160 



give individual municipalities the opportunity and the incentive to 

 develop long-term practical waste disposal alternatives. 



Finally, it is unclear why the staff proposes a special dumping 

 fee for the 12-mile site but not other sites. Such a provision implies 

 that dumping at other sites poses no environmental problems or 

 risks. Existing scientific evidence does not seem to justify the as- 

 sumption. This fee system, moreover, would not create an incentive 

 to search for innovative uses of waste or alternative disposal meth- 

 ods. 



In conclusion, a carefully designed fee system could be the cor- 

 nerstone of a sound program to manage waste in the ocean. Fees 

 are a versatile regulatory and revenue generating tool which de- 

 serves serious congressional attention. 



This concludes my prepared statement. Mr. Chairman, I would 

 be happy to answer any questions. 



[The statement of Mr. Lahey follows:] 



Prepared Statement of William L. Lahey 



My name is William Lahey. I am a research fellow in the Marine Policy and 

 Ocean Management Program at the Woods Hole Oceanographic Institution. I have 

 published a number of articles, including law review articles, on ocean dumping. My 

 testimony focuses on ocean dumping fees generally and the user fee proposal draft- 

 ed by the Subcommittees' staff in particular. 



Briefly, my testimony makes the following points. First, environmental charge 

 systems can be designed to accomplish different objectives, ranging from simply gen- 

 erating revenue to creating incentives for sound disposal practices. Second, there 

 are number of strong arguments for establishing a dual-purpose ocean dumping 

 charge which would both generate revenue and create incentives. Third, the staffs 

 current fee proposal, while containing commendable provisions for revenue distribu- 

 tion, could go further in incorporationg important regulatory uses of a fee system. 



REVIEW OF ENVIRONMENTAL CHARGE APPROACHES 



Past discussions of fees for ocean dumping suggest that there are many different 

 notions of what this mechanism can and should do, even among the proponents. 

 This lack of agreement is due, in part, to the fact that charges can be used in a 

 variety of purposes. Indeed, pricing mechanisms are used in a variety of environ- 

 mental contexts in the United States and other countries. This diversity is reflected 

 in the myriad of labels given to these mechanisms — pollution taxes, effluent charges 

 and user fees to name but a few. 



In an effort to resolve some of the disagreement over ocean dumping fees I have 

 developed a simple classification scheme which differentiates charge approaches ac- 

 cording to the economic variable used to calculate the charges. This process also 

 provides an opportunity to examine a number of existing environmental charge sys- 

 tems both here and abroad. Much can be learned from these charge systems which 

 can be applied to devising a fee system for ocean dumping. 



Enviromental charges are designed for two basic purposes — to accomplish regula- 

 tory objectives and raise revenue. Let us first look at charges designed primarily to 

 regulate behavior. Two methods for calculating a regulatory-based charge which are 

 widely advocated are the social cost approach and the ambient standards approach. 



First, the charge can be calculated to reflect the cost imposed on society by the 

 pollution; this can be called the social cost approach. This method requires a user of 

 common property resources, such as air or water, to bear the full costs of his activi- 

 ty. In other words it internalizes the external costs. 



This method of charge assessment requires two difficult steps. First, the amount 

 of environmental damage caused per unit of emission must be calculated. In other 

 words, a dose-response curve needs to be calculated. This is difficult because there 

 are a number of complicating factors including possible synergistic effects from var- 

 ious combinations of pollutants. It can also be difficult distinguishing between natu- 

 ral fluctuations in the environment and man-induced changes. The latency of some 

 pollution effects is but another complicating factor. Second, the damage must be 

 monitized. This is very difficult because economists have not yet devised an effective 

 way of quantifying environmental damage. 



