many of its most prominent defenders have grounded the legitimacy of regulatory review in fears that unchecked agencies will be systematically biased in the exercise of their powers, including by accommodating powerful special interests to the detriment of general social welfare. According to this line of thinking, centralized review facilitates presidential control over agencies, which helps to ensure that administrative action is responsive to the broad national constituency represented by the president rather than to parochial special interests.

There are two important problems with this account. First, the background assumption of the conventional account – that the president responds to a national, rather than parochial, constituency – is overly simplistic. Presidents respond to a range of incentives that may not be well aligned with the broad national interest. More important, the Office of Information and Regulatory Affairs (OIRA), which is charged with carrying out centralized review, is not the functional equivalent of the president. Even if increased presidential control is desirable, it is not obvious that OIRA review always achieves this goal.

In the United States, vesting control over environmental regulation at the federal level is most commonly justified both in the legal academic literature and the legislative arena by reference to three distinct arguments. First, advocates of federal control argue that in its absence interstate competition would result in a “race to the bottom.” Second, they maintain that federal regulation is necessary to prevent interstate externalities. Third, proponents of centralization raise the public choice claim that environmental interests will be systematically underrepresented at the state level relative to business interests.

This essay, which builds upon my prior works in the area, has three major purposes. First, it casts serious doubt on the validity of some of the arguments made in favor of centralizing environmental regulation. Second, it shows that, to a large extent, there has been a misallocation of responsibility over environmental regulation: the federal government has taken too aggressive a role with respect to matters best handled at the state level, but has been too constrained in its exercise of authority with respect to issues over which it enjoys a distinct comparative advantage. Third, it attempts to extract from the experience in the United States, lessons that might be of interest to the European Union and to the international trading regime.

The first section develops the arguments for a presumption for decentralization, which calls for vesting responsibility over environmental protection at the state rather than federal level, as a result of differences in preferences over environmental protection, as well as differences in the benefits and costs of such protection.